Tuesday, January 31, 2006

"Kodak Digital Sales Outpace Film for First Time"

The Globe and Mail is reporting today that Kodak's digital sales were greater than film product sales for the first time in 2005.
Digital sales accounted for 54 per cent of total revenue for the year, marking the first time in the company's 125-year history that digital exceeded traditional sales.

For those of us old enough to remember, Kodak's name has been synonymous with film and photography throughout our lives. Today, many of us will not attach the Eastman Kodak brand with imaging at all which speaks to how rapidly digital photography has taken over from film-based, even though it's only been available to the consumer since about 1994!

Sunday, January 29, 2006

Old Style Managers On The Way Out?

These two comics are in February's issue of The Harvard Business Review and demonstrate the thinking of some that old style managers are on the way out.

Are they? There is more talk these days of extending mandatory retirement ages than of ousting experienced managers. Time will tell but...well, the first guy's just a bit of an exageration isn't he...although come to think of it, I used to know a guy just like him...:-)

Wednesday, January 25, 2006

North America's Impending Loss of Economic Control

The writing is on the wall.

While Americans and Canadians worry about offshoring and the resulting loss of jobs, there is another and far greater threat: the loss of control over the economy. In an earlier post I discussed China's rising prominence in the computer and electronics manufacturing sectors. American companies are also losing marketshare on other fronts. Ford has just announced a plan to cut 30,000 jobs by 2012 in order to reduce its financial hemorrhaging. In an article entitled "Ford's latest Rebuild" (subscription required), the Economist reports:
"Bill Ford, chairman and a scion of the founder’s family, is particularly concerned that Ford is losing out in its biggest and most important market, America. This week he revealed a plan imaginatively dubbed the “Way Forward” that is supposed to cut losses and win back favour from American drivers. He pledged “sacrifice at all levels” to ensure “sustainable, profitable change”. The firm will pare capacity and could lose as many as 30,000 jobs by 2012, around a quarter of its total North American workforce. Some 14 factories will be closed as Ford's car division attempts to return to profitability by 2008.

The firm’s failings are as apparent as rust on a 1970s Ford Maverick. In 2005 Ford’s vital North American carmaking operations produced a pre-tax loss of $1.6 billion; worldwide it lost $1 billion."

The problems are partly related to legacy costs the big three are saddeled with including the costs of unionized workers and rich employee benefits. Again from the same article:
"Japanese carmakers are nimbler not because they produce cars abroad: much of their output is from American factories. But the Japanese firms are not encumbered by the legacy costs of their American rivals. Nor are unions so dominant in the Japanese-run factories."

While the lower operating costs of Japanese fimrs should be a concern as it directly affects US automakers' ability to compete with them profitably, it is the loss of market share that is most worrying:
"Although overall car sales are down a little in America since a peak in 2000 the market is still buoyant. Nearly 17m cars were sold in 2005 and customers are expected to drive a similar number off the country’s forecourts this year. But America’s car giants are losing out to Japanese firms. Toyota is threatening to overtake GM as the world’s biggest car producer this year. Nissan and Honda have made impressive inroads in America. In 2005 the three Japanese firms, combined, grabbed over 28% of America’s market share. Mr Fields acknowledges that the industry’s “big three” is becoming the “big six”."

What we North Americans are in danger of, more than job losses, is the loss of control over our economy. My questions are: what happens once most of the products we purchase are feeding the coffers of foreign controlled companies? What are the root causes of this problem? What are we gong to do about it?

Monday, January 23, 2006

First They Killed My Father

This is an excellent book about a five year-old girl's recollections of the Pol Pot regime in Cambodia. Loung Ung, the author and woman who was the girl, describes her family's flight from Phnom Penh to the countryside where they hid their identities for years. Were the Kmehr Rouge to discover of her father's position in the military as a police captain for the incumbent government it would have resulted in his and his family's death or imprisonment. As they move from village to village and their family is divided they cling more and more tightly to each other. Her world constricts to the immediacy of mother, father, brothers, and sisters. You feel her pain and anguish as she works through her memories of the hardships and horrors of her early childhood years. The narration is factual and almost unemotional at times as she describes the brutality she and her loved ones endured. Her memories are, I believe, coloured by the vision of a five year-old who does not have the range of emotions to accurately describe what she is feeling. And yet, even through the tough child she became in order to survive an intolerable situation, we see her innocence and the injustice of what no young child should ever experience. All of us need to read of these events, understand how and why they came about, and make sure they do not repeat in our lifetimes - either in our country or in another. It is still hard for me to believe it all happened between the years when I was 7 and 11 years old. I had no idea what was going on half way around the world at the time. I wish I had known.

Monday, January 16, 2006

When Will Microsoft Release Office for Linux?

When will Microsoft release Office for Linux?

