Is the Microsoft Surface "too little, too late" or another Big Play that will crush the competition?
It is only, as Android devices are, similar to the iPad in design, features, construction and price, not a "must have" device.
Showing posts with label business model. Show all posts
Showing posts with label business model. Show all posts
2012/10/27
2012/10/05
Telco Customer Service Madness and the NBN
Will Telstra, as it is now, survive to see the NBN contracts end in 35 years?
My view: It won't, not in its current form.
In 2006 I started to write about my concerns for Microsoft's future, giving them 5-6 years before major cracks appeared. They haven't collapsed yet, but Horace Dediu (asymco) has produced a graph that unequivocally shows their rapid decline in whole-sector market share: the quantitative support for my hypothesis.
I didn't understand that when "the pie is rapidly growing", as in technology, companies can survive, even increase sales, whilst their market-share falls off a cliff. The model is IBM post-1980, not Unisys post the 1986 merger of Burroughs and Sperry, with their revenues shrinking by around 10 times.
Telecomms Industry Structural Changes
There are three structural economic changes that Telstra has to master to survive another 15, let alone 35 years:
All these "pillars" of their business are being shattered, first by Internet Everywhere, by the NBN removing their customer lock-in and an increasing number of Technology Businesses that "get" Apple's insight and innovation: The User/Customer is all important for your Business.
What Telstra should be doing to undo the resulting Brand Damage
Below is a case study that Telstra should deeply investigate as it encapsulates most of their challenges/deficiencies and could be used as an on-going Reference for Change, but why would they?
In an ideal world, the centre of the study would have these outcomes:
Consider for a moment, "What would Richard Branson do?". If he was in the country, he'd personally see them, otherwise it would be someone very senior and it would be done very quickly. Stories about his interventions are legion, this is not wild speculation.
If you think Branson and his Virgin Empire are "off with the pixies" and not in the real-world of Big Bureaucracies, mass workforces and challenging business environment, consider the page, "Turn Complaining Customers into Advocates" by The Royal Mail, one of the oldest communications companies on the planet, working under one of the most demanding Industrial Relations systems, riven by Unions and staffed by British Workers, renowned for their lack of customer empathy and poor work-ethic.
If The Royal Mail management understands Customer Complaints are opportunities to both fix your business processes and to convert a hostile customer who'll damage your brand into a strong Brand Ambassador for you, then why don't Telstra?
Don't they understand the rules of Customer Service or read the same well known management books?
What Telstra says it does
In the 2005 Telstra presentation, released to the ASX, supporting their 20,000 node 12Mbps ADSL2 network, I was very impressed with their guiding principles (p3), but those are nowhere to be seen in this case:
The facts of the case study and an analysis of causative Systemic Failures are in a previous post.
Feelings of Frustration, Powerlessness and Agitation in response to poor Customer Service aren't a "minor annoyance" or idiosyncratic: there is some very deep human psychology involved.
The positive effects of Goal Attainment means the inverse, preventing people from achieving goals, is devastating, more so for high-performing individuals as here. If intermixed with multiple events setting up false hopes and then dashing them, the customer response is even more profound.
Treating customers badly, especially when you know about it, is really bad for business. The cumulative Brand Damage may not be curable. It will cause massive customer revolt and backlash when they have reasonable service substitutes available, such as from the NBN.
Business Consequences
This whole episode was preventable: it was clearly an internal fault within Telstra systems.
It wasn't a user-error (the Client did nothing), it wasn't a hardware, connection, patching or line fault nor a an accounting or software error.
My speculation is that Telstra has significant service database errors since the $10B 2005 (1st phase live in 2007) "IT Transformation Project" led by Greg Winn, one of Sol's "Three Amigos" whom returned to the USA with full saddle-bags. It seems complex, high-value customers like the Client were never catered for, from the 2009 article on the project over-running by $200MM (2%):
The ARPU for the single service is $60-$80/month. Total revenue on this account, would be $1-2,000/month. Gross Margin must be 30-60%, Net Margin more like 10-15%??
This whole episode put at risk $10-15,000/year on-going revenue for a $10/month Net Margin. I'm sure Telstra won't bother to detail and account for the cost of the event. Why would they? The fault is fixed.
Over the six week period, there must have been:
As a shareholder, the Client was frustrated that the business was wasting money so prolifically, yet the organisation resisted all efforts to hear this news.
The worst aspect is that Telstra seems oblivious to any need to learn from this affair and follow their own Principles espoused in 2005, "Do it once, Do it right for the customer and Do it in an integrated way".
Lessons
Within 10 years, NBN-Co has planned to displace most of Telstra's wholesale copper network with fibre.
By then, all Retail Providers that can provide good Customer Service will beat Telstra in the marketplace. We are likely to see many small retailers who can offer good, local service, like ISP's, as well as a few large existing companies that compete solely on price,
The NBN seems to be the "magic bullet" that will allow customers to change and release decades of pent-up frustration with Telstra and their oligarchy and monopolistic mindset. The Internet and smartphones/mobile devices have changed the rules of the Telecommunications forever.
If Telstra doesn't learn the lessons of Great Customer Service practiced by the likes of Richard Branson, their only competitive asset will be their 4G mobile network. Which, because they haven't allowed competitors open access via third-party roaming, and forced them to overbuild networks (like HFC Cable TV) is of very little value.
Unlike Microsoft, Telstra is in a Mature Market with moderate, but non-zero, barriers to entry. In a low-growth market like Australia, its revenues will be "eaten" by others, it will follow the Unisys path downhill, but like Unisys, is likely to remain as a brand or engineering operation, though nothing like they are now.
In the same way that I viewed Microsoft as entering a challenging period, I think Telstra is as well, though I don't have a way to estimate or forecast the timeline.
My father spent his entire working life within PMG/ABC/Telecomm/Telstra and it was one of Australia's finest achievements for many decades. I doubt he would be proud of what they've become and I am saddened at their fall from grace.
My view: It won't, not in its current form.
In 2006 I started to write about my concerns for Microsoft's future, giving them 5-6 years before major cracks appeared. They haven't collapsed yet, but Horace Dediu (asymco) has produced a graph that unequivocally shows their rapid decline in whole-sector market share: the quantitative support for my hypothesis.
I didn't understand that when "the pie is rapidly growing", as in technology, companies can survive, even increase sales, whilst their market-share falls off a cliff. The model is IBM post-1980, not Unisys post the 1986 merger of Burroughs and Sperry, with their revenues shrinking by around 10 times.
Telecomms Industry Structural Changes
There are three structural economic changes that Telstra has to master to survive another 15, let alone 35 years:
- Sector Economic Reform through "Digital Convergence".
- Open Access wholesale networks competing for all services except mobile 3G/4G.
- Good Customer Service and Cost-Effective Operations.
- Quality, Performance Improvement and Profitability are inter-dependent, all are based on Reviews and deliberate Corporate Learning and Adaption.
All these "pillars" of their business are being shattered, first by Internet Everywhere, by the NBN removing their customer lock-in and an increasing number of Technology Businesses that "get" Apple's insight and innovation: The User/Customer is all important for your Business.
What Telstra should be doing to undo the resulting Brand Damage
Below is a case study that Telstra should deeply investigate as it encapsulates most of their challenges/deficiencies and could be used as an on-going Reference for Change, but why would they?
In an ideal world, the centre of the study would have these outcomes:
- A personal meeting with the Head of Telstra for the State.
- An apology from him, a guarantee it would never happen again and his personal phone number if further problems arose.
- An audit of all records for their services and accounts to correct all errors.
- A written account of:
- Exactly what went wrong,
- Why it couldn't be fixed, and
- Why it won't recur.
- An offer of compensation for the non-supply of service, for the hours of customer time wasted on the phone and waiting and an ex-gratia payment for the "pain and suffering" caused.
Consider for a moment, "What would Richard Branson do?". If he was in the country, he'd personally see them, otherwise it would be someone very senior and it would be done very quickly. Stories about his interventions are legion, this is not wild speculation.
If you think Branson and his Virgin Empire are "off with the pixies" and not in the real-world of Big Bureaucracies, mass workforces and challenging business environment, consider the page, "Turn Complaining Customers into Advocates" by The Royal Mail, one of the oldest communications companies on the planet, working under one of the most demanding Industrial Relations systems, riven by Unions and staffed by British Workers, renowned for their lack of customer empathy and poor work-ethic.
If The Royal Mail management understands Customer Complaints are opportunities to both fix your business processes and to convert a hostile customer who'll damage your brand into a strong Brand Ambassador for you, then why don't Telstra?
Don't they understand the rules of Customer Service or read the same well known management books?
What Telstra says it does
In the 2005 Telstra presentation, released to the ASX, supporting their 20,000 node 12Mbps ADSL2 network, I was very impressed with their guiding principles (p3), but those are nowhere to be seen in this case:
- Principle #1: Do it once
- Right first time, every time
- Simplify, standardise, focus
- Less of everything – fewer products, platforms, applications, processes, vendors
- Capture the benefits of scale through focus
- Principle #2: Do it right for the customer
- Invest against the things customers value
- Principle #3: Do it in an integrated way
- One Factory
- End to end approach
- Whole greater than the parts
- Principle #4: Do it at the lowest unit cost
- Scalable
- Costs grow slower than revenues and volumes
- Limited manual intervention
The facts of the case study and an analysis of causative Systemic Failures are in a previous post.
Feelings of Frustration, Powerlessness and Agitation in response to poor Customer Service aren't a "minor annoyance" or idiosyncratic: there is some very deep human psychology involved.
The positive effects of Goal Attainment means the inverse, preventing people from achieving goals, is devastating, more so for high-performing individuals as here. If intermixed with multiple events setting up false hopes and then dashing them, the customer response is even more profound.
