Uchumi Supermarket :History Repeating Itself.

Uchumi  current restructuring strategy looks like déjà vu.The company did not  learn anything  from its past mistakes.

From 2006, when the company dramatically went into receivership, the tune has been the same. The company would embark on an expansion strategy that is fueled by debt and greed then the strategy would come crumbling down.

Before the 2006 collapse the company had embarked on a growth strategy that locked cash in property investments that starved the company of much needed cash to remain afloat. The retail chain was put under receivership in June 2006 over a debt of Sh2.2 billion owed to banks, suppliers and former employees.

Uchumi had previously made serious losses which were blamed on mismanagement. In  2003, it posted a loss of Sh254 million, while the subsequent year saw the firm lose Sh699 million.  In 2005, it announced a  Sh1.2 billion loss! All along, auditors from PriceWaterhouseCoopers had given the chain store a clean bill of health.

A Permanent Secretary , testifying in court in 2011, said  Uchumi collapse was led by an ambitious expansion programme, weak management, coupled with poor resource policy and unsuitable financing. Terri Davidson testifying in court also said Uchumi incurred losses of Sh306 million in the 2004 financial year and Sh954 million in 2005 saying the rights issue was done, to among other reasons, pay overdue creditors, refurbish the firm’s old stores and conduct an aggressive marketing campaign. Despite a substantial cash injection the institution was too heavily indebted to survive.

 “Shares of the company were dropping everyday while strategic partners were literally running away,”

In 2008 a recovery plan was initiated, and the then receiver manager of the company was able to clear loans owed to PTA Bank and Kenya Commercial Bank as well as turn around the business, he  improved management of stock ,profitability and cash flow. He was at the time viewed as a corporate hero especially when the company was able to relist in 2011 at the NSE.

According to the new CEO, Uchumi turnaround was a farce. The financial position was not as healthy as the previous CEO led us to believe.The company was bleeding to a tune of Ksh. 200million a month, Suppliers debts were rising , some had even stopped supplying the retail chain, the books were cooked to reflect a healthy company and the managers including the previous CEO were involved in fraudulent activities that resulted in the loss of millions of shillings raised  to capitalize the company.

The biggest problem Uchumi has continually faced has been its flawed procurement system and poor inventory management which has been marred by corruption and insider dealings.Quoting an article that was published In 2007 Ciano had identified the same challenges while restructuring Uchumi,

“The inventory, which is monitored weekly, ensures that any slow moving stock is shipped to other shops or returned to the warehouse as a means of cutting down costs.  In addition, the supermarket has walked away from exclusivity in procurement, which was a major contributing factor to its downfall. It was alleged that some suppliers, who were also part of management, supplied goods at exorbitant prices yet the supermarket still had to sell them at the market price, ultimately incurring major losses”

It is really shocking to see that Ciano ended up presiding over the same rot he had cleaned and brought the company back to its knees where he had found it.

In all Uchumi’s restructuring the retail investors always gets the short end of the stick. When the company issues the right issues the management has always hidden the true picture of the company and all turnaround strategies ends up with equity dilution that only favors the suppliers, the government and financiers.

As Julius Kipng’etich tries to resuscitate Uchumi, he should be very careful not to repeat the mistakes of his predecessor, although his plan seems a complete copy of what Ciano did in his first days at the helm. 

Again, the shareholders are looking forward to another dilution of their shares  if the negotiations with the suppliers to turn their debts into equity are fruitful.lets hope this cycle will be broken.

Why MSC Should Be Delisted And The Board Reconstituted.

The recent development in MSC is just a piece of the iceberg, the company is really rotten and the fact that the board refused to make the KPMG forensic audit public just confirms that.

 Over the years farmers have complained over poor management and corrupt practices some of MSC senior management were engaged in. For instance, most farmers complained about the corrupt agricultural department where cane harvesting and delivery was marred with corruption, the staff in the department used to extort money from farmers for their cane to be collected and were suspected of abetting cane poaching .

Corruption and management ineptitude aside, there are several strategic decisions that were done in 2011/2012 that in my opinion played a big role in bringing this prestigious company to its knees.

First after the resignation of Kidero, the board replaced him with the financial controller.The Board argued that they had done extensive interviews and found Mr.Kebati the most suitable candidate.The board settled on an insider who would ensure continuity even though the company was facing increased competition from the market and COMESA safeguards were about to be lifted.

The decision to replace a long serving CEO with an insider would later that year show how aloof the board was in regards to the health of the company ,both financially and the company's competitiveness.

Mr.Kebati went on a borrowing spree that seem to illustrate lack of proper debt management skills and foresight . For instance, the company took billions in bank loans payable in 5yrs to invest in two capital intensive projects. One of the projects was the ethanol plant and the other a water bottling plant.

 

The huge Capital expenditure was funded by short term debts made up of bank overdrafts and syndicated loans,interests rates ranged from 11% to 21% .This was on a period the company was registering negative cashflow, facing stiff competition in the market, reduced sugar prices and shortage of sugar cane. Instead of staggering the two projects and invest in its existing business the company went ahead with the two projects.

