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Tech-Wreck Era Finally Comes Full Circle


Parsad
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Guest kawikaho

Haha, well, being that I was in Silicon Valley since the dot com boom and bust, this puts a smile on my face.  Although, the recent Open Table IPO makes me wonder if people will ever come to their senses regarding dot coms.

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Guest longinvestor

I have some rather unconventional thoughts regarding the dot.com in particular and in a larger sense, the "information age" we are living in.

 

Much of the capital spent on IT, especially the enterprise variety, will have a sub-zero return over the long term.  IT, in many cases, is an expense(& a recurring one) not an investment. I will go out on a limb and say that some day in the future this would be seen as the single biggest bucket of "sunk capital" in a long time (like in 200 years). IT of the kind you and I as consumers use(Google, Amazon, Skype etc) may be a different story. I'm sure this is "stir-the-pot" post. Should hear from many readers here.

 

 

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Long,

 

I don't think that you will see much of a response from the folks on this board, except that posters will tend to agree with your sentiments. Investments in Technology for most businesses is not so much a matter of increasing profitability, but a matter of sheer survival. Invariably, IT projects are pitched as "productivity enhancers" or some such thing, but I would be willing to bet that the cost savings and/or profit margin enhancement projections have turned out to be overstated 99+% of the time. But firms who delay their IT investments or who do so in a less than judicious fashion will falter compared to their competition and ultimately fail.

 

-Crip

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I have some rather unconventional thoughts regarding the dot.com in particular and in a larger sense, the "information age" we are living in.

 

Much of the capital spent on IT, especially the enterprise variety, will have a sub-zero return over the long term.  IT, in many cases, is an expense(& a recurring one) not an investment. I will go out on a limb and say that some day in the future this would be seen as the single biggest bucket of "sunk capital" in a long time (like in 200 years). IT of the kind you and I as consumers use(Google, Amazon, Skype etc) may be a different story. I'm sure this is "stir-the-pot" post. Should hear from many readers here.

 

 

 

As a guy in the internet industry up close and personal, I think you nailed it. Small anecdotal examples: the domain aftermarket. Fund.com spent 10 million dollars to acquire the domain name "fund.com" on it's own. Pets.com, business.com, drugs.com: cumulatively they were bought for millions upon millions of dollars (just the domain names) and either failed outright (pets.com) or never got off the ground beyond a measly pay-per-click page.

 

I'm guessing the vast majority of the "goodwill" on any balance sheet in the internet sector is mostly worthless.

 

Sometime this year expect the last, greatest fool to pick up Twitter for a billion and they're still "pre-revenue".

 

 

 

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Guest kawikaho

I've been doing I/T in the enterprise for a long time.  The ROI on I/T is variable, but there is often huge game changing ideas that make productivity gains MASSIVE.  It's just harder to capture true ROI.  For example, the paradigm shifts seem small and unnoticeable, but over the past 20 years, we went from a monolithic structure, to a client/server structure, to an Internet model of client/server.  As a business, I have an interface that is accessible via any computer on the Internet with a browser.  You don't need to interface with a business via a call center employee looking at a green screen application hosted on a mainframe.  You can access it directly over the web with a web application that interfaces with the green screen application on the mainframe.  You can rig your business with web services to instantly connect to other businesses and enable B2B extensions.  All of this cuts back on the need for more man power, and allows you to give consumers more control and access.  In the grand scheme of things, I/T has increased productivity and lowered costs by a fair margin.  However, on an individual basis, if your business is running a small operation with no need to grow, then why upgrade your old mainframe system?  That could be a destruction of invested capital (although, in certain instances, upgrading your mainframe could save you money by removing costly legacy support).  You really need business justifications to upgrade.

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From the valuations of acquired technology firms I have seen (esp. internet acquisitions), we done as defensive plays to maintain or enhance an existing franchise from competition.  The story was expansion into new markets but the reality is was a maintenance cost to keep the current franchise in place.  On a macro basis, software reduces costs but the benefits in most cases (competitive industries) falls to the firm's customers not itself because in most cases the same benefit is available to all competitors.

 

Packer 

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Guest longinvestor

Kawikaho,

I respect your experience in the IT field but have to differ on some points you have raised

on ROI: being 1) variable and 2) harder to capture true ROI. I will go with 2) because it is. The sellers of IT like it that way, IMHO.

game changing ideas that make productivity gains MASSIVE.: If productivity means fewer people working, in my experience, that is seldom the case. I am speaking of enterprise IT solutions, the likes of ERP, Oracle SAP et al.

