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The investors dream business is predominately focused on one word in the end – scalability. If you here it uttered once, you will here it uttered at least a thousand times more. Many of you may be asking right now, what exactly is a scalable business? Well, essentially a “perfect” scalable business is one which can achieve huge revenue growth with little additional investment capital required. It’s a business whose revenue model is not constricted by factors such as manufacturing outputs or human capital considerations – it’s one where the revenue (y-axis) vs. cost (x-axis) graph looks much like a vertical line sloping on a 89 degree angle. The cost of each dollar invested is far outweighed by the revenue per dollar returned so the overall incremental cost is reducing as the business expands. To put it simply, a scalable business is one where revenue is exponentially increasing as a function of time.

Of course, such a “perfect” business is never truly possible in real life – this is half the battle. People are needed to run business (damn those humans), markets are different, risks in each market are different, market share is different, brand power and intellectual property considerations are all different. All these factors play into the battle of finding companies which are working towards a highly scalable model, and companies which investors want to focus their funds on. Of course, even taking investment capital suggests – at least in the beginning – that the business is not a truly scalable one, since the investment infers that cost per dollar invested is already outweighing return. Of course, a longer term growth return projection may set this initial failing straight – but applying the narrow definition stated above – it’s an observation that is still true.

So what are some scalable businesses? To start, it’s important to state from the outset – humans are not scalable.

Yep, that rights – any business which solely relies on humans is not scalable. Businesses restricted by human capital and output volume as a function of time do not scale. For example, a legal firm is inherently unscalable - lawyers have lengthy skill development (education), time is limited to a maximum of 24 hours per day which means revenue restrictions, billing time per day fluctuates and most importantly – there is a ceiling limit on what clients will pay for legal advice. Even the best lawyers can only charge so much – as people and businesses – the customers – are themselves limited by cost constraints and will go to the next best lawyer who charges slightly less. This is a perfect example of the inability of an entire industry to be scalable businesses because it is fundamentally restricted by revenue as a function of time – that is, revenue per hour hits a limit.

“OK Then” you are thinking, “well, what is scalable?” Well, practically any industry that is not solely reliant on those pesky humans. Take the Internet for example.

Internet businesses can be hugely scalable because the market available online is not restricted, for example, by jurisdiction. You can purchase a domain name and any person in the world can access this domain name. Sure, they might not even know that something exists at the domain name you have purchased – but it doesn’t limit them accessing it. On the flip side, legal advice is restricted by jurisdiction as laws are different in every country. So Internet businesses have the potential to be hugely – not infinitely – scalable. Of course, a lot depends on the nature of the Internet business and the degree to which it exists entirely online. Business which are built and rely entirely on software are not restricted in anyway by manufacturing output for example – since software can be distributed and replicated an infinite number of times. In comparison, Internet businesses which rely on the processing of physical goods are restricted since they rely on channel, production and distribution partners to assist them with the delivery of the customers order.

This is why a lot of “new age” business are moving online because it entirely removes the need for physical distribution locations – which have heavy costs of staffing, leases, safety, insurance, internal shop fitting and all the rest. It all comes down to the revenue as a function of time. The faster the revenue as a function of time, the more scalable the business – conversely, business which are restricted by such an equation are either not scalable or no longer have the same degree of scalability. If you own a business, you need to look at your revenue drivers and try and establish the highest revenue areas as a function of time and then focus – or promote these more – since it is probable that these are the areas of your business that will increase profit in the long run.

Of course, importantly – this article is not in anyway suggesting that businesses which are not scalable have no chance at being successful – that is a ridiculous proposition. It is merely pointing to the establishment of businesses which are scalable and have a “higher chance” at being able to generate huge revenue quickly as a function of time. Any business can generate huge revenue – but typically they do not fall into the high revenue businesses as a function of time. The key is too look for businesses which can produce $2 or $3 or $100 per second and have no ceiling limit on what this rate can scale too.

