Tag Archives: economy

Political

Grow your own economy

January 30, 2011 – 5:21 pm

We hear a lot about globalisation these days; how money, people and business move freely around the world (although that has had a few teeny problems of late) and how countries must therefore compete in that market for investment, and ultimately jobs and economic success in general. Much of this is true and common sense, however, I do object to the tone and emphasis that is used whenever this argument is made. There seems to be a preference of late for attracting external players to flirt with local economies for as long as possible before they get bored and move somewhere cheaper, rather than focussing on organic growth of businesses from within the existing local entrepreneurial base. You can do both of course, but in recent years I’ve observed that here and in some other places in the world, the balance is strongly in favour of the short-term plan of courting of large, external players, versus the long-term prospects of ‘growing your own’.

Of course, inward investment is a good thing, but too often this investment isn’t in new local businesses, it’s simply about grafting a globally mobile business to the local economy for a while, usually as a result of some kind of sweetener (a tax break, a public private investment, etc).  It’s a ‘quick fix’, injecting money into the economy quickly (perhaps most importantly, within the time frame of a politician’s tenure), but when viewed at a macro scale it’s also very much a temporary one which can be pulled out at almost any time.

Global companies don’t even hide their temporary commitment; in fact, quite the opposite – they are always exploiting this to lobby governments into making changes which favour them, the line is usually “You’re dependent on us now, so you’d better keep things attractive for us (subtext: at the expense of others if necessary), or we walk.”. You see this all the time – the shrinking of the UK games industry because the UK doesn’t  have tax breaks like Canada, and here in my local jurisdiction the introduction of a tax regime which shifts the tax burden to ordinary people and away from companies in order to appease the financial services industry. In the end, being so dependent on such fickle and demanding ‘friends’ is not the greatest of strategies. At times, it can almost be a protection racket – “Nice economy you’ve got here, it would be a shame if something happened to it” (see this Monty Python sketch).

Every economy needs a bedrock of locally-driven, independent entrepreneurship, made up of of people who do business in that economy because they want to, or because it’s their home, not because someone bribed them to bring their money here and are constantly looking for the next sweetener. There are countless success stories of businesses that went global from a local, organic base, such as Ben and Jerry’s and Specsavers, and these companies have kept their attachment to their origins. Such businesses are ‘stickier’ and less fickle, and I’m willing to bet they require only a tiny fraction of the overall cost (once you count tax breaks, subsidies, and other policy changes / deals) to attract and retain than an equivalently sized global player. It takes more time to get there, but when it does, it’s far less likely to be going anywhere.

I’m not suggesting that we somehow cling on to protectionism, nor do I deny the benefits of globalisation. What I am saying is that in my experience, the balance of policy making is way off in favour of the global players at the expense of others. Maybe if politicians weren’t so easily impressed by financiers in expensive suits with their short-term promises of wealth injection, and learned instead to see the long-term sustainable potential in that garage-dwelling startup, they’d be better at not skewing the economic landscape towards the ‘floaters’ rather than the ‘stayers’.

It’s actually why I shake my head when I see people claiming that the UK needs tax breaks for games companies, to compete with Canada and other places. Personally, I think that even if you gave a tax break to the companies that are relocating away from the UK because of this, they’d just be asking for something else next year. Where does the bribery end? I think that games companies that only go where the tax breaks are, are probably not worth trying to hold on to. I sincerely hope that the talented people who are sadly left out of a job because of this are able to start up or join independent game businesses of their own, and dare I say are likely to be a damn sight more creative in that environment too. The UK games industry has lost much of its individuality in recent years, and who knows, this process might well regain some of that.

So I guess my main point is that bribing and paying protection money is not a sustainable way to run an economy. Sounds obvious really?

