It's been about 6 years since I spoke with Steve Mills, head of IBM's Software Group - the most profitable business at IBM.

Mr Mills was in town Monday evening to meet with a handful of media and chat about IBM's green initiatives around municipal infrastructure.

I had a chance to go off topic and ask him about SAP and the changes at the world's largest business software company.
[Please see: SAP Replaces CEO With 2 Co-CEOs - SVW]

Mr Mills said that he welcomed the changes and that it would not impact IBM's SAP related business.

SAP business is a big business at IBM. The company makes money on consulting services and hardware related to SAP implementations. For every dollar that SAP receives in license revenues, IBM and other systems integrators, make about $9 in services and other revenues.

SAP has tried to tap into the revenues that systems integrators make on its installations. But the economic slump has slowed new licenses and maintenance revenues. In the most recent financial quarter profits fell 12% and revenues were 9% below year ago results.

Speaking Monday at a press conference in the northern city of Bilbao, President Cesar Alierta said companies like Google use a lot of network bandwidth for free, something which was lucky for them but not for Telefonica.
...He says things had to change.

Foremski's Take: If ISPs, such as Telefonica, start charging Google they will also charge other companies providing web services. This will be bad news for thousands of startups worldwide.

Why?

Because Google can afford to pay the fees while startups cannot. This will be a huge tax on innovation.

Google, Yahoo, Microsoft, etc -- can afford to pay the fees. This will help their businesses because it will keep competition at bay.

Those companies will then be able to acquire smaller companies that don't have the means to scale their businesses, and eliminate large numbers of potential competitors. While they can do this already, the fees will speed up the process.

The Telcos are in a strong position because in every country they are government regulated entities, which provides a strong barrier to competition. How many new Telcos have arisen in the last five, or ten years? Consolidation has strengthened the current Telcos.

Here is another reason why GOOG should look at the strategic benefits of becoming a Telco or acquiring a Telco.

- - -

Please see: Analysis: GOOG Needs To Have Its Own Telco Service More Than It Needs A Phone...

Google Becomes (Almost) Full-Fledged Telecom, Vonage, Skype, Others In Sites | BNET Technology Blog | BNET

By splitting data into packets and threading them on the same line, the carrying capacity of that link could be boosted and the whole network made more powerful.

Roger Scantlebury, who worked with Dr Davies, presented the ideas about "packet switching" to a conference in the US, where they were picked up by the creators of the nascent Arpanet, the fledgling internet.

Does that mean Britain invented the internet?

"Yes and no," said Mr Scantlebury. "Certainly the underlying technology of the internet, which is packet switching, we did invent."

British researchers also worked on hyperlinks, another crucial Internet technology, way back in the early 1970s.

David Yates was project manager of a program called Scrapbook which rolled together word processing, e-mail and hypertext - a system that incorporated many elements of the World Wide Web.

Scrapbook went live on 28 April 1971...Scrapbook helped people across the 28 acres of the NPL campus collaborate or projects without having to sit next to each other.

Clearly, the British had developed many of the technologies that went into the Internet. And Tim Berners-Lee, is a Brit and he invented the world wide web...

So maybe the British did invent the Internet but with typical British modesty, didn't want to blow their own horn. At least until now.

Please see: BBC News - Alan Turing and the Ace computer

Why would they do that? What advantage is there in allowing third-party services to undermine their business?

I have rarely been able to find a straightforward price comparison that was able to factor in everything, such as shipping, taxes, and extras.

The East coast camera retailers, for example, would advertise low prices online but then charge you extra for flash memory, shipping, warranties, and 'camera kits,' that quickly negated any savings.

And it makes sense that retailers would try to make it as difficult as possible to get a clean price quote because otherwise they are at the mercy of the lowest price competitor. They would also be at the mercy of their stupidest competitor -- the one that charges an unrealistic price, too low to maintain profitability or viability.

Today's New York Times has a report by Brad Stone on yet another aspect of online pricing - manufacturers seeking to control what price retailers can advertise on their products.

The Fight over Prices on the Internet - NYTimes.com

On some pages of e-commerce sites selling products like televisions, digital cameras and jewelry, a critical piece of information is conspicuously missing: the price tag.

Customers have to go to the online checkout to see the price. These missing prices are more likely to be methods of thwarting price comparison engines rather than manufacturers' price controls.