The huge investments ran the risk of stretching the company thin and looking at the result that year it registered a huge loss and had a negative cash flow. The company this year has been forced to renegotiate with the lenders because the company is facing severe cash crunch.

The board has recently terminated the managing director and the commercial director blaming them for participating in an illegal importation of sugar that cost the company billions.The decision in my opinion was used to mask the real issues facing the company.

The company has since Financial year 2011/2012 outsourced their internal audit functions to Price waterhouse coopers (PWC) after the retirement of MSC chief internal Auditor. The board opted to outsource this work to a third party  arguing that  they took  that strategic decision in order to have independent reporting.So, how did the company loose Billion of shillings when they had an independent internal auditor in the name of PWC.

Whereas delivery of the Company’s strategy is the responsibility of the management team, the governance of the processes and performance monitoring is the responsibility of the Board how did the company lose Billions  without the board knowing?

Finally the board did a very interesting management change during the year.Mr Paul Murgor previously the director of agriculture was redeployed to a newly created commercial department. It is not a surprise that a guy who headed a department plagued with corruption ends up being sacked for his involvement in this latest sugar importation scandal.

 

Mumias sugar company should be delisted and a comprehensive restructuring done to safeguard shareholders interest.The ineptitude and management recklessness displayed by Mumias sugar board  and its management, a team that doesn’t know how to be professional ,compounded by its poor performance both as a company and at the NSE bourse necessitates this drastic action.

Mkesho to Mswari: Tracing Safaricom-EquityBank Rivalry.

"If we are going to provide mobile services for customers,we need access to SIM Cards.Whoever controls the SIM card controls the ecosystem."~ Mr John Stanley-Equity Bank, head of mobile money.

Mkesho was the catalyst to the current  battle we are witnessing  pitting Safaricom and Equity bank over a new SLIMSIM technology being deployed by Equity bank.The Mkesho solution which was a partnership between the two companies exposed a lie that is MPesa.

Since its inception Mpesa has been touted as a money transfer service, even the regulators treated it as such, but the truth was most Kenyans were using it as a savings account, most of them still do.Before M-Pesa ,Equity Bank  experienced  rapid growth targeting the common man,but the entry of M-Pesa changed everything.

Both Mpesa & Equity bank have been fighting over the same customers.Equity bank in a way sees MPesa as encroaching on its turf.Even though most banks finally embraced Mpesa, the solution is still a threat to banks and with the rollout of Mswari that threat has become a reality.

The failure of Mkesho was blamed on a strategic failure by the two companies to structure a sound revenue sharing model which, not only made the solution a little expensive to its target customer due to double transaction fees, but also created suspicion between the two. Mr Michael Joseph was once quoted in a book “Money, Real Quick: The story of M-Pesa.”  As saying 

 “There was a lot of suspicion between the two companies; the revenue we made on M-Kesho had to be 50-50. If they made more than we made, we had to get another costing pricing formula.”

There were also other reasons fronted as causes for Mkesho failure such as, sabotage by safaricom agents who saw the solution as a threat to their business, failure by the two companies to offer adequate training to their agents and a lengthy bureaucratic procedure that not only increased the cost of the solution through also hampered registration and adoption.

The truth of the matter was that the Mkesho solution was a threat to Safaricom. Equity bank was posed to cannibalize Mpesa market and threaten a growing revenue stream for safaricom. Equitybank’s quick deployment of the solution to its customers and the number of its branches clearly showed that the solution was more beneficial to Equitybank than to safaricom and the competitive advantage safaricom had in terms of Agents distribution was likely going to be threatened if Equity was going to roll out its own agents.

The launch of Mswari which is a partnership between CBA and Safaricom shows how Mkesho, although a fantastic solution, was viewed by safaricom. Mswari is a complete copy of Mkesho but they differ in terms of bureaucratic requirement .The solution makes CBA totally dependent on Mpesa and its agents.Mswari is a synergistic partnership that does not threaten any of the partners.As opposed to Mkesho, Mswari is totally dependent on Mpesa agents making it a perfect product for safaricom.

After the failure of MKesho and an apparent affront by Safaricom on Equity bank' turf  through Mswari,Equity Bank through its telecoms subsidiary, Finserve got a Mobile Virtual Network Operations (MVNO) licence and is currently awaiting the roll out of SIM cards bearing "0763xxxx" prefix.  which will take on Mpesa head on.The company also intends to deploy the SLIM SIM card technology that will make it easy for users to access their services without a need to acquire a new phone.Safaricom has launched a complaint with Communcation Authoriy of Kenya (CAK) to try and block Equity Bank's SLIM Card deployment arguing it will interfere with its network.

It is apparent we are going to witness a battle royale once Equity Bank deploys its money transfer service.Mpesa dominance is going to be tested and eventually competition in this sector  will benefit the industry and open up the country to more innovation.

What Causes a Currency Collapse?

This year we have witnessed many currency's suddenly collapse. Iceland, Argentina, Hungary, Ukraine and others have all seen a sharp fall in the value of their currency. What causes this? and are other economies at risk?