Tags , , , , | Permalink | Comments (4)
Business Political

Trying to find the positive in a negative climate

January 30, 2009 – 12:17 pm

We all know that the economy is badly screwed. And this isn’t just some country-specific problem, it’s economic buggery on a global scale, thanks to the wonders of a joined-up international banking system run by people who thought they were a lot smarter than they actually were. “Gold rushes” always collapse eventually, it’s just that in this case the gold rush knew no national boundaries and when it ended, everyone is left with a hangover, even (or perhaps even especially) the people that didn’t benefit stratospherically from the good times.

It’s already getting ugly, and it’s going to get a lot worse.

Like a lot of people, I’m outraged with those that drove this particular bubble to such a bursting point; I’ve always been sensible financially – I only buy things I know I can afford, I make sure I have appropriate plans in the event of bad times, etc, and now I’m paying for other people’s folly anyway. I refused to participate in the Internet bubble in the late 90′s too, knowing full well that it was built on hype and lies – and despite offers to get involved in the booming sector, it just felt wrong to start jumping into something I knew would fall apart at any minute as soon as people woke up and smelled the coffee. Basically, if I wouldn’t invest money in something, I sure as hell wasn’t going to stand there and encourage others to do so, just because we might have a fun ride for a few months. It’s immoral. But, that’s exactly what the supposedly reputable banking sector has been doing for the past few years.

I was annoyed by the Intenet bubble too, that the sector I worked in was crippled for a while by people who didn’t (or refused to) acknowledge that what most of them were doing was total, unsustainable nonsense. The difference that time was that at least it was mostly confined to one sector, to the people that screwed up (although some of us also got dragged into it too). This time of course, everyone suffers.

But, the scale of the repercussions of the utter financial folly of the last few years may have one positive effect – to force people to consider the sustainability of what they do, and to hold others to account in the same way. Short-term thinking, get rich quick schemes, the dream of that ‘one big break’ – all these things are distractions, glittery diamonds dangled just out of your reach that more often than not simply lead you directly over a cliff. I personally think that if people put more thought into how they might positively contribute to the world around them in the long term (as well as making a living of course), and less about how they might be able to get on the cover of Forbes or Hello, or wangle the purchase of yet another unnecessary status symbol, they’d actually be much happier, and we’d all benefit.

The culture of worshipping celebrity, coveting great wealth, chasing the high life – it’s a mirage and entirely void of substance. The few that do make the transition to that kind of life (especially in the public eye) often turn into emotional train-wrecks along the way anyway, so quite why this is a laudable goal is beyond me. Better to aim for real, practical and substantial goals – such as a decent living,  being happy, and preferably doing something with your life that you can feel content with (or even proud of), in a way that doesn’t require that you put a monetary figure on it before you can justify the time you spent doing it.

Maybe facing the reality of the folly that caused this economic recession/depression will trigger some people to reassess their priorities a little. If not, then it’s all been for nothing, and the only legacy will be a small bunch of people having gotten rich on the back of crippling the rest of the world for years afterwards, and the whole thing will be repeated in a decade or so once everyone’s forgotten. I’d rather not think that’s the end result.

Tags , , , | Permalink | Comments (11)
Business Personal Tech

2009 Predictions for the IT business

December 28, 2008 – 9:17 pm

So, 2008 is almost done and 2009 rapidly hoves into view. I thought I’d share a few of my predictions for the next 12 months, on the frankly dubious assumption that anyone on the Internet actually cares what I think. Specifically, I thought I’d talk about some IT business topics, since that’s what my mind is largely focused on when it comes to trying to figure out what’s going to happen next. We all know that the economy is well and truly wedged in the toilet, and is likely to slide further round the U-bend as the Christmas period recedes behind us and cold, harsh reality clamps its jaws around our unmentionables. Predicting that isn’t anything exciting – it’s obvious to everyone.

But what about the details? Here’s a few predictions I’ve been pondering about over the last few days.

