October 11th, 2008
Tim Bray on surviving the tough times
Image via WikipediaTim Bray, director of web technologies at Sun Microsystems gave what I believe to be the most practical advice I’ve heard so far for those in startups looking forward. Speaking at FOWA, Tim’s blunt view is that we are headed for tough times but that should not blind people to the downside. Instead he offered positive steps that people can take right now. Among the nuggets he offered (as editorialized):
- Capex style applications and projects are a no=no at a time when cash is king. They simply won’t be funded.
- Consider innovation for regulatory technologies. My colleagues believe we need less rather than more. Tim shares my belief that we will see a slew of new regulation. Therefore, offering technologies that improve transparency will stand a good chance of adoption.
- Build something for yourself. Tim asserts that some of the best technologies are those that were designed to solve a problem that mattered to the individual. That was the genesis of FreeAgent Central (disclosure: I have a small investment in the company.) Time and again I hear that users love the service because it is built for their needs as freelancers.
- The web is heterogeneous so get over whatever your personal technology religion might be. It doesn’t matter and nobody except you cares.
- Contribute to an open source project. OSS are full of holes but if you start to contribute, through bug reports, code or documentation, your reputation will spread. Tim says this is one of the best ways to become known.
The highlights of Tim’s talk (about 13 mins) are here and I have added comments at each of the relevant points so you can concentrate on the things that are important to you.
October 10th, 2008
Seesmic fires a third of staff as recession bites
Loic LeMeur, CEO of Seesmic has announced the company is reducing its headcount by seven people. That may not sound like a huge number but as LeMeur says in the video announcement:
…the longevity of the company is obviously of significant importance - and thus we must reduce costs now in order to establish Seesmic as a solid business and pursue success of the company for years to come.
As recently as June, Seesmic raised $6 million in a Series B funding round bringing the total funding to $12 million. Earlier this evening I called LeMeur:
“We’ve cut anything that’s not core to innovation - marketing, international and design. We are getting back to concentrating on developing a video conversation tool. What changed is that revenue will be much tougher to get, especially advertising. We needed to adjust to ensure we don’t need to raise additional funding. We’ve been extremely careful and it is entirely wrong to say we’re running out of money. People will ask why we fired staff. Seesmic need lots of time to develop and in this economic climate that means conserving resources. There was no pressure from investors, in fact I was pro-active and went to them to explain the situation. It was a decision I took based on what I believe is happening in the market. People should expect this to happen but we are now very well positioned to move forward over years to come.”
October 7th, 2008
Seesmic snags Washington Post
Just after tonight’s McCain/Obama debate ended I received a Tweet message from Cathy Brooks, head of business development at Seesmic telling me the company has snagged the Washington Post as a customer.
Seesmic has developed a ‘white label’ version of its service for the Washington Post’s political blog, The Fix. By the time this is posted, the site should have gone live. If not then shortly thereafter.
I’ve long held the view that commercial deals of this kind are one of the primary ways for video services like Seesmic to generate revenue so it’s good to see they’ve finally got their ‘enterprisey’ act together with this landmark win. From The Fix:
Thanks to this cool technology, you can offer your very own video comment/rebuttal or go the more traditional route and tell us who you think one in the comments section below.
In other Seesmic news, British actor and comedian John Cleese is now on Seesmic. His posts will amuse all those who are Cleese fans, as will his responses in this medium.
October 6th, 2008
Startups listen up: you’ve got a pricing problem
Just about every new product coming to market is being offered as a service rather than packaged software. But pricing remains something of a mystery. A while back, I started a spreadsheet that plots price points for different saas accounting offerings. At the time I concluded that no-one has figured out a viable model that could be generalized for the whole market. Despite it is far from complete and out of date, I believe the same still holds true.
What’s more, economic factors will bring the topic into sharper focus as the anticipated recession forces enterprises to evaluate capital IT investments. Check out what happened to SAP earlier today to get a feel for what is happening. That should be good news for saas vendors but is it?
Phil Wainewright speculates that Zoho may have developed a model that allows it to take advantage of the freemium approach such that it can outgrow Salesforce.com. In one sense that doesn’t surprise me. The SMB market at which Zoho is aimed is huge and in marked contrast to the upper mid-tier and above that, until recently has been Salesforce’s focus. Its pricing reflects its focus with the professional edition coming in at $65/month/user for basic SFA, call center and 10 custom tabs.
At first glance that sounds enticing but a number of customers have told me that to get ‘real’ value, they need to be paying upwards of $100/month. Even then that doesn’t sound bad compared to enterprise on-premise pricing which can easily run the equivalent of $200/month for the license fee and then a further $44 for maintenance and support for CRM packages. On that basis, the saas solution is still cost effective after three and a half years before tasking into account data center and infrastructure costs.