Causes of Currency Collapse

1. Inflation.

Inflation reduces the value of money. If there is rampant inflation, then a currency will depreciate in value. For example, the hyper inflation of Zimbabwe is well documented. Inflation makes Zimbabwe currency worth less, so people will try to exchange Zimbabwe Rand for other currencies which will hold its value.
What causes inflation?

• Printing Money. Note printing money doesn't always cause inflation. It will occur when the money supply is increased faster than the growth of real output.
• Note: the link between printing money and causing inflation is not straightforward. The money supply doesn't just depend on the amount the government prints. The US has been increasing the monetary base substantially, but, as of yet, it hasn't led to inflation because of other factors influencing inflation.
• Large National Debt. To finance large national debts, governments often print money and this can cause inflation. This was the case in Zimbabwe. But, national debt doesn't have to cause inflation. Japan borrowed 195% of GDP, yet have very low inflation.

2. Current Account Deficit

A current account deficit means that a country imports more goods and services than it exports. To finance this deficit, they will require a surplus on the financial / Capital account.

• For example, at the start of this year, Iceland had a current account deficit of around 7% of GDP. They were able to finance this deficit by attracting capital flows.
• - To give one example, their banks had high interest rates which attracted UK councils to save their money in Icelandic banks.
• Because they were getting capital inflows from abroad, the Icelandic economy could continue to finance its current account deficit.
• However, the problem comes when you can no longer finance this deficit - when you can no longer attract capital flows. The global credit crisis meant Icelandic banks were losing money. Therefore, people started to withdraw their savings from Iceland.
• The capital flows were drying up, this will cause a depreciation in the exchange rate. Basically there is more money leaving Iceland coming in. This will be reflected by the fall in the exchange rate.

Another example, this year, Ukraine had a current account deficit of 6.7% of GDP, but, the IMF says next year it will be able to attract less capital flows, therefore, the maximum current account deficit it could run is 2%. Therefore, the Ukraine currency will devalue to reflect this.

3. Collapse of Confidence

If there is a collapse of confidence in an economy or financial sector, this will lead to an outflow of currency as people don't want to risk losing their currency. Therefore, this causes an outflow of capital and a depreciation in the exchange rate. Collapse in confidence can be due to political or economic factors.

4. Lower Growth and lower interest rates.

Lower rates make it less attractive to save in a country and therefore, there will be a modest depreciation. Lower rates don't usually cause a collapse in a currency, but, they will make the currency less attractive.

5. Price of Commodities

If an economy depends on exports of raw materials, a fall in the price of this raw material can cause a a fall in export revenue and a depreciation in the exchange rate. E.g. Ukraine has suffered from a fall in price of steel.

courtesy of  http://www.economicshelp.org

PWC Credibility Questioned.

Few years ago I read a leaked PWC report whose findings had contributed to the closure of an institution by a regulator that had contracted PWC to carry out a forensic audit. The report was full of inconsistencies and lacked evidence to back the recommendations.By using the auditors recommendations the regulator was put in a difficult situation that has left it in a legal limbo to date.

Which brings me to the current CMC fiasco.Pwc has been taken to court after its audit report was accused of making 'findings based on unreliable and speculative information'.Mr Muthoka, a shareholder,is questioning the integrity of the audit firm.

A SouthAfrican auditor, who was hired by the Capital Market Authority (CMA) to look into the CMC debacle , has sharply criticised the forensic report that PWC published on the state of the motor dealer’s finances.He dismissed the report as inconclusive and that the firm submitted open-ended findings without sufficient evidence.Pwc has also come under criticism for making firm conclusions even where it had no evidence to support its findings.

There are claims in the media that Deloitte, who were CMC's auditors before quitting early last month , has been uncomfortable in the task of auditing the motor firm since rival PricewaterhouseCoopers (PwC) was called in to conduct a forensic audit into the company’s finances since 2006.Given that PwC were themselves  CMC auditors until the end of 2005,the restriction of forensic audit to the period after PwC’s exit is, as Deloitte's believes, selective and risky to its interests as a consulting firm.At the same time the issue of impartiality in the forensic audit also come into sharp focus when you consider the historical relationship.

A background check of PwC’s involvement in scandals reveals quite a few.In fact, Pwc has been the auditors of the most notorious financial scandals of the past 15 years ,with the most recent black eye coming from its involvement with MF Global in which the U.S. regulators subpoenaed Pwc for information on the segregation of assets belonging to clients trading on U.S. commodity exchanges .MF global is only the latest of PwC’s trail of ‘negligence’ and ‘bad behavior.’ According to Wikipedia, PwC was involved in improprieties with the companies AIG, Refco, General Re Corp, Berkshire Hathaway, Tyco, the Sityam fraud, Yukos prosecution scandal, the Global Trust Bank misconduct (leading to a one-year ban by India’s central bank from doing business in India), the Transneft Russia scandal and Britain’s Northern Rock case.

