Public Cloud is Better than On-Premise and Netflix vs Zynga proves it

There is a common myth that for super large scale companies it makes sense to build their own data center instead of using a public cloud.

In many cases I believe this is exactly the opposite. For many companies, time to market, focus and top line are more critical than a theoretical saving 20% on the cost.

The Killing , Wikipedia

Consider Netflix and Zynga. Both companies are large and smart enough to build their own private clouds.

Zynga chose to leave AWS and build their own cloud infrastructure. Netflix chose to stay on AWS, probably with a huge discount.

Their stock price might hint on which company made the right choice.

Netflix Vs Zynga

Netflix focused the company’s energy on moving from a tech company into  a movie production studio with shows like “House of Cards” , “Arrested Development”,”The Killing” and “Orange is the new Black”. Zynga was busy in becoming a data center company. Instead of focusing on social games and preparing for the next big change into Mobile.

The more generic point is that the bottleneck in most companies is a person.  More specifically, it is management attention. If everyone is busy in building a private cloud and purchasing 1000’s of servers, no one has time to create a new business line.

The thought is that a private cloud becomes attractive with huge scale because the number of devops people to write software  has an upper bound.

This might be true, but there are very few people in the world who have already done it, and hiring takes a lot of time.

The other option is to hire inexperienced people, at least on this scale, and they would make mistakes.

Companies like Netflix and Zynga are supposed to have 70-90% gross margin. Reducing cost of hardware from 20% to 15% is nice, but even that is not straight forward. And in any case, it is much less important than losing or creating a new $1B on the revenue side.

 

 

 

 

What were they thinking?

Sometimes I feel like a character in a Dilbert cartoon.  Why would a very senior, smart executive, who is Not a functional idiot make an obviously senseless choice?

Here are few examples

• George W. Bush senior, a new product management director, wanted to move Daniel , who now reports to him, into a new position. For some reason, he chose to discuss it first with Emmy who reports to Daniel. Daniel learned about the new plans from Emmy and was insulted twice.  Emmy was also distressed about the weird behavior of her Director.

• Senior accountant Jack Silverman sent an email to 100,000 employees – “Some people are not filling their expense report forms correctly. They keep putting the expenses with decimal points, while the system can only expect integers. This is breaking our ERP and causing a lot of work for the finance department. Employees who continue to make this mistake would face disciplinary actions and may be fired, if they do not amend their ways.”
• Senior VP Jack Welsh decided to shut down the new social media network “Buddy Buddy” as the engineering team in Texas failed to deliver a working product for over a year.  The official reason was that “Buddy Buddy” overlaps the existing product line. Three months later, Jack announced a new product called “Chuku Chuku” which will connect people through social interactions.  The new product leader would be Shlomo Shlomo who ran “Buddy Buddy” .

Food for thought

• George R.Martin , the new CEO just a hired Donald Duck as his new VP of product management. Three months later he decided to fire Donald. He quickly hired Mickey Mouse , an experienced product marketing manager , but fired him as well after four months.  Even Pluto did not last more than five months at the job. While this unfortunate turn of events can happen to the best, George never ran a background check and reference check on any of the candidates. George has been very strict regarding reference checks when his managers had new candidates, but he felt his intuition is good enough for the most senior positions In the company.
• Morgan Dexter was a successful QA Executive for a large Pharmaceutical company for many years.  For various reasons, the new management decided to find a new person to replace him. They wanted to do it respectfully, so allowed Dexter time to find a new position in the corporate.  To everyone’s surprise. Dexter kept using his previous title, in public forums, even 12 months after the change has already happened.

The Unaccountable Number Two

“A body of men holding themselves accountable to nobody ought not to be trusted by anybody.”
― Thomas Paine

One of the most dangerous leaders to have in a company is the unaccountable #2.

UNANT, for short , is usually a former founder, or a top executive, who is still involved in the company, but has no direct reports, or clear accountability for a specific business line.

It can be the CTO, chief strategy officer,the vice chairman or any other obscure title.

Because of his seniority,status and experience the UNANT advises are actually considered decisions.

Unlike other managers, his decisions don’t have to be backed by budgets or organizational support , as he is not the one executing them or responsible for the outcome. It also makes life hard for the rest of the team. Who wants to contradict a member of the board?

Name this #2

In many cases, the lack of accountability , while the authority exists, makes it hard to distinguish “decisions” from “opinion”.

The UNANT tends  use annoying stories from 20 years ago to show he is right (=everyone else is wrong ).