Retailers have long managed to get around pricing controls by giving other things away. For example, Apple dealers aren't allowed to under cut each other on price but they can give away printers and other products, which effectively undercuts Apple's recommended retail prices.

What is much more interesting is this tidbit, buried deeper in the NYTimes article, almost at the very end:

Instead of selling e-books wholesale to retailers like Amazon.com, the publishers want to sell them directly, setting prices and having the retailer act as an agent, taking a fixed 30 percent commission.

Wow. Turning Amazon into an affiliate! How ironic, since Amazon is one of the largest affiliate marketers, offering a percentage of revenues sold by third parties.

This is the danger that online retailers now face: what if their suppliers want to sell direct?

A search engine, such as Google or Bing, would be able to make it very easy to find the online stores of the manufacturers of many goods. This would be like a huge outlet store in the cloud.

In most cases manufacturers are already drop-shipping orders on goods collected by online retailers. Why not cut out the middle man?

In addition, the manufacturers would be collecting important customer data -- data that is currently kept by the retailer. They would be able to develop a direct customer relationship for the very first time (beyond the voluntary 'warranty' cards found with many products).

And if you know who bought what and when, it becomes easy to work out who will probably be needing a new washing machine, or computer, because the old one is on its last legs. Your marketing goes direct -- which cuts out a lot of costs.

Fortunately for the retailers, manufacturers don't know how to market well, or how to manage a direct customer relationship. At least, not yet...

Amazon has some protection from this trend in that it has layered on a lot of cool features and services, such as customer reviews, and secure online payment systems. That will help in retaining customers and making it less attractive for its suppliers to sell direct.

But it's clear that there are troubling signs ahead, that the Internet does make it possible for manufacturers to sell direct; and that search engines could create the storefront; they could aggregate customer reviews; and offer secure payment services (Google Checkout).

Online retailers are caught between a rock (search engines) and a hard place (suppliers selling direct). Both have sound business reasons to squeeze out the middle guy.

This is less true for retailers that also have physical locations such as Wal-mart or Best Buy. Will Amazon make a bricks and mortar acquisition?

Access to all content on morgenpost.de now costs €4.95 (£4.32/$6.79) per month. A premium subscription to abendblatt.de costs €7.95 (£6.93/$10.90) per month. Abendblatt.de has a mixture of free and premium content: it appears it charges extra for content specific to the Hamburg region, while making national news free. Subscriptions for both are renewed on a monthly basis.

The Times, Rupert Murdoch's flagship UK newspaper, is expected to have a paywall in the 2nd quarter of this year.

The good news for US newspaper companies is that they can learn important lessons from the early European newspaper paywall ventures.

Today's New York Times has a report about the debate over newspaper paywalls. Brad Stone writes about the different views of Rupert Murdoch, and Alan Rusbridger, editor of The Guardian.

Media Cache - Free vs. Paid, Murdoch vs. Rusbridger - NYTimes.com

Having “ruthlessly cut the price of his papers to below cost in order to win audiences or drive out competition,” Mr. Rusbridger said in a recent speech, “this same Rupert Murdoch is being very vocal in asserting that the reader must pay a proper sum for content — whether in print or digitally.”

The SAP Executive Board, in agreement with the SAP Supervisory Board, has appointed two Co-CEOs: Bill McDermott, head of field organization and Jim Hagemann Snabe, head of product development, both already members of the SAP Executive Board.

Dennis Howlett, on ZDNet, writes that Mr Apotheker's departure wasn't unexpected. But it was surprising that the company acted so soon.

The choice of new leaders should not be surprising but hardly imaginative. In effect, SAP has chosen ‘last men standing’ rather than taking what some of us thought might be a bold move by appointing an outsider.

SAP is headquartered in Germany and has a large presence in Silicon Valley. The company beat analyst estimates for Q4 but profits fell 12% and revenues were down 9% from a year ago.

UPDATE:

Vinnie Mirchandani in Deal Architect writes: Enterprise software is entirely bereft of soul

...the reality is the customer has been forgotten in enterprise software, not just at SAP. It’s about squeezing as much out of old technology as possible. As I wrote earlier in the week. “I wish the other bigger vendors had the cajones to acknowledge they similarly mostly live off profits from software 15- 20 years old, from consultants which implement that old software and provide services from data centers which were designed during the Cold War.”
Leo was expected to do more of the same in his new role as CEO. So, he did – unbelievably pushing maintenance price hikes in the middle of the deep recession. For all his talk about taking on the partners who have piled 5 to 10X costs on top of SAP’s own expensive solutions, he really could not – they were part of the “field” he created.

