Information Today
Volume 19, Issue 3 — March 2002
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IT Report from the Field •
Keeping an Eye on the Slinky
The SIIA Information Industry Summit offered encouraging signs of hope for the future
by Linnea Christiani

On January 29 in New York, approximately 200 information industry executives attended the SIIA Information Industry Summit, titled "Meeting the New Challenges." The event was sponsored by the Software & Information Industry Association's (SIIA) Content Division, and it addressed key strategic issues identified by the SIIA's online business, e-publishing standards, and digital rights working groups. As such, it attracted companies that publish, distribute, or develop technologies for online content as well as financial firms that fund the industry. It also attracted the senior management from these companies. Nearly 75 percent of the attendees were at a vice president level or higher in their organizations, and 35 percent were CEOs and other company heads.

Peter Simon, chairman of the SIIA Content Division, opened the summit by giving the audience background information about the SIIA and an overview of the program. Following remarks and introductions by SIIA president Ken Wasch, West Group's Michael Wilens gave the keynote speech and used the Slinky Effect, the Double Bubble, and the Three-Body Problem to explain what happened to the Internet economy last year and what could be learned from it. Wilens was followed by a panel of financial experts who presented a rather dismal outlook for funding in 2002.

The next panel included executives from traditional information companies and Web start-ups who discussed what they did to cut costs and survive last year, as well as what their strategies will be going forward. Lunch speakers speculated on the future of the Internet and attempted to shift the program to a positive note. They were followedby an afternoon panel that reviewed new options for packaging and selling content. Finally, the program closed with a solutions showcase that presented content-focused technology selected by an SIIA advisory panel on the basis of innovation, promise, and readiness for the market. This showcase provided further signs that life may be returning to the industry.

Lessons Learned
In his keynote, Wilens reminded the audience of the ways in which the Internet has radically changed information technology in a very short time. He said the Web not only revolutionized online distribution by eliminating the advantage of proprietary platforms and creating standards for technology and business, it also energized product development. As a result of the development of new technologies during the Internet boom, product cycles increased from 3 years to quarters, months, or even weeks. "To remain competitive," Wilens advised the audience, "businesses must get even closer to their customers and plan increasingly shorter time frames."

Wilens used three visual images to illustrate other important lessons that could be taken from the expansion and implosion of the Web economy. The first was the Slinky Effect. He compared the early adopters of technology to the leading edge of a slinky and the bulk of users to the trailing edge, which holds off until the last minute and then jumps all at once. The industry, he said, focused too much attention on the front, which moves more frequently, rather than the back end, which moves in a much bigger jump and has a bigger impact on profits. His advice to the audience was to use the front for directional guidance, but not to lose focus on the back. He used the example of Third World countries: They jumped from no telecommunications infrastructure to ubiquitous cellphones, with no interim step.

The Double Bubble economic model occurs, Wilens explained, when risk-adverse customers (i.e., the trailing edge of the slinky) buy the same product twice on different media and create a revenue bump. When they finally accept a new technology, revenue from other media declines as it did in 2001.

Wilens also advised companies to stay flexible and not shut off options by predicting any farther than 3­4 years out. He described the interaction of content, technology, and distribution in the information industry as a Three-Body Problem and noted that the trajectory is impossible to calculate when three or more objects interact with each other. Browsers affected the development of content unpredictably, he noted, as did broadband distribution, and technology will rule the broadband fight over wireless, cable, and wired line. What is critical, he said, is to be able to respond rapidly to change when it occurs.

The Money Market Outlook
Wilens was followed by a panel of financial analysts who discussed "Outlook for Capital '02: What to Expect from the Money Markets." The consensus seemed to be "not much." Ed Paisley, managing editor of The Daily Deal, moderated the session, which included Paul Noglows, an analyst with JP Morgan H&Q; Pat Kenealy from IDG Ventures; and Howard Tullman, who has founded nine successful companies and financed another eight businesses. Overall, the panelists agreed that 2002 would be another year of triage. It won't be that much harder than last year, Kenealy said, but significant improvement shouldn't be expected before 2003. Kenealy explained that the "back end of the snake is tied" and money is primarily being used to shore up previous investments. Noglows also noted that valuations are becoming more realistic now and Internet companies are expected to reach profitability within 6 months or lose funding. However, the panelists agreed that when money does get freed up, it will go to new opportunities rather than the Internet's "wounded ducks."

