Enterprises Seek Ways to Exploit Web Application Mashups and Lightweight Data Presentation Techniques

Transcript of BriefingsDirect podcast on data mashups with IBM and Kapow.

Listen to the podcast here. Sponsor: Kapow Technologies.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, a sponsored podcast discussion about the state of choice in the modern enterprise around development and deployment technologies.

These days, developers, architects and even line-of-business managers have many choices. This includes things like Web applications, software-as-a-service (SaaS), Services Oriented Architecture (SOA), RESTful applications, mashups, pure services off the Web, and pure services from within an Intranet or even the extended enterprise. We’re talking about RSS and Atom feeds, and, of course, there is a traditional .NET and Java going on.

We also see people experimenting with Ruby and a lot of use around PHP and scripting. The good news is that there are a lot of choices. The bad news is also that there are a lot of choices.

Some of these activities are taking place outside the purview of IT managers. People are being innovative and creative, which is good, but perhaps not always in the way that IT would like in terms of security and access control. These newer activities may not align with some of the larger activities that IT needs to manage -- which many times these days includes consolidation, unification, and modernization of legacy applications.

To help us weed through some of the agony and ecstasy of the choices facing application development and deployment in the enterprise, we have on the call, Rod Smith. Rod is Vice President of Internet Emerging Technologies at IBM. Welcome to the show, Rod.

Rod Smith: Thank you very much. It’s nice to be here.

Gardner: We also have Stefan Andreasen, the Founder and CTO of Kapow Technologies. Welcome to the show, Stefan.

Stefan Andreasen: Thank you.

Gardner: Let’s go first to Rod. We spoke last spring about these choices and how there are, in effect, myriad cultures that are now involved with development. In past years, development was more in a closed environment, where people were under control … white coats, raised floors, and glass rooms come to mind. But now it’s more like the Wild West. What have you been finding in the field, and do you see this as chaos or opportunity?

Smith: A little of both. In times of innovation you get some definite chaos coming through, but IT, in particular, and line of businesses see this as a big opportunity. Because of SOA and the other technologies you mentioned, information is available, and line of business is very interested in capturing new business opportunities.

Time to market is getting shorter, and getting squeezed all the time. So you’re seeing line of business and IT coming together around what they have to do to drive more innovation and move it up a couple of notches, from a business perspective.

Open standards now are very important to IT. Line of business, with mashups in particular, can use those types of services to get the information and create solutions they couldn’t do in the labs, when the propeller heads and others had to be involved five or 10 years ago.

Gardner: So we have dual or maybe multiple tracks going on. I suppose what’s missing is methodological and technical management. That’s an area where IBM has been involved for some time. Does IBM look at this as an opportunity?

Smith: A big opportunity. And you hit it on the head. The methodology here is very different from the development methodology we’ve been brought up to do. It’s much more collaborative, if you’re line of business, and it’s much more than a set of specifications.

Here is where we’re seeing people talk about building mashups. Usually they have a really good idea that comes to mind or something that they think will help with a new business opportunity.

Often the second question -- and we’ve seen a pattern with this -- is “Where is the data? How do we get to the data? Can IT open it up for us? Do line-of-business people have it in spreadsheets?” Typically, when it’s valuable to the business, they want to catalog it and put it together, so other people can share it. Finally, they do a mashup.

So methodology is one of the things we call a self-service business pattern. It starts with the idea, from a developer standpoint. "I really need to understand the business. I need to understand the time to market and the partnerships, and how information can be exposed." Then, they get down into some of the details. "I've got to do it quickly."

What we are seeing from an opportunity standpoint is that many businesses, when they see an opportunity, want a vendor to respond in 30 days or less, [and do more] within six months down the road. So that’s a challenge, and it is an opportunity. We think about tooling and middleware and services. How can we help the customer?

Gardner: Let’s go to Stefan. When you see these activities in the enterprise around mashups, SOAP, REST, HTML and XML, there’s an opportunity for bridging the chaos, but I suppose there’s also a whole new type of development around situational applications.

That is to say that, an opportunity exists to access content that hadn’t really been brought into an application development activity in the past. Can you tell us a little bit about what you’re seeing in the enterprise and how these new types of development are manifesting themselves?

Andreasen: Let me comment on the chaos thing a little bit. It’s important to understand the history here. At first, central IT worked with all their big systems. Line of business really didn’t have any access to IT or tools themselves, until recently when they got desktop tools like Excel.

This current wave is really driven by line of business getting IT in their own hands. They’ve started using it, and that’s created the chaos, but chaos is created because there is a need.

Now, with the Web 2.0 and the mashup wave, there is an acknowledgement of a big need here, as Rod also said. So it’s necessary to understand why this is happening and why it is something that’s very important.

Gardner: These end-users, power users, these line of business folks, they’ve been using whatever tools have been available to them, even if it’s an Excel spreadsheet. I suppose that gives them some productivity, but it also leaves these assets, data and content, lying around on hard drives in a fairly unmanaged perspective.

Can we knock two birds down with one stone in terms of managing this chaos in terms of the data, but also bring together some interface and application development benefits?

Andreasen: The worst thing would be to shut it down, of course. The best thing that’s happening now is acknowledging that line-of-business people need to do their own thing. We need to give them the tools, environments and infrastructure so they can do it in a controlled way -- in an acceptable, secured way -- so that your laptop with all of your customer data doesn't get stolen at the airport.

When we talk about customer data, we leap back to your earlier question about data. What are line-of-business people working with? Well, they’re working with data, analyzing data, and finding intelligence in that data, drawing conclusions out of the data, or inventing new products with the data. So the center of the universe here for this IT work is really dealing with data.

Gardner: SOA is one of the things that sits in the middle between the traditional IT approaches and IT development and then these newer activities around data, access, and UIs and using Web protocols.

I wonder if you think that that’s where these things meet. Is there a way to use an enterprise service bus (ESB) for checking in and out of provisioned or governed services? Is there a way that mashups and the ERP applications meet up?

Smith: The answer is yes. Without SOA we probably wouldn't have gotten to a place where we can think about mashable content or remixable content.

What you are seeing from customers is the need to take internal information and transform it into XML or RESTful services. There’s a good match between ESB things … [and] thinking about security and other pieces of it, and then building the Rich Internet Application (RIA) type of applications.

The part you touched on before is interesting, too. And I think Stefan would agree with me. One thing we learned as we opened up this content is that it isn't just about IT managing or controlling it. It’s really a partnership now.

One thing Stefan has with Kapow that really got us talking early was the fact that for Stefan’s content they have a freshness style. We found that same thing is very important. The line of business wants to be involved when information is available and published. That’s a very different blending of responsibility than we've seen before on this.

So thinking forward you can imagine that while you are publishing this, you might be putting it into a catalog repository or into services. But it also has to available for line of business now to be able to look at those assets and work with IT on when they should be available to business partners, customers and others.

Gardner: It’s interesting you mentioned the word "publish," and it’s almost as if we are interchanging the words "publishing" and "application development" in the sense that they are munging or overlapping.

Does that fit with what Kapow has been seeing, Stefan, that publishing and syndication are now a function of application development?

Andreasen: There are several sides to this question of which data you need, how to access it, how it is published, etc. One thing you are talking about is line of business publishing their data so other people can use it.

