Digital Transformation Digest: Samsung Eyes IoT Data Monetization, Google's Native Ad-Blocker Emerges, the Fight to Save Flash, and More

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Chris Kanaracus is managing editor of Constellation Insights.  Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members.  Prior to joining Constellation, Kanaracus spent seven years covering the enterprise software industry for IDG News Service, where he frequently broke exclusive stories with a focus on end-customer issues. Kanaracus has also held various managerial and reporting roles at newspapers in New England since 1998. Twitter: @chriskanaracus , Title: Big IdeasConstellation Insights Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members. ...

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Samsung wants to turn IoT data into money: In 2015, Samsung launched ARTIK, its entry into the IoT platform market. Now it is adding a layer to ARTIK that's aimed at helping IoT device makers generate revenue off the data they use. Here's the value proposition as stated in Samsung's announcement:

For device manufacturers, IoT shifts their operating model from selling hardware to selling hardware products connected to digital applications. Today, device manufacturers often have trouble recouping data costs associated with free applications and supporting an ecosystem of third-party devices, apps and services. Manufacturers have to either absorb the data costs of operating devices in the field, or factor in anticipated data costs to the retail price of devices.

Samsung ARTIK Cloud Monetization addresses this problem by providing a complete brokering, metering and payments system. It gives device manufacturers an easy way to make their devices interoperable with third-party devices and applications, and monetize data useage. With the Samsung ARTIK Cloud developer portal, device manufacturers have the flexibility to define service plans that meet their business needs. Samsung ARTIK Cloud brokers and meters user interactions against the defined plan, and manages upgrades, payments and revenue share back to the device OEM.

Some may quibble with Samsung's description of the service as the first of its kind, but it undeniably targets a legitimate pain point for IoT device makers.

Samsung's announcement fits into one of the four business models for IoT defined by Constellation VP and principal analyst Andy Mulholland—that of a broker. "Owners of endpoints and consumers of data in ecosystems from smart cities to transportation and alike need a middle broker who interconnects and charges," he says. "There are a host of services around categorization and context for the endpoint, as well as charging, that need to be provided. Given that Korea is one of the hottest spots for smart cities and ecosystems it would seem logical that Samsung ride their homemarket to bring this role into play. But western markets are not so advanced as to immediately be able to make use of this."

Google's native Chrome Ad-Blocker surfaces: Last month, news emerged that Google was developing a native ad-blocker for its Chrome browser. It seemed counterintuitive at first given how much Google depends on web advertising for revenue, but the idea is to block annoying ads and ultimately stop them from getting produced at all. 

Now the tool has shown up in Canary, the pre-release version of Chrome for Android, as Techcrunch notes. Google is planning to make the tool generally available sometime next year, according to previous reports.

Google has joined up with the industry group Coalition for Better Ads, a group with members including Facebook, Unilever, Proctor & Gamble, Thomson Reuters and the World Federation of Advertisers. The CBA is fighting against a dozen types of desktop and mobile ads, including auto-playing video ads with sound, large sticky ads and full-screen scrollover ads.

POV: There are already effective ad-blocking extensions for Chrome and other browsers, but marketers and advertisers should take Google's move seriously, as Chrome commands more than 60 percent of the browser market. Users who haven't installed third-party ad blockers might feel more comfortable doing so with a native tool option.

Digital transfomation keeping some tech jobs back to U.S.: The New York Times took a look at the trend toward U.S. companies looking to onshore outsourcing companies for forward-thinking IT projects. While the piece's evidence is partly anecdotal, there are plenty of interesting nuggets, such as this one:

Monty Hamilton, a former Accenture consultant, took over Rural Sourcing in 2009, when it had just a dozen employees. Today, the company has 300 workers in four delivery centers: in Albuquerque; Augusta, Ga.; Jonesboro, Ark.; and Mobile, Ala. The payroll will reach about 400 people by the end of the year, Mr. Hamilton said.

“Every business now realizes it’s a digital business,” he said. “They need technical help, and that’s really driven the demand for our U.S.-based talent.”

