The IT Strategy Letter
A digest of Doug Kaye's weblogs for the week ending July 29, 2002 (Subscribe)


Web Services Strategies
Web Hosting Strategies
Doug's Media Appearances
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Web Services Strategies

On Liberty. I still haven't had time to read the Liberty Alliance 1.0 specification, but I am trying to follow the opinions of others. Here's a sampling so far:

  • As Editor of Digital Identity World, Phil Becker is part of the pro-identity universe, so it's no surprise that he's excited about the potential.
  • Carol Coye Benson of Glenbrook Partners takes exception to the word federated and its derivatives. "It doesn't mean anything to the average person," she writes.
  • Over at ZapThink, senior analyst Jason Bloomberg believes, "The software vendors and enterprises that put together the spec did not adequately put themselves into the users' shoes."
Based on these and other interpretations of the 1.0 spec, I tend to agree with Jason. First of all, I don't see the need for federated identity from the user's perspective. The example used most often is the sharing of identities between an airline and a rental-car web site. According to all I've read, the first time I use that federated link, I've got to log into the second site anyway, so what's the advantage through that point in time? None. Furthermore, how important is it to me that United and Avis have such a link on an on-going basis? I may have an allegiance to United based on frequent flier miles, but I'm not as loyal to any rental-car company. The second time I click from United to Avis, does it matter to me that I don't have to log in? If I truly care about this (in)convenience, I'm more likely to be using an integrated travel site like Travelocity or Expedia. At these sites, sharing my identity isn't an issue. I can book air travel, cars and hotels at a single site with a single sign-on, and the site remembers all of my preferences, frequent flier numbers, etc. Furthermore, at integrated travel sites I can shop for best prices. As a consumer, I care much more about the integrated convenience and carrier independence than I do about affiliate relationship between vendors who want to share my identity.

There's a critical need for single sign-on among intranet applications, but I still fail to see the need (from the customer's perspective) for federated identity between web sites. Could this be yet another cart looking for a horse?
Posted Sunday, July 21, 2002 11:34:07 AM  

VARs and Web Services. Brent Sleeper asks, "Has the easy access to information and software through the Internet made this sort of traditional channel less important?"

I believe VARs will play an important role in the web-services world. Those with vertical expertise can create the business semantics for their target industries, particularly in those cases where no consortium exists that might otherwise perform this function.
Posted Saturday, July 27, 2002 4:10:10 PM  

Tim Berners-Lee on Web Services. "The most important thing that needs to happen now is the [IT] industry needs to find the strength to build more blocks on top of what's already been developed." Also, Tim's thoughts on the impact of patents. [Source:]
Posted Tuesday, July 23, 2002 5:05:56 PM   

Money: The Missing Link. In his weblog, Phil Wainewright summarizes his own column:

Virtually no meaningful work has been done to develop the technology to accurately measure usage, raise bills, collect payments and distribute settlements for multi-tiered component service delivery ... Without the means to bill for service consumption and make a fair distribution of the proceeds to participants, the next generation of Web service providers could rapidly become as bankrupt as the last.
Posted Tuesday, July 23, 2002 4:47:44 PM   

Amazon Web Service. The on-line bookstore company has announced a developer's toolkit that will allow the following via SOAP or XML over HTTP:

  • search
  • product data retrieval
  • the ability to add items to the shopping cart, wishlist, or wedding registry
  • an XSLT service that can perform real-time transformations of external stylesheets
Posted Tuesday, July 16, 2002 12:46:53 PM  

Web Hosting Strategies

The Netcraft July 2002 Survey has been released. Mike Prettejohn continues to publish some of the most interesting data on web servers and related topics. For instance, this month's survey includes:

  • Apache/2.0 take-up tiny so far: Fewer than 50,000 sites switching to the Apache/2.0 series.
  • Web payment likely to become more concentrated: Payment mechanisms in which details are not taken directly by the merchant site, but stored in a more trusted third party system, are likely to become more and more common.
  • Fewer than half the internet's sites in .com: The percentage of the internet's sites that are registered in .com has fallen below 50% for the first time.
You can subscribe directly to Mike's monthly reports.
Posted Sunday, July 28, 2002 9:39:49 AM 

Now It's Qwest's Turn. "Based on the analysis to date, the company has determined that it has in some cases applied its accounting policies incorrectly with respect to certain optical capacity asset sale transactions in 1999, 2000 and 2001." According to a press release Sunday evening. [Source:]
Posted Sunday, July 28, 2002 7:27:04 PM  

