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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

The Long Tail of iPhone Apps

The folks over at gigaom have written a nice analysis of the iPhone market. you can read that here. It would appear that the success metric for any platform these days is the length of the "app tail" and Apple is growing its tale much like the mythical Hindu monkey god Hanuman. Legend has it that the evil king Ravana set his tail on fire. He exacted his revenge by growing his tail winding it through the city of Lanka and burning it to the ground. In a sense, that is exactly what Apple is doing (minus the revenge bit). Apple took an approach that worked for it in the music buisiness and replicated it for the iPone. Why have they succeeded when others have (in relative terms) failed?

Think Different!

That tag line from the late 80s early 90s is very much alive in Cupertino. That drove their willingness to break the stranglehold of phone companies who for years took the walled garden approach to mobile applications. That undeniably marxist approach ultimately limited the market. The rationale was - everyone's doing it. Thats the point. That strategy ignored what consumers wanted. No different from the music business

Wow Everybody!

The use of technologies such as multi-touch and accelerometers made it compelling enough for at least one phone company to take notice. To their credit, AT&T smartly tore down their own walled garden (in a sense) and made the deal with Apple, gaining exclusivity in return. They got a device no one had seen before. Consumers got excited by the new capabilities, developers found a new creative outlet. An eco-system was born.

Stabilize the Universe

The creation of the iPhone was akin to the big bang. From it spun out a billion planets (apps) but the real work begins now. For life to be sustained, the universe needs to be stabilized. Microsoft knows a lot about this incidentally having very ably stabilized the desktop and server app universe over the past 3 decades. The mobile world is not forgiving enough to give Apple that kind of time, but stabilize it they must for this is the most profitable period of market exapnsion for them. As long as they keep coming out with good devices they will remain the center of the mobile app world.

Repeat until failure

At some point Apple will falter on one of its strategies. Its going to happen. Until then they will keep repeating this formula making just enough changes to fit the opportunity at hand.
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Skype Coming to BlackBerry in May



Could this indeed be a killer app? It could be. As a small business my mobile phone is my lifeline. Indeed at Techaisle we all rely on our mobile phone. for inter-office calls and for communicating with our remote teams, we use Skype. So the combination of the two would help tremendously.

It is intriguing to think about what this does to a unified communications strategy of companies like Microsoft and Cisco. There are some differences and a comprehensive UC solution offers much more. But the low end of the market - very small businesses may find the above solution just good enough.

what do you think?
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Cloud Computing Challenges the Channel

All leading IT companies - Microsoft, HP, Dell, IBM/Sun, Oracle, Salesforce.com and Amazon (yes, I would call then an IT company) are driving towards providing a variety of cloud based platform and application services. Complementing them are a whole host of new companies that are aggressively developing solutions for this space. No doubt over the next 5 years cloud based services will be the new arena of intense competition. A lot has been written about the pros and cons of the various services so I won't address them in this post. Very little though has been talked about the impact on the channel.
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Small Business Stimulus – Will it Work?

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On March 16th US President Barack Obama unveiled measures to revitalize the small business economy in the US. The package includes several measures that look like are the right steps to boost small businesses. The package lays out approximately $730 million in spending towards small business.


direct-spending1The spending largely tackles costs associated with lending with over half of the money going towards fee reductions and increased SBA guarantees for loans.


Nearly 20 million small businesses have received direct or indirect help from one or another of those SBA programs since 1953, as the agency has become the government's most cost-effective instrument for economic development.


In fact, SBA's current business loan portfolio of roughly 219,000 loans worth more than $45 billion makes it the largest single financial backer of U.S. businesses in the nation.


 


Small Business Loan History


Over the past 10 years, (FY 1991-2000), the SBA has helped almost 435,000 small businesses get more than $94.6 billion in loans, more than in the entire history of the agency before 1991. No other lender in this country – perhaps no other lender in the world – has been responsible for as much small business financing as the SBA has during that time. Last year alone, the SBA backed more than $12.3 billion in loans to small businesses. More than $1 billion was made available for disaster loans and more than $40 billion in federal contracts were secured by small businesses with SBA's help.