  1. The ‘Web 2.0′ hype bubble will finally burst. Investors will cease to blindly invest in everything with ‘social networking’ in the title and start asking where the returns are. The multitude of sites that have assumed that so long as they’re trendy & popular, they can figure out a business model later, will find that just about everyone will lose patience with them in 2009, and the easy answer of ‘advertising’ won’t be enough as ad revenues continue to free-fall. I predict that an awful lot of these sites will fail to find an independent business model, and sometime in 2009 (or 2010 if they’re lucky) will be begging to be acquired by a larger company that can use them as a means to an end, or as crowd pleasing ‘fluff’ around something with a real business model. It will be a buyer’s market, and the stratospheric valuations in 2006/7 will be reduced to a fraction of that in the cold light of day. A few might discover a viable model independently, but probably not without offending some of their users, who have come to expect everything for free.  But then, since investors won’t be clamouring to fund new sites for these people to hop over to anymore, they probably won’t have anywhere obvious to go. The dream world of completely free everything on the Internet funded by advertising that doesn’t get in your face very much will slowly die, leading to more premium subscription models, micro-payment models and much more obvious ads.
  2. Open source use will receive a boost. Obviously when money’s tight, you look for the cheapest option and as such open source will continue to get more attention. Not just because of the lack of an initial license fee, but because it hands more control back to the customer, rather than the traditional model of the supplier keeping it all to themselves, and calling all the shots when it comes to upgrades etc. In addition, companies that use open source foundations to make their own premium products or services will find that open source continues to offer them more freedom to explore business opportunities, without being dependent on a supplier that may pull the rug out from under them, or even become a competitor in the future.
    Despite this, I still don’t foresee that much growth in the desktop Linux market. Ubuntu continues to make progress there, but I still don’t think it’s that attractive to the general public. Despite making lots of improvements, it’s still more tricky to look after than either Windows or OS X, and I personally am still nowhere near recommending it to non-technical family members. It’s probably no more difficult to switch to for general home use, when it works, but things like device compatibility and what you can do when things go wrong still requires far too much involvement from traditional geek circles. Still one for the enthusiasts rather than the uninterested general public IMO.
    Server-side though, I see lots of possibilities. Cloud-based hosting services are still in their infancy, and I believe there’s a lot of untapped potential there, from both businesses of all sizes and from general consumers. The Internet as a storage space and processing centre has a massive amount of growth still in it, and open source is perfectly placed to be at the centre of that – both because open source already runs most of the Internet anyway, and because the nature of it encourages collaboration, data exchange, and perhaps most importantly, trust. I think virtualised capacity in the cloud will continue to expand & mature in 2009 and well beyond.
  3. Microsoft will continue to do well. Despite open source’s growth, Microsoft isn’t going anywhere soon and will continue to prosper, particularly with existing customers. Not only  will they continue to recognise that customers see benefits in open source, and try to respond to that (like including jQuery in Visual Studio), but they are very good at delivering value and driving down prices, and they will benefit from budget-constrained conservatism in existing customer sites. As a cash-rich company, they have significant room to provide price incentives, and they have proven themselves capable of providing value in a number of core business areas. While I think open source will continue to gain traction in companies that make software, and at companies with a more technical bent or who are starting up and looking to break moulds, companies that mostly use software as a means to a different end, and particularly those that already use Microsoft software are unlikely to risk change in this climate. When budgets are being heavily cut, provided Microsoft can come in with some good deals for products / tech that the business already uses, that will probably be more attractive to that business than risking a migration away from Microsoft, even if doing so has some potential for long-term benefit. For a couple of years, budget horizons are going to be shorter and therefore any projects that deliver long-term rather than short-term benefits are likely to be put on ice, which will undoubtedly work in Microsoft’s favour, particularly with their existing installed base. Also, with headcounts reducing, software which requires more up-front cost but is easier to manage (requiring less expensive technicians) will continue to be attractive. Again, this still applies mostly within their established product lines – Windows, Office, Sharepoint – the more a company needs to stray outside this core, the less likely MS is to be such an obvious choice.
    Whether Windows 7 will make it out in 2009, and whether people will care is very hard to tell at this stage. Vista showed Microsoft that people are willing to step off their upgrade treadmill if they feel the product isn’t giving them something compelling. In theory there’s still some pent-up demand from people who skipped Vista, but that’s not guaranteed to be released unless Windows 7 delivers something tangibly desirable. So far, I’m not seeing much that says ‘buy me’, unless it’s somehow combined with a touch-sensitive device or something. Frankly, I just don’t think people care about operating system upgrades very much anymore, it’s what they can do with an entire device that matters most.
