Sunday, September 28, 2014

Is your Software too Secure, or not Secure Enough?

  • Last week, it was reported that a significant software vulnerability exists on many computing and communication devices around the world. The problem, called “Shell Shock”, is associated with software originally written in 1987 and is today a part of variations of the UNIX operating system, including Apple’s operating system for desktop and laptop computers, smart phones using Google’s Android and many Internet web servers.  A U.S. Department of Homeland Security alert said the vulnerability was rated as “High” on impact (scoring 10 out of 10) and “Low” on complexity, which means hackers can easily take advantage of the problem and control a computer. Note: the problem does not affect Apple's iOS on the iPhone and iPad, or systems running Microsoft Windows.
  • Separately, FBI Director James B. Comey is concerned about  Apple's and Google’s recent efforts to provide encryption technology on their smart phones that will increase the difficulty of accessing data.  He said  "I like and believe very much that we should have to obtain a warrant from an independent judge to be able to take the content of anyone's closet or their smart phone,” but "The notion that someone would market a closet that could never be opened — even if it involves a case involving a child kidnapper and a court order — to me does not make any sense."
  • Regarding “Shell Shock” - because the vulnerability has been in the market for over 20 years, it is likely that there has already been damage.  However, many technology savvy organizations will  address this problem quickly, but it is likely many devices and systems subject to less stringent security oversight will remain vulnerable to hacker attaches for years to come.
  • Regarding Comey’s comments – As law enforcement groups continue to face the increased lack of trust resulting from the NSA’s aggressive data gathering efforts, it is likely that the use of encryption technology will expand across many forms of computing infrastructures in the future.  

Sunday, September 21, 2014

Life after the Alibaba IPO

  • Jack Ma, a former English teacher, founded Alibaba Group Holding with a $60,000 investment in 1999 and started out in his one bedroom Hangzhou apartment . Today, Alibaba is the world’s largest e-commerce company.  After a global road show to share the firm’s story with investors, the company priced its shares in an initial public offering (IPO) at $68 this past Thursday. On Friday, the shares began trading on the New York Stock exchange at $92.70, and closed up 38% for the day.  The price values the company at $231 billion and made Jack Ma, the richest person in China, worth about $17 billion.
  • Alibaba’s on-line retail sites Taobao MarketplaceTmall, and Juhuasuan account for about 83% of revenue.  Other services include, China’s largest global online wholesale marketplace and AliExpress, a global consumer marketplace that provides cloud-computing services.
  • Its partnerships include Alipay (payment and escrow services); Zhejiang Cainiao Supply Chain Management Co., Ltd. (shipping and logistics services), UCWeb (developer of a mobile web browser). Alibaba investments include $202 million investment in Shoprunner (U.S. shipping services similar to Amazon Prime), $217 million in 1stDibs (on-line luxury ecommerce site) and Lyft (ride sharing service)
  • With the upside for the Alibaba story dependent on expansion both within China, (Internet penetration within the country is less than 50%) and abroad, it is likely that some of that potential is factored into Friday’s 38% price increase.
  • At the same time, the firm’s global aspirations will likely increase completion with smaller players such as AmazonBaiduEBay and Tencent.
  • The most significant risk for the firm is likely that economic growth in China slows down.
  • Bottom Line: In addition to building the world’s largest internet franchise, Jack Ma may also turn out to be one of the best market-timers of all time as well.

Sunday, September 7, 2014

The Disruptive Force of Uber

  • As online transportation company Uber expands globallyconflicts with some regulatorscompetitorsunionized workers and drivers have increased.  Concerns include: 1) Uber is operating without the same licensing and insurance as traditional taxis services, 2) it is trying to lure drivers away from alternative services, such as Lyft, 3) it is changing the terms for drivers operating on its platform and 4) it is placing and then canceling pick-up requests with competitors to disrupt their service.  
  • In addition, last week, as the German government sought to limit Uber’s activities, Anja Floetenmeyer, a representative for Taxi Deutschland, said, “Uber has never observed German law. This is Wild West capitalism without consumer rights.”
  • Some background Uber started in San Francisco during 2009 to provide an alternative to the city’s mediocre taxi service.  Unlike many taxi services, Uber does not own any vehicles. Its platform includes a smartphone app to connect users with drivers, a navigation system and a fare collection and payment system.  Passengers payUber, and Uber pays its drivers about 80% of the fare (there is no requirement to tip the driver). Drivers must pass a background check, provide their own vehicle and comply with service commitment levels, such as the minimum hours per week that they will drive. Estimates vary about the firm’s net revenue (possibly greater than $1 billion), but CEO Travis Kalanick said revenue is doubling every 6 months.
  • Uber, and similar services, provide a refreshing alternative to many mainstream taxi offerings.
  • Its positive business momentum and investor support, has allowed the firm to broaden its services and establish partnerships with organizations such as OpenTableUnited AirlinesStarbucks,TripAdvisor, and Hyatt Hotels
  • With regulatory oversight increasing, compliance with new rules is becoming a business requirement. Also, the interaction with unions (in the U.S. the Teamsters and AFL-CIO are becoming more involved), will likely affect the cost structure of these services. 
  • While Uber's growth may slow and conflicts with drivers may increase, passengers will likely continue to benefit from this disruptive business model.