As the NYT notes, massive offshoring players IBM and Infosys recently announced plans to hire an additional 35,000 workers in total over the next few years.

POV: There's no indication offshoring is in any great peril, given the amount of legacy systems that still need maintenance, preferably at a low cost. But the trend outlined in the story is for real, and as such enterprises undergoing digital transformation should shape their talent procurement strategies accordingly.

Legacy watch: Petitioners hope to save Adobe Flash from extinction: Adobe's long-standing but not-exactly-loved Flash multimedia player is set to be retired, but will live on in another form if backers of a new petition on Github have their way. The solution is for Adobe to open-source Flash and the related Shockwave application builder, which would be right thing to do, the petitioners say:

Flash along with its sister project Shockwave is an important piece of Internet history and killing Flash and Shockwave means future generations can't access the past. Games, experiments and websites would be forgotten.

Open sourcing Flash and the Shockwave spec would be a good solution to keep Flash and Shockwave projects alive safely for archive reasons. Don't know how, but that's the beauty of open source: you never know what will come up after you go open source!

We understand that there can be licensed components you might not be able to release. Simply leave them out with a note explaining what was removed. We will either bypass them, or replace them with open source alternatives.

POV: It's not clear how successful the petition will be, but there's certainly ample precedent of vendors releasing discarded proprietary code as open-source. That said, Flash usage has dropped substantially over the past few years as newer options such as HTML5 took hold, so there's the question of demand going forward. Moreover, Flash was notoriously buggy and insecure—could a fledgling open-source community do better than Adobe at issuing fixes and shoring up Flash's security? It might be best to let Flash just fade away, but if you want to sign the petition, go here.

 

Digital Transformation Digest: Amazon's Cloud Growth, Starbucks' Spins Its 'Digital Flywheel,' and More

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Chris Kanaracus is managing editor of Constellation Insights.  Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members.  Prior to joining Constellation, Kanaracus spent seven years covering the enterprise software industry for IDG News Service, where he frequently broke exclusive stories with a focus on end-customer issues. Kanaracus has also held various managerial and reporting roles at newspapers in New England since 1998. Twitter: @chriskanaracus , Title: Big IdeasConstellation Insights Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members. ...

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Inside the numbers for Amazon Web Services' Q2: Amazon reported second-quarter earnings this week, and as part of it said revenue for the Amazon Web Services segment had jumped 42 percent to $4.1 billion. At the same time, Amazon ramped up spending on AWS infrastructure in the quarter dramatically, spending $8.1 billion on property acquired through capital leases, up 71 percent year-over-year from $6.7 billion. On a conference call, Amazon CFO Brian Olsavsky touched upon the AWS results:

Our usage in all of our large services are actually accelerating and they're growing at a rate higher than our revenue growth. ... We continue to open new regions. We'll be opening five regions in the near future in France, China, Sweden, Hong Kong and a second government cloud region in the East. So, yes, we like the momentum in that business. Stepping back, I would say that while pricing is important, again, we're generally being selected because of our functionality and pace of innovation, the innovation keeps accelerating.

AWS has been continuing to roll out pricing cuts and new services, and these are having an effect on the bottom line, he added:

We've had numerous price decreases, and we continue to have that in the AWS business, both absolute decreases in service costs and also rolling out new services that may be cannibalizing more expensive other services that we provide.

POV: By any reasonable measure, the AWS results are strong. But nor is AWS running away with the market; Microsoft last week reported that Azure revenue had nearly doubled in its second quarter. While Azure is working with a smaller revenue base than AWS, making it easier to post such big numbers, the growth is telling and impressive.

What's important to note is that in the cloud arms race, the weapons vendors are honing in general are good for customers: Richer features, lower costs, better reliability and broader availability. That being said, lock-in remains a key concern, and Constellation believes most enterprises will end up with a multi-cloud strategy, whether they realize it now or not.

Whitman shoots down Uber rumors: HPE CEO Meg Whitman is not moving into the top slot at embattled ridesharing startup Uber, she said in a number of Tweets. Bloomberg had reported Whitman was on the short list to fill the job, which was vacated by Uber founder Travis Kalanick earlier this year following a series of scandals.