Treating customers badly, especially when you know about it, is really bad for business. The cumulative Brand Damage may not be curable. It will cause massive customer revolt and backlash when they have reasonable service substitutes available, such as from the NBN.
Business Consequences
This whole episode was preventable: it was clearly an internal fault within Telstra systems.
It wasn't a user-error (the Client did nothing), it wasn't a hardware, connection, patching or line fault nor a an accounting or software error.
My speculation is that Telstra has significant service database errors since the $10B 2005 (1st phase live in 2007) "IT Transformation Project" led by Greg Winn, one of Sol's "Three Amigos" whom returned to the USA with full saddle-bags. It seems complex, high-value customers like the Client were never catered for, from the 2009 article on the project over-running by $200MM (2%):
The fault had something to do with a modem attachment being incorrectly setup in the database, possibly by an automatic provisioning system attached to the order/fulfilment system.Thodey said 9.2 million customers have moved onto Telstra's new billing and CRM systems, which represented over 70 percent of the carrier's customer base.The final thirty percent were "multi-product holding customers" he said - referring to those Telstra customers that use more than one of the carrier's services.
The ARPU for the single service is $60-$80/month. Total revenue on this account, would be $1-2,000/month. Gross Margin must be 30-60%, Net Margin more like 10-15%??
This whole episode put at risk $10-15,000/year on-going revenue for a $10/month Net Margin. I'm sure Telstra won't bother to detail and account for the cost of the event. Why would they? The fault is fixed.
Over the six week period, there must have been:
- 30-50 phone calls
- 20 staff directly involved and 10-20 indirectly or in 'backroom'.
- 50-100 hours of phone calls [$50/hour?]
- 4-6 site visits, each 1 hour or more [$150+/hour]
- 10-40 hours of marketing and engineering effort [$100+/hour]
As a shareholder, the Client was frustrated that the business was wasting money so prolifically, yet the organisation resisted all efforts to hear this news.
The worst aspect is that Telstra seems oblivious to any need to learn from this affair and follow their own Principles espoused in 2005, "Do it once, Do it right for the customer and Do it in an integrated way".
Lessons
- If faults aren't covered by the (telephony) Customer Service Guarantee, then Telstra behave very poorly towards Customers.
- The Telstra Customer Service and Complaints fails dismally with complex issues.
- There appears to be no recognition of "process faults" or identification of "not previously seen" faults.
- There appears to be no fault escalation process.
- Shareholders are not treated better than anyone else. A marketing opportunity to improve shareholder relations going begging.
- Busy people's time is worth a lot to them, yet Telstra fail to acknowledge this nor provide ways to bring more certainty to site visits. Telstra could help itself and customers by:
- Having registered 'home sitters' that customers could use to allow them to carry on with their lives, or
- Telstra could charge extra for shorter attendance windows (2 hours, 1 hours, 30 mins). If this is allowed by the ACCC and Telco Regulations, it would earn them considerable money and by only reordering technician visits within a single day, not affect service calls.
- Telstra seems not to have a culture of Review Incidents, Learn from Mistakes to intentionally Improve Service, Profits and Productivity.
- Telstra has a major improvement opportunity here and seems to be deliberately discarding it, being intent on destroying customer goodwill and shareholder value.
Within 10 years, NBN-Co has planned to displace most of Telstra's wholesale copper network with fibre.
By then, all Retail Providers that can provide good Customer Service will beat Telstra in the marketplace. We are likely to see many small retailers who can offer good, local service, like ISP's, as well as a few large existing companies that compete solely on price,
The NBN seems to be the "magic bullet" that will allow customers to change and release decades of pent-up frustration with Telstra and their oligarchy and monopolistic mindset. The Internet and smartphones/mobile devices have changed the rules of the Telecommunications forever.
If Telstra doesn't learn the lessons of Great Customer Service practiced by the likes of Richard Branson, their only competitive asset will be their 4G mobile network. Which, because they haven't allowed competitors open access via third-party roaming, and forced them to overbuild networks (like HFC Cable TV) is of very little value.
Unlike Microsoft, Telstra is in a Mature Market with moderate, but non-zero, barriers to entry. In a low-growth market like Australia, its revenues will be "eaten" by others, it will follow the Unisys path downhill, but like Unisys, is likely to remain as a brand or engineering operation, though nothing like they are now.
In the same way that I viewed Microsoft as entering a challenging period, I think Telstra is as well, though I don't have a way to estimate or forecast the timeline.
My father spent his entire working life within PMG/ABC/Telecomm/Telstra and it was one of Australia's finest achievements for many decades. I doubt he would be proud of what they've become and I am saddened at their fall from grace.
2012/10/04
Telco Customer Service Madness: Case Study
Will Telstra, as it is now, survive to see the NBN contracts end in 35 years?
My view: It won't, not in its current form because of multiple failures within the Organisation.
Below is a case study that Telstra should deeply investigate as it encapsulates most of their challenges/deficiencies and could be used as an on-going Reference for Change, but why would they?
In an ideal world, the centre of the study would have these outcomes:
The facts of the case study are:
It's also worth noting that completely out of character, 'A' suffered extreme agitation, frustation and desperation at both the impenetrable wall of "service" and the inability to be heard, treated respectfully and to get a resolution to a service that had become necessary for conducting their business and life.
This isn't a "minor annoyance" or idiosyncratic: there is some very deep human psychology involved.
There's a branch of psychological therapy that relies on our limbic systems' (the cingulate nucleus) response to attaining goals: pre- and post-goal attainment happiness, two very distinct and important phases.
For all humans, striving and overcoming challenges is innate and core to our psychological well-being.
Consistently setting goals and achieving them isn't just "nice", but necessary, for our continued happiness and psychological well-being. Goal Attainment forms the basis of various powerful approaches addressing Depression and other conditions.
Knowingly and uncaringly forcing people into powerlessness and frustration would, in an OH&S workplace setting, be illegal: employers are required in Australia to provide a Safe Workplace. Deliberately causing employees harm, physical, emotional or psychological, is illegal and attracts civil penalties, as well as curative support for those affected.
I'm not sure if current OH&S law can be extended to customers. If so, companies like Telstra which seemingly have a policy and strategy of blocking communications and frustrating customers, would face considerable penalties...
The positive effects of Goal Attainment means the inverse, preventing people from achieving goals, is devastating, more so for high-performing individuals like 'A'. It can be categorised as "cruel and unusual" treatment, especially if intermixed with multiple events setting up false hopes and then dashing them. The human response in this case is even more profound and damaging.
Systemic Failures within Telstra
This whole adventure was unnecessary and presumably preventable: some automatic system failed when a new Cable Modem was ordered and incorrect configuration data uploaded to an operational system, without detection, audit or correction. Who has been charged with finding the root cause?
The final fix, a "manual override", should at worst, have been done the next day by the technician 'R' in Melbourne, prompted by the call from 'A'.
If Telstra's fault resolution system had worked properly, the fault would have been automatically passed to 'R's section as soon as the first technician recorded the Error Code.
The irony is that I shouldn't be writing this analysis at all. None of this should've happened in a well-run organisation that cared sufficiently for its Customers.
The tragedy is that Telstra will probably continue "Fat, Dumb and Happy" for the next 10-15 years in blissful ignorance of this piece and then wonder why they are "suddenly" losing Customers, disproportionately their most valuable, at an accelerating rate.
My view: It won't, not in its current form because of multiple failures within the Organisation.
Below is a case study that Telstra should deeply investigate as it encapsulates most of their challenges/deficiencies and could be used as an on-going Reference for Change, but why would they?
In an ideal world, the centre of the study would have these outcomes:
- A personal meeting with the Head of Telstra for the State.
- An apology from him, a guarantee it would never happen again and his personal phone number if further problems arose.
- A desk audit of all records for their services and accounts to correct all errors.
- A written account of:
- Exactly what went wrong,
- Why it couldn't be fixed, and
- Why it won't recur.
- An offer of compensation for the non-supply of service, for the hours of customer time wasted on the phone and waiting and an ex-gratia payment for the "pain and suffering" caused.
The facts of the case study are:
- Customer, 'A', has on their account multiple individuals, multiple service addresses, and multiple services for each individual and service address (mobiles, landlines, ADSL, Cable TV, Cable Internet, ...).
- Whilst these are all domestic services, Telstra regularly deals with this complexity for SME's.
- They are a "high-value" Telstra customer. This seemed irrelevant in the process.
- Unsure if all individuals and services are billed together or by separate, linked accounts.
- 'A' is also a Telstra shareholder, which seems to have been irrelevant in the process.
- 'A' is highly educated, has run businesses and is well conversant with modern PC's and networking, relying on it for work and private life.
- There are multiple family members who are quite I.T. literate and provide in-home I.T. support and troubleshooting.
- A new Cable Internet service was ordered by 'C' in June. (date?)
- The modem was never delivered.
- When queried at the Telstra shop, customers were advised "the order had been cancelled".
- The customers had not cancelled the order, nor been advised of that action.
- 'A' had a working Cable Internet service that then became intermittent. It met their needs and wasn't reported as a fault due to very poor past customer experiences.
- "Not wholly broken, don't tempt fate" was the reasoning.
- 'B', another of the service holders, took it on themselves to report the fault to Telstra.
- The first technician attended on 23rd-August, intending to change the cable modem.
- They were unable to rectify the fault, did not replace the cable modem as it was serviceable and left saying "there is an error", which at some point changed to "an activation error".
- The replacement cable modem was left on-site, unconnected.
- 'A' was told the install failed because of "Error Code CCP0012", and Tech suggested that the system “thought” there was already a modem on order.
- Technician advised 'A' to call the general BigPond Enquires number (137 663), quote the Error Code, and the fault would be fixed.