“What’s so hard? We wrote version Three in two hours, we only had a broken typewriter , one chair for four people and we sold 50,000 copies in three days.”

The UNANT also comes up with original ideas like “If every developer puts an extra hour a day on cleaning the office we can fire our cleaners and save lots of money”

The only worst organizational type is the unaccountable #2 spin master .He  actually has direct reports and theoretical responsibility , but manages to never pay the price for his decisions. His direct reports are usually being replaced 🙂

The Functional Idiot

Here is a story. I’m sitting in a room with an extremely intelligent  person. Our new VP of product marketing – Mr Y. He has an MBA from one of the finest universities in the world ,a track record as a C level executive in a Fortune 100 company. He is articulate and presents an amazing vision for the future of our company. Moreover, he defines concrete examples how we will be using social media and go beyond traditional  enterprise marketing. I’m quite impressed. Finally, we have someone in marketing who knows what he is talking about.

One month later, Mr Y Speaks in an executive forum. He repeats exactly the same story with the same social media example and same jokes. I’m getting a bit suspicious , but as the great Jack Welch said – communicating your message is one of the top leadership roles. So, I give Mr Y the credit that he is talking to a new audience.

Two months later, Mer Y is already working with us for four months. We are in a customer conference. The same exact story, word by word 😦 . Two months later he was not working with us anymore …

He is probably a “Type A” functional idiot.

I recently learned the term “Functional Idiot” which I really like. Unfortunately it is not well-defined, yet. The Urban Dictionary definition for “Functional Idiot” is :

A person who suffers from functional idiocy.

Which does not help much. However, almost everyone seems to “Get It”, so they must have worked with some.

There can be a few of ways to describe a functional idiot:

• Type A functional idiot – A complete idiot who made it through the system to obtain an important function or position (e.g. George Bush Junior :))
• Type B functional idiot – A very smart person in specific domains who behaves like an idiot in other domains  (e.g. Steve Jobs’ failure to admit he needs to shower to smell good)
• Type C functional idiot – A person who used to be very smart and effective, but became outdated and irrelevant (e.g Dan Margalit might be an example for the Israeli audience)

Let’s say you are walking around the office and you spot a “Functional Idiot”  make a stupid decision. Let me provide you with tools to rationalize it.

Here is a second story. In a board meeting, you realize one of your board members (Let’s call him Prisoner X)  suggests the company should release a “simple self-service” version of your costly, sophisticated enterprise product. This could have been   a great suggestion. But we already did it six months ago and discussed it multiple times with him.

The challenge is that Prisoner X is quite smart and has a very good track record in the industry. How can we explain the fact he get’s $40K$ a month ,but is not able to remember the main products of his four companies?

Prisoner X is probably a type B functional idiot. He is very smart in the big picture and in identifying opportunities, but he is very bad in operational work and following details.

Type C functional idiots are easier to spot. You would usually find them in the CTO office, they have the word “Strategy” in their title.  in a recent example I was observing a very long thread on the pros and cons of C vs C++. The heated discussions was taking place in 2012 by people with an amazing track record in the high-tech industry history. And it was a very interesting discussion to have. In 1996.

To conclude,It is essential to identify functional idiots and tell them apart. Otherwise  we are all doomed 🙂

Could Israel Lead The Data Science Revolution?

Tel Aviv Yarkon River Kayaking

Israel has an enormous potential to play a major role in the new “Big Data” and Data Science ecosystem. Data Scientist is becoming a very “sexy” profession and since “Big Data” is expected to create a huge market, the opportunity should not be missed.

Israel’s has the following advantages:

• A World class academic activity in machine learning , pattern recognition & text analytics. Some example are: Prof. Yishay Mansour , Prof. Naftali Tishby ,Prof. Yair Weiss and Prof. Amnon Shashua.
• Large supply of candidates – there are quite a lot of great PhD or MSC graduates in Applied math, Statistics  Physics , Biology, Bioinformatics and Chemistry . Since the universities have a very limited supply for tenures, the pool is quite deep. In Europe and US there is shortage of these skills.
• These are not new topics For the Israeli Intelligence community and broader Israeli security sector. There are experienced experts who built proven,production systems. The experts are not only on the math side, but also on the business analysis side.
• Typical Israeli data scientist has more IT\programming skills. While these are not mandatory features for success,they tend to accelerate the discovery process and add a lot value.
• There are quite a few business applied Data Mining companies in the commercial sector and in start-ups arena (e.g. Pursway).
• The excellent communication skills, domain understanding and language diversity , especially compared to classical never-worked-outside-of-university PhD. Many Israeli PhD are “forced” to work in teams and in the industry to make a living, or during their army service, so even the more introvert types make a solid team player 🙂
• 50% reduced cost compared to US – for various historical reasons the PHD\Masters title is not as economical as in the states. An amazing Java developer with no degree at all would probably earn twice as much as an amazing chemistry POST-Doc from Harvard. While this is a shame, it presents an opportunity for Data Science service out of Israel. Moreover, there are less hedge-funds to waste people talent 🙂

