Outsourcing innovation

Stephanie Overby of CIO magazine interviews Harvard Business School professors David Pisano and Willy Shih about IT innovation and outsourcing.

Gary Pisano, Harry E. Figgie, Jr. Professor Of Business Administration, Harvard Business School: Just look at what has happened in the mobile communications industry today. A lot of PC companies first gave up manufacturing, and then design. They became reliant on third party suppliers. Now we see what Apple has done with the iPad, and it seems to me there are an awful lot of PC manufacturers scrambling to find an "off- the-shelf" design to compete in the tablet computing space. The problem is, from my perspective, there is nothing unique about any of those designs. They have not competed well against the iPad.

Shih: One global head of IT of a large airline company once told me, "You can't outsource your thinking." I think that captures one of the essences of what we're saying. It's important to understand where your capabilities come from, and how you sustain them.

I think most C-level executives know and understand that this is happening. However, short term thinking and the drive for profits means that not much will change. Most CEOs and CFO only stick around long enough to see bonus paid out of the cost savings.

I used to work in a multimedia research and development lab. In the late 90's I switched to IT engineering.  Now it's IT service delivery management. What's next?

via (@mimmordino)

I don't need the iPad 3G

I just got off the phone from speaking with an AT& T customer service representative. We talked for almost 45 minutes about my current data plans on my iPhone 4 and my iPad. Currently, I have an unlimited plan on my iPad. When I first got my iPad, I exhausted the $15/month 250MB data plan in just one weekend. Ever since that time, I've maintained the $30/month unlimited data plan. I was concerned because I use my iPad more often and differently than I use my iPhone. I use my iPad mostly for reading news (RSS feeds and dedicated apps like the BBC ) and work — email and calendar. Occasionally, I'll watch a Netflix movie while sitting in bed. However, my iPhone is used mostly for communication, although not necessarily voice. I use several social media apps — Twitter, Foursquare, Instagram — and quite several photographies, choosing to instantly upload and share my images. I very much expected that my iPad data usage would be higher than my iPhone 4 data usage. It appears that it might be the other way around.

Just before the iPhone 4 was released AT& T changed the nature of their cellular data plans. The Unlimited plans were unavailable for new customers — existing customers got to keep it — but AT& T now offered a $15/month 250MB plan and a $25/month 2GB plan. When we got out iPhones, I signed my wife up for the 250MB plan, and I got the 2GB plan. I assumed that between Twitter, Foursquare check-ins, and photo uploads — I have several camera apps — that I would need the bigger plan. Analyzing our current usage over the last 9 months, it appears I was correct. My wife averages about 100MB/month, and I average about 500 MB/month. AT& T's provides excellent tools for analyzing iPhone data and voice usage. I am closer to maximizing my iPhone data plan than my wife, but neither one of us is going over.

My wife's iPhone 4 data usage
My iPhone 4 data usage

AT& T does not provide a tool for analyzing the iPad data usage. Perhaps that's on purpose or maybe just an oversight. In any case, I downloaded an app called My Data Usage Pro to analyze my iPad data use over time. I've been only using the app for a few weeks, so the data is not conclusive, but I believe that I am not fully utilizing the Unlimited plan as I assumed I would. Most of my data usage appears to be over Wi-Fi. I have Wi-Fi at work, at home, at cafés, around the Princeton University campus or via Comcast/Xfinity hotspots around town. In fact, from my desk at the office, I can pick up the Xfinity hotspot quite clearly. So far this month, I've used just over 500MB of Wi-Fi and less than 5MB via cellular 3G.

When Apple introduced the Verizon iPhone earlier this year, they also released an updated OS — for Verizon only at first then later for AT& T. iOS 4.3 added, among other things a Personal Hotspot feature. This feature enables the iPhone 4 to share the cellular data connection with your Mac, PC, iPad, or other Wi-Fi-capable devices. With this, the Personal Hotspot feature enabled, I would be able to share my cellular data connection with up to five devices at once. Three of those connections would be via Wi-Fi, the remainder are split between Bluetooth and USB.

After talking with the AT& T representative I've decided to drop the cellular data plan on my iPad and enable the Personal Hotspot feature on my iPhone 4. The plan cost $45/month and comes with an additional 2GB of data per month for a total of 4GB. The hotspot feature is not available with unlimited data plans. If you enable the Personal Hotspot feature, you'll have to give up your unlimited data plan on your iPhone. Based on my analysis of my data usage, I most likely won't notice. In any case, AT& T will warn me if I am about to go over my plan limit and I can purchase an additional 2GB for $25. Assuming that I don't go over my plan limit, canceling my iPad data plan and enabling the Personal Hotspot feature will change my total data plan cost from $55/month to $45/month, saving me $120/year.

Skype, not FaceTime

I've had an on-line debate with some of my tech savvy Mac colleagues about the iPad 2. I made the statement that I would not be upgrading to the iPad 2 because it did not have any compelling new features that I needed/wanted. My current iPad suits me just fine. I don't play games so a faster CPU and gyroscope do nothing for me. I don't do video chat now – I have an iMac and a MacBook and an iPhone 4 – and I argued that having the front facing camera wouldn't change that behaviour. The rear camera is for dorks who think walking around with a 10" camera is cool. I can use my iPhone or my small and lightweight Sony point-n-shoot.

I've done about two FaceTime calls from my iPhone.  One to show off to my friends while in a bar1 and the other at home to show the kids. It was cool to demo but useless – to me. However, I know of other people with the iPhone 4 who video chat regularly via Skype. They do it on their phones or from a computer equipped with video. To most people I talk to, video chat equal Skype.

Skype added 39 million registered users in the fourth quarter to end the year [2009] with a total of 560 million. Skype By the Numbers: It's Really Big: Tech News and Analysis

These are old numbers3 but I think it adds credence to my arguments that FaceTime by itself is not be a major selling feature of the iPad 2.  At the end of 2009, Skype has over 500 million users. FaceTime has potentially much less. Skype owns this market now and the service works over the 3G cellular network2.  FaceTime is limited to Apple products – Macs, iPhone 4, iPad 2 – and works only on Wi-Fi. The Apple advertising does not make any of these limitations clear. I've seen comments on blog post where the commenter is very excited to get an iPad 2 so that he/she can do FaceTime when out and around town. Or so that the kids can FaceTime with grandma from the iPad 2 to the PC. Some people are going to be in for a disappointment. At least until they figure out how to download and install Skype.

Apple is behind on their promise to open up the FaceTime protocol so that others can implement non-Apple specific solutions. FaceTime on Windows would do for iPhone 4/iPad 2 what iTunes on Windows did for iPods. Despite a possible drop in quality while on 3G, "untethering" FaceTime from Wi-Fi would make it much more useful. For me, there is no value to using FaceTime with my wife while at work or at my in-laws or while sitting in a public café.

Now, having said all that, I should say I believe that Apple will sell plenty of iPad 2 as well as iPads. The local Best Buy is discounting the original iPad by $100 making it a more compelling first time buy for those who don't need the new features. Or why not get one for the kids. As for the iPad 2, I know one person in the office who returned the iPad he purchased a few days before the announcement. He'll be using it to video Skype with his family in South Africa.