Her husband is a doctor and he is with a group of about 15 other doctors and nurses. They are stuck in Miami with no transport to Haiti. Can anyone help?

If you can help please call or text me at this number 415 336 7547 and I will put you in contact with Amy.

Let's Use Silicon Valley's Jet Fleet To Rush Aid To Haiti - SVW

"In a play, if more than one person speaks at once ...it's just noise. No one can understand a word. But with opera, with music.... With music you can have individuals all talking at the same time. And it's not noise. lt's a perfect harmony!"

That's what struck me as a fundamental limitation of using online real-time feedback for live events.

In this brave new world of 'conversational' media - real-time creates a real limitation. And no amount of technology can solve this basic issue: you can't have a conversation if everyone is speaking at once.

You can have online conversations if they are within a time-line, such as comments on a blog post. But it doesn't work in real-time. Think of the noise of a crowd -- it's an aggregation of hundreds of conversations.

This might all seem a bit obvious but it's worth pointing out because there is a lot of chatter about the 'real-time' web these days and what it means, and what it can enable.

Thursday evening I was on an interesting panel about "Realtime Feedback Loops."

My fellow panelists were:

• Ravit Lichtenberg, CEO Ustrategy
• Sylvia L. Marino, Executive Director - Community Operations & Social Media,Edmunds.com
• Liza Sperling, Real-Time Sentiment & Trends Analyst, Scout Labs
• Van Riper, Founder & Leader, Silicon Valley Google Technology User Group
• Bill Johnston, Director, Online Community Research Network, ForumOne
• David Libby, SVP, MS&L Worldwide
• Evan Solomon, VP of Marketing, JustinTV
• Marc Smolowitz, Executive Producer - Media & Technology Consultant
  

With over 1,000 people participating in various events across San Francisco during Social Media Week, this party is the perfect way to end an action packed five days.

Individual tickets are on sale for $20 in advance ($30 at the door), and includes two (2) drink tickets. A cash bar will also be available. $10 from each ticket will be donated to NetSquared so they can continue to do their great work educating other non-profits in how to leverage social media technology. "

Mashable and Social Media Club Present the Social Media... - Eventbrite


Michael Brito tells me about Silicon Valley Tweetup: Giving to families in need

We have decided to raise awareness and accept monetary donations to the San Jose Family Shelter. Here are the details of the event (you can RSVP here):

When: Tuesday, February 23

Where: Rosie McCanns at Santana Row

Time: 6:00 PM to 9:00 PM

$10 donation at the door (you will get drink tickets and food too)

RSVP here

Mike Arrington, founder of Techcrunch said that all of his posts have been erased from the archives. And that Mr Brusilovsky did manage to get at least one computer from an unnamed source in exchange for coverage. [An Apology To Our Readers]

He was described as an 'intern.' Which means he was unpaid, or paid the minimum California wage.

[Update: John Furrier from Silicon Angle says he spoke Daniel and was told he did not receive any payment from Techcrunch and had no contract.]

Some observers said that he didn't know what he was doing because of his age, 16. But he spent nine months at Techcrunch and saw how things are done. He knew what he was doing.

However, we don't know what exactly happened. He hasn't given his side of the story and responded to Mr Arrington's specific allegations.

At least not much damage was done. It's not as if Mr Brusilovsky was bribed to squash a "Deep Throat' sourced story.

Techcrunch's stories are all very innocent, mostly about some new product feature. or a startup profile. I doubt readers would be able to distinguish the bribed stories from the rest.

Are other reporters and bloggers for online news sites vulnerable to bribery? Yes, they are, especially if they aren't paid or low paid -- which is the case with most. Low wages are endemic among the online press corps because advertising supported news sites don't make much money per post.

I'm surprised more stories haven't surfaced about this type of behavior. It's no wonder that the 2010 Edelman Trust Barometer found a large fall in trust for all media.

Wow! Edelman Survey Finds Trust In Peers Plunges!!! Bad News For Social Media Mavens

- - -

Please see:

An Apology To Our Readers

Weblog of Daniel Brusilovsky » Blog Archive » The Line Was Crossed

Tech Journalism Wunderkind in Bribery Scandal - Techcrunch - Gawker