Digital Transformation Digest:T-Mobile's New IoT Play, SAP Keeps the On-Premises Flame Burning, Ford Drives Further into Smart Cities

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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T-Mobile goes narrow, but aims big with new IoT play: Self-styled "uncarrier" T-Mobile is staking a big flag in IoT (Internet of Things) with Magenta, a narrowband network that at $6 per device per year, drastically undercuts that of Verizon's comparable offering for IoT devices:

At one tenth the cost of Verizon’s Cat-M plans ...T-Mobile’s new NB-IoT plan takes advantage of narrowband technology, and the efficiency it provides, to significantly lower the costs of connecting things and unleash the next wave of IoT innovation.
 
T-Mobile’s new NB-IoT plan lights up new capabilities to connect massive numbers of devices with small and steady streams of data at low cost. NB-IoT is much more affordable than Cat-M and is already the globally-preferred standard to power the rapidly expanding world of IoT applications. Because it can operate in guard bands – the network equivalent of driving down the shoulders on the highway -- NB-IoT carries data with greater efficiency and performance and doesn’t compete with other data traffic for network resources.

POV: T-Mobile made the announcement in conjunction with the Consumer Electronics Show, ongoing this week in Las Vegas. It's a splashy move to say the least and is clearly T-Mobile's biggest bid for enterprise business to date. It's worth nothing that the $6 pricing model is on a limited-time basis, but T-Mobile can deliver adequate performance at even two or three times that much money, the network should gain traction quickly. It could also help drive down pricing on IoT networking from other carriers, particularly Verizon. Overall, the market seems set to gain a viable new option, which is always good for customers and competition.

SAP plans new on-premises HCM app: Like all enterprise software vendors, SAP has been pouring resources into building out a cloud application portfolio. But the reality is that many of its customers will keep large parts of their application footprint on-premises for the foreseeable future. SAP has acknowledged that reality in a new announcement about its HCM (human capital management) software strategy.

Nearly six years ago, SAP acquired SuccessFactors, providing our customers with the best cloud-based human capital management (HCM) solutions on the market. Since then, the number of customers using SAP SuccessFactors solutions has nearly quadrupled, and we continue to see increasing momentum toward the cloud for HCM globally and across all industries.

Our investment strategy follows this market demand, with the bulk of the planned innovations for our HCM portfolio focused on SAP SuccessFactors solutions.

However, SAP is also developing a new on-premises HCM application that is comparable in scope to the existing one, with availabilty in 2023 and support extended through at least 2030. SAP will offer a license conversion program, the details of which have yet to be completed.

POV: SAP competitors may seize upon the announcement as somehow evidence of SuccessFactors' inferiority, but the reality is a bit more complicated. The vendor's customer base is deeply rooted in some of the world's most conservative industries and it's not surprising that there's enough demand for a new on-premises HCM application. To that end, SAP is essentially obligated to provide new innovations to customers that have dutifully paid annual maintenance fees, but still have no inclination to move to the cloud.

Ford launches smart cities push with Autonomic: Automaker Ford is teaming up with a startup called Autonomic to shape a new vision for smart, connected cities. The companies see data from autonomous vehicles, bicycles and next-generation public transportation as a crucial wellspring of insight into how future cities will live and breathe, but at the same time, a difficult matter to wrangle. Here are the key details from a Ford blog post:

If we play our cards right, we can help allow for millions of people to move into cities and keep streets less congested, not more. We can connect people living in transit deserts to the city center for better jobs. We can manage our curbs better, remove parked and idling cars, and instead plant more trees and share fresh air with more in our community.

Building an ecosystem such as this requires the large-scale connection of bits of distinct data that flow from a variety of sources. And those sources — public transportation services, self-driving cars, cyclists and even infrastructure — will need to speak the same language and communicate with each other if we’re to realize the true potential of this type of ecosystem.

The first step along that path is to establish a platform that enables that kind of communication. That’s why Ford is working with Autonomic ... This platform can manage information flow and basic transactions between a variety of components in the transportation ecosystem — service providers, personal vehicles, bicycles, pedestrians, mass transit systems and city infrastructure, including traffic lights and parking locations.

POV: CES is a perennial place for brands to lay out ambitious technology strategies; Ford's partnership with Autonomic falls in line with that trend. Ford's plans are promising in their outlines. The company compared its planned collaboration with Autonomic as designed to build "a box of Legos" that can be snapped together to fit differing needs, not a monolithic, one-size-fits-all platform. This is the right approach given how much variety and complexity the world's cities contain. It will be interesting to see how their collaboration unfolds over the course of 2018.