- Multiple technician attendances were booked:
- Technician did not attend, did not phone customer. More than once? (date?)
- Technician sent to wrong address, an old service address on the account. (17-Sep-2012).
- Technician 'M' attended (19-Sep-2012), gave customer personal contact number and spent considerable time on-site and continued to work at resolving the fault.
- Possibly instrumental and worthy of commendation.
- 'M' followed-up a week later (25-Sep-2012) saying:
- TRG (Technical Response Group?) were aware of the problem,
- other customers (in the area, state, nationally?) were affected and
- TRG didn't know when or if the Error Code could/would be cleared.
- There were a large number of unsatisfactory and long (1-4 hour) calls to the "Help Desk". e.g. 18-Sep-2012 following Technician no-show.
- 'A' was repeatedly shunted between departments (Accounting, Technical, ...), with no-one taking responsibility. The call finally dropped whilst 'on-hold'.
- No evidence on subsequent calls of any knowledge of previous calls. Every call was a return to the "pass the parcel" with no person/department taking responsibility.
- A Telstra complaint was lodged (04-Sep-2012), 'A' was given a "trouble ticket" number and told to contact Technical Support (number supplied). [[Two people assigned to the case (?), with promises to call-back within 24 hours.]]
- Tech Support called (11-Sep-2012), on-site visit booked for following week (17-Sep).
- Being able to speak to someone with "English as a First Language" had been an immense relief to 'A'. Finally their concerns were noted and seemed to be taken seriously.
- Neither person called 'A' back within 24 hours.
- When contacted, the complaints folk said they'd tried to contact 'A' using an incorrect phone number, one 'A' had never held. No apology was made for this. The complaints people could not correct the database error.
- Having the number corrected took a good deal of time and effort in itself. Multiple departments claimed "can't do it" or "not my area".
- 'A's mobile phone number has been registered with Telstra as their primary contact point for more than a decade. Why were any of the databases incorrect?
- After this (mid-late Sep-2012?) a very confident Telstra employee rang and identified themselves as "Level 3 support" and embarked on a very long and trying support call. They reassured 'A' that they could and would fix the fault.
- Under instruction, the replacement modem was connected by 'A' and failed to work.
- When the original modem was reconnected, it failed to work as well.
- The service was now non-operational and the support person left it that way.
- No apology or explanation was offered.
- The "support" person did not book a recall or ever call back.
- 'A' was nonplussed: Telstra had oversold their competency and destroyed a usable service without progressing resolution of the fault.
- 'A' visited a local Telstra Shop (26-Sep-2012). Wished:
- a credit for the time the service was not provided, and
- to cancel the cable internet service.
- 'A' was told that because of the technician visit arranged for the next day, the service could not be cancelled. The Telstra Shop staff were not interested that the fault had not been fixed in a month.
- 'A' had wished to speak, as a shareholder, to someone senior about costs to the business for the fault. The manager was not present, no meeting was organised.
- 'A' had wished to request checking and correct all related account and service records. This was not organised either.
- 'A' purchased a Telstra prepaid wireless modem from Australia Post (26 or 27-Sep-2012), unable to get working after spending time with Call Centre. Device returned. (date?)
- 'A' bought a Vodafone prepaid wireless modem from Australia Post (26 or 27-Sep-2012) and after a few false starts, got it working and regained their Internet service.
- Telstra Complaints officer called next day (27-Sep-2012) to say "we're working on it".
- Telstra sent a standard e-mail survey following up on the prepaid wireless modem (bought 27-Sep-2012).
- 'A' detailed their disappointment in Telstra service and invited them to call.
- (02-Oct-2012) A Melbourne based Customer Service rep.. 'R', called 'A' about the wireless modem and the on-going fault. 'R' said they would ring the next day.
- (02-Oct-2012) The Teltra Complaints Officier assigned to 'A' called saying another person in their section would contact 'A' later that morning.
- No call was received.
- 'A' left messages that afternoon and the next morning. These were not returned.
- (03-Oct-2012) 'R' rang 'A' in a conference call including a technician , 'J' in Melbourne. 'R' had to leave the call early, with 'J' spending an hour on the phone with 'A', attempting "a manual override" of the Error Code. This required long waits and providing the hardware address of the original modem. This had to be read by 'A', 'J' did not seem to have this on record.
- This over-ride appeared successul at the time.
- The connection failed overnight.
- It seems to be working today.
- How will 'A' know the fault has been cleared?
- They currently believe the fault is rectified.
- Why wasn't this done on, or just after, the first site visit, six weeks earlier?
- Why the long wait and run-around?
- After the apparent resolution, 'A' had multiple calls from people within Telstra, all very excited the fault had been fixed.
- None offered an apology or any compensation, some seemed to claim direct credit.
- None offered an explanation of either the Technical fault within their systems, nor what had gone wrong with internal Telstra processes and automatic systems to cause the multiple faults suffered.
- None offered a "magic phrase" to be repeated to Technicians and Help Desk about the fault should it recur.
- No on-going "trouble ticket" number was given to 'A', should the fault recur.
- No-one offered a shortcut for service if the fault recurred shortly.
- After the overnight service disruption, it wasn't clear if one of the other Telstra personnel had undone the "manual override" with an individual attempt to rectify the fault they'd claimed.
- There was no evidence of good co-ordination amongst the various Telstra "Silos".
- 'A' had concluded on 3 October, that Error Code CCP0012, is not a technical problem, nor is it an accounting problem, but an Activation error problem and simply a code that needs to be removed from the Telstra system to allow the modem to connect and activate.
- 'A' raised a complaint with the TIO (Telecommunications Industry Ombudsman) (03-Oct-2012) sending their records of the incident.
- 'A' had been originally told "there is construction work in your area, a cable may have been cut". This seems to have been a deliberate, misleading statement.
- Telstra did not give any hint that after a month:
- That the fault had been escalated
- That for failing to provide the service, they would rebate 'A' the service charge.
- No offer was made to supply a temporary service, such as a 3G USB modem.
- 'A' had had to cancel a number of important business and personal meetings to wait aimlessly for a Telstra technician to attend on multiple occasions.
- No option for an increased priority owing to the long-standing nature and difficultly of the fault was offered.
- Telstra would never offer better than a 4-hour window for any attendance. They never scheduled 'A' at the beginning of the window, always near the end, or didn't attend.
It's also worth noting that completely out of character, 'A' suffered extreme agitation, frustation and desperation at both the impenetrable wall of "service" and the inability to be heard, treated respectfully and to get a resolution to a service that had become necessary for conducting their business and life.
This isn't a "minor annoyance" or idiosyncratic: there is some very deep human psychology involved.
There's a branch of psychological therapy that relies on our limbic systems' (the cingulate nucleus) response to attaining goals: pre- and post-goal attainment happiness, two very distinct and important phases.
For all humans, striving and overcoming challenges is innate and core to our psychological well-being.
Consistently setting goals and achieving them isn't just "nice", but necessary, for our continued happiness and psychological well-being. Goal Attainment forms the basis of various powerful approaches addressing Depression and other conditions.
Knowingly and uncaringly forcing people into powerlessness and frustration would, in an OH&S workplace setting, be illegal: employers are required in Australia to provide a Safe Workplace. Deliberately causing employees harm, physical, emotional or psychological, is illegal and attracts civil penalties, as well as curative support for those affected.
I'm not sure if current OH&S law can be extended to customers. If so, companies like Telstra which seemingly have a policy and strategy of blocking communications and frustrating customers, would face considerable penalties...
The positive effects of Goal Attainment means the inverse, preventing people from achieving goals, is devastating, more so for high-performing individuals like 'A'. It can be categorised as "cruel and unusual" treatment, especially if intermixed with multiple events setting up false hopes and then dashing them. The human response in this case is even more profound and damaging.
Systemic Failures within Telstra
This whole adventure was unnecessary and presumably preventable: some automatic system failed when a new Cable Modem was ordered and incorrect configuration data uploaded to an operational system, without detection, audit or correction. Who has been charged with finding the root cause?
The final fix, a "manual override", should at worst, have been done the next day by the technician 'R' in Melbourne, prompted by the call from 'A'.
If Telstra's fault resolution system had worked properly, the fault would have been automatically passed to 'R's section as soon as the first technician recorded the Error Code.
- Telstra has no fault escalation procedures, conclusively demonstrated here.
- After any fault has been open/unresolved for two weeks, it should have been escalated to the Head of Operations for the State.
- Any fault that is due to an internal process failure, like this, should be immediately escalated to senior officers with full cross-organisational authority and access to diagnose the root cause and initiate permanent prevention measures.
- Own-goal process faults like these need to be reviewed, tracked and addressed by the CEO and their Senior Management Team.
- They threaten the viability of the whole business and sufficient Responsibility and Authority only comes together at the top of all Silos, the CEO and their team.
- High-value multi-service clients are treated worse than low-value customers: there are demonstrated errors in Service and CRM databases.
- There is a major deficiency within Telstra: nobody is checking and correcting these service records.
- After the "IT Transformation" project, it was known that high-value customers could not be automatically transferred.
- To have stale data in multiple locations (service address, customer contact) says the database is seriously compromised, leading to many costly preventable errors.
- Who is responsible and accountable for Data Quality, and do they have the Authority, will and budget to force records to be corrected?
- This appears to be a major organisational failing and oversight.
- Correcting faults in Telstra records is onerous and time consuming for Customers, it should be simple and easy.
- It cannot be done in real-time whilst speaking to Service Reps, or
- Service Reps are poorly trained or refuse to execute their tasks.
- Telstra shareholders are treated no better than anyone else.
- This is a marketing opportunity going begging to create engaged and supportive shareholders. Telstra has one of the largest 'Mom and Pop' share registers.