What I have learnt from Pwc is that they subscribe to 'he who pays the piper calls the tune'.It's difficult to get an objective finding from this firm.Which raises the question what is the use of this auditors if they only pass what those in office say or want.Can investors depend on this so called 'big firms' to offer objective reports whenever they are contracted to do a forensic audit.

 

Ready For Konza City?

Konza city is an ambitious plan by the Kenyan government to transform a grass land into one of the most successful IT hub in the world akin to silicon valley in California, USA.

Alot has been said about this masterpiece, but one thing still remains, is Kenya ready for Konza by the year 2032 or is this a futuristic city that will be brought to life by the next generation.

   

So far the government has popularised the city locally and internationally.According to a recent advert,the project has generated  immense interest from foreign firms and individuals who have reserved 60% of  the initial 500ha of phase I.

Now lets see, what can we learn from the Asian tigers who are currently leading in technology and BPOs or even from the silicon valley itself?Can Kenya really compete internationally or are we just dreaming.

In these countries there is more interaction between Universities and the industry, where intellectual property rights are respected and they easily make it to the commercial environment.

Silicon valley for instance grew after a Stanford university dean encouraged faculty and graduates to start their own companies, this therefore, created a convergence of innovations on one site of new technological knowledge; a large pool of skilled engineers and scientists from major universities in the area; generous funding from an assured market with the Defense Department; the development of an efficient network of venture capital firms; and, in the very early stage, the institutional leadership of the university.


In India a government initiative to transform  Bangalore into an  IT hub has bore fruits making India one of the leading outsourcing  destinations in the world,It now boast of several  techno-cities.The Following are some of the reasons quoted by one IT expert  why leading global corporates opt for Call Center Outsourcing to India. :-

Efficient work force - Numerous attributes of the Indian manpower like great spoken English, well educated, technically skilled and mass scale availability on much lower remuneration makes India a popular destination for call center outsourcing. Moreover, research reveals that this kind of quality human resources will never cease due to the growing importance of education and a huge population of career oriented youth. 
Expert Service Availability - Due to technically ready base India provides services that cater to various kinds of customer supports. Be it a Voice process, Chat/Email support or Help desk service, expertise is provided with no compromise on the quality. India excels in both inbound and outbound call center services. Guaranteed proficiency is provided with regards to workforce, technology and operations.
Comfortable Time Zone - The twelve hour time difference in the Indian time zone makes India the number one choice for call centre outsourcing. This enables round the clock customer support to clients across the globe. 
Business Friendly Policies - Analyzing the benefits of the call centre outsourcing process and other IT ventures, the Indian government has gone a step ahead and pushed policies benefiting such endeavors. Tax exemptions/ benefits and support in building of effective infrastructure and Technology parks have inspired business owners in launching their own ventures. Polices like free export of capital goods and tax exemption on IT services and ITES exports makes India a clear winner in the call center outsourcing market.
Custom Made Infrastructure - India also benefits from outsourcing of call center services due to the presence of the latest infrastructure required for the ideal operation of such support processes. Excellent technology is put to work to get high quality of services. Also the cheap availability of the communication services is a factor boosting the growth.
Cost Saving Services - India emerges as the only nation to provide cost effective solutions to international inventors for call center outsourcing services. The outlay incurred on the human resource, IT setup and other infrastructure is comparatively less than other Asian and European countries.
Being a Leader in this fortune venture, call center outsourcing to India is a natural choice for various Global organizations. Moreover examples of major call center outsourcing ventures in India has encouraged other competitors in the world market to follow suit.

Another country that is posed to overtake India in call centre Outsourcing business is Philippines.To be competitive,The Filipino government streamlined its bureaucracy for companies setting up call centers and changed its rules to allow individual buildings to be designated special economic zones. Such zones offer tax breaks, quick clearances for building permits, and an exemption from import duties on computers and telecom gear. And some 40,000 students have benefited from government-sponsored training to improve their English and communication skills.

All in all, for Kenya to be competitive we need strong universities to spur research & innovation .The role of higher education in stimulating growth is illustrated most clearly in the cases of Kenya and South Korea.The two countries  were at the same stage of economic development in 1960s, with an average annual per capita income of about $100.While South Korea has experienced steady economic growth and emerged as a key player in the world economy, Kenya has still to attain its Millennium Development Goals, let alone begin to compete globally.When you look at investment made in Human capital and science in the education system you start  to get a rough idea why.If you look around the world the great technology hubs are associated with great universities.India For Instance, produces 400,000 graduate engineer every year which makes it way ahead in Outsourcing business of  more sophisticated services.

Google Engineer View on Product Development.

By Steve Yegge 
I was at Amazon for about six and a half years, and now I've been at Google for that long. One thing that struck me immediately about the two companies -- an impression that has been reinforced almost daily -- is that Amazon does everything wrong, and Google does everything right. Sure, it's a sweeping generalization, but a surprisingly accurate one. It's pretty crazy. There are probably a hundred or even two hundred different ways you can compare the two companies, and Google is superior in all but three of them, if I recall correctly. I actually did a spreadsheet at one point but Legal wouldn't let me show it to anyone, even though recruiting loved it.

