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SOCNET  October 2002

SOCNET October 2002

Subject:

[context accounting] re[4]: business cases for SNA?

From:

Rich Persaud <[log in to unmask]>

Reply-To:

Rich Persaud <[log in to unmask]>

Date:

Tue, 29 Oct 2002 07:07:11 -0800

Content-Type:

text/plain

Parts/Attachments:

Parts/Attachments

text/plain (141 lines)

*****  To join INSNA, visit http://www.sfu.ca/~insna/  *****

|  >SNA improves risk analysis in "new business" cases, by identifying
|  >non-obvious topology in emerging markets.   Defensive techniques
include
|  >pre-emptive branding to differentiate new entrant from failed player.
How
|  >is firm or brand value (quantified by market) related to network
identity
|  >vs. product identity?  Addition and subtraction of assets on a  balance
|  >sheet did not account for the network topology of those assets.  How
will
|  >asset topology be made visible to market metrics, so topologies have
their
|  >own markets?
|
|  I would like you to teach more about the ideas expressed in this
|  paragraph.  Pointers?

Not enough for my liking.  A few to get started:

**1998, Effect of Moore's Law on depreciation, for incumbents vs. new
competitors (via HackThePlanet):
http://www.contextmag.com/setFrameRedirect.asp?src=/archives/199806/technos
ynth.asp:
---
"To get your balance sheet right, you need to focus more on the context in
which your assets operate. Information systems used to be relevant mostly
internally~in accounting, process control, knowledge management, etc.But
now the systems' valuations are based on their ability to help you with
external issues~determining customer needs, advertising offerings, locating
new raw materials. So, external factors can also radically change the value
of your assets ...

... local phone companies have depreciated switches slowly, because their
monopolistic positions and skill at regulatory politics gave them the
freedom to defer the pain. As a result, when phone companies look at new
ways of handling communications, they make their calculations based on
balance sheets that assume signal processing is 1,000 times more expensive
than it really is ...

... While the phone companies assume that they need to have switches that
provide lots of intelligence at the core of their networks~to move calls,
handle call waiting, and so on~a new style of communications has developed
that assumes no intelligence in the network. ... users can finance new
entrants into this kind of telecommunications market, by buying intelligent
phone-like devices, in much the way they've financed the progress in the
computer industry over the past two decades by buying personal computers.
New phone companies don't need to raise risk capital and invest billions of
dollars in central office switches to compete with AT&T."
---

**2002, MIT Sloan on strategic implications of IT solution attributes
(effectively, network topology):
http://www.mit-smr.com/past/2002/smr4342.html :
---
"A new applications-portfolio scorecard helps managers assess information
infrastructure before making investments. Six key considerations are each
IT application's role in strategy, whether the knowledge embodied in the
application (say, salaries in a payroll application) is stable or evolving,
how much change will be needed, where the application will be sourced,
whether the data is proprietary or public, and the application's freedom
from conformance defects. Those parameters differ for different functions.
Managers may not need the latest software for a stable function. They may
decide not to purchase a customized package, because it could be out of
sync with the vendor's future software."
---

The scorecard values prospective investments in the context of legacy
investments by the buyer and/or peers.  Note the emphasis on boundary
definitions (proprietary or public), environmental stability, conformance
(network compatibility, including regulatory compliance) and business rule
stability.  None of these scorecard considerations address
features/functionality/benefits.  All address risk accounting.

**2002, Content Peering vs Content Delivery:
http://www.isp-planet.com/business/2002/equinix.html :
---
"... as content providers' business models change to subscription-based or
upsell models (from ad-supported content), they are becoming more
interested in access to the eyeballs owned by the major ISPs.

As a result, these companies are starting to ink content deals in which
both players link their networks, but no money changes hands. Adelson says
the change is gradual but it is occurring.

"For content providers, the value of a peer is based on the peer's number
of eyeballs, not the size of its routing table," Adleson said. "Some
international telcos have an entire nation of eyeballs and are especially
valuable."

Remember, content peering is not content delivery, at least according to
Adelson. But it can achieve the same ends.

"We're seeing Yahoo and Hotmail now peering directly through each other.
Traffic through peering is better than an edge cache because replicating
content from core to core is cheaper and more efficient than replicating
content from edge to edge," ...
---

Public IBX-based peering means Yahoo and Hotmail locate servers in the same
data center, which are then directly connected by high-speed fiber.
"Peering" means they no longer pay bandwidth charges for traffic between
their networks.  It's the equivalent of renting space on a trading floor
located at O'Hare airport.   Public exchange points like Equinix are
"centralized", yet are not subject to the politics of telco "central
offices".  Instead of regulation, they are market-driven and
self-organizing.

Note the link between social topology and network traffic.  Anonymous email
provider Hotmail exchanges a lot of traffic with anonymous email provider
Yahoo.  Interesting. Shouldn't Yahoo users be sending mail to other Yahoo
users? Or to users at various ISPs on the Internet?  Yet enough Yahoo users
correspond with Hotmail users to warrant a peering agreement.  Cost savings
on network traffic that is peered between Yahoo and Hotmail flows directly
to the bottom line of both providers, increasing the cost of entry for
potential competitors.

Should this peering agreement appear on the balance sheet of either Yahoo
or Hotmail?  Consider a hypothetical competitor that tried to peer with
Yahoo or Hotmail, but was rejected.  Would their balance sheet break out
traffic costs to non-peering competitors? What if traffic costs are also
used as attention/demand metrics, to justify new investment?  Have
disclosure and accounting of traffic costs/benefits already been
standardized?

"Unaccounted" value exchange exerts increasing influence on "accounted"
value exchange.

The applications-portfolio scorecard above uses soft/uncounted risks to
prioritize investment for hard/counted returns.

There must be more examples out there.

Rich

_____________________________________________________________________
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