We are seeing some sporadic reaction from governments around the world to Microsoft's practical monopoly on both personal computer desktop operating systems (Microsoft Windows) and desktop productivity software (Microsoft Office). The government of Peru put forward a bill in 2002 that was passed into law in late 2005 encouraging government institutions to use Open Source Software:
"...Basically, we can say that the fundamental principles that drive the present Bill are tightly related to the basic guarantees of a democratic State and we can sum them up in the following:
  • Free Access of the citizens to public information
  • Perenniality of public data
  • Security of the State and of the citizens

To guarantee the citizens' free access to information, it is indispensable that the coding of the data not be tied to a sole provider. The use of standard and open formats guarantees this free access, making possible the creation of compatible software."

The city of Munich decided in 2003 to change 14,000 PCs running the Windows operating system to the Linux operating system and from Microsoft Office to OpenOffice.org, an equivalent but free software. South Korea, China, and Taiwan are further examples. Most recently The Commonwealth of Massachusetts decided to make the Opendocument file format, supported by OpenOffice.org, the exclusive format for all electronic documents generated by the Executive Department.

Why has this move from Microsoft's proprietary systems to open systems started only in the last few years? There are a few reasons:
  1. Competing and relatively mature equivalent software and operating systems are only now available and they are either free or obtainable at low cost.
  2. The importance of being able to recover electronic documents has become more and more apparent over time. Remember the IBM PC was introduced in 1981, only 25 years ago. Since laws like Sarbanes-Oxley have been passed the importance of recovering documents that are 10 or more years old has increased. Since the way Microsoft stores files, in MS Word for example, has remained a proprietary secret there has been no reliable way to fully recover older documents when new versions no longer support the format the originals were saved in.
  3. Microsoft's Office has become more expensive over its life and has since remained that way. In the early days the price charged for the product could be argued due to having to develop a brand new application but after so many versions of the product it is hard for users to accept being gouged. Just take a look at how much cash MS has on hand and it will become obvious.
Although enough organizations have decided to make the move to free software to worry Microsoft none has as yet completed the move. How successfully and cost-effectively it can be done therefore remains an unanswered question. I am sure Mr. Gates and Mr. Ballmer are not losing sleep over lost revenues. The same article that discusses Peru's move to encourage competing software in government also calls Peru a "hotbed of piracy". Microsoft has been losing money in this and in other developing economies to software theft for years. It is the current exposure (bad press) and the future lost revenues that worry them. Linux and OpenOffice.org still need a little work before they are adopted by mainstream users but are getting closer with each new version released. If Microsoft were to release Office for Linux today they would hasten a move to their arch-rival operating system, something they certainly have no interest in doing. I expect that once Linux adoption hits an as-yet undefined 'tipping point' (I predict within 5 years) they will sell versions of Office that either run on Linux or within a Web browser or other thin client that will run within the Linux OS. IBM has released a new collaboration software called IBM Workplace that allows you to, among other things, create MS Word compatible documents through a browser (yes, it works with Firefox) without having Word on your computer. It uses OpenOffice.org to do this. I also suspect that the effective price of Office will drop significantly over the following years to allow Microsoft to keep its hold on businesses and consumers by maintaining their share of the market. By then they will have other applications using Office and its services and for which we will again be paying. Gates' and Ballmer's hands are in many pies these days, not only in order to grow their revenues, but also to protect them against future erosion. The days when MS could make, as in mint, money selling Office suites and Operating Systems are nearing an end. This article written by an ex-Microsoftie discusses Microsoft's reliance on Windows and Office revenues.

Even so, I expect Redmond has one or two cards up its sleeves and will have little trouble continuing to be profitable for decades to come. I wish them well and am glad to see the gradual shift in their business practices to a more collaborative approach. That's what real competition does to a monopoly that wants to survive. So my hats off to all the people and companies that have helped make Linux a reality. To SUN for open sourcing OpenOffice.org after purchasing it from its creator, to all the other companies and communities that have made open source software a reality (the Mozilla Foundation, the makers of GIMP, Novell, the Apache Foundation and many, many more), and to Microsoft who are proving that you can learn how to play nice well after Kindergarten.

Tuesday, January 03, 2006

The Dumbing Down of America

While the citizens of rising economies like India and China are getting more and more educated, North America is dumbing down.

According to an article in the Economist, high tuition levels prevent 40% of qualified high-school graduates from attending 4-year programs and 22% from attending college at all. This while India has doubled its university student population since the early 90s and China's PhD recipients have jumped from 14,500 in 1998 to 48,700 in 2003 (see article)!

Technology companies like Intel, Microsoft, AMD, and Cisco are investing billions in the Indian economy. Not only is labour cheaper than in America but it is also a highly educated labour force. Instead of whining about the loss of jobs, North Americans need to take education seriously. It starts with the government and translates into, among other things, more investment in universities and student support programs with lower tuition fees and favourable lending policies. Traditionally, many immigrants in North America have been underemployed. This is changing. As their home countries become more competitive and economies take off, many of these people will be returning home or not immigrating to North America in the first place.

The education of the masses is a good thing. It indirectly reduces poverty and the spread of diseases like AIDS. The first world should want rising economies around the world to flourish. From an economic perspective, these economies will be purchasing many of the goods manufactured by first world corporations. Our concern, as the world gets more educated, should be centered on what place our children will occupy in the resulting food chain.