  4. Apple will continue to do well. Even though they make products that are generally expensive, what differentiates Apple from say Microsoft is that they make products that tend to work well as a complete package, and that people aspire to own. People don’t buy Apple because they feel they have to, to be compatible with X, or because that’s company policy, or because the upgrade cycle told them to. They tend to buy Apple because they want the product. As we all know, when you desire something you tend to find a way to obtain it, and are much less likely to be discouraged by extraneous circumstances compared to something that you have little emotional investment in purchasing. While the economy will undoubtedly hurt Apple’s sales like everyone else’s, I think the desirability of Apple products will make them more resilient than most. In addition, offices, long a bastion of Microsoft, seem to be becoming more open to Macs these days, no doubt assisted by the iPhone. Apple is in no danger of overtaking Microsoft yet, but the days of business people ruling out Apple products as just for graphic designers and hippies seem to be firmly in the past.
  5. Contractors will find it particularly difficult. Obviously as headcounts get reduced, contractors tend to get cut first since there are no redundancy complications to worry about. While I have a number of jobs at various stages of the pipeline right now, I’m expecting things to slow down in the next few months and to become less predictable. In a way I don’t mind so much, since I plan to invest any additional free time in R&D / product development for when the market picks up again. When the immediately paying work is there, you tend to take it since you don’t know when the next job will come along, but in fact investing in your own IP can be more important for the longer term. Provided you have the financial flexibility to keep going while the external sources dry up a little (and having been ruthlessly prudent, I’m lucky enough to have that option, for a while), it’s possible to come out the other end in a stronger position than if you’d just contracted on other people’s projects the whole time. That’s my glass-is-half-full perspective anyway :)
  6. Some SaaS vendors will have problems. “Software as a Service” is a nice idea that sometimes works, particularly in high-margin businesses or where you can exploit leverage the development investment of others (e.g. resellers / deployers of open source software who don’t contribute to the core project). When you need an on-demand service that can be throttled depending on your needs, it is efficient and serves customers well, as well as allowing some vendors to get a foothold in markets otherwise dominated by incumbents. However, the thing about services is that they can also be cut quicker than product investments when you’re trimming costs. Product models load the sales revenue at the start of the customer relationship, when they’re expanding, and that’s non-refundable. Service models amortise that revenue across many months or years, and assume that the costs of signing that customer up will be recouped over the period of time they are with you – eventually of course equalling or exceeding the amount of revenue generated from a product sale. This means that losing a customer, or having them scale back, can lose you more revenue quickly – essentially it’s a model that reacts much faster to a changing situation, so you can’t build a buffer up from the good times so easily to last you through the bad times. The counter argument is that since services are more scalable, customers may still at least continue to spend at some level, rather than cutting completely. I think when you add it all up, the surpluses in product models will exceed those from service models in a volatile environment. Thus, I think some areas of the SaaS market are at greater exposure in a downturn, exacerbated by the fact that they’ve never had to deal with one yet. I think we’ll know a lot more about the practicalities of SaaS models by the end of 2009, particularly which ones are the most resilient.
  7. The traditional PC hardware business will continue to stagnate. Personally, I wouldn’t put any bets on lots of people clamouring for faster CPUs or GPUs in the next 18 months. Enthusiasts will still love them, but I think that for the general public, machines have become ‘fast enough’ for what they need, and they’re much more interested in hardware with a different focus – such as sub-notebooks and smart phones. Dx11 will largely follow the Dx10 trend and be very interesting, but will be mostly of marginal practical importance – optional extensions to mass-market applications, and a prerequisite only for specialist applications where hardware & software requirements are predetermined. Dx10 adoption was even slower than my relatively pessimistic predictions; despite having some nice features, the (artificial) Vista prerequisite and upgrade requirements made it a hard sell (and as expected, a plethora of underpowered cards that supported it on paper but were basically unusable in any practical sense muddied the waters still further). Dx11 will benefit from the fact that more time has passed, and that it works on 2 operating systems (Vista and Windows 7, assuming people start adopting one or the other in greater numbers), but that advantage may well be wiped out by the weaker economy.
    In general, I think the time has passed when the general public were onboard with demanding new & faster machines because their operating systems are getting more complicated & demanding. The only areas where I see some headroom still remaining (excluding hardcore gaming here, since it’s a minority) are in interfaces – touch, speech, image recognition, automation, trend analysis and prediction. And even then, I think people are more interested in seeing those applied to their portable devices than their desktops.
    I do however see potential for much consolidation, where tech that was previously only present in hardcore machines is now far more widespread. You can still create some great looking content with a Dx9-class machine, and the benefit is that now, lots more people have them – in fact cheaper consumer cards sold as Dx10 class are often much better applied to Dx9 class applications, where they can actually perform acceptably. I forsee a lot of potential in bringing high-quality, if not cutting-edge, content to a much broader audience.