I split data into several groups. One is what I call core data, the data that is generally available to everybody in the company and probably sits in your big systems. It’s something everybody has. It’s probably something that's service-oriented or is going to be very soon.

Then there is the more specialized data that’s sitting out in line of business. There's a tendency now to publish those in standard formats like RSS, RESTful services, etc.

There's is a third group, which I call intelligence data. That's hard to find, but gives you that extra insight, extra intelligence, to let you draw a conclusion which is different from -- and hopefully better than -- your competitors’.

That’s data that’s probably not accessible in any standard way, but will be accessible on the Web in a browser. This is exactly what our product does. It allows you to turn any Web-based data into standard format, so you can access what I call intelligence data in a standard fashion.

Gardner: This is the type of data that had not been brought into use with applications in the past?

Andreasen: That is correct. There is a lot of information that’s out there, both on the public Web and on the private Web, which is really meant to be human-readable information. You can just think about something as simple as going to U.S. Geological Service and looking at fault lines of earthquakes and there isn't any programmatic API to access this data.

This kind of data might be very important. If I am building a factory in an earthquake area, I don’t want to buy a lot that is right on the top of a fault line. So I can turn this data into a standard API, and then use that as part of my intelligence to find the best property for my new factory.

Smith: When we talk of line of business, it’s just not internal information they want. It's external information, and we really are empowering these content developers now. The types of applications that people are putting together are much more like dashboards of information, both internally and externally over the Internet, that businesses use to really drive their business. Before, the access costs were high.

Now the access costs are continuing to drop very low, and people do say, "Let’s go ahead and publish this information, so it can be consumed and remixed by business partners and others,” rather than thinking about just a set of APIs at a low level, like we did in the past with Java.

Gardner: How do we bring these differing orbits into alignment? We've got people who are focused on content and the human knowledge dimension -- recognizing that more and more great information is being made available openly through the Web.

At the same time, we have this group that is API-minded. I guess we need to find a way of bringing an API to those folks who need that sort of interface to work with this data, but we also need for these people to take this data and make it available in such a way that a developer might agree with it or use it.

How does Kapow work between these constituencies and make one amenable to the other? We're looking for a way to bind together traditional IT development with some of these “mashupable” services, be it internal content or data or external services off of the Web.

I wonder what Kapow brings to the table in terms of helping these two different types of data and content to come together -- APIs versus content?

Andreasen: If you want to have automatic access to data or content, you need to be able to access it in a standard way. What is happening now with Web Oriented Architecture (WOA) is that we're focusing on a few standard formats like RESTful services and on feeds like RSS and Atom.

So first you need to be able to access your data that way. This is exactly what we do. Our customers turn data they work with in an application into these standard APIs and feeds, so they can work with them in an automated way.

It hadn’t been so much of a problem earlier, maybe because there wasn’t so much data, and people could basically cut and paste the data. But with the explosion of information out there, there's a realization that having the right data at the right time is getting more and more important. There is a huge need for getting access in an automated way.

How do line-of-business people work with the data? Well, they work with the data in the application interface. What if the application interface today is your browser?

Kapow allows the line-of-business people to automatically access data the way they worked with it in their Web browser.

That’s a very powerful way of accessing data, because you don't have to have an extra level of IT personnel. You don't have to first explain, "Well, this is the data I need. Go find it for me." And then, maybe you get the wrong data. Now, you are actually getting the data that you see the way you want.

Gardner: Another aspect to this is the popularity of social networking and what's known as the "wisdom of crowds" and wikis. A lot of contributions can be brought into play with this sort of gray area between content and publishing, different content feeds, and exposure and access and the traditional IT function.

Wikis have come into play, and they have quite a bit of exposure. Maybe you have a sense of how these worlds can be bridged, using some of what's been known as social networking?

Smith: Software development now is much more of a social networking activity than an engineering activity. At IBM, we have Blog and Wiki Central, where people use wikis to get their thoughts down and collectively bring an idea about.

Also at IBM, we have Innovation Jam, which we hold every year, and which brings in hundreds of thousands of people now. It used to be just IBM, but we’ve opened it up this last year to everyone, friends and family alike, to come up with ideas.

That part is great on the front end. You then can have a much better idea of what the expectations are, and what a user group wants. They're usually very motivated to stay in the loop to give you feedback as you do development.

The big part here is when it comes to doing mashups. It's the idea that you can produce something relatively quickly. With IBM’s QEDWiki, we like the idea that someone could assemble an application, wire it together in the browser, and it has the wiki characteristics. That is, it's stored on the server, it’s versioned as to enterprise characteristics, and it’s sharable.

It’s a key aspect that it has to be immediately deployable and immediately accessible by the folks that you are networking with.

That relates to what Stefan was saying and what you were asking about on how to bridge the two worlds of APIs and content. We're seeing now that as you think about the social networking side, people want the apps built into dashboards.

The more forward-thinking people in IT departments realize that the faster they can put together publishable data content, they can get a deeper understanding in a very short time about what their customers want.

They can then go back and decide the best way to open up that data. Is it through syndication feeds, XML, or programmatic API? Before, IT had to guess usage and how many folks might be touching it, and then build it once and make it scalable.

We’re doing things much more Agile-wise and building it that way, and then, as a flip, building the app that’s probably 80 percent there. Then IT can figure out how they could open up the right interfaces and content to make it available broadly.

Gardner: Stefan, could you give us some examples of user scenarios, where Kapow has been brought in and has helped mitigate some of the issues of access to content and then made it available to traditional development? Is there a way for those folks who are perhaps SOA-minded, to become a bit more open to what some people refer to as Web-Oriented Architecture?

Andreasen: One example that was mentioned in The Wall Street Journal recently in an article on mashups. It was on Audi in Germany. They are using our product to allow line of business to repurpose existing Intranets.

Let’s say that a group of people want to take what’s already there, but tweak it, combine it, and maybe expose it as a mobile application. With our tool, they can now do that in a self-service way, and then, of course, they can share that. What’s important is that they published this mini-mashup into their WebSphere portal and shared it with other people.

Some of them might just be for individual use. One important thing about a mashup is that an individual often creates it. Then it either stops there, because only that individual needs it – or it can also grow into company-wide use and eventually be taken over by central IT, as a great new way to improve performance in the entire company. So that shows one of the benefits.

Other examples have a lot to do with external data -- for example, in pricing comparisons. Let’s say I'm an online retailer and suddenly Amazon enters the market and starts taking a lot of market share, and I really don’t understand why. You can use our product to go out and harvest, let’s say, all the data from digital cameras from Amazon and from your own website.

You can quickly find out that whenever I have the lowest price, my product is out of stock -- and whenever I have a price that's too high, I don’t sell anything. Being able to constantly monitor that and optimize my prices is another example.

Another very interesting piece of information you can get is vendor pricing. You can know your own profit margin. Maybe it’s very low on Nikon cameras. You see that eBay is offering the Nikon cameras below even your cost as the vendor. You know for sure that buyers are getting a better deal with Nikon than you can offer. I call this using data to create intelligence and improve your business.

Gardner: All this real-time, updated content and data on the Web can be brought into many aspects of what enterprises do -- business processes, purchasing, evaluation, and research.

