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This is TechNotes for the year 2000. You are receiving this message because you have previously subscribed to the TechNotes newsletter. If you have not already done so, please take time to become familiar with the Technical Reality www site, which is also constantly updated with new material, viewpoints, and reference material—including an archive of TechNotes messages and information. If you are an AvantGo user for your PDA device (Palm or CE platform), TechNotes is available as an automatic download AvantGo channel. This is especially handy as reference or reading material while traveling, but since TechNotes is updated irregularly, you should probably continue receiving the e-mail version so as not to miss time-sensitive material if you forget to check your AvantGo channels. For details please click here. Much of the e-mail TechNotes generates is well worth reading. A new INBOX section has been added to share some of these comments and my reactions. I’ve attributed contributions where possible, but this is a large list and individuals are not always readily identifiable by their e-mail addresses. Thanks again for your interest and support. Please feel free to e-mail comments or suggestions to me at:
Wishing you good business,
Recently there are again rumblings that the Microsoft antitrust case might be slowly drifting toward a compromise settlement. Certainly that would be in everyone’s interest. The "findings of fact" issued November 5 by the federal judge in the case may have little immediate affect on most of us, but the conclusion that Microsoft is a monopoly and used its monopoly power to harm consumers and competitors will likely lead to a resolution in that case that will define how our technology-driven economy unfolds in the future. Substantial and fundamental changes as to how Microsoft operates its business or potentially how it is structured are probably inevitable. Over time consumers will need to adapt to a small computer marketplace that is not dominated by a single major player to the extent it has been for the last 15 years. Opinions as to the appropriateness of the way the Justice Department's case has unfolded frequently center in how miserable business will become if Microsoft's ability to establish "standards" is impaired. This view unfortunately misses the point: the issue is competition, not standards. There are some standards that Microsoft has created or materially enhanced that are quite useful and worth preserving. What most people think of as Microsoft "standards" are another matter. In the word processing arena, for example, the Microsoft "standard" has become a critical way of doing business simply because of the reach of the products. A true "standard" requires the support and involvement multiple vendors active in the field, where proposals for standard formats, presentations, interchanges, and the like can be debated on their merits with the superior approach ultimately embraced. This happens in the telecommunications field because there is an international group (CCITT) that applies just such a process—and does so quite successfully. Single vendors that have adopted their own proprietary approaches and attempted to establish them as "standards" through their market power usually do not succeed—in a truly competitive environment, again as telecommunications aptly illustrates. The proprietary Microsoft "standards" people think of in word processing, as one example, are actually a loose collection of formats for various product versions and platforms that don't fit together especially well and are difficult and expensive for the marketplace to adopt because of their frequent modification and proprietary nature. Many of the truly successful standard computer tools and services now taken for granted were developed through collaboration such as I have described in a fiercely competitive marketplace, often over the objections of major industry players with their own agendas. Fifteen years ago, when proprietary operating systems dominated the minicomputer market, comparatively few of us were saying that UNIX (which is a true collaborative standard, in most cases) ought to become the standard platform for that market segment. Over time we were proven right as the proprietary technology was swept aside by the greater flexibility and robustness a widely supported and collaborative standard could bring. The key to all this is competition. Despite what people may tell you about the fiercely competitive small computer software arena, there is far too little competition in key areas for the industry to be healthy. The chances that Linux (a UNIX variant) will achieve substantial traction in mainstream desktop operating systems now monopolized by Windows anytime soon are remote. Once there were several practical PC operating system choices, but Windows has now overcome all but one or two. For all its strengths and admirable qualities, Windows is notorious for its quirkiness, which causes considerable, unnecessary expense for users and would quickly be forced out by a competitive marketplace. Similar examples can be drawn from desktop databases, word processing, spreadsheets, and behind the scenes utilities and system tools--all of which would be greatly strengthened by development of collaborative standards, competition, and the innovation that would result. Over time true standards almost invariably result where there is free and open competition. Claims that the PC world would be in chaos were it not for the order Microsoft imposes through proprietary standards are simply untrue, as the experience of the technology marketplace in development of telecommunications, graphics, Java, UNIX, and a host of other standards illustrate. Competition in other parts of the U.S. computer industry is one reason why ours is the leading technology market in the world, as contrasted to other countries with managed economies dominated by single technology vendors. Doing whatever is necessary to some the competitive problems in the small computer industry is essential to needed innovation and clearly in the best interests of both consumers and, ultimately, also of Microsoft.