I mean, just to give you a very brief taste: Amazon's recruiting process is fundamentally flawed by having teams hire for themselves, so their hiring bar is incredibly inconsistent across teams, despite various efforts they've made to level it out. And their operations are a mess; they don't really have SREs and they make engineers pretty much do everything, which leaves almost no time for coding - though again this varies by group, so it's luck of the draw. They don't give a single shit about charity or helping the needy or community contributions or anything like that. Never comes up there, except maybe to laugh about it. Their facilities are dirt-smeared cube farms without a dime spent on decor or common meeting areas. Their pay and benefits suck, although much less so lately due to local competition from Google and Facebook. But they don't have any of our perks or extras -- they just try to match the offer-letter numbers, and that's the end of it. Their code base is a disaster, with no engineering standards whatsoever except what individual teams choose to put in place.

To be fair, they do have a nice versioned-library system that we really ought to emulate, and a nice publish-subscribe system that we also have no equivalent for. But for the most part they just have a bunch of crappy tools that read and write state machine information into relational databases. We wouldn't take most of it even if it were free.

I think the pubsub system and their library-shelf system were two out of the grand total of three things Amazon does better than google.

I guess you could make an argument that their bias for launching early and iterating like mad is also something they do well, but you can argue it either way. They prioritize launching early over everything else, including retention and engineering discipline and a bunch of other stuff that turns out to matter in the long run. So even though it's given them some competitive advantages in the marketplace, it's created enough other problems to make it something less than a slam-dunk.

But there's one thing they do really really well that pretty much makes up for ALL of their political, philosophical and technical screw-ups.

Jeff Bezos is an infamous micro-manager. He micro-manages every single pixel of Amazon's retail site. He hired Larry Tesler, Apple's Chief Scientist and probably the very most famous and respected human-computer interaction expert in the entire world, and then ignored every goddamn thing Larry said for three years until Larry finally -- wisely -- left the company. Larry would do these big usability studies and demonstrate beyond any shred of doubt that nobody can understand that frigging website, but Bezos just couldn't let go of those pixels, all those millions of semantics-packed pixels on the landing page. They were like millions of his own precious children. So they're all still there, and Larry is not.

Micro-managing isn't that third thing that Amazon does better than us, by the way. I mean, yeah, they micro-manage really well, but I wouldn't list it as a strength or anything. I'm just trying to set the context here, to help you understand what happened. We're talking about a guy who in all seriousness has said on many public occasions that people should be paying him to work at Amazon. He hands out little yellow stickies with his name on them, reminding people "who runs the company" when they disagree with him. The guy is a regular... well, Steve Jobs, I guess. Except without the fashion or design sense. Bezos is super smart; don't get me wrong. He just makes ordinary control freaks look like stoned hippies.

So one day Jeff Bezos issued a mandate. He's doing that all the time, of course, and people scramble like ants being pounded with a rubber mallet whenever it happens. But on one occasion -- back around 2002 I think, plus or minus a year -- he issued a mandate that was so out there, so huge and eye-bulgingly ponderous, that it made all of his other mandates look like unsolicited peer bonuses.

His Big Mandate went something along these lines:

1) All teams will henceforth expose their data and functionality through service interfaces.

2) Teams must communicate with each other through these interfaces.

3) There will be no other form of interprocess communication allowed: no direct linking, no direct reads of another team's data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.

4) It doesn't matter what technology they use. HTTP, Corba, Pubsub, custom protocols -- doesn't matter. Bezos doesn't care.

5) All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions.

6) Anyone who doesn't do this will be fired.

7) Thank you; have a nice day!

Ha, ha! You 150-odd ex-Amazon folks here will of course realize immediately that #7 was a little joke I threw in, because Bezos most definitely does not give a shit about your day.

#6, however, was quite real, so people went to work. Bezos assigned a couple of Chief Bulldogs to oversee the effort and ensure forward progress, headed up by Uber-Chief Bear Bulldog Rick Dalzell. Rick is an ex-Armgy Ranger, West Point Academy graduate, ex-boxer, ex-Chief Torturer slash CIO at Wal*Mart, and is a big genial scary man who used the word "hardened interface" a lot. Rick was a walking, talking hardened interface himself, so needless to say, everyone made LOTS of forward progress and made sure Rick knew about it.

Over the next couple of years, Amazon transformed internally into a service-oriented architecture. They learned a tremendous amount while effecting this transformation. There was lots of existing documentation and lore about SOAs, but at Amazon's vast scale it was about as useful as telling Indiana Jones to look both ways before crossing the street. Amazon's dev staff made a lot of discoveries along the way. A teeny tiny sampling of these discoveries included:

- pager escalation gets way harder, because a ticket might bounce through 20 service calls before the real owner is identified. If each bounce goes through a team with a 15-minute response time, it can be hours before the right team finally finds out, unless you build a lot of scaffolding and metrics and reporting.