I suppose a small amount of effort from a mashup could end up saving a significant amount of money, because you’re bringing real-time information to those people making decisions.

How about you on your side, Rod? Any examples of how these two worlds -- the peanut butter and chocolate, if you will -- come together for a little better snack?

Smith: I’ll give you a good one. It’s an interesting one we did as a technology preview with Reuters and AccuWeather. Think about this again from the business perspective, where two business folks met at a conference and chit-chatted a bit.

AccuWeather was talking about how they offer different types of services, and the Reuters CTO said, "You know, we have this commodity-shipping dashboard, and folks can watch the cargo go from one place to another. It’s odd that we don’t have any weather information in there.” And the question came up very quickly: "I wonder how hard it would be to mash in some weather information."

We took one of their folks, one of mine, and the person from AccuWeather. They sat down over about three or four hours, figured out the scenario that Reuters was interested in and where the data came from, and they put it together. It took them about two weeks, but altogether 17 hours -- and that’s over a beer.

So it was chocolate and nuts and beer. I was in pretty good shape at that point. The interesting thing came after that. When we showed it to Reuters, they were very thrilled with the idea that you have that re-mixibility of content. They said that weather probably would be interesting, but piracy is a lot more interesting. "And, by the way" -- and this is from the line of business person -- "I know where to get that information."

Gardner: Now when you say "piracy," you mean the high seas and the Jolly Roger flying up on the mast -- that kind of thing?

Smith: That’s it. I didn’t even know it existed anymore. In 2006, there were 6,000 piracy events.

Gardner: Hijackings at sea?

Smith: Yes.

Gardner: Wow!

Smith: I had no idea. It turned out that the information was a syndication feed. So we pulled it in and could put it on a map, so you could look at the different events.

It took about two hours, but that’s that kind of dynamic now. The line-of-business person says, "Boy, if that only took you that much time, then I have a lot of ideas, which I’ve really not talked about before. I always knew that if I mentioned one more feature or function, IT would tell me, it takes six more months to do."

We've seen a huge flip now. Work is commensurate with some results that come quickly. Now we will see more collaboration coming from IT on information and partnerships.

Gardner: This networking-collaboration or social interaction is really what’s crafting the new level of requirements. Instead of getting in line behind 18 six-month projects, 12 to 20 hours can be devoted by people who are perhaps on the periphery of IT.

They're still under the auspices of what’s condoned under IT and make these mashups happen, so that it’s users close to the issues, close to where the creativity can begin that create a requirement, and then binds these two worlds together.

Smith: That’s correct, and what is interesting about it is, if you think about what I just described -- where we mashed in some data with AccuWeather -- if that had been an old SOA project of nine or 18 months, that would have been a significant investment for us, and would have been hard to justify.

Now, if that takes a couple of weeks and hours to do -- even if it fails or doesn’t hit the right spot -- it was a great tool for learning what the other requirements were, and other things that we try as a business.

That’s what a lot of this Web 2.0 and mashups are about -- new avenues for communication, where you can be engaged and you can look at information and how you can put things together. And it has the right costs associated with it -- inexpensive.

If I were going to sum up a lot of Web 2.0 and mashups, the magnitude of drop in “customization cost” is phenomenal.

Gardner: And that spells high return on value, right?

Smith: That’s right.

Gardner: How do you see this panning out in the future? Let’s look in our crystal ball. How do you see this ability of taking intelligence, as you call it, around the content, and then the line-of-business people coming in and making decisions about requirements, and how they want to tune or see the freshness of the content?

What’s going to happen in two or three years, now that we are bringing these things together?

Andreasen: There will be a lot more of what Rod just described. What Rod just mentioned is an early move, and a lot of companies aren't even thinking along these lines yet. Over the next one or two years, more people will realize the opportunity and the possibility here, and start doing it more. Eventually, it’s going to explode.

People will realize that getting the right data and the right content at the right time, and using that to create more intelligence is one thing. The other thing they’ll realize is that by networking with peers and colleagues, they'll get ideas and references to new data. All of these aspects -- the social aspects, the data aspect and the mashup aspect -- will be much more realized. I think it’s going to explode in usage.

Gardner: Any last thoughts, Rod, from where you see these things going?

Smith: Well, as we see in other technologies moving through from an SOA perspective, this is a great deal about cultural change within companies, and the technology barriers are coming down dramatically.

You don’t have to be a Java expert or a C# expert. I'm scary enough to be able to put together or find solutions for my own needs. It’s creating a way that line-of-business people are empowered and they can see business results quickly.

That also helps IT, because if the line of business is happy, then IT can justify the necessary middleware. That’s a fundamental shift. It's no longer an IT world, where they can promise a solution to the line of business 12 to 18 months down the road.

It’s much more of, "Show me something quickly. When I’ve got the results in my hand -- the dashboard -- then you can explain what I need to do for IT investments and other things."

It’s more collaboration at that point, and makes a lot of sense on governance, security, and other things. I can see the value of my app, and I can actually start using that to bring value to my company.

Gardner: I suppose another important aspect culturally is that part of SOA’s value is around reuse. These mashups and using this content in association with other different activities, in a sense promotes the notion of reuse.

You're thinking about, "How can I reuse this mashup? How can I extend this content, either off the Web or internally, into new activities?" That, in a sense, greases the skids toward more SOA, which I think is probably where IT is going to be heading anyway.

Smith: Well, what’s fun about this, and I think Stefan will agree, is that when I go to a customer, I don’t take PowerPoint charts anymore. I look on their website and I see if they have some syndication feeds or some REST interfaces or something.

Then I look around and I see if I can create a mashup of their material with other material that hadn’t been built with before. That’s compelling.

People look and they start to get excited because, as you just said, they see business patterns in that. "If you could do that, could you grab this other information from so-and-so?"

It’s almost like a jam session at that point, where people come up with ideas. That’s where we will see more of these examples. Actually, a lot of our stuff is on YouTube, where we had a retail store that wanted to see their stores on Google Maps and then see the weather, because weather is an important factor in terms of their businesses.

In fact, it’s one of the most important factors. What we didn’t realize is that very simple pattern -- from a technology standpoint it didn’t take much -- held up over and over again. If it wasn’t a store, it was banking location. If it wasn’t banking locations, it was ships. There were combinations in here that you could talk to your businessperson about.

Then you could say to the technologist or a developer, "What do I have to do to help them achieve that?" They don’t have to learn XML, Web objects, or anything else, because you have these SOA interfaces. It helps IT expand that whole nature of SOA into their enterprise.

Andreasen: One thing that's going to happen is that line-of-business people are getting a lot of great ideas. If I am working with business problems, I constantly get ideas about how to solve things. Usually, I just brush it away and say, "Well, it will be cool to have this, but it’s impossible."

They just don’t understand that the time from idea to implementation is dramatically going to go down. When they start realizing this, there is hidden potential out on the edge of the business that will now be cut loose and create a lot of value. It’s going to be extremely interesting to see.

Smith: One of the insights we have from customers is that mashups and this type of technology help them to visualize their SOA investments. You can’t see middleware. Your IT shop tells you what’s good, they tell you they get flexibility, but they want to be shown results -- and mashups help do that.

The second part is people say it completes the "last mile" for SOA. It starts to make a lot of sense for your IT shop to be able to show how the middleware can be used in ways it wasn’t necessarily planned for.

