ft.com/techblog

The email has been flowing fast and lurid since I wrote a column earlier this week suggesting that the the software-as-a-service (Saas) business was unlikely ever to be as profitable as traditional software (in fact, one venture capitalist with a lot of experience in the field offered to send me to “reeducation camp.” Can’t wait.)

To recap briefly: I argued that subscription businesses where customers can switch suppliers easily tend to suffer from heavy churn and falling prices. It may be called “software”, but the economics of Saas have nothing to do with the old enterprise software business.

The main argument from readers who have been lighting up my inbox is that I failed to make allowances for all the switching costs companies face when they change Saas suppliers (such as training workers to use a new service,) so there is a degree of customer lock-in. A second argument is that Saas companies can add value to their otherwise commodity-like services by customising them to fit specific industries.

These are fair qualifications, but I don’t think they change the central issue. Maintenance fees are the gravy train of enterprise software: SAP recently said it would raise maintenance fees by nearly 30 per cent between now and 2012. No Saas company is going to be able to do that.

Let’s be clear: I’m not saying the Saas market will collapse in two years (which is what the CEO of Lawson Software told ZDNet Asia.) But I am saying that when Saas becomes a more mature market, the power of customer choice will be a significant factor. Some suppliers will still thrive under these conditions, but they will have lower margins than their predecessors.

Yahoo has failed again to create a compelling social-networking service - announcing the closure of Mash on September 29.

Mash began as Mosh, but changed its name to avoid a clash with Nokia’s service of the same name. It began in beta on September 14 last year and has never been given a full launch.

Mash allows users to create online profiles and also start and change profiles for their friends. It has features similar to Facebook - a newsfeed showing what friends are up to and modules such as games and Flickr photo feeds.

Judging by the Mash blog, development seems to have ground to a halt since January, with no entries since then apart from yesterday’s closure announcement.

Mash users are urged to copy whatever content they have on the service as it will be wiped when it closes.

Yahoo says its 360 service - its previous underachieving attempt at social networking - will be unaffected by the shutdown.

The Silicon Valley company seems to have rejected the idea of a social networking service as an independent entity in favour of ’socialising’ its established services.

“As you may remember, we launched Mash as an experimental profile service with the goal of providing an interactive and social way of connecting with others,” it said in a statement.

“Yahoo has announced we will soon be launching a new profile experience to work across the network, in the effort to make all of Yahoo! more social.”

This is the Yahoo Open Strategy, announced in April, which has similarities and ties to Google’s OpenSocial approach to combating the threats of Facebook and other social networks.

Executives are planning to give an update on the strategy just ahead of the Open Hack Day at Yahoo’s campus in two weeks’ time, where developers will be introduced to its implications.

The App Store has been billed as the secret weapon for the iPhone 3G, a source of third-party content and services that will eventually drive demand for the handsets far ahead of what Apple could achieve on its own (I say “eventually” because, for now, this looks as over-hyped as the launch of the Facebook platform more than a year ago: it is a very big idea, but many of the initial apps have been junk and have done little to prove the real power of the platform.)

So great is the long-term potential, in fact, that Apple’s rivals have been rushing to launch or dust off their own mobile storefronts. On Thursday it was Google’s turn, with an early look at its Android Market (the first Android handsets, from HTC, are due to go on sale from T-Mobile this autumn.) Many important details are still being kept under wraps, but it was at least possible to discern how Google plans to set itself apart from Apple.

Rather than an organised store, like Apple’s, this will be an online bazaar, something much more like YouTube. Google is also counting on its search technology to give it an edge in helping users find their way to relevant apps.

A second point of differentiation looks like being Google’s use of analytics - tools to help app developers get a better sense of where their new mobile “audience” is coming from. As free apps become vehicles for mobile advertising, that data will be vital. With Google Analytics, the search company already has some of the best free tools on the Web.

One vital question is still unanswered: how big a slice of the cake will Google take from sales of paid-for apps? It must surely undercut Apple’s 30 per cent take. Apple has done a clever job making this sound entirely reasonable, the bare minimum it needs to take to cover its costs, but the figure sounds high.

I heard Mitch Lasky, former head of mobile game company Jamdat, say this week that that 30 per cent is roughly what he used to pay Verizon to distribute his company’s games - and we all know how hated the mobile companies are for supposedly using their “closed” networks to levy excessive fees from content producers.

Those nice people at Mozilla, the folk who brought you the Firefox browser, have introduced an empowering instant mash-up feature that anyone should be able to master.