- every single one of your peer teams suddenly becomes a potential DOS attacker. Nobody can make any real forward progress until very serious quotas and throttling are put in place in every single service.

- monitoring and QA are the same thing. You'd never think so until you try doing a big SOA. But when your service says "oh yes, I'm fine", it may well be the case that the only thing still functioning in the server is the little component that knows how to say "I'm fine, roger roger, over and out" in a cheery droid voice. In order to tell whether the service is actually responding, you have to make individual calls. The problem continues recursively until your monitoring is doing comprehensive semantics checking of your entire range of services and data, at which point it's indistinguishable from automated QA. So they're a continuum.

- if you have hundreds of services, and your code MUST communicate with other groups' code via these services, then you won't be able to find any of them without a service-discovery mechanism. And you can't have that without a service registration mechanism, which itself is another service. So Amazon has a universal service registry where you can find out reflectively (programmatically) about every service, what its APIs are, and also whether it is currently up, and where.

- debugging problems with someone else's code gets a LOT harder, and is basically impossible unless there is a universal standard way to run every service in a debuggable sandbox.

That's just a very small sample. There are dozens, maybe hundreds of individual learnings like these that Amazon had to discover organically. There were a lot of wacky ones around externalizing services, but not as many as you might think. Organizing into services taught teams not to trust each other in most of the same ways they're not supposed to trust external developers.

This effort was still underway when I left to join Google in mid-2005, but it was pretty far advanced. From the time Bezos issued his edict through the time I left, Amazon had transformed culturally into a company that thinks about everything in a services-first fashion. It is now fundamental to how they approach all designs, including internal designs for stuff that might never see the light of day externally.

At this point they don't even do it out of fear of being fired. I mean, they're still afraid of that; it's pretty much part of daily life there, working for the Dread Pirate Bezos and all. But they do services because they've come to understand that it's the Right Thing. There are without question pros and cons to the SOA approach, and some of the cons are pretty long. But overall it's the right thing because SOA-driven design enables Platforms.

That's what Bezos was up to with his edict, of course. He didn't (and doesn't) care even a tiny bit about the well-being of the teams, nor about what technologies they use, nor in fact any detail whatsoever about how they go about their business unless they happen to be screwing up. But Bezos realized long before the vast majority of Amazonians that Amazon needs to be a platform.

You wouldn't really think that an online bookstore needs to be an extensible, programmable platform. Would you?

Well, the first big thing Bezos realized is that the infrastructure they'd built for selling and shipping books and sundry could be transformed an excellent repurposable computing platform. So now they have the Amazon Elastic Compute Cloud, and the Amazon Elastic MapReduce, and the Amazon Relational Database Service, and a whole passel' o' other services browsable at aws.amazon.com. These services host the backends for some pretty successful companies, reddit being my personal favorite of the bunch.

The other big realization he had was that he can't always build the right thing. I think Larry Tesler might have struck some kind of chord in Bezos when he said his mom couldn't use the goddamn website. It's not even super clear whose mom he was talking about, and doesn't really matter, because nobody's mom can use the goddamn website. In fact I myself find the website disturbingly daunting, and I worked there for over half a decade. I've just learned to kinda defocus my eyes and concentrate on the million or so pixels near the center of the page above the fold.

I'm not really sure how Bezos came to this realization -- the insight that he can't build one product and have it be right for everyone. But it doesn't matter, because he gets it. There's actually a formal name for this phenomenon. It's called Accessibility, and it's the most important thing in the computing world.

The. Most. Important. Thing.

If you're sorta thinking, "huh? You mean like, blind and deaf people Accessibility?" then you're not alone, because I've come to understand that there are lots and LOTS of people just like you: people for whom this idea does not have the right Accessibility, so it hasn't been able to get through to you yet. It's not your fault for not understanding, any more than it would be your fault for being blind or deaf or motion-restricted or living with any other disability. When software -- or idea-ware for that matter -- fails to be accessible to anyone for any reason, it is the fault of the software or of the messaging of the idea. It is an Accessibility failure.

Like anything else big and important in life, Accessibility has an evil twin who, jilted by the unbalanced affection displayed by their parents in their youth, has grown into an equally powerful Arch-Nemesis (yes, there's more than one nemesis to accessibility) named Security. And boy howdy are the two ever at odds.

But I'll argue that Accessibility is actually more important than Security because dialing Accessibility to zero means you have no product at all, whereas dialing Security to zero can still get you a reasonably successful product such as the Playstation Network.

So yeah. In case you hadn't noticed, I could actually write a book on this topic. A fat one, filled with amusing anecdotes about ants and rubber mallets at companies I've worked at. But I will never get this little rant published, and you'll never get it read, unless I start to wrap up.

That one last thing that Google doesn't do well is Platforms. We don't understand platforms. We don't "get" platforms. Some of you do, but you are the minority. This has become painfully clear to me over the past six years. I was kind of hoping that competitive pressure from Microsoft and Amazon and more recently Facebook would make us wake up collectively and start doing universal services. Not in some sort of ad-hoc, half-assed way, but in more or less the same way Amazon did it: all at once, for real, no cheating, and treating it as our top priority from now on.