The Telecom Richter Scale. Through constant due diligence and a good exit strategy you can protect yourself from the potential business failure of your web-hosting service. But what about the effects of the continued telecom meltdown? If any of the major ISPs were to turn off its routers and switches we would all be affected. Not only would our web sites become unreachable by the ISP's direct customers, but because of the Internet's complex routing and peering, such a failure would be felt by all sites and all customers. The Internet may be decentralized such that there's no single point of failure, but that also means that any substantial injury will be felt throughout the entire organism. The loss of the WorldCom/UUNET/MCI backbone will rumble like an earthquake throughout the entire Internet.
Posted Thursday, July 25, 2002 8:49:38 AM 

Rawlson King, over at The WHIR, writes, "With financial uncertainty running rampant throughout the entire Web hosting and telecommunication sectors, corporate consumers must negotiate strategically with outsourcers to protect their business interests."
Posted Saturday, July 27, 2002 4:26:33 PM 

Working With a Reseller. My own latest column for The Web Host Industry Review. "Resellers are the ideal hosting solution for any SME without in-house technical expertise."
Posted Saturday, July 27, 2002 3:50:22 PM  

Cover Story. My guest commentary, Don't Be a Square Peg, was the cover story last week at Internet World.

In the current climate, you can't count on vendors to walk away just because the fit isn't right. You've got to figure that out on your own. You've got to find each vendor's sweet spot, and make sure you're in the middle of it.
If the article isn't on the home page by the time you read this, you can find it here.
Posted Tuesday, July 23, 2002 10:52:12 PM  

Digex Vulnerable? Digex issued this press release, reminding all of us that it's a separate company. But in addition to being funded by WorldCom, one has to believe that there are many off-books services Digex receives through this relationship. Given the huge gap between WorldCom's assets and liabilities, one has to question whether it can continue to fund Digex as the press release promises. If it has to sacrifice some assets to save others, I expect WorldCom would dump its share of the hosting business in order to hang onto its long-distance customers. Digex could be caught between a rock and a hard place. Do I hear C&W in the wings with checkbook once again in hand? Or perhaps EDS?
Posted Monday, July 22, 2002 10:16:43 PM 

Update from the company's 8-K filing with the SEC on July 24, 2002:

  • One third of the company's revenues during the second quarter ($16.4 million of $48.7 million) came from WorldCom.
  • Cash expenses (my arithmetic--infamously inaccurate on occasion) are $48 million per quarter, not counting a $12.6 million provision for doubtful accounts for WorldCom.
  • The company has $4.8 million in cash and equivalents: enough to pay its operating expenses for a little more than a week by my math.
  • The 8-K isn't complete, but I conservatively estimate the cash burn rate at $16 million per quarter, EBITDA.
  • Current assets less current liabilities are negative $28.2 million.
  • Digex claims to use "the shared, dedicated and colocation hosting technologies of WorldCom" and "the facilities-based WorldCom global network." (Are those Internet data centers at risk?)
  • "Earlier this week, WorldCom received court approval to continue funding Digex's operations." (But for how long?)
  • Digex's stock closed Friday at $0.17 per share, giving it a market cap of only $11 million.

Can Digex pick up and move to another colocation provider's IDCs? Even then, If WorldCom doesn't keep pumping in cash, where will it come from? And would anyone want to pay even $11 million for a company that's burning through another $16 million each month? Who knows what that number if Digex has to stand on its own. [Note: The 8-K filed by the company contains selected data and is unaudited. Furthermore, I'm certainly no financial analyst, so my conclusions may be inaccurate or misleading. Look at the numbers and draw your own conclusions.]

InternetAcceleration. If you want to track the content delivery/acceleration sub-industry, I highly recommend this free weekly email newsletter published by Peter Christy and John Katsaros of NetsEdge Research Group.
Posted Tuesday, July 16, 2002 10:03:54 PM   

Doug's Appearances

Web Services Reality Check: A Roundtable Discussion
Internet World Fall 2002
Jacob K. Javits Convention Center, New York City
October 2, 2002

Hear from a variety of web-service vendors and their customers as they discuss how web services will change the way we do business forever. Discuss the benefits of online services including fast ROI, low TCO, no software implementation or maintenance costs, updates and upgrades in real-time, increase in employee productivity and the pros and cons of Web service products.

Moderator: Doug Kaye, RDS
Panelists: Annrai O'Toole, Executive Chairman, Cape Clear; Patrick Grady, CEO, Talaris; others TBA.

SDForum Presentation. The slides from my 6/18/02 presentation, Web Hosting Strategies, and a writeup/review are available in PDF format.

WorldCom and Me. I'm among the featured bloggers in this issue of WorldCom Magazine. Could it be the last? Doh! Too bad I threw my copy in the trash. It may become a collector's item.

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