Digital Transformation Digest: Starry Internet Eyes National Expansion, Macy's Digital Drive Continues, California Struggles to Launch Pot-Tracking System

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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Cindy Zhou

CMO
Level Access

Cindy Zhou is a practicing CMO.  Prviously, she was Vice President and Principal Analyst at Constellation Research covering Digital Marketing Transformation and Sales Effectiveness. With over 18 years of practitioner experience in corporate marketing, product marketing, product management, and sales operations, Zhou has spearheaded marketing transformation at multiple technology companies. She advised Constellation’s clients on strategies to light-up demand generation, prove revenue contribution, and maximize sales productivity. Prior to joining Constellation, Zhou was Global Senior Vice President of Marketing and Sales Operations at BackOffice Associates, a global provider of data quality and information governance solutions to the Fortune 1000 and SAP SolEx partner. Before…...

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Starry Internet eyes expansion in 2018: After a couple of years testing its unique wireless broadband service in the Boston area, Starry Internet is set to expand coverage to Los Angeles and Washington, D.C. in the near future, with plans for more than a dozen other major market additions over the course of the year. 

The company's service uses base stations mounted on rooftops that deliver Internet connections via high-frequency millimeter waves. Devices placed at and inside subscribers' homes capture the signals, convert them to lower frequencies and create a wifi network. Starry says it can offer 200MB broadband for $50 a month, a claim that has drawn its share of skepticism.

Company CEO Chet Kanojia is known for his previous startup, Aereo, which used antennas to capture and stream local TV channels. The company failed when the U.S. Supreme Court ruled its business model was in violation of the law.

POV: The notion of ultra-fast, affordable wireless Internet is a tantalizing one, particularly in light of the recent FCC vote overturning net neutrality laws. In fact, Starry has made net neutrality a centerpiece of its marketing efforts, saying it will never throttle customer data or block any websites. 

But there are serious challenges standing in its way. Any wireless network is at heart a real estate play; it's not trivial to site and build a cellular tower, particularly in expensive urban areas. Starry's infrastructure has a much smaller footprint, but its use of millimeter waves has drawbacks, namely a much shorter range than other technologies. If Starry is going to offer broadband at scale it will need to blanket urban areas with base stations, and each will require negotiations with building owners.

Then there is the question of how entrenched carriers will respond. If Starry's plans work out, they will not stand idly by. To that end, millimeter waves are hardly new or exclusive to Starry. While it has had a couple of years to develop special hardware and run limited beta tests, players with bigger resources pose a clear threat.

Ultimately, innovation in wireless broadband is a good thing, however. It will be interesting to see how the year unfolds for Starry.

Macy's digital drive still work in progress: Venerable department store chain Macy's reported that sales for the November-December holiday period rose 1.1 percent year-over-year, but at the same time announced plans to close 11 more stores, including one in downtown Miami. Four of the stores, including one in Los Angeles, had already been disclosed as slated for closure.

Macy's announced plans to close 100 locations in August 2016 and with the latest batch, will have completed 81 of of them. In total, the chain has shuttered 124 stores since 2015.

There are multiple store brands among Macy's holdings, including Bloomingdale's and Blue Mercury. Holiday sales were spurred by strong performance in areas such as fine jewelry, men's tailored clothing and high-end cosmetics.

Macy's CEO Jeff Gennette said in a statement that the company's store closings are all part of a bigger plan:

“Our primary focus in 2017 has been to continue the strong growth of digital and mobile, stabilize our brick & mortar business and set the foundation for future growth. We’ve made good progress on each, including encouraging trend improvements in our brick & mortar business. A healthy store base combined with robust digital capabilities is Macy’s recipe for success."

POV: Macy's results announcement doesn't mention it, but strong holiday sales on higher-ticket items was likely driven by the chain's Star Rewards loyalty program, which it overhauled prior to the holiday season. Macy's derives half of its annual revenue from the 10 percent of customers who spend at least $1,200 per year there. Those shoppers are now enrolled in the program's Platinum tier, which gives them 5 percent back plus free shipping. It's the brainchild of Gennette, who has been tasked with improving Macy's omnichannel strategy. This element, at least, seems to be working.

