Improvement as a service: how software paved the road for the hardware industry

22

October

2017

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When the software industry moved towards the cloud, updates ran over the air and the compact disc became obsolete. Now customers expect hardware to change too.

Ask a random system administrator veteran about software updates and he will likely start to shiver. It’s not that long ago when rolling out an update meant having to switch off all computers that were connected to the mainframe, or – even worse – manually updating all the systems by disc. The worst part: if something was wrong, it would take ages before the patch would reach you.

The cloud has changed this for the good. It didn’t take long for software companies to find out that being able to update frequently would be a huge advantage. The business model had to shift accordingly. This is when ‘software as a service’ (SaaS) occurred. And not just software, there’s even the collective noun ‘Everything as a Service’ or XaaS.

The big difference is in the money: instead of a one off, one usually pays a subscription or usage fee. This is not only good for the software company that suddenly gets a revenue stream, but also for the customer since he can now simply calculate what value the software should bring to be an addition to his company or household.

Now let’s get back to those updates. Because we’re suddenly talking about subscriptions to software that can be updated over the air, or that’s running in the cloud, it’s not just easier to improve: we expect software to improve. Popular smartphone applications like Facebook are even updated on a weekly basis.

It didn’t stop here: hardware manufacturers do it too. Tesla is notorious for running over-the-air updates that for instance improve the autonomous capabilities of the car or just raise the steering wheel a bit when you stop the engine, to make it more easy to get out of the car.

And Tesla is definitely not the only one. The high-end audio brand Bowers & Wilkins promises to update the performance of its brand new PX headphones over the air. So we are officially living in a time where we can expect basically every piece of hardware to improve over time, as long as there’s at least one chip in it.

There is a downside, though. Over the air updates are undeniably an improvement of our lives, but they usually come with an app. The pain with apps is that they need to be updated to remain functioning properly. A question that has not been answered yet: how long is a reasonable timespan to support an accompanying app?

Apple updates its mobile operating system until five years after an iPhone has come to market. Considering the average lifespan of an iPhone of only three years, this seems reasonable.

On the other side there’s Denon, a manufacturer of receivers that decided to completely redo its smartphone app in 2016. The old app, needed for ‘old’ receivers, has become obsolete from that moment on.

Now what’s the average lifespan of a receiver? I wouldn’t be surprised if it’s more than ten years, which means that people with a 2014 Denon receiver will have a non-functioning app anytime soon that will never come back to life. This certainly doesn’t sound like best practice to me.

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Technology of the Week – What happened to my newspaper?

29

September

2017

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VPblog

Creating, distributing and receiving news has tremendously changed over the past decades – and is likely to change throughout the next ones.

Why has it changed so drastically?

The rise of new (internet-) technologies have disrupted various markets and have especially changed all information goods markets. Information goods are goods that contain information such as books, cds, newspapers and these are now all digitised into intangible versions that can be replicated indefinitely and cheaply distributed via the Internet. The newspaper industry is one of many which has been completely reshaped.

Due to the rise of internet and online news websites, the amount of printed newspapers has decreased globally since the beginning of this century. This meant an enormous decline in printing revenues and in the amount of existing newspaper firms due to bankruptcies and unavoidable mergers. To stay alive in this industry, newspaper firms have gone digital but how has this changed the newspaper market? To answer this question, let us take a look into the market dynamics.

Strong forces cause shifts

The buying power has increased significantly as there are no switching costs for customers who do not longer need subscriptions. On the supply side, freelance journalism has made incumbents more reliable on external sources but also gave them the freedom of working with various journalists on an ad-hoc base. Hence, this force remains more or less equal. An interesting industry dynamic which influences both the supply and demand bargaining power in Porter’s model is the long-tail phenomenon. Due to the increase in news-sources, the popularity for mainstream news declines and the supply and demand of ‘niche market news’ has dropped. This results in a more even distribution of products and hence the name ‘long tail’. Incumbent newspapers see their reach decline as not all customers can be reached with mainstream articles anymore.

Next to this, it is now easier than ever for potential new entrants to buy a website domain, create so-called ‘news’ and spread them globally through social networks. This does improve brand value of some incumbents in the market who have differentiated themselves but at the same time barriers to enter have significantly been lowered. Related to this, substitutes have become more powerful in the newspaper market. Social Media has become the new main substitute which offers even more channels for people to receive their news from.
In a nutshell, Porter’s forces tell us that the newspaper market has become even more competitive due to the formation of the world-wide web, the increase in the data storage capacity and the ability to access information from the cloud as well as that the dynamics have changed a lot over time.

New players

As expected, especially new market entrants seem to take advantage of the change in industry dynamics and customer preferences. For example, the company Blendle, which is a digital newsstand that offers on demand articles from various newspapers, used this new business environment to enter the market.

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(Blendle uses different technologies to drive the change)

Blendle is able to compete in the market as it’s making use of most of the SMACIT technologies which enable business transformation.

The S stands for Social. Blendle is incorporating a network effect by showing people trending topics or things that their friends found interesting and giving them the possibility to directly share articles via different social media platforms.

The M stands for Mobile, Blendle is accessible via Mobile phone which allows users to have a quick-read on the go, instead of carrying around a whole newspaper.

The A stands for Analytics, Blendle uses big data to show articles you might find interesting based on your previous reading-behavior

The C stand for Cloud, Blendle uses cloud storage to show people all articles published by the 40 biggest newspapers in the Netherlands what also allows them to scale up and provide their service in different countries all over the world.

And IT stands for Internet of Things, the only thing Blendle is not making use of yet – not yet. Because, hardware like Beacon Technology provides interesting use-cases that could further empower Blendle’s usage with the help of micromapping.

A glimpse into the future

People will always need news and feel the want to stay informed. That is why also in the future, newspapers will most likely stay relevant.

Amazon Holds News Conference

(Jeff Bezos buys Huffington Post)

Nevertheless, future innovations and new technologies are likely to further reshape the industry. Incumbents have to act on these changes in order to stay relevant. Those who act fast on new technologies will grow and consolidate the market through a range of mergers and acquisitions.

One can also expect digital native companies from outside of the newspaper industry to buy struggling players of the industry. These outsiders are able to utilize their digital knowledge and assets to restructure classic newspapers. This has already been shown in the example of Amazon buying the Huffington Post, doubling Huffington’s digital subscription revenues within a short period of time.

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