My comments on Travel Auctions in TechNotes 2000 No. 4 regarding TRAVEL AUCTIONS sparked a bit of comment: "Airlines have dismayed business consumers for years with their pricing strategy that requires a Saturday night stay. No single factor is more abrasive to corporate buyers. Of course, airlines can accomplish exactly similar results through inventory controls on fares, which businesses generally find palatable if not sometimes exorbitant. "This is only to question any theorem suggesting that commodity suppliers, acting as oligarchies, cannot survive with arrogant attitudes toward their best customers. As far as auctions go, I suspect that airline futures will come into reality one of these days; then, businesses will be at risk and will re-sell what they cannot use, possibly at auction." DW: The "black art" of airline pricing is conceived with one of its many goals as generating precisely this type of abrasion. While the result achieved through capacity controls is similar to that realized through other controls directed specifically against business, it is not an identical result. In the end, one goal of most airline yield management is to differentiate between customers who theoretically at least can and will pay more (business travelers) and everyone else. There is an expensive analytical system and supporting infrastructure in place to sustain this model, and the countless appendages that surround it. That model works exceedingly well most of the time for airlines with sophisticated yield management programs. Many of these same vendors have successfully resisted attempts at buyer consolidation and other purely market-driven mechanisms for price setting. Their participation in most auction systems is peripheral and does not deliver sustained pricing advantages beyond those routinely available in their usual yield management environment. I’ve thought for at least 16 years that some form of airline futures was inevitable—but that day if anything appears more remote than ever.
"As long as test marketing is comprised of bias-laden assumptions regarding process, e-commerce will continue to repeat past errors. In travel's case, we have assumed, ala Bill Gates, that choice is precious, so every system seeks to supply a catalog page of options where, in most cases, inadequate evaluation training or absence of critical knowledge makes that buying experience unpleasant. In travel, an unfortunate axiom applies: no party is trustworthy; CRS, who present options are driven by segment fee optimization; airlines are driven by maximization of yield, even though their pricing structure is upside-down (most costly services - connections - carry lowest prices); travel agencies, who have sold their souls for overrides; hotels, who misrepresent value and exploit a naive business attitude that lodging is not a critical cost factor; and finally travelers whose insatiable appetites for frequent flyer miles corrupts their presumed loyalty to employers. "E-commerce should begin with an assumption that it must deliver value, not obfuscation. Everyone should be aware that Amazon.com, for example, will not likely be very profitable until it controls supply, because it not only bears all the costs of conventional retailing, biggest of which is transportation and warehousing, but it does not have the benefit of a consumer roaming around their bookstore and "picking" product while a cashier waits for that consumer to arrive at their counter and pay. "While your emphasis is on research, my hang-up is problem definition. Research is generated only when someone says "we can do it for a song and it will serve our strategic objectives." Political polls are probably more self-serving than any function performed in society; media love polls; USA Today's most popular features are lower left-hand corner charts on its first page that condense everything into a colorful graph. "In business travel, nobody wants to tackle tough issues: Why do we travel? What does our enterprise get out of it? Are substitutions available? Can travel activity, nebulously defined, really improve corporate profitability? (I think it can, but I'd never advocate such an undertaking on a large scale and I'm skeptical that objectivity can be preserved.) "Today, problems are ignored because we have low inflation, low unemployment and fast growth, all related to an erupting "information era" that has plenty of data but no information. Research only gets done right when problems are seriously examined." DW: It’s certainly true that there are serious problems with both travel distribution and e-commerce that show little sign of ever being addressed. I personally observe whenever someone gives me the opportunity that among the most serious problems facing travel distribution (greater even that the diminished talent pool) is the ongoing failure to plan—which is nothing new but appears to be getting worse. The quote from this letter that I’ll be sure to remember is: "E-commerce should begin with an assumption that it must deliver value, not obfuscation." One can but hope that our IPO and market share-centered industry hears this message sooner than later. Finally, this comment on the same issue: "Nice piece regarding the "fluff" behind most Internet industry research. I think we all fall victims to this minimalism in quantifying opportunities based on today's travel industry research. Then again those of us that are technologists are sometimes forced to make these research predictions a reality. Even though the basis and method of the study might be unsound the "hype" and "fear" of being left behind drives our investments and efforts in making these studies a reality." Mat Orrego
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