There are various directions to capitalize the potential:

• Providing Data Scientists as a service, out of Israel. While remoteness presents some challenges, we have seen early success. It seems that the pros outweigh the cons.
• Build infrastructure products for Big data – around Hadoop, Hive, Mahoot etc. Adding the enterprise features and improving performance  These are similar in nature to traditional Israeli expertise in networking, storage and security. In my opinion, there is higher chance for na Israeli start-up to succeed here, bigger than in a new social application.
• Develop innovative services that use Machine Learning internally to gain a competitive edge (In advertisement, Retail or Medicine)

In a world where “old-fashioned” software engineers are more and more common, each one of these direction can help maintain Israel’s Hi-Tech uniqueness.

P.S

I just saw that other people also think Israel has the chance to be a world leader in big data . Although the quote is from EMC, I knew nothing about it 🙂

Tel Aviv Bicycle Race Sukkot 2012

Why Great Software Developers Should not do Porn and AlgoTrading

Product Manager – Backgammon, Company unspecified, Gibraltar

The world’s leading online gaming company, requires an innovative Product Manager to own, develop and manage the company’s suite of Backgammon products. This dynamic role will see you developing and owning the product roadmap for Backgammon, generating new product ideas and driving successful product rollouts.

I believe it is a shame when some of the top intellectual minds of our times devote their 12 hours work days to algorithmic trading, on-line gambling, “casual” gaming, search engine optimization  , on-line porn, search diversion through “Freeware\Malware” and so on.

Of course, these ultra smart developers are not using these services (at least not all of them:) ). They are the brains that run the software and algorithms to operate the questionable services.

I’m not passing judgment on the need for the services , although I’m quite sure Algo Trading has no economical benefit to the world :). I do think that being a “Product manager for backgammon” is less important and satisfactory than “Product manager for diabetes cure” .

I see too many brilliant friends who want to make easy money by finding a loop-hole in the global financial system. While I can’t commit that I would never work in such company, I prefer not to do it, as long as I can.

Interestingly enough, these services are somewhat related. For example, a lot of the real good money in SEO is from references to gambling and porn sites . Forex trading is not really different from a legal(?) form of gambling and “casual gaming” ,IMO, is quite the same.

It just seems that developing the Google search engine is more productive than algorithms that create fake content that only seems real to Google, but no real person would ever want to read.

Our civilization moves forward from innovation like Bioinformatics and Wikipedia, even Facebook and Twitter. But it seems that we can leave SEO to the average  developers….

Mitigating the risk of lawyers

It’s not a crime to be innocent, these things we have not done
But you’re not some little child, spring is past and gone
Well I know my craving heart and I’ve seen your vicious eyes
And I think we know the truth, both you and I
Don’t flutter your lashes like a little girl
And ask me why it’s such a cruel, cruel world, no
Don’t ask any more stupid questions
You already know the answers to,

New Model Army, Stupid Questions

Lawyers represent a huge risk to the business. Most of them believe their role is to insure they can never be blamed for any decision made, rather than the traditional role of a business – to make money.

And I’m not even talking about external lawyers who are looking for ways to sue you 🙂 these are your own employees who earn their living of your business.

A typical discussion with the legal department goes something like this:

• Manager: Can I Do X?
• Legal:No, it is risky.
• Manager:But It is Really Important.
• Legal: I’ll check.

Legal never get back so the managers pings legal two weeks later.

• Manager : What’s the answer? Legal : You can’t.
• Manager : Why? Because it is very risky for IP\TAX\HR\Contract reasons.

Happy Legal Expert Taking Risks

I have learned a few rules to mitigate the risk from the legal department.

