IBM: 15 Whiffs in a Row
January 20, 2016
Watson seems to be running out of answers. The system came up with a cook book, a plan to put a dent in cancer, and make sense of Big Data. Great public relations efforts, but the financial payoff seems to be lacking.
I read “IBM Shares Slide as Revenue Drops for 15th Stright Quarter.” How can this be when a company has the smartest, fastest, bestest artificial intelligence system in the world?
The answer is similar to Google’s analysis of its autonomous car’s track record. Wrecks are the fault of those pesky humans. IBM may be better off letting Watson and its Lucene based, home brew, and acquired technology make business decisions for IBM.
I learned in the write up:
Revenue shrank to $22.06 billion versus $24.11 billion.
And in “IBM Still on a Downward Roll with 15th Consecutive Quartgerly Revenuye Drop” this caught my attention:
“We continue to make significant progress in our transformation to higher value,” offered IBM chairwoman and chief executive Ginni Rometty.
Perhaps Ms. Rometty is not listening to IBM Watson? Or, on the other hand, perhaps she is? Either way, Watson is not delivering the payoff that IBM’s somewhat wonky Watson marketing purports.
Revenue, gentle reader, not marketing fluff seems to be needed. Cognitive computing and humans seem to be ineffective when it comes to generating sustainable, substantive revenue.
Stephen E Arnold, January 20, 2016
Will 2016 Be the Year of the French Search Revolution?
January 19, 2016
I think about French search and content processing systems once a year. Okay, maybe less frequently. I check out what’s new with Antidot, KBCrawl, Exalead Dassault, Sinequa, CustomerMatrix (né Polyspot), and Pertimm Qwant plus a handful of other outfits.
Most of these firms are unknown to those who kibitz in Sillycon Valley. Each of the companies has a revolutionary technology, world class technology, and galactic confidence in their zeros and ones.
The concern I have for French information access companies in 2016 is a story in USA Today, the McPaper which is often a source of amusement for me.
The article is “French President Declares Economic Emergency.” Here’s the passage I noted:
French President Francois Holland pledged Monday to redefine France’s business model and declared what he called “a state of economic and social emergency,” unveiling a 2-billion-euro ($2.2 billion) plan to revive hiring and catch up with a fast-moving world economy.
Will a couple of billion filter down to impact the economic fortunes of the French search and retrieval vendors? That’s a good question.
But the answer is, “Non.”
Some of the systems are quite interesting. Most of the firms struggle to generate substantial organic revenue in the US. Once a search vendor announces that it will expand its US operations, the follow through is often modest.
France cranks out some good engineers. But 2016 is going to be as or more challenging for the French search engine vendors as any other year in recent memory.
Stephen E Arnold, January 19, 2016
Sergey Brin Sells Alphabet Google Shares
January 6, 2016
I read “Insider Selling: Alphabet Inc (GOOG) Major Shareholder Sells $26,091,956.28 in Stock.” I noted these transactions summarized in the write up:
- On Tuesday, January 5th, [2016]Sergey Brin sold 33,340 shares of Alphabet stock. The stock was sold at an average price of $753.62, for a total transaction of $25,125,690.80.
- On Monday, January 4th, [2016] Sergey Brin sold 33,332 shares of Alphabet stock. The stock was sold at an average price of $745.36, for a total transaction of $24,844,339.52.
- On Thursday, December 31st, [2015]Sergey Brin sold 33,332 shares of Alphabet stock. The stock was sold at an average price of $773.18, for a total transaction of $25,771,635.76.
- On Tuesday, December 29th, [2015] Sergey Brin sold 33,332 shares of Alphabet stock. The stock was sold at an average price of $784.52, for a total transaction of $26,149,620.64.
Timing is everything my grandfather told me. Perhaps 2016 will be an interesting year for Google’s stock price?
Stephen E Arnold, January 6, 2016
Are Search Unicorns Sub Prime Unicorns?