That’s the way I see things going anyhow. It’s looking fairly bleak in a great many respects, but there are always opportunities to be found even in the worst of circumstances. At the least, there’s nothing like a good shake-up to really separate the wheat from the chaff.

Tags , , | Permalink | Comments (7)
Business Open Source

What does a recession mean for open source?

October 23, 2008 – 12:00 pm

Like most people I’ve been following the current economic news with a mixture of morbid entertainment and mild trepidation. I’m not likely to be out of a job soon (my employer and I are on very good terms), but inevitably my work is part of the global economy, so I can’t expect to be completely unaffected.

There are a few interesting lines of thought in the blogosphere that I thought I’d share with you. Open source and related business models weren’t really around in any great quantity during the last big recession, so what precisely will happen in this area is subject to some speculation.

A Boon?

On the one hand, there’s the argument that when money is tight, companies will be more likely to investigate less high-profile, cheaper alternatives to the usual IT purchasing they do, which actually means that open source software actually stands to do better. In the good times, it’s easy to justify buying the majority of your technology from one very large vendor (Oracle, Microsoft, IBM etc) because it’s ‘easy’ – everything has a better chance of working together out of the box, you can expect common terminlogy and tools, that kind of thing. However, when funds get tight, people inevitably start examining all these things in much greater detail than they did before, searching for a budget to cut. There is an argument that says that staff are the most costly resource, and therefore if a suite of technology is familiar and easy (but more expensive), those costs will be recovered in staff efficiencies. However, there’s a problem with this argument – even if you accept that expensive proprietary software is easier to use than open source software, which is not always the case, savings in staff efficiency are non-tangible, compared to licensing and annual support costs which are very much tangible. Cashflow is also a big deal in almost any company, and the open source model of ‘use now, pay later (maybe)’  is highly attractive. And, when it comes down to it and your CIO needs to cut the budget, I’m sure you’d rather he/she cut the license/support contract expenditure rather than your job. That also makes sense for companies too – when the recession ends re-skilling is a pain in the ass, it’s much better to hang on to your good staff and save money elsewhere.

So in fact open source projects and the companies that provide products and services around them may actually be one of the few winners in a downturn. That’s certainly the impression I’m getting from bigger open source companies, and in fact even I have seen a modest upturn in business in the last month. It’s too early to tell whether this is a trend or just a coincidence, but I can hope.

A Drought?

Another opinion is that as the economy gets tougher, and people start to lose their jobs, they will start becoming more ruthless about earning money, and will stop contributing so much for free to open source projects, and to other volunteer activities. This is the view put forward by Andrew Keen – that the culture of ‘free’ only works during a boom, and that that will affect numerous Web 2.0 companies, open source projects and user-contributed sites like Wikipedia.