- Service discounts, special offers and loyalty bonuses are possible.
- Special service and access arrangements for shareholders would encourage them to give all their business and that of their immediate families to Telstra.
- Telstra BigPond seems to offer nothing like the Telephony Customer Service Guarantee (CSG).
- The Internet is a vital lifeline personally, professionally and in business for almost all Telstra customers now.
- Decent Service Guarantees would match Consumer expectations and usage, as well as provide Product Differentiation.
- Telstra's Offshore "Help Desk" with ESL speakers are counter-productive, especially for complex, long-running faults.
- Whilst possibly tolerable for simple tasks and "script driven" data acquisition, they are a Nett Negative Value in this situation and many others. Saving money on Help Desks may be illusory and detrimental to the whole business.
- Allow Customers to choose more expensive support options:
- Like Airlines, offer multiple levels of pay-for-service, allowing the business to maximise profits by offering multiple price-points. (No "money left on the table").
- Higher cost support could be automatically included as 'upgrades' for high-value customers, as Banks do.
- After two calls on the same fault, automatically direct the Customer to a specialist Held Desk with a single person assigned and responsible for achieving Customer Satisfaction.
- Instead of measuring "time to finish or transfer call", complex calls need to measure "Time until Customer is fully satisfied". Only the Customer can close complex faults.
- The Help Desk practice of "pass the parcel" is frustrating to Customers and Counter-productive as it causes significant Brand Damage.
- Somebody within Telstra needs to be responsible for detecting, monitoring/reporting and preventing this situation.
- Ideally, the phone system should track customers who are passed around and offer them a "circuit breaker".
- Making Customers wait on Help Desk queues for hours serves no purpose other than weeding out those with better things to do, prompting them to look for alternate service providers.
- Long Help Desk delays are an invitation for Customers to Choose Another Carrier, a tactic which would not impress shareholders one iota.
- Under provisioning Help Desk service staff only serves to reinforce the stereotypical image provided by Lily Tomlin in her "We're the Phone Company" sketches. This is against the best interests of the Business.
- This reinforces Telstra as a Toxic Brand to Customers. Whilst Customers have no better place to go, they will tolerate it. Given the choice, they will flee, never to return.
- This is known, preventable Brand Damage at its worst.
- Complex faults are slow and difficult to solve. This isn't simply a Customer Service and Brand Damage issue, but very expensive to the organisation.
- This fault cost $5-10,000 more than it should have.
- We know that this wasn't a one-off and that other Cable Internet subscribers were affected, but their faults weren't resolved.
- The initial problem, the non-supply of an ordered service, was never addressed.
- How much business can an organisation deliberately throw away and survive?
- It seems nobody is directly responsible or accountable for this lost revenue.
- Telstra, if it wants to engage and retain customers, must never internally cancel a service order without contacting the customer, explaining the situation and offering alternatives, It's an opportunity to "upsell" the client.
- There is a major fault with the Technician ticket system: The first on-site Technician should not have been able to pass a known, unresolvable fault back to general enquiries.
- Telstra confirmed that "TRG":
- knew of the "Error Code CCP0012" fault,
- that it affected multiple customers,
- presumably they had no idea of the immediate or root cause, and
- they had no idea of when they would be able to fix it.
- In ITIL-speak, this was a Severity One Major Problem, but wasn't classified as such.
- An appropriate organisational response would've been to establish a war-room comprising the State Heads of Branches and Senior Line-of-Business Managers.
- Following the successful work-around, all other faults associated with the Problem should've been corrected.
- Investigations initiated as to the root causes (automatic systems and processes) responsible for the error and means of detecting recurrences and costs of prevention measures.
- Telstra's Problem Management is either deficient or non-existent.
- Problems are not Faults, but the cause of one or more Faults.
- To have a Known Problem not detected by the Fault Ticket Handling system is a major Professional failure that should be explicitly investigated and reviewed.
- All the Help Desk and Technical Systems should've found an outstanding Problem with "Error Code CCP0012", with a known workaround ("manual over-ride").
- The systems and processes need Review and correction.
- A major internal inquiry is needed to uncover the root causes of this meta-failure.
- Multiple Telstra employees were contacting the Client unbeknownst to one another.
- This is the compelling reason for a CRM, a "single Client Communication Flow".
- This definitively failed, either because the CRM was faulty, or it was bypassed or procedures ignored.
- All of these are cause for deep concern and deserve an inquiry.
- The inability of the Complaints Officer to progress the issue, or identify it was a Known Unresolved Problem, means their systems and/or processes are deficient or faulty.
- This is a major problem deserving immediate attention.
- The fault was only resolved accidentally when a Customer Survey person became involved and somehow was able to refer the fault to a diligent, competent and active Technician.
- The unidentified "level 3" support person that caused the service to fail entirely should be found and castigated, as should the many service personnel who failed to follow-through on the fault.
- These actions are consistent with a widespread attitude of "Care Factor: Zero", inimical to resolving faults or preventing faults through good Problem Management.
- The one Technician who persevered should be found and commended.
- The consistent lack of apology to the Client, the lack of any offers to provide an alternate service until the service was restored or anyone offering the statutory minimum (under the TPA/CCA) of rebating service charges show a systemic failure in even adequate, not good, Customer Service training and knowledge of legal requirements.
- At a minimum, this is a systemic Training failure.
- It indicates that nobody is monitoring, measuring and reporting on general levels of Customer Service and evaluating adequacy of Training.
- The most critical and over-arching and pervasive Failure is the identification and investigation/analysis of massive cost over-runs on service faults etc:
- This fault cost the organisation an unnecessary $5-10,000, more than the $100/year service margin could ever return.
- This will not be an isolated occurrence, many of these will be eating away at Profits and turning away Customers, particularly high-value long-term Clients.
- This only got resolved through an accidental interaction, the Customer Survey person who bothered to follow-up on the feedback. This bodes very poorly for the future performance on the organisation.
- By rights, Telstra should have standing reports with automatic escalation:
- Identify full internal cost to resolve faults and other service issues.
- Report and escalate excessive fault resolution costs to Senior Management.
- Mandate Root Cause Analysis (RCA) of the "Top Ten" faults found in the RCA's.
- Require the CEO and their Senior Management Team to track all "Top Ten" issues and regularly report to the Board on progress and problems identified.
The irony is that I shouldn't be writing this analysis at all. None of this should've happened in a well-run organisation that cared sufficiently for its Customers.
The tragedy is that Telstra will probably continue "Fat, Dumb and Happy" for the next 10-15 years in blissful ignorance of this piece and then wonder why they are "suddenly" losing Customers, disproportionately their most valuable, at an accelerating rate.
2012/10/01
Microsoft Troubles XVII: The full product lifecycle curve, inception to collapse
2009/08/07
Rupert Murdoch - Fool or Genius?
Does Rupert Murdoch know something the rest of us don't?
The recent news is that News Ltd would start charging for on-line access to its newspapers.
Not a good idea.
Experienced Journalist & commentator, Alan Kohler also thinks so...
First, Rupert is not in the business of selling 'news', quality journalism or not.
He sells Advertising.
Just like Google and friends. But apparently not nearly as well as they do on-line.
There are people who sell 'news', and they are going strong.
Organisations like Reuters, Associated Press, Bloomberg, AAP, ... The wire-services.
The same ones that sell to Google, businesses, TV and Mr Murdoch's newspapers.
News Ltd doesn't sell journalistic content (news): like every major newspaper, it has always given away its content. Exactly the same as Free-to-Air radio and TV.
The "value proposition" to most newspaper customers, News & Stories, is a Free Good.
Major papers actually cost their publishers to sell. Newsagents typically keep the full "cover price" of the local major papers. Perhaps this is why Fairfax Ltd lists "Newsprint and Ink" as its single biggest expense.
Publishers make their money from the advertising they sell (Classified and 'Display' or general).
They set their advertising rates on the estimated number of readers - not copies sold/distributed. (There's a whole industry 'auditing' circulation & readership).
Small advertisers will always be 'price-takers', while the large regular advertisers can negotiate.
On-line breaks many/all the Newspaper assumptions:
Browsing the 1200+ entries for 'newspapers' in the Australian Yellow Pages, these groupings seem apparent:
A newspaper without content, pure advertising, the ideal for the business side of newspaper.
Second, a long time ago newspapers were the source for capital-N News - timely, important, factual.
They broke stories, 'scooped' one another, had many editions during the day and dealt in "the facts m'aam, just the facts" as Joe Friday might say.
The sort of thing shown in 1930's Black and White movies.
By the 1970's, newspapers had comprehensively lost the race as the first news source.
"Watergate" showed they could still 'scoop' other media with investigate journalism, but the Vietnam War played out on the nightly TV news.
When Ted Turner started CNN, the game changed - Free-to-Air was usurped.
The 1991 Gulf War had CNN "reporting live from Baghdad" and assumed the mantle of "first news source".
These days it is a tussle between Cable News and on-line services to be "first".
And that race has always led to problems with accuracy and false/fabricated stories.
An editor who is under pressure "to be first" can be manipulated into publishing without good fact checking. When there was considerable effort & expense in rolling the presses, the downside ensured more caution. In the on-line world, nearly all barriers to production are eliminated alongside "instant" publication. An editorial mistake is much more likely and potentially much more damaging to a large publisher, the Drudge Report non-withstanding.
Newspapers have been providing Opinion & Analysis for a couple of decades.
Any pretence they are cutting edge or breaking stories in real-time is a "fools paradise" and delusional.
News Ltd has great content produced by many great people and serves a faithful cohort of consumers. It just isn't 'news' they are selling.
Third, there are many good free alternatives for news, on-line and not, to newspapers.
Google pays for wire-services and gives away the content.