 

All of this cuts back on the need for more man power, and allows you to give consumers more control and access. In my post I kept enterprise IT separate from consumer IT. Agree with the consumer choice, but that happened despite enterprise investment in IT. In most cases, many enterprises were late to the party. "Oh #@it, we need to sell thru the internet channel" is how I have seen it happen. And the biggest fear was (& still is) decreasing pricing power due to broader consumer access. Most businesses I have come across approach this defensively. I love it as a consumer to be able to shop around and do things like checking on product ratings on Consumer reports etc.

However, on an individual basis, if your business is running a small operation with no need to grow, then why upgrade your old mainframe system?

Agree with you here. My premise with enterprise IT is medium / large businesses. In fact small businesses with undiluted ownership interest did the obvious thing, implemented garden variety IT solutions like small databases, Microsoft, web apps etc.

 

You really need business justifications to upgrade. Agree wholeheartedly. However, large enterprise IT solutions are often sold rather than bought. Selling points are based more on fear/consequences like "data security", "Compliance" (like audit trails, Sarbox) and "no more system support" rather than "this is going to take X fewer people". And in my experience, once an enterprise IT solution is sold, subsequent upgrades happen like "rape with consent". In a prior work life, the CEO of our company would have loved to strangle the CEO of the ERP provider if they ever came face to face.

 

What is interesting and widespread is that IT is almost always sold to the CFO-types in large enterprises. IMHO, this has one ultimate purpose, feeding "the love of numbers at fingertips". The folly in this is that having data/information at fingertips does not mean that you can always act on it with purpose.

 

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Guest kawikaho

longinvestor,

 

Don't blame the CEO of the ERP company, blame your CEO and your CTO for making stupid decisions!  I mean, if you get stuck with vendor XYZ, then you didn't do your homework.  Guys that have researched, tested, and load tested a good ERP or CRM system know what they are diving into.  You don't have to spend $$$ for Salesforce.com, or Oracle, when you run a small-med sized business.  You can use open source ERP or CRM systems, or build one from scratch.  The costs to the system is from lack of due diligence.  You get stuck with a crappy house because you didn't hire an inspector, well, that's your fault.  I know if I was a CTO, and looked at all of my available options, I would be hesitant to go with big name vendors like SAP or IBM, because I know they are unwieldy and require lots of expensive consultants, most of whom are not worth their $$'s, to put the system in place and support it.  But if my business is very large, and growing, and growth is being constrained by lack of a scalable enterprise system that can accept orders from multiple sources like call centers, website, or other businesses and vendors; fulfill the orders with our warehouse and inventory systems; ship the orders with our shipping partners; etc..., etc..., then I will do what I need to do.  

 

If you ask most CEOs about technology, they will tell you it's on their priority list for making their businesses more competitive and productive (I mean, really, do you want to do all of your payroll, and accounting by the old ledger book method???).  I think businesses are highly more productive due to their I/T systems than without.  Even when it doesn't make sense, upgrading your IT systems produce enough ROI in the long run to justify it.  Visa has been in the process of removing most of their old legacy systems for quite awhile.  They are working with IBM India to complete the project.  Innovant, a subsidiary of Visa that is essentially their IT arm, has mostly used old legacy mainframes for their operations.  Visa did a study to look at the costs with such system going forward, and the benefits of upgrading.  They decided it was necessary to upgrade.  The conversion to UNIX and newer software is going to be EXPENSIVE, but in the long run, Visa knows it's the right thing to do.  It's like alternative energy.  Even though most people know that at current energy prices, alternative energy doesn't make sense, there's enough compelling evidence that without putting such technology in place, we could be digging our graves in the long run via peak oil.  

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Guest Broxburnboy

IT systems are only a tool, they are not in themselves productive or nonproductive. To be productive, they must (like any other tool) increase efficiency of performing a certain task. The applications that benefit best from computerization are those that take advantage of the computer's strengths.. speed and brute force. With the advent on the internet we can add speed of communication as an advantage.

The best efficiencies are made in scientific and math applications that require a large volume of transactions. Modern day computers were originally developed for use in military calculations (ordinance trajectory tables) and accounting (government and corporate payrolls). The more complex the task in terms of requiring human input, the less benefit there will be in computerizing it.

In my experience (I owned a company that installed Local area networks, accounting software and end user training), the failure of installations was almost always with the end user... management purchased (or were sold) inappropriate tools for the job they had in mind, the end user did not know how to use the tool (bookkeepers who had no knowledge of double entry accounting) or were not trained on its use or the cost/benefit calculation was flawed.

Being a dealer for a sales organization that used salesforce.com, I can tell you that it was a poor substitute for a well functioning hierarchical sales organization. The organizational structure (human to human) was broken before it was implemented and remained so afterwards. A bigger hammer cannot improve a carpenter's aim.