But no. No, it's like our tenth or eleventh priority. Or fifteenth, I don't know. It's pretty low. There are a few teams who treat the idea very seriously, but most teams either don't think about it all, ever, or only a small percentage of them think about it in a very small way.

It's a big stretch even to get most teams to offer a stubby service to get programmatic access to their data and computations. Most of them think they're building products. And a stubby service is a pretty pathetic service. Go back and look at that partial list of learnings from Amazon, and tell me which ones Stubby gives you out of the box. As far as I'm concerned, it's none of them. Stubby's great, but it's like parts when you need a car.

A product is useless without a platform, or more precisely and accurately, a platform-less product will always be replaced by an equivalent platform-ized product.

Google+ is a prime example of our complete failure to understand platforms from the very highest levels of executive leadership (hi Larry, Sergey, Eric, Vic, howdy howdy) down to the very lowest leaf workers (hey yo). We all don't get it. The Golden Rule of platforms is that you Eat Your Own Dogfood. The Google+ platform is a pathetic afterthought. We had no API at all at launch, and last I checked, we had one measly API call. One of the team members marched in and told me about it when they launched, and I asked: "So is it the Stalker API?" She got all glum and said "Yeah." I mean, I was joking, but no... the only API call we offer is to get someone's stream. So I guess the joke was on me.

Microsoft has known about the Dogfood rule for at least twenty years. It's been part of their culture for a whole generation now. You don't eat People Food and give your developers Dog Food. Doing that is simply robbing your long-term platform value for short-term successes. Platforms are all about long-term thinking.

Google+ is a knee-jerk reaction, a study in short-term thinking, predicated on the incorrect notion that Facebook is successful because they built a great product. But that's not why they are successful. Facebook is successful because they built an entire constellation of products by allowing other people to do the work. So Facebook is different for everyone. Some people spend all their time on Mafia Wars. Some spend all their time on Farmville. There are hundreds or maybe thousands of different high-quality time sinks available, so there's something there for everyone.

Our Google+ team took a look at the aftermarket and said: "Gosh, it looks like we need some games. Let's go contract someone to, um, write some games for us." Do you begin to see how incredibly wrong that thinking is now? The problem is that we are trying to predict what people want and deliver it for them.

You can't do that. Not really. Not reliably. There have been precious few people in the world, over the entire history of computing, who have been able to do it reliably. Steve Jobs was one of them. We don't have a Steve Jobs here. I'm sorry, but we don't.

Larry Tesler may have convinced Bezos that he was no Steve Jobs, but Bezos realized that he didn't need to be a Steve Jobs in order to provide everyone with the right products: interfaces and workflows that they liked and felt at ease with. He just needed to enable third-party developers to do it, and it would happen automatically.

I apologize to those (many) of you for whom all this stuff I'm saying is incredibly obvious, because yeah. It's incredibly frigging obvious. Except we're not doing it. We don't get Platforms, and we don't get Accessibility. The two are basically the same thing, because platforms solve accessibility. A platform is accessibility.

So yeah, Microsoft gets it. And you know as well as I do how surprising that is, because they don't "get" much of anything, really. But they understand platforms as a purely accidental outgrowth of having started life in the business of providing platforms. So they have thirty-plus years of learning in this space. And if you go to msdn.com, and spend some time browsing, and you've never seen it before, prepare to be amazed. Because it's staggeringly huge. They have thousands, and thousands, and THOUSANDS of API calls. They have a HUGE platform. Too big in fact, because they can't design for squat, but at least they're doing it.

Amazon gets it. Amazon's AWS (aws.amazon.com) is incredible. Just go look at it. Click around. It's embarrassing. We don't have any of that stuff.

Apple gets it, obviously. They've made some fundamentally non-open choices, particularly around their mobile platform. But they understand accessibility and they understand the power of third-party development and they eat their dogfood. And you know what? They make pretty good dogfood. Their APIs are a hell of a lot cleaner than Microsoft's, and have been since time immemorial.

Facebook gets it. That's what really worries me. That's what got me off my lazy butt to write this thing. I hate blogging. I hate... plussing, or whatever it's called when you do a massive rant in Google+ even though it's a terrible venue for it but you do it anyway because in the end you really do want Google to be successful. And I do! I mean, Facebook wants me there, and it'd be pretty easy to just go. But Google is home, so I'm insisting that we have this little family intervention, uncomfortable as it might be.

After you've marveled at the platform offerings of Microsoft and Amazon, and Facebook I guess (I didn't look because I didn't want to get too depressed), head over to developers.google.com and browse a little. Pretty big difference, eh? It's like what your fifth-grade nephew might mock up if he were doing an assignment to demonstrate what a big powerful platform company might be building if all they had, resource-wise, was one fifth grader.

Please don't get me wrong here -- I know for a fact that the dev-rel team has had to FIGHT to get even this much available externally. They're kicking ass as far as I'm concerned, because they DO get platforms, and they are struggling heroically to try to create one in an environment that is at best platform-apathetic, and at worst often openly hostile to the idea.