Although he felt it was difficult to be more pessimistic, Paisley said that Internet businesses were losing less money and that investments would still be made in enabling technologies, proprietary information, and combination paper and Web solutions. Tullman advised entrepreneurs to have domain expertise (i.e., don't go to school or learn the business on investors' money), to not reinvent the wheel or do something cheaply that shouldn't be done at all, and whenever possible to reuse or deploy modular investments. During the question-and-answer period, the panelists offered additional advice to the audience about content investments. The distribution game is over, according to the analysts, and publishers were advised to go where the eyeballs are now. They were also told that crummy technology is OK if it's easy to use, but crummy content is not. Kenealy also encouraged verticals in niche markets—customized products and solutions that allowed disintermediation or direct access to information by customers.

Survival Stories
After this rather bleak financial outlook for 2002, a panel of executives from information companies described how they survived the downturn last year and what their strategies would be going forward in a session entitled "Rethinking the Information Company: Gaining from Adversity." Moderator Lee Greenhouse, president of Greenhouse Associates, positioned the speakers to his right, from traditional to Internet start-up. Included were Lisa Mitnick, a senior vice president with LexisNexis; Dan Schimmel, president and CEO of OneSource; and John Wickersham, chairman of NorthStar Travel Media. Martin Nisenholtz, CEO of New York Times Digital, and Jack Lynch, CEO of BigChalk, represented the nontraditional companies in the group.

Despite the diversity of company types, there were more similarities than not in theirsurvival strategies. All had either established B2B subscription revenue or acted early in 2000 to diversify their business models. At the same time, they cut costs by reducing personnel and eliminating nonessential businesses. Sales efforts were redeployed to solutions selling, or from the consumer to the business market. Productivity and other efficiencies were achieved despite the cuts by investing in infrastructure.

In the case of BigChalk, a digital learning site, Lynch noted that the company had changed its complex B2C2B model to an institutional-based subscription model and had acted early in 2000 to curtail its growth and shrink the company significantly. Nisenholtz said New York Times Digital had also acted early, and as a result isn't down on therevenue side. It reduced its head count by 40 percent and eliminated redundancies by working more closely with its newsroom. He felt that this coordination along with infrastructure investments actually improved the quality of the Web site and increased its usage.

NorthStar Travel suffered revenue lossesfrom the downturn in travel ads in 2001. However, like Lynch, Wickersham reduced staff and adjusted the company's business model to refocus on the corporate side of the business rather than direct consumer markets. NorthStar Travel also made infrastructure investments as it moved production from Reed Elsevier, resulting in more flexible data.

In contrast to the nontraditional businesses, OneSource and LexisNexis only needed to make tactical adjustments to their long-term strategies to maintain profitability last year. Schimmel noted that OneSource's business has always been focused on subscriptions from Fortune 500 companies. The company's strategy was to drop its investment in the lower end of the market and restructure the sales force to focus on targeted verticals. Like OneSource, Mitnick said that LexisNexis had already moved to a subscription model and wasn't hurt as much asother traditional online services by drops intransactional revenue. She also felt the company was protected by its diversified markets. As some sectors contracted, she said, others grew, including risk management, the federal government, and law enforcement. LexisNexis also made an investment in salesand was able to take advantage of the downturn to pick up market share.

In general, the panelists viewed their position as survivors in a positive light. Theyfelt there was less competitive noise in their channels now and more opportunity to take market share. They also see now as a great time to make acquisitions and hire talented people. Mitnick noted that LexisNexis plans to hire 200 employees in the next year and considers it an opportunity to bring in new, innovative talent. LexisNexis will also invest in its global infrastructure and content that touches customers.