The big comment we hear is, "I want my content to be mashable or re-mixable." We figured out that it’s very much a SOA value. They want things to be used in ways they weren't planned for originally. Show me that aggressive new business opportunity, and you make me a very happy person.

Andreasen: Probably one thing we will see in companies is some resistance from the technologists, from central IT, because they are afraid they will lose control. They are afraid of the security issues etc., but it will probably be like what we've seen with company wikis.

They're coming in the back door in line of business and eventually the companies buy the company-wide wiki. I think we'll see the same thing with mashups. It will be starting out in line of business, and eventually the whole company understands, "Well, we have to have infrastructure that solves this problem in a controlled way."

Some companies have very strict policy today. They don’t even allow their line-of-business pros to write macros in Excel. Those companies are probably the ones that will be the last ones discovering the huge potential in mashups.

I really hope they also start opening their eyes that there are other roles for IT, rather than just the big, central system that run your business.

Gardner: Well, great -- thanks very much for your insights. This has really helped me understand better how these things relate and really what the payoff is. It sounds compelling from the examples that you provided.

To help us understand how enterprises are using Web applications, mashups, and lightweight data presentation, we’ve been chatting today with Rod Smith, Vice President of Internet Emerging Technologies at IBM. I really appreciate your time, Rod.

Smith: Thank you.

Gardner: And Stefan Andreasen, the Founder and CTO of Kapow Technologies. Thanks for joining, Stefan.

Andreasen: It’s been a pleasure, Dana.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions, and you've been listening to a BriefingsDirect. Thanks for listening and come back next time.

Listen to the podcast here. Sponsor: Kapow Technologies.

Transcript of BriefingsDirect podcast on data mashups with IBM and Kapow. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

Holiday Peak Season Hits for Retailers Alibris and QVC -- A Logistics and Shipping Carol

Transcript of BriefingsDirect podcast on peak season shipping efficiencies and UPS retail solutions with Alibris and QVC.

Listen to the podcast here. Sponsor: UPS.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions and you're listening to BriefingsDirect.

Today, a sponsored podcast discussion about the peak holiday season for retail shopping -- online and via television -- and the impact that this large bump in the road has logistically and technically for some major retailers.

We’re going to discuss how Alibris, an online media and bookseller, as well as QVC, a global multimedia shopping network, handles this peak demand issue. The peak is culminating for such shippers as UPS this week, right around Dec. 19, 2007.

We’re going to talk about how the end-user in this era of higher expectations is now accustomed to making a phone call or going online to tap in a few keystrokes, and then -- like Santa himself -- having a package show up within a day or two. It's instant gratification, if you will, from the logistics point-of-view.

Helping us understand how this modern miracle can be accomplished at such high scale and with such a huge amount of additional capacity required during the November and December shopping period, we’re joined by two guests. We’re going to be talking with Mark Nason, vice president of operations at Alibris, and also Andy Quay, vice president of outbound transportation at QVC. I want to welcome you both to the show.

Mark Nason: Thank you, Dana.

Gardner: Tell us a little bit about what’s different now for Alibris, given the peak season demands, over just a few years ago. Have the expectations of the end-user really evolved, and how do you maintain that sort of instant gratification despite the level of complexity required?

Nason: What we strive for is a consistent customer experience. Through the online order process, shoppers have come to expect a routine that is reliable, accurate, timely, and customer-centric. For us to do that internally it means that we prepare for this season throughout the year. The same challenges that we have are just intensified during this holiday time-period.

Gardner: For those who might not be familiar, tell us a little about Alibris. You sell books, used books, out-of-print books, rare media and other media -- and not just directly, but through an online network of independent booksellers and retailers. Tell us more about how that works.

Nason: Alibris has books you thought you would never find. These are books, music, movies, things in the secondary market with much more variety, and that aren’t necessarily found in your local new bookseller or local media store.

We aggregate -- through the use of technology -- the selection of thousands of sellers worldwide. That allows sellers to list things and standardize what they have in their store through the use of a central catalogue, and allows customers to find what they're looking for when it comes to a book or title on some subject that isn’t readily available through their local new books store or media seller.

Gardner: Now, this is a very substantial undertaking. We're talking about something on the order of 70 million books from a network of some 10,000 booksellers in 65 or more countries. Is that right?

Nason: Roughly, that’s correct. Going in and out of the network at any given time, we've got thousands of sellers with literally millions of book and other media titles. These need to be updated, not only when they are sold or added, but also when they are priced. Prices are constantly changing. It’s a very dynamic market.

Gardner: What is the difference in terms of the volume that you manage from your slowest time of the year compared to this peak holiday period, from mid-November through December?

Nason: It’s roughly 100 percent.

Gardner: Wow!

Nason: In this industry there are actually two peak time periods. We experience this during the back-to-school season that occurs both in January and the latter-half of August and into September.

Gardner: So at the end of the calendar year you deal with the holidays, but also for those college students who are entering into their second semester?

Nason: Exactly. Our peak season associated with the holidays in December extends well into January and even the first week of February.

Gardner: Given this network and the scale and volume and the number of different players, how do you manage a consistent response to your customers, even with a 100 percent increase at the peak season?

Nason: Well, you hit on the term we use a lot -- and that is "managing" the complexity of the arrangement. We have to be sure there is bandwidth available. It’s not just staffing and workstations per se. The technology behind it has to handle the workload on the website, and through to our service partners, which we call our B2B partners. Their volume increases as well.

So all the file sizes, if you will, during the transfer processes are larger, and there is just more for everybody to do. That bandwidth has to be available, and it has to be fully functional at the smaller size, in order for it to function in its larger form.

Gardner: I assume this isn’t something you can do entirely on your own, that you depend on partners, some of those B2B folks you mentioned. Tell us a little bit about some of the major ones, and how they help you ramp up.

Nason: In the area of fulfillment, we rely heavily on our third-party logistics partners, which include carriers. At our distribution centers, typically we lease space, equipment, and the labor required to keep up with the volume.

Then with our B2B partners -- those are the folks that buy from us on a wholesale or distribution basis -- we work out with them ahead of time what their volume estimates might be and what their demands on us would be. Then we work on scheduling when those files might come through, so we can be proactive in fulfilling those orders.

Gardner: When it comes to the actual delivery of the package, tell us how that works and how you manage that complexity and/or scale.

Nason: Well, we have a benefit in that we are in locations that have scalable capacity available from the carriers. That includes lift capacity at the airport, trucking capacity for the highway, and, of course, railheads. These are all issues we are sensitive to, when it comes to informing our carriers and other suppliers that we rely on, by giving them estimates of what we expect our volume to be. It gives them the lead time they need to have capacity there for us.

Gardner: I suppose communication is essential. Is there a higher level of integration handoff between your systems and their systems? Is this entering a more automated level?

Nason: It is, year-round. For peak season it doesn’t necessarily change in that form. The process remains. However, we may have multiple pick-ups scheduled throughout the day from our primary carriers, and/or we arrange special holiday calendar scheduling with those carriers for pick-up, perhaps on a Saturday, or twice on Mondays. If they are sensitive to weather or traffic delays, for example, we know the terminals they need to go through.

Gardner: How about returns? Is that something that you work with these carriers on as well? Or is that something you handle separately?