Publicly funded media - radio, TV and on-line - have a mandate to provide services with public monies. The BBC and Australian ABC have large news rooms and international reporters.
The ABC alone has 700 people in its News Division providing current content for all its outlets.
How does a newspaper, with at best 300 journalists, compete with a better resourced competitor who's content is free?
Not on news - only with other types of content and other incentives - like DVD's and special offers...
Fourth, there are just 3 workable Revenue Models.
Revenue options are:
subscription/donations and cover-price + advertising.
(pre-paid vs 2-part charging)
There are only 4 Revenue Models possible in this scheme.
Fully free can't self-support itself, so there are only 3 workable models.
Murdoch is complaining the Revenue Model that has worked well in the physical world for approaching a century doesn't work on the Internet. Who'd have thought?!
The wire-services thrive and on-line advertising is booming.
The only people out of step are the firms running newspapers.
They could have acted in 1995 to move their advertising on-line, but didn't.
Were they blinkered or lacked 'vision'?
Was it a sound business decision based in part on not canabalising their main cash flows?
Things are how they are...
There seems little to be gained from now analysing the reasons for non-action.
There are other issues that have to be resolved when moving to on-line services.
Lastly, What would work?
This is an argument in three parts: as a society we need 'quality journalism', news rooms aren't cheap, and are there models we could follow?
The media as "The Fifth Estate" is an important and necessary part of any Democratic government. A Free Press is a necessary part of Open and Transparent government.
But whither Investigative Journalism. There is a lot of TV reportage of politicians doing 'door stops' or in stage-managed events. And a lot of 'tabloid journalism' on TV.
Would Woodward and Bernstein now be funded for their lengthy Watergate investigations?
Would any editor allow it to be published these days?
I think Watergate is less likely to be reported these days for many reasons and the Drudge Report and other gossip sources do not fill the gap.
"Quality Journalism" has to be nutured & supported for us to have stable, prosperous societies.
The ABC states it has 700 people in its News Division.
On-line sources suggest major newspapers have ~300 journalists in their newsrooms. [This information isn't in the Annual Reports I scanned.]
What would it cost to run such a news room?
$30M a year in wages, $10M in wire-services, $10-15M for bluidings and systems.
Marketing & Sales probably $30M. Accounting and collecting subscriptions: $5-10M.
Publishing on-line would add another $20-30M, with an overall 30% Gross Margin required to fund upgrades, depreciation and dividends.
Perhaps $150M/year in revenue, or $3M/week.
The Sydney Morning Herald has an audited circulation of 210-360,000 and readership from 850,000-1,100,000 [without SunHerald, $1.80 and 480,000/1.25M]
Previous comments: "Internet Changes Everything: Newspapers".
Even if you achieved 500,000 individual subscriptions, a weekly price of $5+, versus the $1.40/weekday and $2.40 Saturday for the paper version.
I believe that's far beyond the consumer 'price point' for a single publication.
So what models are out there that might work?
'Cable TV' provides content aggregation, common marketing services & subscription and billing.
It has severly impacted Free-to-Air TV over the last 4 decades for many reasons.
One of the big factors I believe is allowing content providers to focus on their strengths and the Cable Service Provider (Foxtel in Australia) to focus on the technical and retail/customer relations and support business.
The public are offered content aggregated into affordable and desirable 'packages'.
They can decide the utility to them of each package and compare the cost to other forms of entertainment. A$30-$50 seems to be the price point.
Cable TV for content providers removes barriers to entry and avoids competition between technical delivery methods. The customer wants the service and isn't interested in the technology per se. This model allows & promotes small, new entrants with serving specialist or highly targeted niches.
The revenue returned to content providers is unknown to me. Large studios are not 'price takers' and have significant negotiating power as 'headline products'.
Presumably small niche providers get a return based on consumer views.
This shared infrastructure and 'content packages' seems ideally suited to on-line delivery of paid content - which doesn't have to be limited to news or 'quality journalism', but certainly includes them. Plus we have the natural providers already operating with large, high-quality customer lists: Cable Service Providers.
The technical implementation for an "on-line Channel Service" is simple. Though the ABC iView experience suggests that collaborating with ISP's and allowing unmetered content is necessary. [Australian ISP's impose download quotas on broadband].
Customers already have some sort of PC (Windows, Mac, Linux, ...) and look after their own broadband connection.
A controlled, universal 'player' is required - happily companies like VMware already provide, free, a basic product that work across all platforms, the "VMware Player", which can run pre-built systems with embedded applications, "Virtual Appliances".
The only necessary work is tailoring a VPN or similar and distributing the required registration/connection keys. Foxtel already has the infrastructure in place to source, distrubute, service and support hardware & devices.
That's not a big leap...
And one where services can be packaged in a series of packages with many different price-points.
All those free Community papers, plus a Major Metro Papers: $5/month?
Add a speciality or trade paper, all the Major Metros, a financial services 'feed' and an alert service like 'Media Monitors' for a company of 75 people: $lots.
How does this proposal site with the Newspaper assumptions:
On top of this, additional options allowing subscribers to pre-pay to view or print normally inaccessible content. The Channel Service Provider doesn't become a credit provider - in fact gains by holding the prepaid money - which it never need return and might even expire, like pre-paid mobiles.
Importantly, 'micro-payments' are avoided. They are very, very hard to get right and consequentially expensive. That's why we've never seen Visa and Mastercard move on this market.
But moving 1cent 'funny money' from your pre-paid balance to a vendor - very cheap.
It's the basis of prepaid mobiles.
With the business-friendly upside of all the unused payments that expire - a tidy 5-10% profit.
In summary: Do I think Murdoch is wrong-headed in charging for access to his newspapers?
Absolutely.
Do I think an on-line service offering this facility effectively, efficiently and profitably can be constructed?
Absolutely.
Will anyone read & respond to this piece and the proposal?
Who Knows :-)
The recent news is that News Ltd would start charging for on-line access to its newspapers.
Not a good idea.
Experienced Journalist & commentator, Alan Kohler also thinks so...
First, Rupert is not in the business of selling 'news', quality journalism or not.
He sells Advertising.
Just like Google and friends. But apparently not nearly as well as they do on-line.
There are people who sell 'news', and they are going strong.
Organisations like Reuters, Associated Press, Bloomberg, AAP, ... The wire-services.
The same ones that sell to Google, businesses, TV and Mr Murdoch's newspapers.
News Ltd doesn't sell journalistic content (news): like every major newspaper, it has always given away its content. Exactly the same as Free-to-Air radio and TV.
The "value proposition" to most newspaper customers, News & Stories, is a Free Good.
Major papers actually cost their publishers to sell. Newsagents typically keep the full "cover price" of the local major papers. Perhaps this is why Fairfax Ltd lists "Newsprint and Ink" as its single biggest expense.
Publishers make their money from the advertising they sell (Classified and 'Display' or general).
They set their advertising rates on the estimated number of readers - not copies sold/distributed. (There's a whole industry 'auditing' circulation & readership).
Small advertisers will always be 'price-takers', while the large regular advertisers can negotiate.
On-line breaks many/all the Newspaper assumptions:
- no intermediaries with good 'passing trade' to find customers
- exact counts, not estimates, or readership
- exact counts of advertiser hit-rates (count links followed)
- targeted/niche audiences, not "broad spectrum" mass market
Browsing the 1200+ entries for 'newspapers' in the Australian Yellow Pages, these groupings seem apparent:
Business, Trade & Industry, Lifestyle, Sports, Political, Special Interest, Community/Local, Regional & Rural, Ethnic, Language and Religious,and versions of the "Trading Post".
A newspaper without content, pure advertising, the ideal for the business side of newspaper.
Second, a long time ago newspapers were the source for capital-N News - timely, important, factual.
They broke stories, 'scooped' one another, had many editions during the day and dealt in "the facts m'aam, just the facts" as Joe Friday might say.
The sort of thing shown in 1930's Black and White movies.
By the 1970's, newspapers had comprehensively lost the race as the first news source.
"Watergate" showed they could still 'scoop' other media with investigate journalism, but the Vietnam War played out on the nightly TV news.
When Ted Turner started CNN, the game changed - Free-to-Air was usurped.
The 1991 Gulf War had CNN "reporting live from Baghdad" and assumed the mantle of "first news source".
These days it is a tussle between Cable News and on-line services to be "first".
And that race has always led to problems with accuracy and false/fabricated stories.
An editor who is under pressure "to be first" can be manipulated into publishing without good fact checking. When there was considerable effort & expense in rolling the presses, the downside ensured more caution. In the on-line world, nearly all barriers to production are eliminated alongside "instant" publication. An editorial mistake is much more likely and potentially much more damaging to a large publisher, the Drudge Report non-withstanding.
Newspapers have been providing Opinion & Analysis for a couple of decades.
Any pretence they are cutting edge or breaking stories in real-time is a "fools paradise" and delusional.
News Ltd has great content produced by many great people and serves a faithful cohort of consumers. It just isn't 'news' they are selling.
Third, there are many good free alternatives for news, on-line and not, to newspapers.
Google pays for wire-services and gives away the content.
Publicly funded media - radio, TV and on-line - have a mandate to provide services with public monies. The BBC and Australian ABC have large news rooms and international reporters.
The ABC alone has 700 people in its News Division providing current content for all its outlets.
How does a newspaper, with at best 300 journalists, compete with a better resourced competitor who's content is free?
Not on news - only with other types of content and other incentives - like DVD's and special offers...
Fourth, there are just 3 workable Revenue Models.
Revenue options are:
subscription/donations and cover-price + advertising.
(pre-paid vs 2-part charging)
There are only 4 Revenue Models possible in this scheme.
Fully free can't self-support itself, so there are only 3 workable models.