“Normally, I do not comment on rumors, but the speculation about my future and Uber has become a distraction,” Witman tweeted. “I am fully committed to HPE and plan to remain the company’s CEO. We have a lot of work still to do at HPE and I am not going anywhere.”

POV: Other big names are now circulating as potential Uber CEOs, including outgoing General Electric CEO Jeffrey Immelt. Uber has plenty of work to do and its board should deliberately carefully before making a choice. Enterprise IT and Uber aren't often said in the same breath, but for all its faults, the company has been a true industry disruptor and its fate is worth watching closely.

Starbucks heats up its 'digital flywheel' strategy: Coffee and tea giant Starbucks has seen its business ebb and flow over the years—one example is its decision to shutter nearly 400 mall-based Teavana stores—and is betting that a broad digital transformation of both its internal IT and ongoing relationship with customers is the way to long-term success. The company first outlined its "digital flywheel" plan in December, and on its Q3 earnings call this week global chief strategy officer Matthew Ryan gave an update on its plans.

A big part of it is about driving customer loyalty. For example, Starbucks now has 13.3 million rewards program members who account for 36 percent of its U.S. business, Ryan said. There are four segments to the digital flywheel: gaining new customers, spending-based rewards, personalized offers and easier ways to order:

The data are clear that when we acquire a new customer, the act of signing up for a digital relationship results in a sudden and sustained lift in spend, as measured by careful pre/post tracking. That's how we're able to drive so much value from a relatively small portion of customers.

Starbucks Rewards are highly motivating and the conversion to a spend-based program has resulted in a clear lift in member spend. Third, personalization, in which we target specific messages and offers to individual customers based upon their history with us, has proven highly effective, as evidenced by test and control measurements in spend per member. Fourth, mobile ordering remained highly incremental, resulting in many more occasions per customer than would be the case otherwise because the convenience encourages more on-the-go visits.

In addition to our long-term digital technology roadmap, we continue to innovate in the short term around our newer technology platforms. We are expanding personalization by offering new offer constructs, real-time triggers and push notifications to engage customers more deeply, building on the momentum that is generating the higher spend per member.

Ryan had a lot more to say about Starbucks plans; a transcript is available here (login required).

POV: Retail is a game that gets tougher all the time, but Starbucks future plans are ambitious and it's aleady been an early mover in customer engagement practices that lead to increased spend. There's something many enterprises can learn from its strategic direction.

Digital Transformation Digest: Slack Off the Block, Whitman to Uber? And More

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Chris Kanaracus is managing editor of Constellation Insights.  Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members.  Prior to joining Constellation, Kanaracus spent seven years covering the enterprise software industry for IDG News Service, where he frequently broke exclusive stories with a focus on end-customer issues. Kanaracus has also held various managerial and reporting roles at newspapers in New England since 1998. Twitter: @chriskanaracus , Title: Big IdeasConstellation Insights Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members. ...

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Slack off Amazon's shopping list?: Last month, Bloomberg reported that Amazon was contemplating an acquisition of group messaging platform Slack for up to $9 billion. Now the wire service is back with a new report, also citing anonymous sources, stating that Slack is raising a $250 million funding round, and that acquisition talks "have cooled in recent weeks."

POV: While Slack has five million daily active users, it only launched its enterprise edition in January. But Slack maintains that it has brought a mature initial product to market that's ready to serve large companies at scale. Slack integrates with Microsoft's Office platform but also competes with Redmond's Teams product. Would it make sense as part of Amazon? Constellation VP and principal analyst Alan Lepofsky explores that question right here.

Whitman taking the wheel at Uber?: From the "didn't see that one coming" department, Bloomberg is also reporting that Hewlett-Packard Enterprise chief Meg Whitman is on the short list of candidates to fill the empty CEO slot at embattled ridesharing company Uber. An HPE spokesman told Bloomberg that Whitman is "fully committed to HPE and plans to stay with the company until her work is done."