Nason: Returns are a fundamental part of our business. In fact, we do our best to give the customer the confidence of knowing that by purchasing in the secondary market, the transaction is indemnified, and returns are a definite part of our business on a day-to-day basis.

Gardner: What can we expect in the future? Obviously this volume continues, the expectations rise, and people are doing more types of things online. I suppose college students have been brought up with this, rather than it being something they have learned. It’s something that has always been there.

Do you see any prospects in the future for a higher level of technology need or collaboration need, how can we scale even further?

Nason: Constantly, the improvements in technology challenge the process, and managing the complexity is what you weigh against streamlining even further what we have available -- in particular, optimizing inter-modal transport. For example, with fuel costs skyrocketing, and the cost of everyone's time going up, through the use of technology we look for opportunities on back-haul lanes, or in getting partial loads filled before they move, without sacrificing the service interval.

These are the kinds of things that technology allows when it's managed properly. Of course, another layer of technology has to be considered from the complexity standpoint before you can be successful with it.

Gardner: Is there anything in the future you would like to see from such carriers as UPS, as they try to become your top partners on all of this?

Nason: Integration is the key, and by that I mean the features of service that they provide. It’s not simply transportation, it’s the trackability, it’s scaling; both on the volume side, but also in allowing us to give the customer information about the order, when it will be there, or any exceptions. They're an extension of Alibris in terms of what the customer sees for the end-to-end transaction.

Gardner: Fine, thanks. Now we’re going to talk with Andy Quay, the vice president of outbound transportation at QVC.

QVC has been having a very busy holiday peak season this year. And QVC, of course, has had an illustrious long-term play in pioneering, both retail through television and cable, as well as online.

Welcome Andy, and tell us a little bit about QVC and your story. How long you have been there?

Andy Quay: Well, I am celebrating my 21st anniversary this December. So I can say I have been through every peak season.

Although peak season 20 some years ago was nothing compared to what we are dealing with now. This has been an evolutionary process as our business has grown and become accepted by consumers across the country. More recently we’ve been able to develop with our website as well, which really augments our live television shows.

Gardner: Give us a sense of the numbers here. After 21 years this is quite a different ball game than when you started. What sort of volumes and what sort of records, if any, are we dealing with this year?

Quay: Well, I can tell you that in our first year in business, in December, 1986 -- and I still have the actual report, believe it or not -- we shipped 14,600 some-odd packages. We are currently shipping probably 350,000 to 450,000 packages a day at this point.

We've come a long way. We actually set a record this year by taking more than 870,000 orders in a 24-hour period on Nov. 11. This led to our typical busy season through the Thanksgiving holiday to the December Christmas season. We'll be shipping right up to Friday, Dec. 21 for delivery on Christmas.

Gardner: At QVC you sell a tremendous diversity of goods. Many of them you procure and deal with the supply chain yourselves, therefore cutting costs and offering quicker turnaround processing.

Tell us a little about the technology that goes into that, and perhaps also a little bit about what the expectations are now. Since people are used to clicking a button on their keyboard or making a quick phone call and then ... wow, a day or two later, the package arrives. Their expectations are pretty high.

Quay: That’s an excellent point. We’ve been seeing customer expectations get higher every year. More people are becoming familiar with this form of ordering, whether through the web or over the telephone.

I’ll also touch on the technology very briefly. We use an automated ordering system with voice response units that enable my wife, for example, to place an order in about 35 seconds. So that enables us to handle high volumes of orders. Using that technology has allowed us to take some 870,000 orders in a day.

The planning for this allows the supply chain to be very quick. We are like television broadcasts. We literally are scripting the show 24-hours in advance. So we can be very opportunistic. If we have a hot product, we can get it on the air very quickly and not have to worry about necessarily supplying 300 brick-and-mortar stores. Our turnaround time can be blindingly quick, depending upon how fast we can get the inventory into one of our distribution centers.

We currently have five distribution centers, and they are all along the East Coast of the U.S., and they are predominantly commodity driven. For example, we have specific commodities such as jewelry in one facility, and we have apparel and accessories as categories of goods in another facility. That lends itself to a challenge when people are ordering multiple items across commodities. We end up having to ship them separately. That’s a dilemma we have been struggling with as customers do more multi-category orders.

As I mentioned, the scripting of the SKUs for the broadcast is typically 24 hours prior, with the exception of Today's Special Value (TSV) show and other specific shows. We spend a great deal of time forecasting for the phone centers and the distribution carriers to ensure that we can take the orders in volume and ship them within 48 hours.

We are constantly focused on our cycle-time and in trying to turn those orders around and get them out the door as quickly as possible. To support this effort we probably have one of the largest "zone-jumping" operations in the country.

Gardner: And what does "zone-jumping" mean?

Quay: Zone jumping allows me to contract with truckload carriers to deliver our packages into the UPS network. We go to 14 different hubs across the country, in many cases using team drivers. This enables us to speed the delivery to the customer, and we’re constantly focused on the customer.

Gardner: And this must require quite a bit of integration, or at least interoperability in communications between your systems and UPS’s systems?

Quay: Absolutely, and we carefully plan leading up to the peak season we're in now. We literally begin planning this in June for what takes place during the holidays -- right up to Christmas Day.

We work very closely with UPS and their network planners, both ground and air, to ensure cost-efficient delivery to the customer. We actually sort packages for air shipments, during critical business periods, to optimize the UPS network.

Gardner: It really sounds like a just-in-time supply chain for retail.

Quay: It's as close as you can get it. As I sometimes say, it's "just-out-of-time"! We do certainly try for a quick turnaround.

Coming back to what you said earlier, as far as the competition goes it is getting more intense. The customer expectations are getting higher and higher. And, of course, we are trying to stay ahead of the curve.

Gardner: What's the difference between your peak season now and the more regular baseline of volume of business? How much increase do you have to deal with during this period, between late-November and mid- to late-December?

Quay: Well, it ramps up considerably. We can go from a 150,000 to 200,000 orders a day, to literally over 400,000 to 500,000 orders a day.

Gardner: So double, maybe triple, the volume?

Quay: Right. The other challenge I mentioned, the commodity-basis distribution that we operate on -- along with the volatility of our orders -- this all tends to focus on a single distribution center. We spend an inordinate amount of time trying to forecast volume, both for staffing and also planning with our carriers like UPS.

We want to know what buying is going to be shipping, at what distribution center, on what day. And that only compresses even more around the holiday period. We have specific cutoff times that the distribution center operations must hit in order to meet the customers' delivery date. We work very closely on when we dispatch trucks ... all of this leading up to our holiday cutoff sequence this week.

We try to maximize ground service versus the more expensive airfreight. I think we have done a very good job at penetrating UPS’s network to maximize ground delivery, all in an effort to keep the shipping and handling cost to the customers as low as possible.

Gardner: How about the future? Is this trend of that past 21 years sustainable? How far can we go?

Quay: I believe it is sustainable. Our web business is booming, with very high growth every year. And that really augments the television broadcast. We have, honestly, a fair amount of penetration, and we can still obtain more with our audiences.

Our cable broadcast is in 90 million-plus homes that actually receive our signal, but a relatively small portion actually purchase. So that’s my point. We have a long way to go to further penetrate and earn more customers. We have to get people to try us.

