Beginning the #BlogBus tour

I’m here at Orange in Silicon Valley for the beginning of the #BlogBus tour.  We’re beginning with a presentation from the CEO of Orange Silicon Valley, Georges Nahon.  I’m liveblogging this session, so keep reloading the page for updates.

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Nahon begins with focusing on what Oraneg is doing in Sikicon Valey. came here 10 years ago, but moved to dowtown SF in March.  Started doing R&D and now doing business development and applied R&D, producing about 12 patents a year – useful output from a team of 60 people.  They want to assist the company in making informed decisions about the industry.  Nahon quotes military strategist Helmuth von Moltke sayings that ‘no business plan ever survived its first encounter with the market’. He says tha you learn to be very humble in the tech market.  You need to expect the unexpected, to seek out intellectual audacity to  maintain an always-ready stance for changes to the sector.

Nationally venture capitalists invested $7 billion in US companies.  The Bay area alone accounts for 46% of this spend ($3.2 billion).  Another $837 million is invested in the rest of Southern California.  The software industry gets the majority of this spebd ($2.3 billion in Q2 2012) – nearly 2.5 times its next competitor, industrial energy.  If you take the top 5 companies in the software sector, their revenue generation is $1.2 trillion, of which more than 50% of their revenue comes from outside the US, thus the spend in the sector is still regarded as justified.

Nahon says that the Valley is reaching a sweet spot where there are big shifts in the tech sector.  These include the decline of encyclopaedia and newspaper industries, the decline of console games and concomitant rise of Facebook and social games, missing profit expectations among mobile handset operators (eg: RIM, Nokia), and the decline in profits among consumer electronics companies (eg: Sony, Sharp and Panasonic).  Collectively these trends indicate a trend toward IT oriented, social, and internet-delivered content consumption company dominance.  Broadband is the anchor service and socially-mediated or at least collectively-consumed content is the trend.  And when it comes to social consumption, there is a trend toward simpler, rather than more complex communication – less voice, less video-communicated shared experiences, with more text and simple messaging.

In 2012, 8 server makers account for 75% of Intel’s server chip revenues – Quanta, SuperMicro, Wiwynn, Huawei and Google (5th largest).  The server market is growing as the PC is being displaced by enterprise systems and cloud computing.  But also there are shifts in chip maker revenue with the rise of profits for ARM as a direct result of mobile handset and tablet computing.

Nahon notes the following trends on PCs:

  1. Discs gone (CDs, DVDs)
  2. Ethernet replaced by wifi
  3. Hard drives gone (replaced by Cloud)
  4. Speech (increased dictation and speech recognitions systems)
  5. GUI waning (being replaced by gesture computing)

Nahon says that all these changes are happening at all layers of technology, simultaneously.  This is new.  Mobile products are selling faster, and being adopted faster. The cost of setup of an internet tech startup has reduced from approx $2 million in 2000 to $5,000 in 2011.  Thus the number of startups being established worldwide has grown by an exponential order of magnitude.

Social, Nahon says, creates scale.  Scale is pushing technology to its limits.  It’s because the traditional IT world didn’t know how to deal with scale that fewer data centres were established.  But now data centres are forming the basis of a successful social business.  Facebook alone is collecting more than 500 terabytes of data each day. Twitter is generating 8 terabytes of data a day.  In comparison, the New York stock exchange is generating just 1Tb of data a day.

One of the key issues with data centre management is counted in megawatts, not megabytes.  The cooling of a datacentres and the efficient transfer of energy is becoming a key cost saving measure for the tech industry.  And the longer we spend online and the more devices we have connected, the energy consumption considerations are profound.

There will soon be more mobile subscriptions in the world than there are people.  And because of this, the opportunity to transact is increasing (not reducing, as retail sector may believe).  But the organisations who can best take advantage of this mobile dominated transaction environment are the biggest acquisition ‘monsters’ of the IT sector.  Mergers and acquisitions are the new R&D, as companies buy up new social start-ups to establishing patent control, and to get access to social audiences.  Key acquisitions in the first half of 2012 include:

  • NDS by Cisco for $5b
  • Ariba by SAP for $4.3b
  • Quest by Dell for $2.4 b
  • Taleo by Oracle for $1.9b
  • Kenexa by IBM for $1.3
  • Nicira by VMWare for $1.26
  • Sonicwall by Dell for $1.1b
While the value of social networks is declining, led by the Facebook IPO, this is probably a reassessment of the actual value of the technologies or processes embedded in the product.  And social is still the most crucial layer of the internet.  The opportunity to rise to a billion dollar company is still increasing, especially in the enterprise space.
Nahon believes that the main trends of the next 5 years will be:
  1. Mobile: companies must be seen as pursuing a mobile first approach.  75% of the world’s population has access to a mobile – this is going to grow, in spite of poverty.
  2. Social: companies must consider the social opportunities of their business functions.  The social graph, interest graph and influence graph will be the most common indicators of performance. Social search will grow in relevance.  
  3. Big data: the fastest growing companies are those that can deal with big data.  Explosive data growth combined with a lack of structure to that data has produced an opportunity as well as a weakness for companies.  Value of tech companies is beginning to be affected by the structures and insights arising from data.  Without the capacity to realise potential of data, value of tech products and companies will decline.
  4. Video networks: all video will eventually be transmitted bia broadband networks.  The biggest online video market share companies are already internet companies – this trend will continue.  TV will be streamed, and will become heavily reliant on social communication and apps.  The multi-screen environment will direct programming development.

The web is becoming datacentric, that apps will rule consumer and enterprise innnovations, real time and social search will grow in complexity and will replace site-based web, mobile devices will matter more than desktop environments, real time mutiuser game cloud platforms will influence enterprise networks (dealing with latency issues), mobile payments will increase.  Companies must become porous in order to respond to the social and mobile market, and the only way that they can do that is to move their applications to the Cloud. 

Orange believes that Google and Facebook will be ‘Yahoo-ed’ (marginalised) within 3 years.  Amazon will continue to diversify and create more online entertainment and mobile devices as tablets and phones. They also believe that strategic imperatives in a ‘Post IT world’ will be driven by knowledge transfer from innovative thinkers – groups that will raise new issues and address new questions.  This is  an augmentation of the traditional academe.  Instead of focusing entirely on applied research, there will be a consideration of scale-oriented, business-oriented thinking.  Great PhDs keep getting hired. You don’t find them in universities unless they are in military.  You can’t beat the tech sector for access to data.  As a result there will be more breakthroughs coming from companies and less breakthroughs coming from university environments.

It is said that statistically that in the tech sector you have 5 great companies every 10 years.  But in future Nahon believes that the degradation of company reputation will happen faster.  This will affect the desire of innovative thinkers to join  teams, and it will affect the relevance of companies for younger markets.

We conclude with a discussion of patent wars, and Nahon believes that while patent wars are being used as a break on innovation, businesses, IT companies will continue to settle in order for innovation to continue. And the growth of creative commons will act as a new space for sharing ideas as a means of creating new products and services.

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We’re now heading out to meet the US bloggers and see some new products around Orange Silicon Valley.

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