29 May
2007
Open Source about to explode Wireless Security Market
OpenSEA launches at InterOp
Most of the business press will miss this, but a big thing just happened. Wireless security via an open source industry initiative OpenSEA will quadruple the market growth of 802.1x wireless security by widening adoption of WEP technologies. Jon Oltsik even acknowledges parentage, which is unusual for an analyst. Its a perfect example of what I spoke of as strategic open source (see prior blog entry).
With 802.11 WLAN's everywhere, you'd think that businesses would've already mined out all the opportunities ... but its actually quite the opposite. Read more ...
A large number of wireless networks are totally wide open - even in industry. Or they are totally locked up, and sometimes new ones are added because no one can identify how to gain appropriate access by different groups of users. Worse yet, there are business initiatives afoot to tie specific businesses/products into wireless security, whereby either you're a secure customer of those products, or you're running by the aforementioned rules.
Every corporate or educational campus has this problem, of thousands of wireless connected users, with uneven security policies distributed across them. If you look at this as an opportunity to interact with those users, the point of an open source platform becomes clear - each institution/corporation can have crafted solutions that take into account the customers needs - not forcing awkward "built into the platform" solutions that mask or omit critical elements necessary for security policy.
Information security works best when it fits an institution "hand in glove". With appropriate incentives, instead being an obstacle, adopting security policies can be seen as a means by which users "self identify" and seek out verification resources, such that the burden of maintaining quality credentials shifts to the users, because they see the benefits accruing for them. The means by which you let users "pull" security instead of "push" through management can be a watershed opportunity that only open source can achieve.
Open source here erases the artificial product links, allowing a horizontal market for security products and services. It allows a broad degree of "customer choice", while allowing the best providers to bid on comprehensive client solutions with a standards-based architecture.
The security products/services markets could face exponential growth if this eliminates the frustrations of deployment of this "ground level", that all depend upon.
Internet Security Market takes the next step...
Interoperable Standards created by Open Source
Two years back Dan Lynch asked the panel of Internet Experts at Stanford's "Internet: Today and Tomorrow" about interoperable security standards. Last week at InterOp, the trade show he invented, OpenSEA was announced, taking 802.1x into that arena using open source as the active means to that end. It almost exactly matched what he asked for.
[Disclosure: Dan's a friend, and led the finance of one of my ventures. His son, Zack, was in today's SF Chron promoting NeuroInsights, and it's a great read on both of them.]
It occurs to me that people don't get the elements of how this all works together, so I'll break it down into details. Read more.
Lets take an accepted success - Internet Explorer and Firefox. IE overtook Netscape to dominate the browser client space a decade ago. Firefox, the reinvention of the bones of Netscape, is an open source rival that pushes innovation beyond IE in innovation (tabbed browsing, integrated spell checking, new standards integration, ...).
The key to the success of Firefox is the way it works leveraging a common product and development base with a component/services framework that pushes other products and partners. Meanwhile, even Microsoft finds it hard to catch up - they are late with poor quality new browser versions (IE7), they unfavorably compete with their own older versions (IE6 is *still* king, albeit an addled one), and Active-X, their component software play, is falling apart with security issues, stability, and standards challenges galore. In essence, the tiny little flyspeck of Firefox runs circles around the Goliath Microsoft perpetually.
This is soon to become the rule and no longer the exception. And no, it's not just Microsoft as the target, but any large company with a non-competitive product offering, trying to ride a platform sell. This is what the OpenSEA announcement is all about.
So the formula is this - your open source client module/application/library displaces the platform one, and forms a new cross platform "platform", and in lieu of plug-ins, has a external service architecture over the network (or web) that it leverages for advantages the embedded one can't provide. Since open source means that best of breed features constantly, cheaply, and reliably show up ahead of the stolid embedded one, competitive position is easily maintained given a broad base. Revenue from the external service architecture partners moves the client further down the field.
There's a lot more about this I'm not saying, but you get the drift on how the basics work. In addition, proprietary competitors, platform owners, and support providers can attempt to damage or severely redirect these opportunities, but they would do so at the risk of killing product sales opportunities themselves, so there's no obvious "knockout strategy" to be employed.
Use your own imagination to discover the latent possibilities of this approach - but here's a hint - there are more of them than popular open source projects available today. Just takes a little "initiative".
30 May
2007
Dismal Failure turns out to become Brilliant Success
"The Marriage of Private Equity and Tech Investing" – David Rubenstein
Last week David Rubenstein, co-founder and managing director of The Carlyle Group, gave a talk at Stanford's Business School on the invention of the private equity business. In a fast paced, staccato style, he hammered the audience with his personal history, private equity's necessity of invention, reasons behind its dramatic growth, lucrative current deals going down, its potential near term bust, and long term post-bust future.
If you blinked, you probably missed 2-3 slides. It was that fast.
Ironically, the mere existence of a private equity market says more about the qualities of the public equity market than anything else - read more.
David recounted his (mis)adventure as a presidential adviser to a mediocre president, and that his jump into the private equity market, then known as "bootstrap finance", was more of way a necessity like than of a fledgling being forced to fly - this or else!
An ironic beginning to a brilliant entry at the start of the rise of the private equity industry. He noticed there were none in Washington DC, and used his influence wisely to start what would become an extremely prosperous one.
The way you hear him describe the past, present and future of the industry, it sounds more like an ode to the excesses and vulnerabilities of being a publicly traded firm. What makes this hilarious is that the same investor pushing for short term gains at the cost of long term ones for the public one, is being sold on the long term gains in the privately managed one! Its incredibly hypocritical any way you slice it. As if the opportunity for private equity largely comes out of the conundrum forced on being publicly traded by the same investors who invest on the leveraged side.
He provided a "$200K personal check" challenge to the students to find him a deal he is not currently doing, that if he does finally do it, he'll sign-off on. Which may sound great to the students, but less so to those of us who earn 3 percent finders fees for our trouble of selling a new deal to an investor (his smallest deal is typically in the billions). [My wife, who always loves challenges and is on the tech side so not put off by the lack of 3 percent, thought up a massive deal the next day - ran the numbers on it and it does work out sweet!].
With deal size growing beyond $30B, and the potential for $100B+ deals on the horizon, there are a lot of public companies that make tantalizing prospects - among them he mentioned were Microsoft and Cisco.
I may be in the wrong side of the business given 30% returns in private equity - start-up's are a more chancy thing. But then, I don't have to explain losing billions of someone else's money - its hard enough when seed round start-ups don't always come off.