Murdoch is complaining the Revenue Model that has worked well in the physical world for approaching a century doesn't work on the Internet. Who'd have thought?!
The wire-services thrive and on-line advertising is booming.
The only people out of step are the firms running newspapers.
They could have acted in 1995 to move their advertising on-line, but didn't.
Were they blinkered or lacked 'vision'?
Was it a sound business decision based in part on not canabalising their main cash flows?
Things are how they are...
There seems little to be gained from now analysing the reasons for non-action.
There are other issues that have to be resolved when moving to on-line services.
- Paper is simple and always "Just Works', modulo getting wet.
Attempts to stream printed news electronically have been widely successful outside of offices. Radio serves the travelling public well. Printed media is cheap, available and can be forgotten without dire consequences. Some section of the population may read the news on their Kindle or iPhone on their morning commute, but it won't be a large audience.
Neither will there be much call for $10 newspapers... - Serving "The Diaspora": An important function of newspapers is allowing non-resident locals to "keep in touch with home". Australia shows that people may permanently emmigrate and never return home, but still identify strongly with their country of origin. This fuels our strong ethnic newspapers. For people who've only moved towns, a daily or weekly "fix" of their hometown newspapers fills a strong need. They even pay a premium.
- Niche buyers. Most buyers throw most of a newspaper away. They are very specific & selective in their needs and uses of the massive content provided. There are better ways to serve many of those niches on-line. Like classified advertising is better served by e-bay and 'trading post'. It's fast, current and cheap - plus very efficient for the reader. The service does the searching and the reader can be contacting a seller within minutes of loading the site.
- Network effects and the tipping point. When a product has reached around 40% market penetration, it 'suddenly' becomes popular and quickly saturates the market. This happened in 1984 with Group-3 fax and then around 1996 with The Internet/World Wide Web. Newspapers need to be keenly aware of their competitors - when the end comes, it may be frightenly fast.
- Copyright and Libel Laws. The journalists union has spent a very long time negotiating what rights the publisher & content-creator have. This all has to be done again in an on-line world. The other side of the coin is commercial protection of journalists against Libel or defamation actions. The publisher wears the risk once the editor decides to print. Those named know that a newspaper can afford to and will defend itself. If journalists are personally exposed to litigation, justified or not, they will sensibly withhold contensious pieces. Why wreck your life for a decade or more, as happened to Chris Masters over the "Moonlight State" and other pieces? For many, the price is too high.
Lastly, What would work?
This is an argument in three parts: as a society we need 'quality journalism', news rooms aren't cheap, and are there models we could follow?
The media as "The Fifth Estate" is an important and necessary part of any Democratic government. A Free Press is a necessary part of Open and Transparent government.
But whither Investigative Journalism. There is a lot of TV reportage of politicians doing 'door stops' or in stage-managed events. And a lot of 'tabloid journalism' on TV.
Would Woodward and Bernstein now be funded for their lengthy Watergate investigations?
Would any editor allow it to be published these days?
I think Watergate is less likely to be reported these days for many reasons and the Drudge Report and other gossip sources do not fill the gap.
"Quality Journalism" has to be nutured & supported for us to have stable, prosperous societies.
The ABC states it has 700 people in its News Division.
On-line sources suggest major newspapers have ~300 journalists in their newsrooms. [This information isn't in the Annual Reports I scanned.]
What would it cost to run such a news room?
$30M a year in wages, $10M in wire-services, $10-15M for bluidings and systems.
Marketing & Sales probably $30M. Accounting and collecting subscriptions: $5-10M.
Publishing on-line would add another $20-30M, with an overall 30% Gross Margin required to fund upgrades, depreciation and dividends.
Perhaps $150M/year in revenue, or $3M/week.
The Sydney Morning Herald has an audited circulation of 210-360,000 and readership from 850,000-1,100,000 [without SunHerald, $1.80 and 480,000/1.25M]
Previous comments: "Internet Changes Everything: Newspapers".
Even if you achieved 500,000 individual subscriptions, a weekly price of $5+, versus the $1.40/weekday and $2.40 Saturday for the paper version.
I believe that's far beyond the consumer 'price point' for a single publication.
So what models are out there that might work?
'Cable TV' provides content aggregation, common marketing services & subscription and billing.
It has severly impacted Free-to-Air TV over the last 4 decades for many reasons.
One of the big factors I believe is allowing content providers to focus on their strengths and the Cable Service Provider (Foxtel in Australia) to focus on the technical and retail/customer relations and support business.
The public are offered content aggregated into affordable and desirable 'packages'.
They can decide the utility to them of each package and compare the cost to other forms of entertainment. A$30-$50 seems to be the price point.
Cable TV for content providers removes barriers to entry and avoids competition between technical delivery methods. The customer wants the service and isn't interested in the technology per se. This model allows & promotes small, new entrants with serving specialist or highly targeted niches.
The revenue returned to content providers is unknown to me. Large studios are not 'price takers' and have significant negotiating power as 'headline products'.
Presumably small niche providers get a return based on consumer views.
This shared infrastructure and 'content packages' seems ideally suited to on-line delivery of paid content - which doesn't have to be limited to news or 'quality journalism', but certainly includes them. Plus we have the natural providers already operating with large, high-quality customer lists: Cable Service Providers.
The technical implementation for an "on-line Channel Service" is simple. Though the ABC iView experience suggests that collaborating with ISP's and allowing unmetered content is necessary. [Australian ISP's impose download quotas on broadband].
Customers already have some sort of PC (Windows, Mac, Linux, ...) and look after their own broadband connection.
A controlled, universal 'player' is required - happily companies like VMware already provide, free, a basic product that work across all platforms, the "VMware Player", which can run pre-built systems with embedded applications, "Virtual Appliances".
The only necessary work is tailoring a VPN or similar and distributing the required registration/connection keys. Foxtel already has the infrastructure in place to source, distrubute, service and support hardware & devices.
That's not a big leap...
And one where services can be packaged in a series of packages with many different price-points.
All those free Community papers, plus a Major Metro Papers: $5/month?
Add a speciality or trade paper, all the Major Metros, a financial services 'feed' and an alert service like 'Media Monitors' for a company of 75 people: $lots.
How does this proposal site with the Newspaper assumptions:
- intermediaries with good 'passing trade'
Exactly what the Cable TV companies do. - exact counts, not estimates, or readership
Page counts and the precise subscriber unequivilacly identified & grouped.
Near-perfect marketing information, and a perfect, undisputed source of revenue figures for 'page hits' revenue scheme. - exact counts of advertiser hit-rates (count links followed)
You don't have to sell advertising, and many content providers would not,
But if, like the Trading Post, you did... Trivial. - targeted/niche audiences, not "broad spectrum" mass market
Tailored content per source, niche & specialist sources, remembered preferences and interests... Near perfect for subscribers and providers alike. - Normal print-media space restrictions are lifted: Content providers can provide additional "in-depth" material easily & cheaply.
- Individual content providers can use the Channel Service to provide archive, search and print-on-demand services. Leaving each party doing what they do best.
- 'Leakage' of content can be controlled with the Virtual Appliance.
It may be configured to only allow 10 pages a day to be printed... With extras purchased. - Anyone interested in expensive periodicals, Academic Journals or hard-to-find books?
With controlled access and clear charging regimes in place, there is no issue about denying or destroying copyright.
In another day, this might have been called "Your Local Library".
On top of this, additional options allowing subscribers to pre-pay to view or print normally inaccessible content. The Channel Service Provider doesn't become a credit provider - in fact gains by holding the prepaid money - which it never need return and might even expire, like pre-paid mobiles.
Importantly, 'micro-payments' are avoided. They are very, very hard to get right and consequentially expensive. That's why we've never seen Visa and Mastercard move on this market.
But moving 1cent 'funny money' from your pre-paid balance to a vendor - very cheap.
It's the basis of prepaid mobiles.
With the business-friendly upside of all the unused payments that expire - a tidy 5-10% profit.
In summary: Do I think Murdoch is wrong-headed in charging for access to his newspapers?
Absolutely.
Do I think an on-line service offering this facility effectively, efficiently and profitably can be constructed?
Absolutely.
Will anyone read & respond to this piece and the proposal?
Who Knows :-)
2009/07/02
Internet Changes Everything: Newspapers
The News Broadsheet was a pivotal element of the 1776 American Revolution, eventually becoming enshrined in the First Amendment to the US Constitution.
Newspapers were integral to the Twentieth Century rise and evolution of Western Democracies. Without "frank and fearless" reporting (and an engaged electorate), governments can quickly spiral out of control.
We're now 15+ years into the "Internet Revolution", so where are Newspapers in their journey on-line? Significantly, nobody seems to have discovered a "secret sauce" to generally monetise News and the work of Journalists in the way that Amazon and Google etc have monetised books and on-line ads. Those who make money from writing seem to do so from direct subscriptions - the on-line form of "newsletters".
In my first job, there was a direct and obvious connection between the 5g +/- 0.01g of sugar being analysed and 'the business': Our analyses determined payments for 500 or 1,000 tonne lots. Getting it wrong wasn't an option. My place in the scheme of things was self evident.
The world of Software and I.T., even after 60 years, still doesn't have that direct & obvious link.
I.T. shares many traits with Journalism:
Getting even rough numbers to judge demand and price-points seems very hard.
For any on-line business to succeed, revenues have to support costs. While serving bit-streams may be considerably cheaper than printing & shipping paper, what will people pay for it and how do you get money off them? How do you draw in more subscribers - what are your Marketing & Sales channels?
Newsagents keep the full "cover price" of most newspapers. For magazines and most other products, the publisher gets half with the distributor & newspaper splitting the rest.
The content of newspaper, News etc, is why people buy newspapers.