So channeling the funds through the SBA makes complete sense. Overall, about 65% of the $730M is going towards offsetting the costs of the program and only 35% is going towards a new loan program to alleviate SB debt. At first glance it does not look like much but to be fair other components of the larger recovery package will have direct and indirect impact on the small business market.


Secondary market key to recovery: The administration is also allocating $15 billion tonumber-of-loansamount help unfreeze the secondary credit markets. Often primary bank lenders will seek to sell the SBA loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners. Over the last 14 lending-lessmonths, it is this area of lending that has frozen leading to a decline in the number of loans made to small businesses (see chart right). The SBA has guaranteed approximately $20 billion in loans annually, but new lending this year is on track to fall below $10 billion. A 50% drop off in loan guarantees will clearly have a significant impact on the Small Business economy.


Note that the drop off does not largely affect new business creation. That is because most loans go towards existing businesses with somewhat of a track record to show to lenders. In this environment lenders will be even stricter in their evaluations of loan applicants so it is likely that the Small Businesses in most dire need of a loan may not receive funds. The program is likely to benefit large and small banks. The three banks shown below were the top three Small Business lenders in 2007.


 


Impact


Tax Incentives: The package doubles the amount small businesses can write off their taxes for new investments made in 2008, from $125,000 to $250,000. It also lifts the cap on businesses eligible for the deduction, expanding it to businesses making up to $800,000 (up from the current $500,000 limit). This is really good since it is likely to have an immediate impact. Additionally, Small Businesses earning up to $15 million will be allowed to claim losses for the past five years in the current tax year;




  •  Can reduce estimated tax payments to 90 percent of the previous year's filing.



  • Are allowed to take larger depreciation deductions within the first year of property purchases.



  • And will see 75 percent of capital gains excluded for those who invest in small businesses.


Government Grants: Another long ignored aspect that will clearly have a significant impact on small businesses is to stop the abuse of and clearly enforce current regulation that sets aside 23% of all federal contracts to be given to small businesses. Under the Bush administration rampant violations of this law took money away from Small Businesses. Enforcement will have an immediate and positive effect.


Small Business Healthcare: For many years, the cost and availability of health insurance has been a top small business concern. Aspects of insurance that drive small business concerns are premium increases and administrative costs. Advocacy research shows that:




  • Insurers of small health plans have higher administrative expenses than those that insure larger group plans



  • Employees at small firms are less likely to have coverage than the employees of larger entities.


These results are confirmed by the Kaiser Family Foundation, which also finds that firm size is an important indicator of whether a firm offers health insurance. This survey shows that about half of businesses with fewer than 10 workers offer health benefits to their employees. The ratio grows to about three-fourths for firms with 10–24 employees, to almost 90 percent for firms with 25–49 employees, and to 98 percent for firms with 200 employees or more. Two-thirds of workers in firms of all sizes take health insurance coverage if offered. So in terms of granting cost relief, healthcare costs need to be addressed. While this is not part of the program, one hopes that the overall healthcare strategy and policies will help Small Businesses in the long run.


Impact of the broader recovery program: It is difficult to assess the precise impact of the broader program given all its complexities (see chart) but there is no doubt that the broad investment being made in infrastructure and other areas will benefit Small Businesses.


IT Spending


 


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When the economy recovers, small businesses are the first to bounce back. Based on Techaisle’s recently completed surveys of small businesses it is expected that within the US market, the small business spending will grow by 3.4% in 2009 over 2008 which is two full percentage points higher than the expected growth rate by enterprises.


 


 When asked,“Which ONE of the following statements BEST describes the impact the current economic downturn has had on your business's performance? “, about 60% of small businesses mentioned that they have had some impact on their business.


 These small businesses also mentioned that once the economy improved and they had capital to purchase either through vendor financing of better cash flow including business improvement they would invest in servers, notebooks, business productivity software and upgrading their networks.


Entire Stimulus Plan Chart – Source: Flowing data


full-flow


 

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