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Guest kawikaho

No offense, but you don't know what you're talking about.  Scientific and math applications require large volume of transactions?  Wha??  Do you know what the difference between a transaction and floating point operation is?  Scientific/math applications require computers to do calculations, not transactions.  Transactions is what you do when you go to a bank or atm.  When I add 2+2, I didn't do a transaction, I did a calculation.  When I go to the atm to withdraw money, I didn't do a calculation, I did a transaction.  Transactions are WAY different than a calculation, and there are entire courses, mathematics, and books that delve into the concept of a transaction.  A transaction must fit the ACID properties to be considered a transaction.  No math or scientific application requires any transactions or ACID properties, unless, of course, the need to interact with a database or EIS for something out of the ordinary.

 

Modern day computers were originally used for military calculations??  Define "modern day computers".  If you are talking about transistor based computers, then no, the first one of those weren't used solely for calculating projectile trajectories and accounting.  Infact, they were used for all sorts of purposes like code breaking.  And the Internet didn't invent speed in communication.  You can thank Bell instead for that.

 

Fuck it.  It's like talking to a brick wall.

 

IT systems are only a tool, they are not in themselves productive or nonproductive. To be productive, they must (like any other tool) increase efficiency of performing a certain task. The applications that benefit best from computerization are those that take advantage of the computer's strengths.. speed and brute force. With the advent on the internet we can add speed of communication as an advantage.

The best efficiencies are made in scientific and math applications that require a large volume of transactions. Modern day computers were originally developed for use in military calculations (ordinance trajectory tables) and accounting (government and corporate payrolls). The more complex the task in terms of requiring human input, the less benefit there will be in computerizing it.

In my experience (I owned a company that installed Local area networks, accounting software and end user training), the failure of installations was almost always with the end user... management purchased (or were sold) inappropriate tools for the job they had in mind, the end user did not know how to use the tool (bookkeepers who had no knowledge of double entry accounting) or were not trained on its use or the cost/benefit calculation was flawed.

Being a dealer for a sales organization that used salesforce.com, I can tell you that it was a poor substitute for a well functioning hierarchical sales organization. The organizational structure (human to human) was broken before it was implemented and remained so afterwards. A bigger hammer cannot improve a carpenter's aim.

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Guest Broxburnboy

By modern computers I mean electronic, semiconductor based computers that first came into play in the late '40s early 50's.

The first military application was in the calculation of shell trajectories for use in gunnery (look it up). Prior to this, these types of calculations were done by a room full of humans (called computers) armed with pencil, paper and slide rules (a type of manual computer). The task was onerous because of the sheer number of calculations that had to be done.

In modern day computers, each calculation for your information requires a number of floating point operations and a simple addition such as 2+2 requires several FLOPS, depending on the native instruction set of the CPU.

Payroll applications for large entities (such as government) were onerous because of 1. the number of calculations per cheque written and 2. the number of transactions (each record  of each database that is accessed, read or written during this course is referred to a a transaction). 3. the number of iterations of the process (the number of payrolees).

Any applications that accesses databases, whether scientific or otherwise, engages in a transaction.

I think you need to do some research and fill in some gaps in your knowledge before becoming abusive, as appears to be your intent.

 

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Fuck it.  It's like talking to a brick wall.

 

 

Guys, can we chill?  Where is this board going, with a bunch of folks being particularly testy for the past couple of months, a new poster calling Sanjeev "dude", and now even the F____ word flying? 

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Fuck it.  It's like talking to a brick wall.

 

Guys, can we chill?   Where is this board going, with a bunch of folks being particularly testy for the past couple of months, a new poster calling Sanjeev "dude", and now even the F____ word flying? 

 

I agree with UhuruPeak.  Everyone should keep their posts respectful (this is not the yahoo boards). Criticism strengthens our understanding but I think most of us here want to see constructive criticism that is focused on refuting ideas, not attacking individuals. This is what the old board was like when it was at its best. 

 

I respectfully suggest that all posters should re-read the Terms of Use that Sanjeev posted on the main page.

http://cornerofberkshireandfairfax.ca/forum/index.php?topic=42.0

 

Cheers!

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I agree with UhuruPeak.  Everyone should keep their posts respectful (this is not the yahoo boards). Criticism strengthens our understanding but I think most of us here want to see constructive criticism that is focused on refuting ideas, not attacking individuals. This is what the old board was like when it was at its best. 

 

I respectfully suggest that all posters should re-read the Terms of Use that Sanjeev posted on the main page.

http://cornerofberkshireandfairfax.ca/forum/index.php?topic=42.0

 

Cheers!

 

I have nothing to add...

 

-Crip

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