Thoughts From The Piper Jaffray Telecom Conference
The USBancorp Piper Jaffray 1999 Telecommunications Conference is being held this week in Boston. Here are some selected thoughts gleamed from presentations made on Wednesday.
Nokia: Finland is Ahead
Not having been to Finland, Nokia's (NOK) presentation was an eye opener. Finland is way ahead of the US in terms of mobile phone and online usage in daily life. While there are certainly many more mobile phones and internet users in the US, actual applications in Finland, and usage of them, is ahead of the States. Here are some examples.
Mobile phones: 60% of the population have mobile phones. Internet/phone integration has already begun there. Bus schedules can be called up on a mobile phone, with an indication of whether the most current bus is ahead or behind schedule. Billing statements for mobile phone usage are delivered over the net via email, and if you have an online banking account, can be paid solely by clicking.
The MeritaNorbanken bank was used as an example of how far along online banking is in Finland. Fifty percent of this bank's customers access their accounts online. 49% of all stock transactions conducted at the bank (brokerages can be owned by banks, apparently), are done online. 26% of all bills processed by the bank are paid online.
While all of these numbers were undoubtedly selected to highlight Nokia's experience in the online world, the number of services already present and in daily use are the types of things you hear about as "the future" in the United States.
If the numbers are actually representative of Finland, internet information applications are further along there. This is in contrast to the generally prevailing notion that Europe lags the US in both internet usage and applications.
Nokia is actively working on a "Wireless Application Protocol," or WAP, which edits and reformats internet web data for display on mobile phones. Already in use in Finland, it should be available to web developers later this year.
Qwest: ASPs Are Coming
Qwest's (QWST) presentation focused on the coming merger of US West and Qwest, but little new information was presented.
However, of more interest was Qwest's plans to develop their ASP (Application Service Provider) business. Qwest nearly admitted that the ISP (Internet Service Provider) business would one day be a commodity, by stating the ASP business is more desirable, being higher up the value chain.
An ASP is conceptually equivalent to "renting" applications. Critical Path is probably the clearest example of this, as it outsources email systems for businesses. But Qwest is talking about providing a complete range of software applications. With Microsoft, Qwest is offering complete Virtual Private Network solutions. With Siebel, Qwest is offering a sales management service. With KPMG, Qwest is offering an outsourced financial package for business, although details of this deal were not provided.
The evolution of the internet into a utility-style information system, where you pay only for what you use (as with electricity), has long been talked about in the abstract. Qwest is actively working on it now.
Common Wisdom is that Cable and DSL Will Draw
It is now becoming common wisdom to state that the broadband access fight will be a draw. Cable will win the home market, and xDSL will win the business market.
The "draw" viewpoint neither provokes questions nor emotions anymore. It is as if everyone has tired of the broadband war issue, which was hot even just six months ago.
The "draw" statement appeared in at least three presentations, including Redback Networks, Ramp Networks, and the guest speaker Geoffrey Moore, consultant and author of In The Tornado.
But it wasn't made by Breezecom, a manufacturer of wireless broadband equipment.
Geoffrey Moore: Gorillas, Kings, Godzillas
Geoffrey Moore is a consultant with the Chasm Group, and author of: Inside The Tornado and The Gorilla Game. He uses metaphors to summarize business situations and companies, with a goal towards determining which companies will ultimately dominate markets. While we can't provide a complete summary of the book's ideas, since we haven't read them, we can offer a short primer on the concepts he presented in his lunchtime talk.
A Tornado is a market that explodes. The PC revolution and the internet are both tornados. Companies don't create tornados, new technologies do. There are usually multiple types of offerings at the beginning.
Tornado markets can either have a dominant proprietary architecture (PCs have Microsoft), or they can be opne (the internet).
A "gorilla" is a company which manages to get a competitive advantage in a tornado, through a proprietary architecture. The gorilla "rides the tornado" (what an image...) to dominance. Example: Microsoft. Cisco. Lucent. Message: Buy Gorillas, even late in the game. Gorillas only get bigger, and as long as the market continues to grow, the company only outpaces its competitors.
"Chimps" are companies that have a proprietary architecture, but lost the architecture battle. While the tornado carries them along as well, they fall further and further behind the gorilla, and eventually suffer. Example: Apple. Message: Avoid Chimps.
"Monkeys" are companies that copy gorillas. They offer products that are either clones of, or accessories to, the Gorilla product line. Gorillas often buy monkeys. Message: Buy Monkeys.
In a tornado market where there is no proprietary architecture battle, the market leaders are called "Kings." Kings dominant the market, but not because of architecture. Examples were Ascend and US Robotics. It is okay to buy Kings.
Princes are companies that challenge Kings for market dominance. It is okay to buy Princes, but only if their relative Price/Sales ratios are half those of the kings in the same market.
When "gorillas" acquire kings, it is a good thing for both companies. Kings, in fact, should have acquisition by a gorilla as their goal. But when two Kings merge, is bad, and both stocks should be dumped.
A "godzilla" is a company which looks like a gorilla but isn't. (Godzilla is a myth). Godzillas get huge market capitalizations because they are stocks that are present in a tornado market, but they have no lasting sustainable advantage. Although Mr. Moore stated that most internet stocks are Godzillas, not Gorillas, he gave no example.
Obviously, this brief summation only touches upon the ideas presented by Mr. Moore. But the metaphors are useful, because they provide a simplified way to gain an insight into otherwise complex issues. If the concepts interest you, you may wish to check out the books.
Comments can be emailed to the author, Robert V. Green, at rvgreen@briefing.com.
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