Still, Macy's has work yet to do. "They are not doing well with their digital strategy," says Constellation VP and principal analyst Cindy Zhou. "The emails are unfocused and it's challenging to find associates to help in-store. They need to focus more on personalized customer engagement and how to improve their digital-to-in-store experience."

California's marijuana-tracking system has yet to fire up: The Golden State is unfortunately notorious for a long string of wildly expensive, poorly executed government IT projects. The latest could end up being a system that is supposed to track recreational marijuana sales, now that the drug was legalized for that use on Jan. 1. Here are the key details from an Associated Press report:

California’s legal pot economy was supposed to operate under the umbrella of a vast computerized system to track marijuana from seed to storefronts, ensuring that plants are followed throughout the supply chain and don’t drift into the black market.

But recreational cannabis sales began this week without the computer system in use for pot businesses. Instead, they are being asked to document sales and transfers of pot manually, using paper invoices or shipping manifests. That raises the potential that an unknown amount of weed will continue slipping into the illicit market, as it has for years.

For the moment, “you are looking at pieces of paper and self-reporting. A lot of these regulations are not being enforced right now,” said Jerred Kiloh, a Los Angeles dispensary owner who heads the United Cannabis Business Association, an industry group.

POV: State officials say the system has been "implemented," but it's not clear when the necessary training dispensaries need on it will be complete, or when its use will be firmly mandated. Overall, the project has a number of moving pieces, a factor that can often lead to delays and overruns.

The voter referendum legalizing recreational marijuania in November 2016 also dictated that the state begin issuing licenses for it by Jan. 1. Several state agencies are involved in the regulatory process, and the licensing system will actually consist of two software platforms, one from Accela and another from Pegasystems. There are also multiple systems integrators working on the project. Finally, there is a track-and-trace system component, which hadn't even been procured as of last June.

California is banking on recreational marijuana generating substantial tax revenue, so getting the system up and running soon is paramount. But rushing its completion may only lead to more problems; this may be a case when mellowing out a bit is the best option for state officials.

Digital Transformation Digest: Amazon Eyes Alexa for Ad Revenue, Microsoft Acquires Avere for High-End Azure Workloads, 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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Amazon eyeing Alexa for digital ads: Some of the world's largest consumer goods companies have had discussions with Amazon about advertising and product placement through the Alexa voice assistant, according to a new report from CNBC. The companies reportedly include Proctor & Gamble and Clorox:

Some of the early discussions have centered on whether companies would pay for higher placement if a user searches for a product such as shampoo on the device, similar to how paid searches work in Google.

The move by Amazon, which right now does very little advertising on the Echo, could mean big things for consumer companies that are fretting their influence on a voice-powered shopping experience.

With Alexa's clout anticipated to rise, brands are worried about being left out of the voice-shopping platform entirely. Advertisers and brands are particularly focused on search placement on Alexa because shoppers are more likely to select a top result on a voice assistant than they are on the web, where it's easy to scroll down or ignore written suggestions.

POV: Right now, Amazon allows advertising on Alexa in a limited manner. For example, a podcast or streaming radio channel can have ads as long as the voice doesn't sound like Alexa, refer to Alexa or mimic its interactive style.

Amazon says it sold tens of millions of Echo devices over the holiday shopping season, and market estimates have it with nearly three-fourths of the voice assistant market overall. The number of third-party Alexa apps is also rising, with the total of Alexa skills reaching 25,000 last month. It's a large and rapidly growing target for advertising, particularly when combined with Amazon's rich trove of user data.

Therefore, it's a safe bet that advertising will soon be more pervasive on Alexa; the question will be how well Amazon manages the user experience and advertising policies going forward. In any case, CMOs should have a plan for voice assistant ads on their radar going into 2018.

This was bound to happen sooner or later, says Constellation VP and principal analyst Cindy Zhou. "If you look at the Amazon dash buttons, they are branded and I do see the potential ad revenue for Amazon with sponsored voice searches," she says. For example, if you say now "Alexa, what deals are available?" it reads off the different products exclusive to voice shopping, Zhou notes. "I imagine Amazon working these into the Alexa offers and providing a preferred position when reading out deals," she adds. "I can see brands bidding to be read first through third as most people lose patience, similar to reading only page one or two of search results."

Microsoft buys Avere to boost high-end Azure workloads: Redmond has made its first acquisition of the new year, and the target is hybrid and high-performance computing workloads for Azure. Microsoft is paying an undisclosed sum for Avere Systems, a Pittsburgh company focused on flash storage and advanced file systems.