No business can do this forever, but the ones that consistently maintain high levels of revenue as a function of time are the ones to watch.

It’s has been amazing to watch the torrid of information and critical analysis floating around the web relating to Google and Bing – Microsoft’s New Search Engine product. I have read numerous articles and have reserved comment on all of them, instead waiting until something particularly erked me enough to write a post and pass my judgement. Interestingly, it was a New York Times article and the respective comments which really provided the passionate to write this post.

So, a few months ago Microsoft released their new search product – Bing – into the wild without a great deal of fanfare on launch. The product was initially demonstrated at the AllThingsD conference where Steve Ballmer was generally excited about the product but withheld the expectations that Microsoft was placing on the success of Bing – accepting that Google was a significant force in the market. Of course, the natural succession to the launch of Bing was the comparison to Google and whether a paradigm shift would occur with users willing to change from Google to Bing, and whether it would adversley affect Google’s bottom line. The initial reaction from the numerous articles I read was that generally internet consumers thought Bing was good – but it did not provide users with enough incentive to change. Articles and commentary appeared that presented an underlying connotation that Bing was a great product – but presented too late in the game to make a difference. Microsoft were also criticised about the effectiveness of their $100 million dollar advertising campaign to promote the product.

Soon after, several separate impartial engines were established which contrasted the results of Yahoo, Google and Bing together on the one site and asked consumers to generally pick the best results before revealing which search engine was responsible – here is one such experiment called ‘BlindSearch’. Such experiments significantly changed the basis on which technology enthusiasts reviewed the search engines and I think, surprised a number of people with the quality of results from Bing in comparison to Google. Of course, this lead to some influential technology journalists and bloggers writing increasingly positive articles about the search engine and how they were more willing to give Bing a go – and this is probably where the situation currently resides.

Of course, my opinion on the whole matter relates most specifically to who provides the best all round consumer experience. In my mind, this tends to be heavily influenced by where ones brand allegiance lies. I do not believe the issue is based entirely on the delivery of the best results – it was increasingly apparent from my testing that the results illustrated were both fairly similar. This is not to say Google was always better than Bing, or indeed, that Bing was better than Google – both returned varying degrees of satisfaction in the searches I conducted. The search terms I entered ranged from extremely easy subject matter right down to overtly abstracted searches relating to all sorts of weird and wonderful law and medical terms. Of course, over time it is expected that this is going to significantly improve as both Google and Bing continue to build out their products – but all in all, my testing provided me with the information that I needed to write this article.

I think the issue in this whole debate rests on brand power as opposed to who provides the better results. It is evident in the short-term future that both Microsoft and Google are going to have solid search products – solely from the sheer volume of money being poured into search from both sides of the fence. The purchase of any technology which will significantly improve search will be hotly contested by both Google and Microsoft and so will the human capital that is actually able to continually engineer and build out both products – after all, a company is only as good as the people it has working for it. But I digress, the point of this article is to focus on the flawed comparison of why one is better than the other – I believe this is non-argument. Google is of course a better engine – solely from the abstracted basis that it has invested all of its resources in the last 10 years to building an extremely successful search engine – Microsoft has not. Microsoft is now starting this process – and in my mind, has started significantly well with the Bing offering – but it’s going to be a long-term project to dint Google’s market share and I believe Microsoft also acknowledge this.

Importantly – Google, as a product, has been drummed into my generation as the pre-eminent search engine since the company was founded in 1998 and since I started using it in late 1999. Their culture, the effectiveness of their results and the entire Google story was something that related specifically to my friends and I – and pretty much everyone else. Of critical importance however, was that the product exceeded so many other search engines available at the time in scouring the Internet, finding and returning the information that was keyed into it – nothing else offered even came close to Google. It is therefore a fruitless, and down right pointless argument, to suggest that Microsoft is going to make significant in-roads into a product that has been relied on by people for the last 10 years on the Internet because natural bias will win through to Google’s corner. A similar analogy would be expecting the majority of consumers to just change to a new operating system after using Microsoft for more than 10 years – it just doesn’t happen that way. Brand power is an incredibly powerful thing – and the trust, faith and continual delivery of great results resides well in a lot of consumers on the Internet who correlate search to Google. In fact, Google as brand is so powerful that many people now even correlate Google as a browser – as witnessed in this video.