OneSource expects to invest in customer service, content integration, acquisitions, and new technology solutions in advance of the market. Nisenholtz noted that there are very few pure-play dot-coms left and that New York Times Digital is focused on becoming the best journalistic product on the Web. It plans to diversify its revenue models this year and use the Web to drive print sales. NorthStar will develop new tools for travel agents, and BigChalk will use XML and other Web technologies to reduce its cost structure.

In all, it's an encouraging sign that these companies plan to invest in infrastructure, content, and product development going forward. The crossbreeding of dot-com and traditional cultures could also produce some interesting results if conservative companies with money—like LexisNexis—start addingnew and innovative talent. It could also improve their ability to heed Wilens' advice to shorten product cycles and respond rapidly to change.

The Next Stage of Evolution
During the luncheon program, participants were treated to a panel of visionarieswho discussed "Internet Redux—What's Next for the Net?" The session was moderated by James Kollegger, CEO of Genesys Partners, and included William Day, CEO of; John R. Patrick, president of Attitude, LLC; Jim Rutt, former CEO of Network Solutions and CTO of Thomson Corp.; and Amy Harmon, a technology writer for The New York Times.

Kollegger noted that in the last year the Internet had not only been hit by the perfect storm, but visited by the four horsemen of the apocalypse as well. Nevertheless, the panelists were all optimistic about its future and viewed the Web as still in an early stage of development. Some of the key drivers they expect to affect the next phase are wireless portability, peer-to-peer access, user empowerment, and the ubiquitous growth of communities serving specialty niches.

Rutt opened the discussion by placing the Web at the "end of the beginning." He likened the Internet to a new ecosystem opening up and compared it to both the Cambrianexplosion 500 million years ago when phyla came into existence and also to the introduction of the PC in 1982 when many new forms (i.e., applications) were created. The basic categories are laid down early, he said, followed by an explosion of species that overpopulate them. Eventually, Darwinism takes over and one winner per niche emerges.Dominance, he said, is typically established during climatic changes such as an ice age, or in the case of PCs, when the switch from DOS to Windows took place. His advice to participants was to configure their strategies to take advantage of coming climatic changesthat will affect Web dominance, such as broadband, portability, and new classes of user interfaces—such as voice and mental telepathy—that may replace the mouse.

Patrick also described the Internet as only 3 percent of the way to its potential and felt that it was not being fully exploited by companies to improve their customers' experience. How often, he asked, do you have to phone a company during business hours for information that should be accessible from its Web site? He believes both Internet portability and customer empowerment will change the game. Day took a long-term view and pointed out that the Internet continues to grow and people are spending moretime on it now than on traditional media such as TV, print, etc. Harmon also noted the growing importance of communities, peer interactions, and trading on the Web and stressed that publishers should capitalize on these trends rather than fight them.

When asked what was next, all of the panelists thought that wireless access would play a major role in changing the Internet, especially when combined with instant messaging. Right now, Patrick told the audience, the Internet is where your PC is. In the future, it will be where you are. Harmon pointed out that many companies are waiting for the third generation of wireless to act. However, she said, transaction-based notices, such as a bank deposit clearing or other notifications, such as airline flight delays, are of high value to users and do not require much bandwidth. There are also unregulated communities springing up that are expanding the range of wireless by linking and sharing access.

Both Rutt and Patrick thought a stable form of user identity or digital authentication would also be needed to allow content to flow freely across services and devices as well as to avoid copyright problems and viruses. Overall, it was interesting to speculate on the applications and services that might be developed once users can access information or send messages by mental telepathy from anywhere on the globe or while performing any task.

