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The Star Tribune recently reported that US Internet is finishing the roll-out of WiFi services to the Minneapolis area. I don’t mean to dismiss the efforts by all the vendors involved but I think this is a case of too little too late.
Comcast is rolling out DOCSIS3 in the cities and advertising 50Mbps Internet. Qwest is fumbling its way through an ADSL2+ FTTN implementation and promising 12 and 20Mbps. Sprint, Verizon, and others are building out high speed wireless networks.
I’d hate to be competing against those big boys even with a monopoly contract. They can market you to death. They can trench in fiber and eventually tap unlimited bandwidth. And they can refresh their technology faster.
Wireless internet access will ultimately be driven by mobile devices rather than people looking for cheap access from their stationary home. I can access the net using the Sprint network on my 8830 blackberry all over the world. Why do I need municipal wifi?
The biggest benefit to this wifi service is that it provides people with another option (and a lower cost option at that) for connecting to the net. I’m just uncertain the business case will survive long term.
During the conference yesterday I asked Phil Soran, CEO of Compellent, if the up-and-coming crop of Internet storage services like Amazon S3 are a competitive threat to his business.
His answer was two parts: 1) Compellent sees storage services like S3 as potential customers, and 2) Compellent focuses mainly on customers that need higher-end storage.
I understand his response but I respectfully disagree with some of his thinking.
First, storage services probably are not going to buy Compellent storage. It’s simply too expensive on a $/GB basis. It scales vertically pretty efficiently (by adding disk shelves) but not horizontally. If I were building a storage service I would look for the cheapest disk I could find. Then I would find a way to make it scale (virtualization, load balancing, mirrored storage, etc).
Second, it’s true that many companies need the storage performance that a company like Compellent can provide. Sadly services like S3 will still eat into Compellent’s growth — and their own story proves it. Compellent’s big product claim is their automated tiered storage. Basically a customer can install fast fiber-channel drives and slower sata drives in the same SAN. The SAN will then migrate less frequently accessed data blocks to the slower drives — keeping the faster drives free to store more high-performance data. It’s a smart concept. The problem is what happens when companies start replacing those sata drives with S3. Or, what if S3 becomes the third, and lowest, tier of storage. People just won’t need to buy as many new drives and shelves.
Sure, but companies will always need faster storage right? Well, not if the SaaS companies have something to say about it. My customers aren’t buying storage for Microsoft Exchange and Sharepoint anymore because I provide it at my datacenter. My customers aren’t going to buy storage for Microsoft CRM. Eventually they will be outsourcing their ERP and business intelligence applications to SaaS providers. And guess what? Some of those young SaaS providers are starting to build their platforms on top of the online storage services.
Phil made a good point that many companies don’t want to store confidential information on “shared” storage services. I agree that this is an impediment to the growth of the Internet storage platforms. But this is definitely starting to change — especially with SMB. The larger companies will follow suit as they outsource more of their applications to SaaS providers.
I attended the Minnesota High Tech Association (MHTA) Spring Conference yesterday at the Hyatt Regency in downtown Minneapolis. I decided to walk to the hotel since I work downtown and it is only eight blocks away. Mistake. I ended up having to walk in the cold rain for several blocks and felt like a wet dog walking into the conference. Thankfully my day improved.
I participated in the MHTA Ace leadership program a year ago and got to know quite a few young technology leaders in the region. So I felt much more sociable at this year’s event because I knew so many people.
I walked into the opening presentation and grabbed a seat in the ballroom. Who do I just happen to sit next to? My friend Graeme Thickins — illustrious blogger, twitterer, marketer, and web x.0 thinker. We chit chatted for a while about some of the interesting start ups in town. Then we settled in to listen to the speakers. I really enjoyed listening to Robert Stephens, founder of Geek Squad. I’ve never heard him speak but I’ve followed his company for many years. I can’t saw I’ve ever been enamored of the Geek Squad concept. But I can’t dispute his strategic thinking. He understood the concept and didn’t loose focus while his organization expanded. He made an interesting point that “play” is a great way to learn and unlock creativity. He gave some examples of how his organization uses play to collaborate and innovate.
I bumped into several vendors and customers during the show. I just happened to sit right next to a customer during lunch. I swear, every time I walk into a room full of people and sit down next to someone I discover there is some sort of personal or professional connection. Granted, Minneapolis isn’t that big of a town. But it still surprises me. I sat down at a random table for lunch at Datacenter World in Vegas and just happened to sit next to one of the few people from Minneapolis. And it turned out my company bought services from his company.
I ended the day watching a panel of state politicians discuss global competitiveness. As expected the discussion followed strict party lines. The democrat state senator was strongly pushing for early education programs (I could hear silent cheers from the teachers union members in the audience). He mentioned that early childhood education would provide a 16% return on investment — much better than giving tax incentives to technology businesses. I will be happen to invest my personal savings in such a venture if the government can guarantee that kind of return (of course the senator wasn’t talking about “that” kind of ROI. The type of return he is talking about would be much harder to measure and therefore ensure the survival of his pet project).
The republican was pushing for greater business tax incentives for jump starting technology and innovation. He noted that states like Minnesota have to compete with other states for business development. Makes sense. I don’t agree with the repubs on everything but it is clear that they understand business and what it takes to compete in Minnesota.
I just learned this week that Qwest is planning to exclude local ISPs from its new broadband product roll out. Qwest is investing a couple hundred million dollars in rolling out FTTN ADSL2+ services in several markets — including Minneapolis, my company’s main market. In the past ISPs could be “connected” into Qwest’s DSL network so that residential and business DSL subscribers could use local ISPs for Internet access. Those customers would still pay Qwest for the actual DSL line. Now Qwest doesn’t want to share their infrastructure with little local ISPs anymore.
Thank you Qwest.
It’s time to put the local ISP business model to bed. It just isn’t relevant anymore. I’ve been working with ISPs since 1994 and I’ve seen many changes through the years. I’ve worked hard to convince my company and others in the industry that the days of the local ISP business are numbered. But change is hard to come by when the money train is still coming in. Well, that train is about to leave the station. Sometimes you change because you want to and sometimes because you have to.
The upside is that my company will ride out this wave with no problem. I think that it will take Qwest 18-24 months to roll out this product successfully. We will easily make up the lost revenue in our fast growing managed services business by that time. In fact, we should be able to focus more time and energy on our services that are growing. Many of the other local service providers that depend on Internet connectivity for 30-75% of their revenue will not make it. Motto: Change or die.