The point of my argument is that Internet users tend to very brand loyal consumers. If you check out the top sites you visit – it is more than probable that you have a list of no more than 5 to 10 sites that you visit regularly on a daily basis. For me, this would include Google, Gmail, Google Reader, Facebook, The Age, Digg, New York Times, Stack Overflow and of course our company’s product websites. This generally would infer that I am a loyal Google user and this absolutely rings true – because the only real search engine I have consistently used in the last decade has been Google. Furthermore, Google has successfully cross-promoted their products and I am also a regular user of Gmail and Google Reader products. The code and continual feature roll-outs in these products far exceeded anything that Microsoft offered in its Hotmail – now Windows Live – system and so the change became more of a Darwinian takeover as opposed to any associated choice decision equation. The converse is also true – I have never used anything except Microsoft Operating Systems for the last 10 years and would be very resistant to change. While it’s true that I own a iMac – I only realistically use it for Photo Editing and Movie creation as the products offered in iLife are extremely user friendly and I could not find any PC related software that exceeded the offerings by Apple at a similar price.

So for now, when I read an article – such as the one published on the New York Times –  and see the majority of comments include words such as trust, faith, relevancy, monopoly, market domination, advertising, speed, bias media, paid reviews, MS copying other products and all the rest – I pretty much laugh. I find it very difficult to believe that the majority of this is driven from anything other than pure brand allegiance and genuine belief that Google is a company that “does no evil”. Most of the non-tech populous does not even know about the huge struggles that each company is going through to beset the other – generally, they just want a product that works and want to trust the company that provides it – something Google has succeed with on the web. Of course, this is pure marketing genius and the power of the Google brand – as opposed to the reality of the situation regarding the actual data privacy concerns that majority of the world holds over Google. Consumers trust Google and do not trust Microsoft to the same degree, and it is this trust that emanates so wildly in the passion that is stirred up in any Google vs. Bing, or indeed Google vs. Microsoft debate. This infers that Google’s search product will continue to dominate over Bing – until Microsoft is able to breakdown the resistance that Consumers have built up towards Microsoft. Generally, becoming a more open and transparent company, creating more ads like these that consumers generally find ‘cool’, listening more intently to consumer desires and responding faster to feedback, and continuing to deliver more products like Bing is going to have a serious impact to the trust argument that consumers place in Microsoft. It’s an area that Microsoft really need to work on if they are succeed as spectacularly online as they have in the server and operating system market. Perhaps a good place to start would be attacking Googles data retention policies, making consumers aware of just how much information Google holds and changing their own policies to pass control to the user would be a very good place to start in my mind.

The flip side to all this – is that while consumers trust Google, businesses trust Microsoft. It is absolutely true that businesses are responsible for driving Microsoft’s bottom line – an area that I believe Google has the exact same problems that Microsoft has in the consumer space. Many businesses are extremely wary of trusting Google because of the advice they have received regarding Google privacy policies and the overall data retention policies that Google holds. Each company would actually be wise to analyse the positions of the other in each respective competitive field and I think they would find they have more in common than each actually believes. The key to all of this ? Listen to consumers, implement features they want and go out of your way to provide them with a great product – this builds trust and ultimately – this builds success in the online world.

At Fluc Media, we love cloud computing – in fact, for what we are doing cloud computing really makes the world go around. Interestingly however, is just how little a lot of my friends really understand about cloud computing and the coined phrase “in the cloud” – so I set about explaining the entire concept in this simple post.

So what is cloud computing?