Content Slicing and Dicing
The last panel discussion of the day, "Content E-Commerce: New Approaches to Packaging and Selling Content," broughtthe audience back to the more immediate concern of how to facilitate broader distribution of content and focused on delivery, protection, and pricing issues. It was moderated by Scott Edwards, SIIA's vice president of Anti-Piracy and Content Programs, and featured Robert Bolick, McGraw-Hill Publishing's vice president and director of new business publishing; Thomas R. Diaz, senior engineering manager for Adobe Systems' eBook Development Group; Brad Gandee, ContentGuard's XrML Standards Evangelist; and David Sidman, CEO of Content Directions.

Sidman opened the discussion by making a case for assigning Digital Object Identifiers (DOI) to all content. The DOI is an unique identifier that, he said, empowers the slicing and dicing of content by providing permanent routing to it on the Internet and eliminates broken links when URL addresses change. According to Gandee, XrML standards also support the free flow of content by providing a mechanism for the owner to get paid. XrML embeds rights information at the document or object level and thus allows usage rules and business requirements to go wherever the content goes. DOI registration is available now through Content Directions, Sidman noted, and is currently being adopted by the scientific journal sectors. XrML and Onyx standards are also available, he said, but a layer of integration might be needed. Diaz reported that Adobe is currently developing such a layer and is designing systems that use both rules and DOI. He also said that the underlying digital rights management systems and technology are now both functional and secure.

Bolick represented the publishers' perspective on the panel and provided examples of business models that McGraw-Hill Publishing has used to sell content on the Web. He pointed out that, using DRM, the company has successfully sold subscriptions of medical texts on the Web that have not hurt its print sales. A timely book on post-traumatic stress was also successfully marketed and sold to consumers as an e-book after the September 11 attacks. The key to making money with e-books on the Web, he believes, is getting more titles up so users have more choices. However, he also noted that more investments in digital asset management systems are needed because production and distribution systems are still not optimal for re-purposing.

Content Solutions
The program closed with a Solutions Showcase that reviewed eight solutions selected by an SIIA advisory panel on the basis of content focus, game-changing potential, stability and promise, readiness for clients, relevance to business-professional information markets, and balanced distributionacross the supply chain. They coveredeach sector of the create-package-distribute-use content supply chain and fell into two categories: 1) solutions to reach and keep customers (accessibility, value-add, personalization, enterprise integration) and 2) solutions to achieve operational improvements (monetization, protection, organizational effectiveness).

The following solutions were described by representatives from each company:

  • OuterForce Systems—A production-process-management system for media and professional publishing that integrates resources and work flows

  • Sealed Media—A digital rights management solution that offers persistent protection via client-side technology at the point of consumption

  • ExactOne—A data access and integration solution that allows real-time access of data from internal and external sources as well as integration of disparate data formats

  • Clear Forest—An information-extraction engine that adds automated XML tagging of events, facts, names, etc., to unstructured data and provides analysis and navigation tools that illustrate relationships and link documents|

  • Context Media—A content asset management solution that allows publishers to aggregate, package, and deliver digital assets

  • Digital Owl—Information management application services for managing licenses, distribution, and usage tracking of premium information within a corporate community

  • Next Page—Peer-to-peer business networking that facilitates communication, collaboration, and file sharing across organizations

  • NewsStand—An Internet delivery solution that offers digital content to subscribers in its original context and provides DRM protection, customer billing, and support

Signs of Life and Rebirth

Early on in the program, speakers referred to the audience as "survivors" and set the tone for what would follow. It conjured up an image of dazed victims trying to understand what hit them, searching through the ruins of the dot-com explosion for signs of life while making plans to rebuild more intelligently—not unlike the city where this program was being held. By the end of the day it seemed clear that the knowledge, technology, and talent needed to rebuild the industry are, in fact, available. Moreover, eventhough funding won't improve until next year, the survivors seem willing to make investments they need to grow their businesses. Another positive sign is that Internet and traditional companies seem to be learning from one another. Internet companies are adopting subscription business models and traditional companies are implementing Web technology solutions. Success may come from the crossbreeding of these cultures. So when the slinky jumps again, the industry could be ready and positioned on the right step this time.

Linnea Christiani is a content-licensing and business-development consultant with 15 years' experience in the information industry. Her e-mail address is

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