Personally I think the trouble with Keen’s argument is that he fails to acknowledge the widely different types of ‘free’ contribution / project, and the wide array of motivators people have for being involved. I can definitely see that in a downturn, companies that have significant burn rates and are built on the ‘attract people by the million now, figure out how to pay for it later’ will finally have to undergo significant reality checks. I’m all for this – the days of companies like Facebook attracting stupendously highly capitalisations without having anything close to a viable business model should be finally over, and not a moment too soon. Twitter have announced that they’re going to ‘find’ a business model next year – right, good luck with that.

However, the viability of these money-pit Web 2.0 companies is a completely different matter to the more organic open source projects and companies out there. I’m sure those that have grown their communities gradually and sensibly, rather than on the back of some ‘get rich quick later’ scheme, will be entirely unaffected by an economic downturn, because the communities are made up of people who want to be there. Sure, there will be cases where a community member is there only because of their current job / project, and the demise of that may cause them to cease being involved, but I’m confident that’s not a huge number of people. And besides, those leaving because of economic conditions may well be compensated for by the people that lose their jobs using open source involvement as a good way to network, keep their skills sharp, and to build a portfolio / reference work which they can use when obtaining their next employment.

Overall, although a recession is never a good thing, I think open source and related businesses are in a position to come out of it stronger, rather than weaker. Open source is no longer a pipe-dream – I remember having an argument with my (then) boss in 2000 about the viability of running some core functions on Linux instead of spending money on more Windows servers (with the inherent upgrade requirements, licenses etc); his opinion at the time was that Linux and open source were always going to be amateur and not ready for prime-time, and that the only sensible option was to buy into more Microsoft tech. He thought I was crazy to suggest that something non-proprietary might be viable for business – I challenged him that in 5 years he’d be proven wrong, and I kinda wonder whether he ever acknowledged that I had a point. There are many real, viable options in open source, and even Microsoft acknowledges this now, despite years of ranting and FUD about it from their blustering executives. When we come out of this recession, I think the scales will have tipped even further towards open source as a core component in the IT strategy of many companies.

Tags , , | Permalink | Comments (11)
Business Political Travel

Exchange rate gambling: I win for a change!

September 3, 2008 – 9:32 pm

One of the problems with doing most of your business internationally is that you’re at the mercy of currency exchange rates, with the ever-present possibility of losing money just because the market changed. In the last couple of years the Pound has steadily got stronger against the Dollar, meaning it’s not a case of whether I lose, but rather how much. It has also meant that for new work I either have to stick to my Pound rates and risk being less competitive, or just accept a lower & ever-depreciating Dollar rate in order to secure the work.

Over the last month though, things have suddenly changed. The UK housing market is in free-fall, and most recently the Chancellor gave a rather unexpectedly candid interview in which he basically admitted that the UK economy is up a certain creek without a certain paddling device. Nice of him to be honest about it, but the markets aren’t used to such lack of spin and reacted quite badly (being as they are twitchy, caffeine-overdosed sheep suffering from chronic panic attacks) – and promptly leaped off a metaphorical cliff, as did the exchange rate. Perhaps the Chancellor’s honesty is attributable to those eyebrows – I’m guessing they make bluffing considerably more difficult :)

Lots of people are now lamenting on the news & talk panels about how this will affect the price of imports, but there’s never a shortage of people to go on these programs declaring that we’re all doomed and we might as well throw ourselves under the next passing bus. Personally I find it rather ridiculous because these are the same people that were lamenting when the rate went up in the first place, because it would cripple all the exporters in Britain (and we might as well throw ourselv….you get the idea).

Personally, I’m glad – the Pound/Dollar rate has finally returned to about what it was when I went into full-time business in 2006 ($1.77 ish), having dropped over 10% in a month. I wouldn’t mind if it dropped a bit lower – I was quite happy when it was about 1.6 personally. Sure I’ll pay more if I buy something from the States, but far more money comes in my direction from there than the other way around.

So, to the Chancellor: thank you, Darling! ;)

Tags , , , | Permalink | Comments (3)