January 4, 2016
The question is a baffler. Navigate to “Sorting Truth from Myth at Technology Unicorns.” If the link is bad or you have to pay to read the article in the Financial Times, pony up, go to the library, or buy hard copy. Don’t complain to me, gentle reader. Publishers are in need of revenue. Now the write up:
The assumption is that a unicorn exists. What exists are firms with massive amounts of venture funding and billion dollar valuations. I know the money is or was real, but the “sub prime unicorn” is a confection from a money thought leader Michael Moritz. A subprime unicorn is a co9mpany “built on the flimsiest of edifices.” Does this mean fairy dust or something more substantial?
According to the write up:
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. But the way in which private market valuations have become skewed and inflated as start-ups have delayed IPOs raises questions about the financing of innovation. Despite the excitement, venture capital has produced weak returns in recent decades — only a minority of funds have produced rewards high enough to compensate investors for illiquidity and opacity.
Why would funding start ups perform better than a start up financed by mom, dad, and one’s slightly addled, but friendly, great aunt?
The article then makes a reasonably sane point:
With the rise in US interest rates, the era of ultra-cheap financing is ending. As it does, Silicon Valley’s unicorns are losing their mystique and having to work to raise equity, sometimes at valuations below those they achieved before. The promise of private financing is being tested, and there will be disappointments. It does not pay to be dazzled by mythical beasts.
Let’s think a moment about search and content processing. The mid tier consulting firms—the outfits I call azure chip outfits—have generated some pretty crazy estimates about the market size for search and content processing solutions.
The reality is at odds with these speculative, marketing fueled prognostications. Yep, I would include the wizards at IDC who wanted $3,500 to sell an eight page document with my name on it without my permission. Refresh yourself on the IDC Schubmehl maneuver at this link.
Based on my research, two enterprise search outfits broke $150 million in revenues prior to 2011: Endeca tallied an estimated $150 million in revenues and Autonomy reported $700 million in revenues. Both outfits were sold.
Since 2012 exactly zero enterprise search firms have generated more than $700 million in revenues. Now the wild and crazy funding of search vendors has continued apace since 2012. There are a number of search and retrieval companies and some next generation content processing outfits which have ingested tens of millions of dollars.
How many of these outfits have gone public in the zero cost money environment? Based on my records, zero. Why haven’t Attivio, BA Insight, Coveo, Palantir and others cashed in on their technology, surging revenues, and market demand?
There are three reasons:
- The revenues are simply acceptable, not stunning. In the post Fast Search & Transfer era, twiddling the finances carries considerable risks. Think about a guilty decision for a search wizard. Yep, bad.
- The technology is a rehash gilded with new jargon. Take a look at the search and content processing systems, and you find the same methods and functions that have been known and in use for more than 30 years. The flashy interfaces are new, but the plumbing still delivers precision and recall which has hit a glass ceiling at 80 to 90 percent accuracy for the top performing systems. Looking for a recipe with good enough relevance is acceptable. Looking for a bad actor with a significant margin for error is not so good.
- The smart software performs certain functions at a level comparable to the performance of a subject matter index when certain criteria are met. The notion of human editors riding herd on entity and synonym dictionaries is not one that makes customers weep with joy. Smart software helps with some functions, but today’s systems remain anchored in human operators, and the work these folks have to perform to keep the systems in tip top share is expensive. Think about this human aspect in terms of how Palantir explains architects’ changes to type operators or the role of content intake specialists using the revisioning and similar field operations.
Why do I make this point in the context of unicorns? Search has one or two unicorns. I would suggest Palantir is a unicorn. When I think of Palantir, I consider this item:
To summarize, only a small number of companies reach the IPO stage.
Also, the HP Autonomy “deal” is a quasi unicorn. IBM’s investment in Watson is a potential unicorn if and when IBM releases financial data about his TV show champion.