Cloud computing is essentially a method of delivering applications over the Internet directly using a dynamically scalable system of computers which can be quickly scaled upwards or downwards as demand changes for the delivery of  the application. The term ‘cloud’ is effectively a metaphor for the word the ‘internet’ such that the cloud hosted applications are delivered through a large host of networked servers which are interconnected by high speed bandwidth connections at server farms around the world.

The hosting of a cloud computing system is typically provided by the Internet giants of the world – primarily because they have the financial resource capacity to purchase thousands of servers, strategically house them for optimal performance delivery and most importantly – develop the internal cloud computing software which allows the whole process to work. Amazon has one such service called Amazon Web Services which is a full-featured cloud computing service such that any application can be developed and delivered over the service and which supports multiple languages of code. Google also offered a  service called Google App Engine – which is not a full-featured cloud computing service, as at the moment applications can be only developed in a coding language called Python (written in C). Microsoft are also developing a full-featured cloud computing platform that can run any Microsoft based software program and it’s called Microsoft Azure Services Platform – which is what Microsoft are basing a lot of their future strategy on.

Why use cloud computing?

The beauty of cloud computing in comparison to a standard application server configuration is the ability to scale resources indefinitely as demand changes through a simple click of a button. Under a traditional computing model, the application is delivered over a set number of servers and if capacity changes quickly – the speed at which new servers must be built, activated and added as additional capacity is quite slow – meaning that the application either crashes under heavy load or the application provider must stop the service until more capacity can be added. Then of course, if demand drops after the additional server capacity has been added – the application provider has paid for this increase which means that there overall CPH (cost per hour) of computing has sky-rocketed for a short-term increase in demand. A very ineffective use of resources.

So the obvious way to manage this is to only pay for the resources which are required at any one time – hence, enter cloud computing. The effective paradigm of cloud computing is its ability to create large economies of scale and facilitate a reduced cost opportunity (cost per hour of computing) for application providers. This infers that the ability to quickly add and remove capacity as required is simply handled through a custom interface which allows the cost perspective to be paid on a per-usage basis. Typically, this means paying for bandwidth and per-hour instances of server usage. So, if demand skyrockets – additional capacity can be rolled out quickly and the application load can be distributed over this additional capacity in an instant – ensuring that the application doesn’t break under the changing demands for load. Once demand falls, the added server instances can simply be switched off and the per-hour usage for the additional capacity can be charged to the application provider – who has potentially saved thousands in not having to build and deploy new servers which may not be needed again in the short-term.

Sounds great, so why isn’t everyone doing it?

Currently, while the benefits of cloud computing are numerous and the ability to rapidly up-and-down scale applications can occur at the flick of a switch – the data storage, security and privacy aspects are building resistance to wide-spread corporate adoption of cloud computing. All these aspects are effectively outsourced to the cloud computing service provider – which in my opinion is better, as it allows industry specialists to constantly maintain and upgrade security and privacy aspects of the service with the latest technology principles – aspects which are financially and operationally impossible for most companies.

Of course, a lot of service companies – such as financial providers, law firms, health services, employment providers – all hold extremely sensitive data which must have the highest privacy and security standards. Many executives balk at the thought of having all this data sitting “somewhere in the cloud” instead of at the bottom of their building in a server room – and in some regards this is not an baseless concern. Cloud-computing is still a very much cutting edge set of technologies which are rapidly evolving – and as it rapidly evolves so must the law – a key concern for companies. The litigious nature of our world now means that data security and privacy must be basically 100% guaranteed and this infers that cloud computing must provide a much better service than what is currently offered internally in the corporate environment for there to be a strong cost-security-performance argument to change.