I'm just frankly describing what developers.google.com looks like to an outsider. It looks childish. Where's the Maps APIs in there for Christ's sake? Some of the things in there are labs projects. And the APIs for everything I clicked were... they were paltry. They were obviously dog food. Not even good organic stuff. Compared to our internal APIs it's all snouts and horse hooves.

And also don't get me wrong about Google+. They're far from the only offenders. This is a cultural thing. What we have going on internally is basically a war, with the underdog minority Platformers fighting a more or less losing battle against the Mighty Funded Confident Producters.

Any teams that have successfully internalized the notion that they should be externally programmable platforms from the ground up are underdogs -- Maps and Docs come to mind, and I know GMail is making overtures in that direction. But it's hard for them to get funding for it because it's not part of our culture. Maestro's funding is a feeble thing compared to the gargantuan Microsoft Office programming platform: it's a fluffy rabbit versus a T-Rex. The Docs team knows they'll never be competitive with Office until they can match its scripting facilities, but they're not getting any resource love. I mean, I assume they're not, given that Apps Script only works in Spreadsheet right now, and it doesn't even have keyboard shortcuts as part of its API. That team looks pretty unloved to me.

Ironically enough, Wave was a great platform, may they rest in peace. But making something a platform is not going to make you an instant success. A platform needs a killer app. Facebook -- that is, the stock service they offer with walls and friends and such -- is the killer app for the Facebook Platform. And it is a very serious mistake to conclude that the Facebook App could have been anywhere near as successful without the Facebook Platform.

You know how people are always saying Google is arrogant? I'm a Googler, so I get as irritated as you do when people say that. We're not arrogant, by and large. We're, like, 99% Arrogance-Free. I did start this post -- if you'll reach back into distant memory -- by describing Google as "doing everything right". We do mean well, and for the most part when people say we're arrogant it's because we didn't hire them, or they're unhappy with our policies, or something along those lines. They're inferring arrogance because it makes them feel better.

But when we take the stance that we know how to design the perfect product for everyone, and believe you me, I hear that a lot, then we're being fools. You can attribute it to arrogance, or naivete, or whatever -- it doesn't matter in the end, because it's foolishness. There IS no perfect product for everyone.

And so we wind up with a browser that doesn't let you set the default font size. Talk about an affront to Accessibility. I mean, as I get older I'm actually going blind. For real. I've been nearsighted all my life, and once you hit 40 years old you stop being able to see things up close. So font selection becomes this life-or-death thing: it can lock you out of the product completely. But the Chrome team is flat-out arrogant here: they want to build a zero-configuration product, and they're quite brazen about it, and Fuck You if you're blind or deaf or whatever. Hit Ctrl-+ on every single page visit for the rest of your life.

It's not just them. It's everyone. The problem is that we're a Product Company through and through. We built a successful product with broad appeal -- our search, that is -- and that wild success has biased us.

Amazon was a product company too, so it took an out-of-band force to make Bezos understand the need for a platform. That force was their evaporating margins; he was cornered and had to think of a way out. But all he had was a bunch of engineers and all these computers... if only they could be monetized somehow... you can see how he arrived at AWS, in hindsight.

Microsoft started out as a platform, so they've just had lots of practice at it.

Facebook, though: they worry me. I'm no expert, but I'm pretty sure they started off as a Product and they rode that success pretty far. So I'm not sure exactly how they made the transition to a platform. It was a relatively long time ago, since they had to be a platform before (now very old) things like Mafia Wars could come along.

Maybe they just looked at us and asked: "How can we beat Google? What are they missing?"

The problem we face is pretty huge, because it will take a dramatic cultural change in order for us to start catching up. We don't do internal service-oriented platforms, and we just as equally don't do external ones. This means that the "not getting it" is endemic across the company: the PMs don't get it, the engineers don't get it, the product teams don't get it, nobody gets it. Even if individuals do, even if YOU do, it doesn't matter one bit unless we're treating it as an all-hands-on-deck emergency. We can't keep launching products and pretending we'll turn them into magical beautiful extensible platforms later. We've tried that and it's not working.

The Golden Rule of Platforms, "Eat Your Own Dogfood", can be rephrased as "Start with a Platform, and Then Use it for Everything." You can't just bolt it on later. Certainly not easily at any rate -- ask anyone who worked on platformizing MS Office. Or anyone who worked on platformizing Amazon. If you delay it, it'll be ten times as much work as just doing it correctly up front. You can't cheat. You can't have secret back doors for internal apps to get special priority access, not for ANY reason. You need to solve the hard problems up front.

I'm not saying it's too late for us, but the longer we wait, the closer we get to being Too Late.

I honestly don't know how to wrap this up. I've said pretty much everything I came here to say today. This post has been six years in the making. I'm sorry if I wasn't gentle enough, or if I misrepresented some product or team or person, or if we're actually doing LOTS of platform stuff and it just so happens that I and everyone I ever talk to has just never heard about it. I'm sorry.

But we've gotta start doing this right.