Formed in 2008, Avere's products optimize on-premises storage installations while helping efficiently move HPC workloads to the cloud when they make financial and logistical sense. Customers include Sony Pictures, John Hopkins University, the Centers for Disease Control, the Library of Congress and Turner Broadcasting. Its CEO, Ron Bianchini, founded Spinnaker Networks, which was sold to NetApp for $300 million in 2003.

Avere has raised about $86 million in venture funding since its inception. Google participated in the most recent round, but it's unclear whether the acquisition was a competitive process between Microsoft and other players.

POV: It's interesting to note that Avere has existing partnerships with both Amazon Web Services and Google Cloud Platform; it's not clear what will become of those arrangements once the Microsoft deal is closed. Google actually named Avere its cloud platform partner of the year in 2015, and indications are that it's currently ahead of Microsoft in terms of integration with Avere's technology. Avere plays in a fairly crowded space, which suggests its technology stood particularly well to Microsoft, which had many choices.

Overall, Avere looks like a good complement to a previous HPC-related acquisition Microsoft made in August, of Cycle Computing. That company developed CycleCloud, a software platform for orchestrating and managing high-end computing jobs on the cloud. In a blog post, Microsoft noted that HPC is becoming relevant to many more industries in the past as they seek to take advantage of machine learning:

Whether it’s building animations and special effects for the next blockbuster movie or discovering new treatments for life-threatening diseases, the need for high-performance storage and the flexibility to store and process data where it makes the most sense for the business is critically important.

Avere also helps build out Microsoft's hybrid cloud play, which got a big boost last year with the release of Azure Stack, which allows companies to run the Azure software stack in their own datacenters. (Go here for Constellation VP and principal analyst Holger Mueller's take on Azure Stack.)

As for Avere, "the cloud is becoming vertical, and Microsoft buying a media specialist in Avere is a proof point," Mueller says. While Avere is specialized in media and specific file formats, it is a rather late move by Microsoft, given that much of the media and streaming content out there already sits on infrastructure," he adds."

Black hat hacker gifts IoT botnet code to the world: A hacker posted source code over the Christmas holiday for an IoT botnet that takes advantage of a weakness in Huawei routers, raising the specter of a new wave of crippling botnet attacks as the year begins.

Dubbed Satori, the malware is a variant of Mirai, the notorious botnet that took down some of the world's largest websites last year. The hacker posted the code to Pastebin, according to Ankit Anubhav, principal researcher at IoT device security vendor NewSkySecurity.

Check Point had discovered the vulnerability in December and reported it to Huawei, which has issued a fix. But the subsequent release of the code should result in it being exploited by "script kiddies and copy-paste botnet masters," Anubhav wrote.

The real problem is that IoT attacks "are becoming modular day by day," he added. "When an IoT exploit becomes freely available, it hardly takes much time for threat actors to up their arsenal and implement the exploit as one of the attack vectors in their botnet code."

POV: It remains to be seen how much impact Satori has going forward, but in general, the state of IoT device security remains woeful and shows little sign of broad improvement. The holiday season, during which many millions of new Internet-connected devices were purchased, has massively increased the attack surface. That situation and a lack of best security practices around IoT are a recipe for pain, if not disaster.

Digital Transformation Digest: Amazon and Salesforce's Move Away from Oracle, Adblocker War Heats Up, Tech Conferences to Watch

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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Holger Mueller

Vice President and Principal Analyst
Constellation Research

Holger Mueller is VP and Principal Analyst for Constellation Research for the fundamental enablers of the cloud, IaaS, PaaS and next generation Applications, with forays up the tech stack into BigData and Analytics, HR Tech, and sometimes SaaS. Holger provides strategy and counsel to key clients, including Chief Information Officers, Chief Technology Officers, Chief Product Officers, Chief HR Officers, investment analysts, venture capitalists, sell-side firms, and technology buyers.  Coverage Areas: Future of Work Tech Optimization & Innovation  Background: Before joining Constellation Research, Mueller was VP of Products for NorthgateArinso, a KKR company. There, he led the transformation of products to the cloud and laid the foundation for new Business Process as a…...

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Amazon, Salesforce reportedly moving off Oracle: The Oracle database lies at the core of untold numbers of applications and enterprise IT environments, including those at Amazon and Salesforce. But that reportedly may not be the case for good, as both companies have active efforts underway to move off Oracle to alternatives, according to a report in the Information.