The price people are willing to pay for the whole paper indicates the "ultility" they get.
But how do you arrive at a value-in-use of just the News component?
Are there synergist effects in operation?
The output of Journalists, "News", is essentially a "Free Good" to both consumers and the business. To the publisher, each newspaper printed is only a cost - which they actively attempt to minimise, whilst revenues are from advertising and independent of pages printed. The connection is the "rate card" - people will pay more in advertising for wider circulation & readership. The connection is anything but direct and immediate. Meanwhile, "content" (& "classified" adverts) brings in readers, but the supply-demand curve is generally unknown.
Makes the economics of "free" community publications more obvious. The distribution costs are only slightly more than to newsagents and the claimed readership is maximised.
It also says why businesses are so very happy with "advertising only" publications, like "Trading Post". Pure profit and no content producers to wrangle! These business translate on-line very well - but lose all "display advertising" to corporates like retailers looking for mass market advertising.
Audited Circulation figures aren't too hard to come by and "The Press Council" publish a good snapshot of the whole Print Media scene, but there are only tangential references to journalist "head counts". Fairfax journalists feel pressured by staff cuts and are taking action.
To come up with viable business models for on-line News, especially when competing with "Free" on-line services like Google or Free-To-Air broadcasts (radio & TV), you need both sides of the Accounting Equation:
Profit = Revenues - Expenses.
Other marketing data is needed to determine whether Size Matters (only one global Google and Amazon) or Little & Local works or some combination in between...
Whatever the result, there is one guaranteed loser: newsagents.
They are the traditional Marketing & Sales Channel for newspaper.
What becomes of them in an on-line world?
Can their access to "passing trade" and existing business relationships be leveraged?
What we do know is that people are very happy with "Free" on-line content: using search engines to point to unbilled on-line newspaper articles.
Newspapers initially tried to force reader registration, even though content was "free" people went elsewhere. Fees were charged to access "archives" or additional material made available to paid subscribers.
News Ltd's upcoming experiment in charging for on-line content will be watched very carefully throughout the industry.
What would it cost to run an adequate newsroom? Do the 15 journos of brisbanetimes.com.au reported by the Press Council provide adequate local coverage? Various sources suggest major metropolitan news have 200-300 journalists, while the national broadcaster, the ABC, have 700 people in their "News Division" (which is how many journalists?).
Any 24/7 operation requires shift-work. To provide a minimum staffing of 2 people, needs a team of ~12. Numbers build very quickly as more sections & coverage is needed.
Fairfax's Annual Report (2007) says they made a profit of ~A$500M ($447M EBITDA) on A$2.3B sales.
Around one third of sales were from New Zealand. Overseas and non-print revenues were unclear.
The Australian Digital operation made A$37M on sales of $137M.
Their ~10,000 employees were their largest single expense: A$700M.
Paper and ink came in second at A$270M.
Sales and Promotions were A$88M.
Communications: A$17.5M
I.T.: A$15M and
News services: A$12M
Fairfax reports $8B of Assets - $6B of which is "intangibles" - "goodwill" and "value of mastheads". They've around A$850M in Property, Plant & Equipment - the physical assets needed to produce newspapers.
But how many journalists were there and what does a single "high-quality" newsroom cost to run? That's not going to change for an on-line News service.
What will an average subscriber pay for an on-line News service?
What additional content are needed, and what synergies exist?
How many on-line subscribers will sign-up for each different offering?
Can the existing subscribers be converted to on-line subscribers? What would help in the transition?
What are the different attributes that subscribers value and what premiums will they pay?
This says that monetising on-line News services may be hard and their general lack says solutions are still not obvious.
Other comments, observations and relevant factoids:
Newspapers serve important subsidiary functions, like being "the paper of record" for Births, Deaths and Marriages as well as public events, political speeches and disasters, crises and more.
"Public Notices" of many types are published - from bankrupts to probate on wills to personals.
Newspapers have come to be the definitive textual mass-communication device.
There appears to not yet be any on-line equivalent.
In the USA, recent failures of long-running mastheads says there isn't that much time left to find a good answer.
Circulations:
The SMH sells ~212,000 copies Mon-Fri (@ $1.40), 364,000 on Sat ($2.40) and [Sun-Herald] 505,000 on Sun. ($1.80). It has increased circulation in recent years. No figures available for pages of advertising sold.
The Melbourne Age has comparable sales figures, though Sunday sales are roughly half the SMH.
'Readership' of the SMH is estimated at 853,000 Mon-Fri and 1,116,000 Sat.
Papers are shared around.
These figures suggest that newsagents & supermarkets make around $1.5M/week for Mon-Fri sales and the same again on weekends. Removing that income stream would leave a very unhappy sales channel...
Payments and Subscriptions types:
What do Newspapers do?
What comprises 'stories'?
The value to the reader is collection and pre-screening: reducing a mountain of data and facts to quickly and easily accessible information. Journalists classify and prioritise stories, letting the reader minimise time used and maximise information found.
This "Usability" principle extends to presentation, layout and story structure.
The fonts and columns widths are chosen to best suit human factors.
Modern printing added pictures to text - an important aid to readers and writers alike.
The use of white space, headlines and graphics/pictures increase readability & accessibility.
Stories follow the "inverted pyramid" - the most important facts first, tailing off. It means readers can quickly scan articles and find the most relevant/useful to them, and sub-editors can easily trim articles to fit by removing trailing paragraphs.
It is instructive to read a 100-yo paper without these modern features - they look dense and impenetrable. The small number of pages would've been a blessing.
Professional Journalists bring special factors to collecting stories:
The users of News services look for many different benefits and uses:
"non-News" Newspaper functions that Online services may need to duplicate:
Newspapers were integral to the Twentieth Century rise and evolution of Western Democracies. Without "frank and fearless" reporting (and an engaged electorate), governments can quickly spiral out of control.
We're now 15+ years into the "Internet Revolution", so where are Newspapers in their journey on-line? Significantly, nobody seems to have discovered a "secret sauce" to generally monetise News and the work of Journalists in the way that Amazon and Google etc have monetised books and on-line ads. Those who make money from writing seem to do so from direct subscriptions - the on-line form of "newsletters".
In my first job, there was a direct and obvious connection between the 5g +/- 0.01g of sugar being analysed and 'the business': Our analyses determined payments for 500 or 1,000 tonne lots. Getting it wrong wasn't an option. My place in the scheme of things was self evident.
The world of Software and I.T., even after 60 years, still doesn't have that direct & obvious link.
I.T. shares many traits with Journalism:
- Both are "Performance Disciplines", like Music, Art, Surgery and Gymnastics.
- "Effortless Performances" (as in 'making it look easy') take a lot of skill and experience. The public and more often now, management, have little appreciation of the process & skills.
- Input Effort and Results bear no discernible relationship.
- Quality is Everything, but seems impossible to measure.
- Although both are central and necessary to the businesses they support, they are managed as "Cost Centres", with seemingly no attempts at connecting outputs with Profit.
- Both deal in intangible and invisible "stuff" - information. Often with tight deadlines and very fast decay in product "usefulness".
- Both share a central problem: Effort/Inputs are decoupled from Income/Results.
Getting even rough numbers to judge demand and price-points seems very hard.
For any on-line business to succeed, revenues have to support costs. While serving bit-streams may be considerably cheaper than printing & shipping paper, what will people pay for it and how do you get money off them? How do you draw in more subscribers - what are your Marketing & Sales channels?
Newsagents keep the full "cover price" of most newspapers. For magazines and most other products, the publisher gets half with the distributor & newspaper splitting the rest.
The content of newspaper, News etc, is why people buy newspapers.
The price people are willing to pay for the whole paper indicates the "ultility" they get.
But how do you arrive at a value-in-use of just the News component?
Are there synergist effects in operation?
The output of Journalists, "News", is essentially a "Free Good" to both consumers and the business. To the publisher, each newspaper printed is only a cost - which they actively attempt to minimise, whilst revenues are from advertising and independent of pages printed. The connection is the "rate card" - people will pay more in advertising for wider circulation & readership. The connection is anything but direct and immediate. Meanwhile, "content" (& "classified" adverts) brings in readers, but the supply-demand curve is generally unknown.
Makes the economics of "free" community publications more obvious. The distribution costs are only slightly more than to newsagents and the claimed readership is maximised.
It also says why businesses are so very happy with "advertising only" publications, like "Trading Post". Pure profit and no content producers to wrangle! These business translate on-line very well - but lose all "display advertising" to corporates like retailers looking for mass market advertising.
Audited Circulation figures aren't too hard to come by and "The Press Council" publish a good snapshot of the whole Print Media scene, but there are only tangential references to journalist "head counts". Fairfax journalists feel pressured by staff cuts and are taking action.
To come up with viable business models for on-line News, especially when competing with "Free" on-line services like Google or Free-To-Air broadcasts (radio & TV), you need both sides of the Accounting Equation:
Profit = Revenues - Expenses.
Other marketing data is needed to determine whether Size Matters (only one global Google and Amazon) or Little & Local works or some combination in between...
Whatever the result, there is one guaranteed loser: newsagents.
They are the traditional Marketing & Sales Channel for newspaper.
What becomes of them in an on-line world?
Can their access to "passing trade" and existing business relationships be leveraged?
What we do know is that people are very happy with "Free" on-line content: using search engines to point to unbilled on-line newspaper articles.
Newspapers initially tried to force reader registration, even though content was "free" people went elsewhere. Fees were charged to access "archives" or additional material made available to paid subscribers.
News Ltd's upcoming experiment in charging for on-line content will be watched very carefully throughout the industry.