Their Ubiquity application also makes the kind of command-line interfaces that went out with MS-DOS actually seem easy to use in their drop-down implementation.

An explanatory video on the Mozilla Labs blog gives a number of demonstrations of how Ubiquity can be ubiquitous within the browser.

One example: write an email inviting someone to lunch, highlight the address, call up Ubiquity with a keyboard stroke, type a Map command and click ‘Insert’ to add the map that appears into the email. Type Yelp and a review of the restaurant can also be inserted. Type Add and the event is added to your calendar.

Aza Raskin, Ubiquity’s creator, says the service is still a prototype but enabling these user-generated mash-ups amounts to a big win already.

Some of Ubiquity’s uses are also possible through other browser plug-ins such as Vysr’s RoamAbout, but the application is another example of how Firefox is staying one step ahead of Microsoft’s Internet Explorer in the browser wars by extending the possibilities of user input.

Time was the only typing needed in the browser was to write www addresses. With the latest Firefox release, the “awesome bar” now replaces the Google search box, history and bookmarks features in some respects as typing in a keyword brings up a drop-down list of previously visited sites from which to choose.

Microsoft is making progress on other fronts. It has introduced new privacy options in IE8 Beta 2, released today.

InPrivate Browsing, Blocking and Subscriptions makes it easier to control whether IE stores browsing history and cookies and allows users to block sites that monitor their browsing. The feature has already been given an affectionate “porn mode” label by bloggers.

The buzz around femtocells – desktop boxes that boost indoor mobile phone coverage and route calls over a broadband connection – has helped RadioFrame Networks raise an additional $28m in debt and equity backing, bringing its total funding to over $100m.

RadioFrame, which was founded in 1999 mostly by McCaw engineers and executives who left the mobile network operator after it was acquired by AT&T, has spent the last few years designing a femtocell around its own silicon. As a result it expects to be able to sell its petite Omnicell@home device for less than $100 – much cheaper than most rival products.

RadioFrame’s current device supports both 2G and 3G services based on the GSM and WCDMA standards. The company also plans a 4G version that will support both LTE (Long Term Evolution) and WiMax.

Femtocells and their larger cousins dubbed Picocells are effectively mini base-stations designed to extend cellular coverage into homes and businesses where outdoor signals are often weak or non existent. Most analysts are predicting big things for these small devices, provided network operators embrace the technology. In the US Sprint Nextel has been testing femtocells and most operators in Europe have trials underway.

In the latest funding round Hedge fund Plainfield Asset Management joined existing investors who include Craig McCaw, the mobile phone network pioneer. Other investors include Samsung and Ericsson, two of the largest telecoms infrastructure vendors, O2 and Sprint Nextel, both network operators, and two more VCs, Ignition Partners and VantagePoint Venture Partners.

Intel failed at mobile phone chips before, so why should this time be any different? I got a chance to put that question to Intel CFO Stacey Smith at last week’s developer forum in San Francisco.

He had two answers. One was that Intel won’t make its push into smartphones until next year, by which time its new 32 nanometer technology will be in full swing. This should push the Atom processor (which will be hitting its stride in netbooks in the second half of this year) deeper into the high-volume, low-price mobile market: each wafer will be able to produce 2,400-2,500 die, or 400-500 per cent more than the existing technology, according to Smith.

His other answer was that Intel had no competitive advantage the last time it ventured into mobile. It was, as he put it, “just another ARM merchant”.

This time, with a chip based on Intel Architecture, it has the full power of the Intel ecosystem behind it: that means being able to leverage much of the work already done by providers of applications, content and services for existing Intel technology.

Will this be enough? Discussions with handset makers are already underway, says Smith, though devices will not hit the market until the very end of 2009, or more likely early 2010. Intel needs some early design wins to show it is on the right track.

(By the way, if you doubted the importance to Intel of new mobile form-factors, from netbooks to smartphones, you only had to see one chart the company showed at the developer forum: it projected sales of 200m Atom-powered devices in 2012, compared to 300m traditional notebooks.)

I’m always struck, when writing about Windows Vista, by how many PC users there are out there who immediately feel compelled to write in with their own strong feelings on the subject.

These generally fall into two categories: the XP die-hards who view Vista as an enhancement of dubious value they would happily do without, and the Windows detractors who have experienced all the circles of PC hell (it usually starts with a virus and ends in a decision to wipe the harddrive and start again, or a trip to the Apple store.)

It’s always a good reminder of the strong passions technology arouses - or to be more precise, the passions imperfectly functioning technology arouses.