Gardner: And, of course, people are now also finding goods via Web search. For example, when they go to search for a piece of apparel, or a retail item, or some kind or a gift -- they might just go to, say, Google or Yahoo! or MSN, and type something in and end up on your web site. That gives you a whole new level of potential volume.

Quay: Well, it does, and we also make the website very well known. I am looking at our television show right now and we’ve have our www.qvc.com site advertised right on it. That provides an extended search capability. People are trying to do more shopping on the web, in addition to watching the television.

Gardner: We have synergies on the distribution side; we have synergies on the acquisition, and of using information and how to engage with partners. And so the technology is really in the middle of it all. And you also expect a tremendous amount of growth still to come.

Quay: Yes, absolutely. And it’s amazing, the different functions within QVC, the synergies that we work together internally. That goes from our merchandising to where we are sourcing product.

You mentioned supply chains, and the visibility of getting into the distribution center. Our merchants and programmers watch that like a hawk so they can script new items on the air. We have pre-scripted hours that we’re definitely looking to get certain products on.

The planning for the television broadcast is something that drives the back end of the supply chain. The coordination with our distribution centers -- as far as getting the operation forecast, staffed and fulfilled through shipping to our customers -- is outstanding.

Gardner: Well, it’s very impressive, given what you’ve done and all of these different plates that you need to keep spinning in the air -- while also keeping them coordinated. I really appreciate the daunting task, and that you have been able to reach this high level of efficiency.

Quay: Oh, we are not perfect yet. We are still working very hard to improve our service. It never slows down.

Gardner: Great. Thanks very much for your input. I have learned a bit more about this whole peak season, what really goes on behind the scenes at both QVC and Alibris. It seems like quite an accomplishment what you all are able to do at both organizations.

Nason: Well, thank you, Dana. Thanks for taking the time to hear about the Alibris story.

Gardner: Sure. This is Dana Gardner, principal analyst at Interarbor Solutions. We have been talking with Mark Nason, the vice president of operations at Alibris, about managing the peak season demand, and the logistics and technology required for a seamless customer experience.

We’ve also been joined by Andy Quay, vice president of outbound transportation, at the QVC shopping network.

Thanks to our listeners for joining on this BriefingsDirect sponsored podcast. Come back and listen again next time.

Listen to the podcast here. Sponsor: UPS.

Transcript of BriefingsDirect podcast on peak season shipping efficiencies and UPS retail solutions. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.

Wind River's John Bruggeman on Google Android and the Advent of Mobile Internet Devices

Edited transcript of BriefingsDirect[TM] podcast with John Bruggeman of Wind River Systems on the Google Android platform and the Open Handset Alliance, recorded Nov. 12, 2007.

Listen to the podcast.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Today, a discussion about a new platform for mobile development and deployment, as well as a large partnership endeavor. We’re going to be discussing the Android platform, proposed by Google, as well as the Open Handset Alliance (OHA).

To help us sort through some of the ins and outs of this and the implications for developers, ISVs, mobile carriers, and just folks like you and me, we have John Bruggeman, chief marketing officer of Wind River Systems. [Disclosure: Wind River has been a sponsor of BriefingsDirect podcasts.]

Welcome to the show, John.

John Bruggeman: Thanks, Dana. I'm thrilled to be here.

Gardner: This whole idea of an open-source stack above the operating system (and perhaps some of the platform, too) isn’t necessarily new, but it does seem to be something that’s needed in the mobile market.

We've had fragmentation and a lot of complexity in choosing among silicon, platform, test, and development environments, as well as carriers. Is this Android approach a good idea, and am I right in saying that it is not really new?

Bruggeman: I want to give a little background, because I don’t know how much of the audience will be totally familiar with the recent history in the mobile handset space. The high-end of this market, where there are a lot of both business-focused applications as well as traditional home- or consumer-based applications, has predominantly been the space of Symbian and Microsoft, and both of those are proprietary platforms.

As such, you get all the goodness of a proprietary platform, things like control and predictability. The down side of a proprietary platform includes those things that might be most compelling to drive that marketplace forward -- and those would be innovation and cost.

Proprietary platforms are limited by the number of developers who can get deep access that allows them to understand them and drive innovation. As far as costs, proprietary tends to lock in and drive up the price.

Open source delivers the promise to tackle both of those obstacles to the growth of mobile phone-based applications and offers the promise to drive that growth from the high-end phones further down into the mid- and low-end part of the market.

The concept of wanting an open source-based mobile phone software platform has been talked about over the past couple of years, and many have tried to offer that. This particular one seems really interesting in that they might be the most likely to consolidate the space today.

Gardner: Now, we’re making this recording, John, on Nov. 12, 2007, and today, Google and the others involved released the software development kit (SDK) for Android. If you've had a chance to look at it, we might be able to hit on the news of what it means. It seems to include mobile, rich media, and browser. It seems fairly complete from what I've been able to see.

Bruggeman: I've had the opportunity to look at this harder than most. It is a very rich and complete toolkit for a developer to immediately start creating applications on the Android platform.

Gardner: Is this close to the reality of write once and then run in many or most places, when it comes to the mobile environment -- or is that a little bit of "pie in the sky" still?

Bruggeman: I think it’s a tiny bit premature, Dana, because this will be a write once and run many different phone sets that have adopted the Android platform. But, the other big consortia is one called LiMo, and at the outset, the SDK won’t work on the LiMo platform. The promise in the industry is that will happen over time. [UPDATE: LiMo partners with Wind River.]

Gardner: John, we spoke many times about the history of computing and how things seem to repeat themselves in terms of trends and paradigms -- volume development, developer decisions, and then platform, content, data, applications and services -- all coming together.

We’ve seen this happen a few times on the PC. We’ve seen it on the server, in some respects. Do you think that we have a fairly good shot at creating that, and succeeding where Symbian and Microsoft did not?

Bruggeman: I do, and it will for reasons that might surprise you. From a technological point of view, this was an incremental move forward for the marketplace. There is a little bit better tooling and a nice rich, tested platform, but that’s not new.

What’s new is the business models that open up, and the new opportunities. That’s going to fundamentally change the underlying fabric of the mobile phone space and it’s going to challenge the traditional operators' or carriers' positions in the market. It’s going to force them, as the supply chain, to address this.

The most fascinating part of this announcement to me was which carriers embraced and were initial members of the OHA. Carriers potentially are going to have to embrace completely new revenue and service models in order to survive or prosper.

Gardner: Let’s drill down on that a little bit. The mobile operators that did sign up are China Mobile, KDDI, NTT DoCoMo, Sprint Nextel, T-Mobile, Telecom Italia, and Telefonica, all companies with a significant presence and/or origins outside the North American market. What does that tell us?

Bruggeman: A couple of things. You have to look at it regionally. For example, Japan is really interesting, because roughly 90 percent of the market is shared by NTT DoCoMo and KDDI. This move really made a major push into Japan.

China Mobile has the potential for hundreds of millions of users or customers. In EMEA, it’s little bit more interesting. T-Mobile is one of three pan-European carriers and Vodafone is the biggest there so this was a move potentially for T-Mobile to make a strategic market strike inside of EMEA. The others you mentioned are all regional or for a particular country.