What would it cost to run an adequate newsroom? Do the 15 journos of brisbanetimes.com.au reported by the Press Council provide adequate local coverage? Various sources suggest major metropolitan news have 200-300 journalists, while the national broadcaster, the ABC, have 700 people in their "News Division" (which is how many journalists?).
Any 24/7 operation requires shift-work. To provide a minimum staffing of 2 people, needs a team of ~12. Numbers build very quickly as more sections & coverage is needed.
Fairfax's Annual Report (2007) says they made a profit of ~A$500M ($447M EBITDA) on A$2.3B sales.
Around one third of sales were from New Zealand. Overseas and non-print revenues were unclear.
The Australian Digital operation made A$37M on sales of $137M.
Their ~10,000 employees were their largest single expense: A$700M.
Paper and ink came in second at A$270M.
Sales and Promotions were A$88M.
Communications: A$17.5M
I.T.: A$15M and
News services: A$12M
Fairfax reports $8B of Assets - $6B of which is "intangibles" - "goodwill" and "value of mastheads". They've around A$850M in Property, Plant & Equipment - the physical assets needed to produce newspapers.
But how many journalists were there and what does a single "high-quality" newsroom cost to run? That's not going to change for an on-line News service.
What will an average subscriber pay for an on-line News service?
What additional content are needed, and what synergies exist?
How many on-line subscribers will sign-up for each different offering?
Can the existing subscribers be converted to on-line subscribers? What would help in the transition?
What are the different attributes that subscribers value and what premiums will they pay?
This says that monetising on-line News services may be hard and their general lack says solutions are still not obvious.
Other comments, observations and relevant factoids:
Newspapers serve important subsidiary functions, like being "the paper of record" for Births, Deaths and Marriages as well as public events, political speeches and disasters, crises and more.
"Public Notices" of many types are published - from bankrupts to probate on wills to personals.
Newspapers have come to be the definitive textual mass-communication device.
There appears to not yet be any on-line equivalent.
In the USA, recent failures of long-running mastheads says there isn't that much time left to find a good answer.
Circulations:
The SMH sells ~212,000 copies Mon-Fri (@ $1.40), 364,000 on Sat ($2.40) and [Sun-Herald] 505,000 on Sun. ($1.80). It has increased circulation in recent years. No figures available for pages of advertising sold.
The Melbourne Age has comparable sales figures, though Sunday sales are roughly half the SMH.
'Readership' of the SMH is estimated at 853,000 Mon-Fri and 1,116,000 Sat.
Papers are shared around.
These figures suggest that newsagents & supermarkets make around $1.5M/week for Mon-Fri sales and the same again on weekends. Removing that income stream would leave a very unhappy sales channel...
Payments and Subscriptions types:
- Pre-paid or billed subscriptions. Like Home Delivery
- On-demand use: Ad-hoc or occasional purchase
- Prepaid access to articles.
- Business or family sharing. Limited copies shared between many.
- Public access - libraries.
- "Media Monitors" - clipping services across many sources relevant to a business.
What do Newspapers do?
- Inform
- Educate
- Entertain, and
- Surprise and Delight.
What comprises 'stories'?
- facts
- expert analysis
- commentary
- opinion, and
- interviews
The value to the reader is collection and pre-screening: reducing a mountain of data and facts to quickly and easily accessible information. Journalists classify and prioritise stories, letting the reader minimise time used and maximise information found.
This "Usability" principle extends to presentation, layout and story structure.
The fonts and columns widths are chosen to best suit human factors.
Modern printing added pictures to text - an important aid to readers and writers alike.
The use of white space, headlines and graphics/pictures increase readability & accessibility.
Stories follow the "inverted pyramid" - the most important facts first, tailing off. It means readers can quickly scan articles and find the most relevant/useful to them, and sub-editors can easily trim articles to fit by removing trailing paragraphs.
It is instructive to read a 100-yo paper without these modern features - they look dense and impenetrable. The small number of pages would've been a blessing.
Professional Journalists bring special factors to collecting stories:
- access to people & organisations, like police, politicians, CEO's, ...
- funding for travel, communication and fees - like FOI requests or corporate data.
- Researchers, archives and access to expensive subscription services.
The users of News services look for many different benefits and uses:
- text, images, audio and video
- Mobile access
- Alerts and "Instantaneous news items" (the latest stories)
- Distraction, Relaxation and passing-time (as in commuting)
- Social settings - Cafe and Brunch
- Search and information: Browsing classified and focused searches
- distribution format. PDF's or HTML?
How do I read it on the train?
Does it read well on a laptop or iPhone? - enforcing DRM. How to limit copying? What to do if copied illegally?
- on-going subscription rights:
If I've bought a "paper" once, do I have permanent access to it, even after my subscription ends? - Competing with Free-To-Net services. Seems hard, have to provide additional value.
- Catering for local community news
- Accepting input from the general public.
- The Blogosphere and non-professional writers. They can't be held to journalistic standards and ethics, can't be reprimanded or censured and will publish/repeat unsubstantiated gossip and rumour.
"non-News" Newspaper functions that Online services may need to duplicate:
- "paper of record" function: Public Notices, Births-Deaths-Marriages
- Mass-market display advertising.
- Marketing and Sales channels. How to grow new business?
- Access to Printed copies - eg. weekly summaries.
- Searchable service provider directories and classified adverts.
Implies RSS-style alerts & monitoring.
- Monetisation. Advertising, subscription or sponsor based? Other?
- Niche marketing. By location, interest, community, employment sector.
- Tiered Subscriptions: free, basic, premium, target area, search tools, ...
Profits can be maximised by segmenting services with multiple price-points. - Organisational access.
2008/02/08
The Open Source Business Model
This post by Dana Blankenhorn on ZDnet is the best answer I've seen to the question "Why Open Source?".
He says 'plumbing', I'd say '(Unix|Open Source) is the Universal Glue'.
And the on-going Open Source Business Model is "support" for those that need/want 'certainty'.
Which if you are the CIO (read: 'my arse is on the line') for somewhere with a high dependence on I.T., is only Good Governance (or "common sense"). You can't make key staff stay, nor mandate they never get sick or burn-out and "go sit on a beach" - and after '9/11', all Business Continuity plans have to account for covering people as well as systems and networks.
That's it - Business I.T. is all about the Data (or "all about XXX, stupid" to be Clintonesque).
Open Source tools are usually about manipulating data or providing services - like Apache, e-mail, DNS, firewalls and IDS, ...
Open Source is here to stay: use it, don't deny or fight it.
This Business Model, 'support for essential tools', is robust and on-going.
Whatever systems you use in the Data Center, you'll always have the need to provide many services and interface disparate systems and data formats.
The model also applies to embedded 'Appliances' and dedicated devices, like firewalls - or commercial web-hosting services. They are based in whole or part on Open Source.
You'll note this model has very limited application to the client-side - the 'Desktop' or End-User compute platform.
"Free Software" from GNU et al is about an ideological stance and subsumes all other goals to this.
"Open Source" is pragmatic and about getting on with the job. It makes sense for large vendors, like IBM and HP, to support it. Customers can feel confident and secure - because the source and tool-chain are freely available from multiple sites, they cannot be held to ransom or 'orphaned' by unpredictable events or capricious decisions.
"Open Source" starts from the premise that "IT is done for a Business Benefit" - that you build software, systems and services for the use of others, not your own amusement and benefit.
Business supporting software has to meet Professional standards/criteria - good design, clear documentation, reliability, robustness and very few errors/defects - with the unstated driver of Continuous Improvement.
Never new features for their own sake or to create 'forced upgrades', always making the code more stable, usable and useful.
Commercial considerations, by definition, are always subsidiary to technical. If the user community doesn't like changes - they aren't forced to upgrade and in an extreme case, can 'fork' the code, internally or publicly: just do it how they want.
He says 'plumbing', I'd say '(Unix|Open Source) is the Universal Glue'.
And the on-going Open Source Business Model is "support" for those that need/want 'certainty'.
Which if you are the CIO (read: 'my arse is on the line') for somewhere with a high dependence on I.T., is only Good Governance (or "common sense"). You can't make key staff stay, nor mandate they never get sick or burn-out and "go sit on a beach" - and after '9/11', all Business Continuity plans have to account for covering people as well as systems and networks.
That's it - Business I.T. is all about the Data (or "all about XXX, stupid" to be Clintonesque).
Open Source tools are usually about manipulating data or providing services - like Apache, e-mail, DNS, firewalls and IDS, ...
Open Source is here to stay: use it, don't deny or fight it.
This Business Model, 'support for essential tools', is robust and on-going.
Whatever systems you use in the Data Center, you'll always have the need to provide many services and interface disparate systems and data formats.
The model also applies to embedded 'Appliances' and dedicated devices, like firewalls - or commercial web-hosting services. They are based in whole or part on Open Source.
You'll note this model has very limited application to the client-side - the 'Desktop' or End-User compute platform.
"Free Software" from GNU et al is about an ideological stance and subsumes all other goals to this.
"Open Source" is pragmatic and about getting on with the job. It makes sense for large vendors, like IBM and HP, to support it. Customers can feel confident and secure - because the source and tool-chain are freely available from multiple sites, they cannot be held to ransom or 'orphaned' by unpredictable events or capricious decisions.
"Open Source" starts from the premise that "IT is done for a Business Benefit" - that you build software, systems and services for the use of others, not your own amusement and benefit.
Business supporting software has to meet Professional standards/criteria - good design, clear documentation, reliability, robustness and very few errors/defects - with the unstated driver of Continuous Improvement.
Never new features for their own sake or to create 'forced upgrades', always making the code more stable, usable and useful.
Commercial considerations, by definition, are always subsidiary to technical. If the user community doesn't like changes - they aren't forced to upgrade and in an extreme case, can 'fork' the code, internally or publicly: just do it how they want.
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