Then there are a number of search and content processing creatures which could be hybrids of a horse and a donkey. The investors are breeders who hope that the offspring become champions. Long shots all.
The Financial Times’s article expresses a broad concept. The activities of the search and content processing vendors in the next 12 to 18 months will provide useful data about the genetic make up of some technology lab creations.
Stephen E Arnold, January 4, 2015
IBM: There Are Doubters
December 31, 2015
Watson has its works cut out for itself in 2016. I read “IBM Set to Drop 13% in 2015.” When one is tossing around a $100 billion outfit, the thought of a share drop is disconcerting. Will Alibaba or Jeff Bezos step in. Fixing up the Washington Post may be trivial compared with an IBM scale challenge.
According to the write up:
Much of the disappointment in the tech company is because it has been unable to replace its hardware and software legacy products with new cloud-based and AI products — at least not at a rate that would pull IBM’s revenue up. Its major branded product in new age technology is Watson. While Watson has been the source of press releases and small customer alliances, outsiders have trouble seeing what it does to sharply increase IBM’s sales. Granted, Watson may be one of the most impressive product advances among large companies in the sector recently, but what it does for IBM may be very modest.
Somewhat of a downer I perceive.
The smart software thing is not new. In the last 18 months, awareness of the use of various numerical recipes has increased. Faster chips, memories, and interconnections have worked their magic.
The challenge for IBM is to make money, not just marketing hyperbole. The crunch is that expectations for certain technologies are often more robust than possible in a market.
Watson is, when one keeps its eye on the ball, is a search and content processing system. The wrappers make it possible to call assorted functions. Unlike Palantir, which has its own revenue fish to catch, IBM is a publicly traded company. Palantir does its magic as a privately held company, ingesting money at rates which would make beluga whale’s diet look modest.
But IBM has exposed itself. The Watson marketing push is dragged into the reality of IBM’s overall company performance. In 2016, IBM Watson will have to deliver the bacon, or some of the millennialesque PR and marketing folks will have an opportunity to work elsewhere. Talk about smart software is not generating sustainable revenue from smart software.
Stephen E Arnold, December 31, 2015
Newsreaders through Time
December 30, 2015
Those chart mavens at CBInsights have produced another timeline for wild and crazy Internet services. “The Rise and Fall of Venture Backed News Readers” makes clear the long odds traditional news producers face when trying to find a business model. The chart is a shopping list of case studies for MBA programs. The idea of providing “news” to the hungry minds with mobile devices and sci fi laptops seems to be a bit of a challenge. For investors, these services trigger opportunities to explain why their investments did not perform particularly well. The chart, intentionally or unintentionally, causes Flipboard to stand out from the crowd. It may be the red logo and bold faced type. Alternatively, Flipboard has managed to attract money over the last five years. The chart makes clear why an average millennial may want to take a vacation instead of investing in a newsreader start up.
Stephen E Arnold, December 30, 2015
Yahoo: The Value of Being a Parasite
December 29, 2015
I read a number of articles about Yahoo each day. Most of these are rehashes. Xoogler flops. Yahoo tanks. A fresh angle rare.
“Why Yahoo Needs a Monopoly to Survive” is different. The approach takes a tough stance:
Yahoo is in trouble. Despite nearly $5 billion in annual revenue, investors value Yahoo’s business at next to nothing. Most of its value comes from its investment in Alibaba–to the point where Yahoo has largely become a tracking stock for Alibaba shares.
Direct and to the point.
The write up continues:
Google has the content platform in search. Facebook has the social networking platform. Amazon has the product marketplace (in the U.S.). Similarly, in China, Alibaba has the top product marketplace, Tencent has the top messaging platform and Baidu has the leading search platform. All leading platforms have a core monopoly that is the lifeblood of their business. Why? Once a platform has a monopoly, it can use its core network to expand into other markets Every subsequent platform can leverage the platform monopoly’s network to its advantage.
There you go. A monopoly is just darned good. Quite a generalization, but I like the frankness of the insight.