This is a chance for somebody like Telefonica to position themselves against a pan-European carrier. The absence of North American carriers is pretty interesting.

Gardner: So, Verizon Wireless and AT&T, the big gorillas in this market, are not yet involved, but to me this says something about how the U.S. has evolved through regulation, laws, and policies. Also, the U.S. found the internet through dial-up, and the rest of the world found the Internet through mobile.

Mobile became the predominant internet connectivity method, at least for those across the world who got used to it there first. Therefore, the mobile carriers are like an internet provider, rather than a mobile-phone service provider. Does that make a difference in all this?

Bruggeman: It makes a huge difference, because, if you think about it, the traditional plays of Vodafone or Verizon and AT&T are true, or pure, carrier plays. A Google play is a natural for somebody who understands and thinks of themselves as a new type of ISP.

Clearly, the great promise of the Google phone platform is aimed more at an ISP mentality, where they make money on how we provision or enable new services or applications.

Gardner: So the business that you alluded to a moment ago is really more about an internet business model?

Bruggeman: Correct.

Gardner: There might be revenue that’s derived through connectivity, but increasingly we're seeing the big money around the monetization of advertising attached to search, advertising attached to specific content, and advertising attached increasingly to mobile location and presence.

Bruggeman: Correct.

Gardner: How will OHA and Android kick-start this new economic impetus for mobile services and applications and, in a sense, force the U.S. and the North American market into what the rest of the world does with mobile?

Bruggeman: I'll back you up just a bit. Clearly, the traditional carrier is a more connection-based business model. You pay for connection. This model will clearly evolve to be some sort of internet model, which today is typically an ad revenue-share model. That’s how I see OHA will play out over time. We’re going to have to adopt or embrace an ad revenue-share model.

Gardner: I think Google would be happy to help you do that.

Bruggeman: You bet! Because they’ve mastered that. What’s really interesting is a mobile phone has a very traditional supply chain, and it’s a deep supply chain that goes through multiple layers.

On the PC, that’s not necessarily true. In a traditional internet-based model, the supply chain isn't as deep. It’s easier for the supply chain to adopt or embrace that, but on this mobile phone what’s yet to play out is how the supply chain is going to get paid, especially because it’s Linux or open-source based, so you’re fighting a lot of issues here.

How do people make money in open source? When you're in open source, even if you figure out how to make money, Google has come in and turned it upside down again. It’s not only that you need to figure out how to make money in open source, but you need to do it under this completely new model. Any inefficiency in the supply chain better strip itself out, otherwise the economics aren’t going to work.

Gardner: Okay, so we’re going to have this period over the next year, or two, or three, where some of these issues about who gets paid, volume adoption, and motivation for the developers come into some kind of sync.

There will be different approaches in different markets, but it almost sounds, John, as if you're confident that the technology issues have been addressed, and that this is now really much more of a partnership, business ecology, monetization, and then, ultimately, a cultural behavioral adoption thing.

Bruggeman: It would be naïve to say the technology issues are completely solved, but I think a lot of the hard problems are understood, and there is a path to solution. Those will play out over the next 12 months. I see a clear road to success on the technology side. It will be easier for the technologists to overcome the obstacles than it will be for the business people to overcome the new models in an open source world.

Gardner: It seems pretty straightforward how the operators would make money. They have the opportunity to engage customers with the connection service, charge on some sort of the monthly basis, perhaps have some additional services they could charge more for to increase their share of wallet. They could also have a sharing revenue model with Google or others around advertising and monetization in terms of linking up or associating advertising revenues with content or services.

It also seems fairly straightforward about how the folks that are creating the services or applications would play in that. They would have some association with the carrier, perhaps, or just go through a mobile-browser approach, or, being open, monetize on their own, and also be involved with Google. So the application-services carrier side seems pretty straightforward.

What’s less clear to me is how the software, stack, tool, test, and platform people make a go of it. How would a company like Wind River, for example, thrive with this new monetization and in the Google influence?

Bruggeman: I want to answer that question, but I don’t want to slide past a couple of your base assumptions, which I think are not as clear when you un-peel the onion a couple of layers.

At the 50,000-foot level, I agree with everything you said about the carriers. I don’t think that the extreme is that improbable, that the actual connection price would go down to zero. I could have a mobile phone and pay a $0 monthly fee.

Gardner: That would include the hardware and the service for connectivity?

Bruggeman: Potentially.

Gardner: Potentially, voice and internet?

Bruggeman: Yes.

Gardner: Okay, you got my attention.

Bruggeman: The ad revenue is where the real dollars are here, as well as all the location-based value that you can do. This is the true delivery on the promise of the one-to-one marketer's dream. You’ve got your phone. I know exactly where you are.

Gardner: I have an individual number.

Bruggeman: An IP address.

Gardner: Right.

Bruggeman: And, I know physically where that IP address is. You are around the corner from Starbucks. Now, is Starbucks going to be willing to pay a premium to get you to drive or walk around the corner? Or, I know you're sitting in the airport terminal. All the possibilities become very powerful concepts.

The challenge is that the traditional carriers have built up a 100-year-old business model that says I charge per connection. Who is their sales force? Who is going to go sell, who do they sell to, how do they bill for that, and how do they account for the click-throughs? Companies like Google are totally familiar with this and know how to monetize.

This is going to be brand new for the carriers to try to solve. So in concept it's pretty easy. But in execution we've got to teach an old dog all kinds of new tricks. It isn’t as obvious once you start to think about it for a minute or two. It becomes pretty complicated.

Gardner: Yes, it’s complicated, because, if I am a carrier, and I am a publicly traded company -- and this is no doubt the case -- I have to convince my investors that I am going to make a transition from the current system to your vision, without going broke for some significant period of time.

Bruggeman: You bet, and there’s going to be a lot of pressure to drive down that connectivity price really quickly. I say that because I think you can’t ignore the overtones of Google being willing to buy their own bandwidth and become their own carrier. That threat is out there. As a carrier, I've either got to embrace or fight -- and embrace seems most logical to me.

Gardner: There are other options for connectivity -- Clearwire, WiMAX, and so forth.

Bruggeman: All types. The technology is becoming good enough that those are very viable alternatives. Now, I’ll go into the supply chain, because that’s where it's really interesting. There are different types of people inside the supply chain. If I write applications, and I want to be paid for my application or my service, that seems pretty straightforward.

The ones that are going to be harder are those people that make up the platform, the Android platform itself. How does a middleware provider get paid, or how does a Linux provider like Wind River get paid? Those people provide components or pieces in Android which is free and available now through the SDK.

Gardner: We are talking about developers, ISVs, service providers?

Bruggeman: Any of those types of people who are actually enabling or are part of the platform, as opposed to an end application developer. That’s an interesting one. Clearly, over the last week Wall Street has been confused. How are those companies going to make money? I'd like to make the banker’s job a little bit easier today, if I could.

Bruggeman: The whole challenge of open source is how does anybody make money? Wind River is clearly the fastest-growing Linux provider. In the device world, it's very public now, we are at over a $50 million annual run rate in the Linux business. So somehow we’ve cracked the code. And here is what we have learned, and this plays out in spades in the mobile handset space.

What the mobile handset manufacturers, those people that make the phones want is to have their cake and eat it, too. They want the promise of open source -- fast innovation, low bill-of-material (BOM) cost, and a broad ecosystem around it.