Needless to say, these people turned out in force today when I wrote about Microsoft’s forthcoming Windows advertising campaign and compared the current brand image to a bowl of cold porridge (by coincidence, the Wall Street Journal also reported today that Microsoft had signed up comedian Jerry Seinfeld for the campaign.)

To be fair, my own experience with Vista has been passably good: no driver glitches or speed problems. I’ve also had a good experience with Windows Live OneCare.

But the general tenor of the correspondence I got today was summed up by one writer: spending more to market Vista is like putting lipstick on a pig.

Up to a point. While I understand the sentiment and sympathise with the experiences (yes, I’ve been to PC hell and back), I actually think Microsoft has plenty to gain from overhauling its Windows brand marketing (and to be clear, the forthcoming blitz will be all about the Windows name, not an attempt to boost Vista per se.)

This feels like a case where the perception of the brand is worse than the actual experience. The marketing geniuses at Apple have done a great job of exploiting Microsoft’s recent failure to reinforce the brand, stepping into the vacuum to shape perceptions in their own favour. It makes sense to combat this.

There’s a second sound reason to spend more money on a brand-building campaign. Windows could increasingly come to feel like a burdensome tax on new PC purchases: as hardware costs continue to fall and the perceived value of computing shifts more towards internet-based services, the cost of the PC operating system will loom larger.

Microsoft has to counter that - which is why the forthcoming campaign will play on Windows as a Web and mobile computing brand as well. It’s a valid defence, as long as users can be persuaded that all these Windows environments fit together in some way that is worth more than the sum of the parts.

With widgets popping up everywhere from Facebook to the Chumby, it was only a matter of time before someone tried to bring them to TV sets. Intel and Yahoo obliged today, announcing plans to use a Yahoo software platform and an Intel chip for set-top boxes to do just that (think little pop-up boxes on the TV screen that draw content from the internet to complement the shows you’re watching.)

Will this be any more successful than the many failed visions of TV/internet convergence that came before? Beats me. Yahoo should at least have a strong proposition for the TV industry: widgets would be a great way to drop relevant advertising into TV shows in a way that doesn’t intrude on the viewing experience, which is the biggest challenge they face.

The problem, as always, will be changing the ingrained habits of couch potatoes. At least it makes the internet subservient to what TV does best - carry TV shows - but devising a user interface that will be simple enough to work from a remote control while still giving users the flexibility to draw in the content they want will not be easy.

It is possible - probable, even -  that Apple’s latest iPhone software update was designed to address the bad reception and frequent dropped calls that have frustrated iPhone 3G customers over the past few weeks. But if so, Apple isn’t telling.

An Apple spokeswoman called me Tuesday morning to confirm what was already self-evident:  that yesterday afternoon, Apple had indeed launched an iPhone update. When asked for details, Apple would only say that the update was designed to “improve communication with 3G networks.”

Outside of this vague statement, Apple gave no details about the nature or extent of the problems the improvements were designed to address, or whether the fix had been effective. When asked for these details, the Apple spokeswoman read back the original statement verbatim.

Judging by comments around the blogosphere today, users remain frustrated. Take this comment on the New York Times’s Bits Blog:

“It would be nice if Jobs actually made some statement to help his customers out. We dont even know if this was supposed to be the fix, heck if we go by Apple we still wouldnt know there was a problem.”

Indeed.

Apple has remained characteristically tight-lipped about the reception problems with its much-hyped 3G iPhone. Indeed, it has yet to even acknowledge that a problem exists - a fact that has provoked frustrated responses from some users on Apple’s own support forums. Could that be about to change?

We hear that Apple is close to releasing a software upgrade designed to ‘fix’ the issues contibuting to dropped calls and poor 3G reception on iPhone handsets. Our industry sources tell us that Apple is expected to launch the new software within “the next few days.”

That would be an implicit acknowledgement that at least some of the user complaints about poor 3G performance are justified, although it remains unclear whether problems are truly widespread or whether they are affecting only a fraction of the millions of iPhones sold since the 3G handset launched last month.

Whatever the case, the whole affair highlights something engineers at rival companies like Research in Motion are fond of stating in connection with Google’s forthcoming Android software stack, as well as the iPhone:  People underestimate the complexity of mobile handsets, (cellphone) radio is not simple.

Bottom line for Apple fans: Don’t despair, help seems to be on the way. 

Update: And just like that, Apple has gone live with an iPhone software update designed to fix unspecified “bugs”. It remains to be seen if this is the update our sources were referring to. Apple still has not come out with any public statement about the extent of reception problems on the iPhone 3G, or what it is doing to fix them.