How does this relate to Yahoo?
Yahoo is not a monopoly. Yahoo must be a monopoly. The logic of the article is that Yahoo is a goner unless, like a pilot fish, it attaches itself to the shark Alibaba.
What will the Xoogler do? Do the parasite move or stick with a symbiotic relationship? Yahoooo!
Stephen E Arnold, December 29, 2015
Technical Debt: Financial Disaster
December 25, 2015
Adoption of cloud-based services provides the enterprise with I read “Treat Technical Debt Like a Bad Relationship.” Googlers called attention to technical debt. I wrote about that Google paper earlier in 2015. The idea is not a new one. The idea is that today’s technology requires on-going investment.
That investment is necessary if the product is to be kept working and in step with what competitors offer. What happens if one ignores the technical debt, the local bean counter points out that the amount of dough required to keep a product is greater than its revenue. End of story. Some products can chug along for years. I don’t think too much about my refrigerator unless it stops working. I don’t repair it if it is 11 years old. I get a new one. That’s what happens with search and content processing. A recent example is GoDaddy. The company bought Enterprise (yes, I know that your friendly mid tier consultant does not know about this system. But GoDaddy decided after 11 years to get a new one.
In the write up, the notion of a bad relationship speaks more about the author than about how the finances of a technology work out over time. Perhaps an expensive divorce would be more apt. Plenty of organizations license a search and content processing technology and then figure out that a new one is needed. Expensive? Yep.
The write up points out:
Adoption of cloud-based services provides the enterprise with the ability to minimize technical debt by striking a balance between continuously delivered cloud solutions and existing controls necessary to remain compliant with security requirements. Experienced technical personnel must assess those requirements against available cloud offerings. Increased cloud adoption will free technical security personnel from managing software, empowering them to spend more time on assessments and adoption of technology to stay ahead of evolving threats.
What happens if the cloud solution delivers the same cost burdens as any other enterprise application?
The answer is, “Get a new one.”
That’s what IBM itself does. The company coded up STAIRS III, converted it, and still sells the technology today. IBM bought iPhrase, bought Vivisimo, invested in home brew content processing initiatives like Web Fountain. Now IBM has wrapped scripts around a basket of technologies.
If one buys into the IBM solution, will the technical debt become a tiny part of the information technology budget? I don’t think so. The customer pays for its decisions. The vendor loses a client. A technology failure can impair or cause a business failure.
Technological debt is very different from having a bad friend. The divorce metaphor works well: Pain, lawyers, and brutal costs.
How does one deal with technical debt? Well, buy cloud services from IBM, after you, gentle reader, query Watson for guidance.
Stephen E Arnold, December 25, 2015
Search Vendors Under Pressure: Welcome to 2016
December 21, 2015
I read ”Silicon Valley’s Cash Party Is Coming to an End.” What took so long? I suppose reality is less fun than fantasy. Why watch a science documentary when one can get lost in Netflix binging.
The write up reports:
Based on interviews with about two dozen venture capitalists and tech investors, 2016 is shaping up to be a year of reckoning for scores of technology start-ups that have yet to prove out their business models and equally challenging for those that raised money at unjustifiably high prices.
Forget the unicorns. There are some enterprise search outfits which have ingested millions of dollars, have convinced investors that big revenue or an HP-Autonomy scale buy out is just around the corner, and proprietary technology or consulting plus open source will produce gushers of organic revenue. Other vendors have tapped their moms, their nest eggs, and angels who believe in fairies.
I am not there is a General Leia Organa to fight Star Wars: The Revenue Battle for most vendors of search and content processing. Bummer. Despite the lack of media coverage for search and content processing vendors, the number of companies pitching information access is hefty. I track about 200 outfits, but many of these are unknown either because they don’t want to be visible or lack any substantive “newsy” magnetism.