In Australia for example, our Privacy laws are governed under the Privacy Act 1988 and the National Privacy Principals (NPP) for organisations who have a turnover of more than $3 million per annum. These laws do not address cloud-computing in any way, shape or form and so any privacy issues must be addressed under this legislation. Of course, when data is stored in the cloud – the data can be distributed across any number of servers in order to optimise performance – and it’s even possible for information to be cached at multiple distribution points across the world to increase performance delivery. All this means that while Australia privacy principles apply, the information may not actually be stored in Australian server facilitates at all – rather, it could be stored at any server farm around the world. The obvious concern for corporates is that they don’t want this to occur due to the legal implications which may arise – so cloud service providers must be able to facilitate jurisdictional boundaries and allow the provisioning of application data storage to occur within the confinements of countries using the Service – an issue that really requires detailed legal advice and may dip its toes into the world of cross-jurisdictional and international law.

The other main sticking point for many companies is SLA’s – service level agreements. Any company engaging in cloud computing must ensure that the service provider has 99.999% up-time guarantees – and this has also been a point of resistance for many companies moving their applications into the cloud. Most cloud technology at the moment is still developing quite rapidly and hasn’t matured to the level that many companies expect outsourced technology services to be at. At most, only one to two year development cycles have occurred at the largest and most well-known cloud service providers – with some offerings having cloud software development cycles at levels much less than this. This all infers that companies are simply starting to ‘test’ application hosting in the cloud – but in no way are committing heavy financial resources to it just yet. It is my opinion that this will change in the next 3-5 years as many companies see the amazing benefits of outsourcing server, application hosting and performance delivery into the cloud – but more development needs to be achieved before many CIO’s (chief information officers) will recommend cloud computing to their executive level counterparts. The cost-benefit ratio needs to not only exist but so does the legal aspects of cloud computing from a risk mitigation perspective in ironing out the data security and privacy aspects of such services. Only then will companies commission a serious foray into cloud computing and start moving their applications, services and data accordingly ‘into the cloud’.

Hope this has help many who are confused ;)

In the spirit of my last post, I thought I would also tell my loyal readers about how to really speed up their Firefox web-browser. So much so in fact, that you will be amazed at how much faster your web-pages actually load. This little trick is really designed for website users who have broadband connections – but those of you that do not – you are probably able to adjust the settings to a slightly lower level and it will still increase your page load time. This works best on any version of Firefox 3+ :)

A little unknown fact about Firefox is the HTTP application-layer protocol that most web-pages are transferred with and the “safe” limits that Firefox developers put into the config to ensure maximum stability. The problem is that these settings are really really conservative – and while sure thing this improves stability – it slows the whole process down. To really increase your web-page speed and make your browsing experience better – and more importantly faster – with 99% stability – we need to tweak the HTTP application-layer protocol. The logic behind this is much the same as the logic behind tweaking the maximum number of connections when using Peer-to-Peer systems. The more HTTP connections the application can make on a broadband connection the better – so use the settings below to make your web-pages load at least 4-5 times faster (and indeed make Firefox load faster when you open it):

1. Type in the Firefox address bar about:config
2. Accept the Warning notification and continue
3. At the top of the page will be a filter – search for, and adjust, the following settings:

network.http.pipelining: true
network.http.proxy.pipelining: true
network.http.max-connections: 50
network.http.max-connections-per-server: 40
network.http.max-persistent-connections-per-proxy: 20
network.http.max-persistent-connections-per-server: 10
network.http.pipelining.maxrequests: 20

4. Then right-click anywhere in a blank space and select New –> Integer
5. Name this integer “nglayout.initialpaint.delay” and set its value to 0.
6. Right-click again anywhere in a blank space and select New –> Boolean
7. Name this boolean “config.trim_on_minimize” and set its value to True.
8. Now in the Icon Tray, right-click on the Mozilla Firefox Icon and select Properties
9. Under “Target”, you will see the line “C:\Program Files\Mozilla Firefox\firefox.exe”
10. Change this line to “C:\Program Files\Mozilla Firefox\firefox.exe” /Prefetch:1″
11. Ensure that there is a space i.e. \firefox”(space)/Prefetch:1″

Enjoy your new found Firefox load time and speed!