The progress has been fairly significant at Amazon; it has moved its customer master and order master databases to a NoSQL platform, according to the Information's report. Salesforce has been working on an Oracle alternative with the code-name Sayonara, which was first reported by Fortune in mid-2016. It has been rumored for years prior to that report Salesforce was investigating a move onto PostgreSQL.

POV: The report comes at an interesting time for Oracle, which is about to launch the newest version of its database. The update will give the platform the ability to patch itself on the fly; Oracle CTO Larry Ellison has dubbed it a "self-driving" database, playing off the interest in autonomous vehicles. Oracle believes the new version will spark a wave of workload migrations to Oracle's cloud. 

Salesforce may be working on an Oracle exit plan, but will be tied to the platform for the next several years. It signed a nine-year contract renewal with Oracle in 2013 that was reportedly worth $300 million; even so, Salesforce CEO Marc Benioff said at the time that it would cut his database costs in half. (Notably, a source told the Information that Salesforce intends to be completely off of Oracle by 2023.)

Ellison hasn't been shy about bragging how Salesforce and Amazon, both fierce competitors of Oracle's, pay millions of dollars to use its software. If either company succeeds in moving substantially away from Oracle's database, it will provide a case study for other large enterprises in how to pull such a task off.

It might be easier for Salesforce to make a move off Oracle, as it can incrementally shift subscribers and instances, says Constellation VP and principal analyst Holger Mueller. But at the same time, the type of features Oracle is promising in the new database version are just what cloud vendors want, since they can reduce or even eliminate labor costs and human error, Mueller adds.

The ad-blocker arms race heats up: The war over online ads, with users and ad-blocking browser extensions on one side, and marketers and publishers on the other, reached new heights in 2017. One of the biggest developments was Google's decision to add a native ad-blocker to its Chrome browser, which has more than 60 percent market share. Google's blocker will go into action on Feb. 15; it will block only ads deemed overly intrusive under a set of standards laid out by the Coalition for Better Ads, an industry group that includes Google, Facebook and other companies that are highly dependent on advertising revenue.

But while Google's move was high-profile, thousands of the world's top websites have been waging a quieter war against ad-blocking technologies, researchers at the University of Iowa have determined. The researchers developed a system that analyzed the top 10,000 websites on Internet traffic monitor Alexa, and found that 30.5 percent of of them employed anti-adblocking code, a much higher percentage—up to 52 times as many—than previous studies uncovered.

POV: The researchers' paper goes on to detail programming methods aimed at thwarting anti-adblockers. Overall, their work raises provocative questions about a pressing issue for not just large Internet companies but all brands, as well as their customers. As the researchers note, the adblocker versus anti-adblocker war will likely escalate as the year unfolds:

It is crucial that adblockers are able to keep up with anti-adblockers. Moreover, the increasing popularity of adblocking has already led to various reform efforts within the online advertising industry to improve ads ...However, to keep up the pressure on publishers and advertisers in the long term, we believe it is crucial that adblockers keep pace with anti-adblockers in the rapidly escalating technological arms race.

Constellation believes that Google's native Chrome adblocker can have the weight and influence needed to spark significant improvements in the quality of Internet advertising. Companies making investments in online ad programs deserve to get a fair shot at a return on them, but not at the sake of user experience and brand integrity.

Tech conference season kicks off—what's on tap: After a quiet period over the holiday break, the tech conference calendar will be busy this month. Here's a look at the top events and what to expect.

CES: First up is the massive Consumer Electronics Show, which starts Jan. 8 in Las Vegas. The show will feature the usual raft of gadget and audiovisual product announcements, but the biggest conversations will be around around smart cities, autonomous vehicle technology, IoT and the arrival of 5G networks.

NRF 2018: The retail industry's biggest and most important conference kicks off Jan. 14 in New York. Expect a heavier-than-ever emphasis on technology during this year's event, particuarly in areas such as AI and robotics, which will have direct impact on the in-store customer experience.

World Economic Forum: The annual gathering of world leaders takes place Jan. 23-26 in Davos, Switzerland, under the theme "Creating a Shared Future in a Fractured World." While not a pure technology conference by any means, Davos is nonetheless an important setting for discussions on the digital economy.

Constellation's 2017 Enterprise Awards

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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