POV: Whitman would be an ideal CEO for Uber on a number of fronts. She's a highly seasoned and senior tech executive who has led major corporate transitions, namely the 2015 split of HP into two separate companies. (However, opinions vary greatly on how well that transition has gone.) Whitman is also politically well-connected, something Uber needs as it fights regulatory battles.

In addition, Whitman is a woman. Uber founder Travis Kalanick stepped down earlier this year, with the final straw being revelations about a pervasively sexist environment at the company. Whitman is respected for far more than her gender, of course, but Uber's pledge to change its culture would carry more weight with somebody of her stature at the helm.

Will Whitman go? The HPE spokesman's quote really doesn't rule anything out. Committments don't have to last forever and Whitman may have already decided her "work is done" there. She has also chosen this week to announce her departure from HP's board of directors.

Facebook adds more business features to Messenger: Chatbots are becoming table stakes for any company's sales, marketing and support business, particularly in the B2C arena. To that end, Facebook is adding a series of new features to its Messenger Platform focused on delivering more useful and intelligent chatbots. Here are the key details from a Facebook blog post announcing Messenger 2.1:

Built-in NLP to enhance automated conversations: This is a simple way for developers to incorporate NLP into their bots. When Built-in NLP is enabled it automatically detects meaning and information in the text of messages that a user sends, before it gets passed to the bot. This first version can detect the following entities: hello, bye, thanks, date & time, location, amount of money, phone number, email and a URL. This is the first step in bringing NLP capabilities to all developers, enabling brands to scale their experiences on Messenger.

Other important new features include improved support for payments, additional "call to action" buttons—including Shop Now and Get Support—developers can use on pages. Facebook's blog post goes into more detail.

POV: Facebook is still in the early stages of monetizing Messenger, currently serving up ads to small numbers of users, CEO Mark Zuckerberg said on the company's Q2 earnings call this week. There's a longer-term strategy in place, he added:

The biggest strategic thing that we really need to do in messaging right now is make it so that people organically interact with businesses and that that is a good interaction both for people and for the businesses.

If you're a business and you have a higher ROI for interacting with a person in your messaging thread than you do on the mobile web or trying to get them to install an app, then that creates this positive feedback loop, where you're going to point your ads towards the Messenger thread. You're going to invest more of your engineering resources in building out the content and experience on the Messenger thread.

POV: Zuckerberg and other executives fielded a slew of questions from analysts about Messenger monetization on the call. Again and again, they painted a similar response: Facebook will take its time figuring out how to make money on Messenger while also pleasing users in the process. It's a good way to go but how Facebook executes the strategy will be something to watch.

Adobe adds more AI to Target: We hear the phrase a lot—mass personalization at scale. That's what Adobe is attempting to deliver with an update to Target, the ad-targeting engine derived from the acquistion of Omniture. For one thing, brands will now be able to add their own algorithms and data models to Target. Adobe is also integrating Target with its Sensei machine learning and AI framework.

What kind of personalization? Adobe's announcement gives the example of a hotel chain using Target to deliver offers to reward members based on the fact it knows the customer has a track record of traveling to warm places.

POV: "Marketers have been challenged with segmentation and the one-click personalization with be a welcomed feature," says Constellation VP and principal analyst Cindy Zhou.

Legacy watch: Mega-bucks government IT system holding data hostage: A $364 million computer system that is supposed to run Rhode Island public assistance services is unable to furnish federally-mandated quality control reports for its food stamp program. While it's just a threat for now, the feds say continued noncompliance could lead to "suspensions/disallowance" of federal dollars, as the Providence Journal-Bulletin reports.

Specifically, the system can't separate out food stamp information from other public-assistance data. It was launched last year despite protests from federal officials that it wasn't ready—calls that were apparently all too prescient. Other hiccups with the system have led to what was at one point a backlong of 14,000 pending applications for benefits.

POV: System failures and government IT projects unfortunately are phrases often said in the same sentence. This is the largest IT project in the state's history and to say its rollout wasn't executed well is an understatement. The question now is how quickly the state can stabilize it, and just as importantly, determine accountability for its shortcomings.