• Learn the principles. My two MBA courses on contracts and law in information systems have given me enough basics to ask hard questions.
• Managers should understand employees’ social rights , benefits and different employment models etc. This is important part of the role, not “HR department role”.
• Always start from the business goal. The lawyer cannot argue about that because he does not understand the business and because you are the owner.
• If you are hiring the lawyers get the good ones who understand business and are service oriented.
• If you are using internal legal and  get bad service – complain. Legal is a service provider , just like the IT department. If their responses are slow, inaccurate or unhelpful to te manager one should talk to their executive and ask for assistance.
• Demand domain expertise. High-Tech Lawyers should understand the difference between SaaS ans On Premise, for example.

• Use standard forms,standard contracts, standard NDA etc. It is not scalable to rethink these for each relationship.
• Request service, not consulting. For example :”   want to have a OEM partnership with X in two weeks because it is going to add 20M$ for us next year. Please handle the legal parts ASAP”
• Give the lawyers context and business reasons: what  are you trying to achieve, who is the other side, what’s the urgency, what’s the reward.
• Don’t go legal unless you have to.Risk is everywhere – bugs, features, unhappy customers. As managers we manage risk without even thinking about it. Lawyers are trained to think only about the risks and have a very strong bias against action. In decisions where risk is understood and  is small , it is better to leave legal out of the picture.
• Unless we are talking about tax or death issues , no one is going to come back to the manager 10 years from now and blame him anyway
• Insurance is a great way to quantify risk and can be used in many cases. For example , instead of  long debates on what will happen if your web site is crashed by aliens,  it is simpler to buy insurance.
• “Risk to legal department” != “Risk to the business”
• Magic words: “I understand the risk and I accept it, If things go wrong this is my business decision”.Since most lawyers are just looking to cover their behinds, this is what they need to hear.

An Apple Real Smart TV – Next Week?

The rumors about Apple launching a “Real” TV appliance next Month make a lot of sense.

Apple quote is “We have something you really have to see. And touch”.

• It is very easy to easy to imagine the features. Just think about a very big iPad. It needs internet access + Itunes + Applications + Local and Cloud Storage.
• There are many “Smart TV’s” around. As usual, the hardware companies jut don’t get it. The user interface is boring, the CPU is too slow, the software is limited. Just like smart phone before iPhones and touchpads before iPad (think Window Tablet for example ).
• The component prices are low enough that such an appliance can be reasonably priced.
• It might have build in Camera, making consumer Tele Presence real, for the first time.
• Apple has track record of selling large beautiful screens.
• From the business side Apple can partner with one of the Big Cable vendors to handle the “boring” stuff. The same way it saved AT&T business it can save a cable provider. Instead of fighting the internet the cable provider would get access to a new exciting high premium market. Or they can just buy NetFlix.
• Apple likes to take market away from Samsung and Sony 🙂
• Big question mark is on user interaction.Might be something like PrimeSense or maybe “Just” smart usage of iPhone\iPad people already have at home. Or maybe a new kind of control which is a hybrid of iPad and iPhone.
• I guess the stock would rise to $700 , if they do announce such an appliance 🙂

Here is an example of “Smart TV” from a company that does not “Get it”.

Fresh Look – Dozen Interesting Israeli Start-Ups

Fresh Paint Balfour Street Tel Aviv

I have assembled a pseudo-arbitrary list of interesting Israeli start-ups. These are mostly companies whose product I got to try and whose team I met. Some bias to companies with real intellectual property in algorithms or products. They may have much in common,and there are many more around, but worth watching.

1. ToTango – Simple Idea. Wide Appeal. “New Wave” solution.
2. Contendo – Speed of Light is constant. Akamai is Too Expensive. DNS too Crucial.
3. Xtremio– SSD can be a game changer.
4. ZeRTO – Smart guys. Track record. Stealth Mode.
5. TakaDu – Smart guys. Strong Algorithms. Strong Need. Out of the box.
6. Panaya – Strong Algorithms. Pure Israeli. Sales 2.0. Sharing knowledge. Proven Results.
7. WatchDox. A Nobel approach to managing document and security.
8. WorkLight – Portable Mobile Apps Make great sense. CEO.
9. PrimeSense – Great Algorithms. Awesome product. Huge Potential.
10. Plimus – Money has a wide appeal :). Great alignment for SaaS. Good API. Stands out in a confusing world.
11. Kampyle – Simple product, wide appeal. Responsive to Customers. In the good sense.
12. Snaptu – They were on the list before their exit 🙂 Same for Sentrigo

Orange and Carrot Juice in Tel Aviv

Now in Video: Spec Master, The Hidden Product Manager

I played a bit with GoAnimate to create an animated version of Spec Master: The Hidden Product Manager Role blog post.
Fun stuff, and it helps your brain to avoid reading.