My hunch is that this article suggests that 2016 may be different from the free money era the articles suggests is ending. In 2016, my view is that many vendors will find themselves in a modest tussle with their stakeholders. I worked through some of the search and content processing companies taking cash from folks with deep pockets often filled with other people’s money. (Note that investments totals come from Crunchbase). Here’s a list of search and content processing vendors who may face stakeholder and investor pressure. The more more ingested, the greater the interest investors may have in getting a return:
- Antidot, $3 million
- Attensity, $90 million
- Attivio, $71 million
- BA Insight, $14 million
- Connotate, $12 million
- Coveo, $69 million
- Digital Reasoning, $28 million
- Elastic (formerly Elasticsearch), $104 million
- Lucidworks, $53 million
- MarkLogic, $175 million
- Perfect Search, $4 million
- Palantir, $1.7 billion
- Recommind, $22 million
- Sinequa, $5 million
- Sophia Ambiance, $5 million
- X1, $12 million.
Then there are the acquired search systems which been acquired. One assumes these deals will have to produce sustainable revenues in some form:
- Hewlett Packard with Autonomy
- IBM with Vivisimo
- Dassault Systèmes with Exalead
- Lexmark with Brainware and ISYS Search
- Microsoft with Fast Search
- OpenText with BASIS, BRS, Fulcrum, and Nstein
- Oracle with Endeca, InQuira, and Rightnow
- Thomson Reuters with Solcara
Are there sufficient prospects to generate deals large enough to keep these outfits afloat?
There are search and content processing vendors competing for sales with free and open source options and the vendors with proprietary software:
- Ami Albert
- Content Analyst
- Concept Searching
- dtSearch
- EasyAsk
- Exorbyte
- Fabasoft Mindbreeze
- Funnelback
- IHS Goldfire
- SLI Systems
- Smartlogic
- Sprylogics
- SurfRay
- Thunderstone
- WCC Elise
- Zaizi
These search vendors plus many smaller outfits like Intrafind and Srch2 have to find a way to close deals to avoid the fate of Arikus, Convera, Delphes, Dieselpoint, Entopia, Hakia, Kartoo, NuTech Search, and Siderean Software, among others.
Despite the lack of coverage from mid tier consultants and the “real” journalists, the information access sector is moving along. In fact, when one looks at the software options, search and content processing vendors are easily found.
The problem for 2016 will be making sales, generating sustainable revenues, and paying back stakeholders. For many of these companies, the new year will be one which sees a number of outfits going dark. A few will thrive.
Darned exciting times in findability.
Stephen E Arnold, December 21, 2015
More Big Data Analytics Market Size Numbers
December 13, 2015
I read “IBM, SAS, and SAP Do0minatge Big Data Analytics Market, but Challengers Remain.” The write up contained one of those wild and wooly market estimates. I love these confections. Many gobble down the figures because, like cupcakes, the sweet looks so darned tasty.
Here’s the passage I highlighted:
Big Data analytics software revenues will experience strong growth in the coming years, doubling its current global 2015 revenue of $US36.20 billion to $US 73.77 billion by 2021 and reaching $US81 billion by 2022, a compound annual growth rate of 12 per cent in the next seven years.
Here’s another number:
Drilling down into industry specifics, findings also claim that the Big Data analytics healthcare vertical segment will grow from $US7.964 billion in software revenue in 2015 to $US17.031 billion in 2022, a CAGR of 11 percent worldwide.
Seven years. Okay. There is no explanation about the method used to cook up the data. That’s fine. Who reads the label on a box of Cap’n Crunch?
The write up identified some companies posing a challenge to the Big Data analytics leaders IBM, SAS, and SAP. I found this list fascinating:
- Bosch
- Cisco
- Dell
- General Electric
- Intel
- Microsoft
- Oracle.
Life is tidy when the pool of players consists of publicly traded companies. What about the minnows not on the list? Presumably the big folks need not worry about upstarts.
Stephen E Arnold, December 13, 2015
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