Gardner: Just to pause you there, John. The folks that are in that subset, that are in the OHA, include HTC, LG, Motorola and Samsung.

Bruggeman: Those are the four originals. You can think of any of those four companies. They want that promise -- innovation, lower BOM cost, and the vast ecosystem. But, at the end of the day, they have to put out a commercial product.

So they need things like high quality, low risk, and fast time to market. It turns out that the promise of open source plus the promise of commercial are at odds with each other. Every time you have huge innovation, it typically challenges quality.

Any time you have lower BOM cost, you’ve got to give somewhere, and that give is in the form of time, quality, etc. Those two promises are competing, and the people who prosper and thrive on the Android platform are going to be those companies that can squarely plant one foot in the open-source promise and the other foot firmly in the commercial side of the equation.

Gardner: Just as we’ve seen in enterprise servers, this commercial-open source tag team, if you will, is very popular.

Bruggeman: You've got it. Why are Red Hat and SUSE successful? Because they’ve figured out how to put their feet on both sides. Nobody prior to Wind River [in mobile] had really figured that out. They were either very open-source friendly or very commercial friendly, but no one had been able to straddle the transom, and that’s clearly the key to Wind River’s success.

Gardner: I remember that you guys, probably a little bit over two years ago, made the decision to steer that ship toward Linux.

Bruggeman: It was a good decision, and certainly we’ve found our way through that. I wouldn’t say it's easy, but that’s the key to success for us. Anybody else who’s going to participate successfully on the Android platform, such as mobile handset manufacturers, need to put out a product. It is their life blood.

They need basic things that you would expect from a commercial product. Those things are obvious once you think about it. But they also need the things like really great test suites for the software. They need documentation, training, support, maintenance and updates. They need roadmap protection, indemnities, and warranties -- and all the things that, when you buy a commercial product, you expect in spades.

Gardner: Even though the code is licensed open and free?

Bruggeman: You bet. That’s what makes it hard, because how do you provide those values on code that you may or may not have developed? That’s the mastery of the open-source world ... and marry that to the mastery of the commercial world.

Gardner: So a company like Wind River is going to be providing, on a commercial-open source basis, the platform, test environment, development environment, and middleware that would be underneath Android, but above the handset folks that we mentioned, the handset makers and the semiconductor makers?

Bruggeman: Well, certainly above the semiconductor makers. They are selling a chip, and they need to know that the platform that will sit on the chip brings out the differentiation in the chip. That’s their bread and butter.

Each silicon manufacturer has their own area of specialty that they use to compete and win silicon business. They need to have the confidence that the Linux that sits on top draws out that differentiation. That’s a very hard thing to do technically, and it’s in Wind River’s life blood.

Gardner: We're down to the 0s and 1s at this point, the binaries?

Bruggeman: And then the Android piece on top needs to know that the Linux is predictable, reliable, and stable, so that a developer ecosystem can emerge around it. That’s hard in open source.

Gardner: The way this works on the waterfall of monetization is that somehow -- either free or low-cost -- these handsets and applications find a way to the end users. The providers monetize, perhaps through an advertising model, or through Google.

The money trickles down to the handset makers through the relationship with the end user and through the developers, ISVs, and service providers, who then have to pick and choose the best technology on which to continue to provide the best applications and services. You're a player in that market and that’s how you monetize yourself.

Bruggeman: You got it.

Gardner: As a carrier, you probably have a more predictable future in the status quo and North America, at least. Why would they be interested in following the Google approach, because there’s going to be a period of uncertainty and disruption for them?

Bruggeman: Well, I definitely believe that there is going to be broad-based market adoption of this platform. If you're going to be a major member of the mobile-phone supply chain, you've got to address this platform.

Gardner: The system is broken?

Bruggeman: You bet, and it’s what drove Linux originally. The Linux problem was fragmentation, and we see this as being a rallying point to defragmenting the existing environment, and any time you defragment a market, if you can have a major market share on that defragmenting platform, that’s a great place to be.

Gardner: Because ultimately the pie grows, the volume adoption takes place, and more people are doing more things that are monetized through these devices. A bigger chunk of money can then be divvied up among the various players in the supply chain.

Bruggeman: That’s right!

Gardner: I like the idea, and I'm sure many consumers would like the idea of free or low-cost handsets and connectivity. I'm already used to seeing ads when I go to the ballpark, when I go online, when I drive my car down the highway. So we're living in ad-based world already. There's no big shift for me there.

Now, these devices, the converged mobile device in particular, something like an iPhone, strikes me as a stepping stone between a traditional PC, as we know it, and some of these mobile devices.

If I can get a lot of what I get through the PC free or low-cost through one of these mobile devices, the only real difference is the size of the monitor, keyboard, and mouse. Isn’t there an opportunity in two, three, or four years that I might say, “I don’t need that PC and all that complexity, cost and so forth. I might just use my mobile device for almost all of the things I do online?"

Bruggeman: PC manufacturers and those that are the traditional part of that supply chain are threatened by that every day now. You've hit it on the head. There’s an emerging market. Maybe the most important technology market to observe right now is the mobile Internet device (MID).

Many analysts are starting to pick up on it, and it could be viewed as the next generation of the mobile phone. But I think that’s underselling the real opportunity. If you look on the dashboard of your automobile, the back of your airplane seat, everywhere you go and everything you touch, it is a potential resting place for a MID with a 4x6 screen or a 3x5 screen, or all different kinds of form factors. That kind og use gives you the experience that is the eventual promise of the Android platform.

Gardner: That’s what gets me really excited about this.

Bruggeman: We all should start thinking about and talking about the MID market pretty quickly.

Gardner: The pie that we're defining isn’t really just mobile internet or voice, presence, and mobile commerce. It’s really the whole internet.

Bruggeman: You bet!

Gardner: Very interesting! What are the next steps? We have the Androis SDK out. We have the OHA, and I’ve seen interest by other companies in joining up with the OHA.

We'll have to watch and see what happens with some of the other carriers and some of the other platform providers. But while we wait and see, what is going to happen next, John, that starts this MID buzz saw that can radically change the world?

Bruggeman: The first thing is we need to get some Android-based phones out there. Some time next year, you're going to see the first phones and that’s when we're actually going to have to see the operators who offer those phones address all the business model issues that you and I've have been talking about today.

So the next big step is that it’s got to move from the talk about to the reality of "here are the phones," and now we're going to have to resolve all these issues that are out there. That's not years away -- that’s next year.

Gardner: Sure, it seems to me a slippery slope. Once you've gotten past a certain point, the acceleration picks up and sort of the flood gates are open and everything starts to really fall into place and take-off.

Bruggeman: You bet!

Gardner: Well, great. Thanks for joining us in better understanding Android, the OHA, some of these supply-chain issues and the complexities therein. It's something I've been looking at for a while, and I'm very excited and interested to see how Android is adopted.

Bruggeman: It was a fun conversation. Thanks a lot, Dana.

Gardner: My pleasure.

We've been talking with John Bruggeman, chief marketing officer at Wind River Systems. This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a BriefingsDirect podcast. Thanks and come back and join us next time.

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Transcript of BriefingsDirect podcast on the Android platform and the Open Handset Alliance. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.