That argument doesn’t take into account the relative simplicity of today’s saas offerings compared to their more mature on-premise cousins. That’s an argument for another day. For the purposes of this discussion, I am assuming relatively straightforward functionality for an SME. In other words, the vast majority of the market by volume. Back to the plot.
But then along come companies like Method Integration telling me they can offer CRM style integration to QuickBooks as a service for $45/month for the first user and $20/month for subsequent users. That’s a pretty good deal but I still think it needs to come down. QuickBooks can be readily be used by companies trading up to $20-25 million a year without much trouble and has the benefit of a low cost add-in payroll. But adding in say 20-30 sales people using Method is going to add $425 to $625/month to the customer’s bill. Less than Salesforce.com but will this type of business fork over these amounts of scarce cash? I doubt it.
Just as the number of even $10/month /user services can rise rapidly when scaling to hundreds or thousands of users, this form of flat pricing seems doomed to survive except for all of the smallest or niche saas offerings. Price breaks will have to be metered into the charging equation at the very least.
Already we’re seeing pressure build. Only today, Caspio, which provides a ‘do-it-yourself database for rapid web application creation’ announced an effective 50% price reduction, starting at $39.95/month for small businesses. From the release: “Unlike other offerings which charge per user and create a formidable cost to businesses, Caspio allows any number of employees, partners, members or customers to access web applications at no extra charge.”
On-demand/saas systems are opening up a world of opportunity for both buyers and sellers. Custom apps at affordable prices and a cornucopia of choice upon which the SME can gorge are but two of the alluring factors that should drive growth. But when it all comes together, if the cost is too high in aggregate then those same SMEs will make the same tough choices their larger brethren are making. That’s why prices need to come down further.
The volume is there for any entrepreneurial vendor to have a good shot at achieving decent market share. But it will require invention in business models and a willingness to trade something other than direct cash.
October 3rd, 2008
Enterprise 2.0 and business collaboration
Update: I hit “publish” before the article was completely finished, so I’ve added some images and updated some links. I can’t pull the post without it leaving a trail behind it, so I may as well just own up now and say, “whoops, sorry”.
GroupSwim Collaboration, in a nutshell, is a SaaS social and business collaboration tool, solution, application - whatever you want to call it. With “Collaboration“, it’s a hosted service by GroupSwim which could well be used as a replacement for SharePoint. Although it doesn’t have all the features of SharePoint, it still works extremely well, if not better, than SharePoint in small to medium enterprises.
There are many key features of Collaboration: the main one is that it appears in forum and group form. It can be a central point of contact from a customer’s perspective to get in touch with after-sales care. With forums and groups, even wiki functions for small enterprises and businesses, there are some obvious similarities with Google Groups with some exceptions. One person can be part of different groups, and with AJAX and Web 2.0 (or as it’s an enterprise web application, Enterprise 2.0) style for the site, it boasts over-over tabs to get more detail on something before you look.
It can be served along side these features as a document repository. You can directly upload to a group, forum or wiki, attach to discussions you’re having with work colleagues or consultants, clients and customers, or email them in using your unique GroupSwim email which is provided for you.
But… the documents aren’t stored in GroupSwim. Everything’s taken through the wires to Amazon S3 which significantly increases repository security and decreases bandwidth costs.
Every file has a unique page - just as SharePoint does. However what interested me was the enterprise social network feel to it. It has a version tracker and a download counter, whilst behind the scenes it’s being indexed word for word, byte for byte. Because not everybody had the available plugins for viewing the documents, they use an API available from Scribd which provides the ability to access and preview those documents in full.
September 30th, 2008
Zoho Marketplace: awesome
Awesome is not a word I use often but when I saw Zoho Marketplace, the sound of my jaw hitting the desk was audible in the next street. What better way to get its collection of services working as the hub for other services that might build from Zoho products? Larry Dignan offered this critique:
The bigger question is whether Zoho’s Marketplace can attract more developers to its ecosystem. Salesforce.com’s AppExchange has been a critical cog to its development and strategy. Zoho could do the same. For now, Zoho says its market “is not big enough for vendors to make a living and not small enough to ignore.”
It’s a good point. The way I’m hearing it, Salesforce.com’s marketplace hasn’t been super successful for the developer community. Zoho might prove different. It is appealing to a much broader swathe of customers than Salesforce.com which increasingly is trying to go up the enterprise foodchain. Zoho firmly positions itself as an SMB player so potentially has a huge global audience. Larger companies that develop solutions based around Zoho might choose to use the marketplace as a way of sharing what they have learned. If that happens then goodness gets spread around to much broader audiences. However, Zoho Marketplace still has to find its way in the world and if companies don’t ‘get’ the value of what Zoho is offering then it will have failed.
In the meantime, my colleague Craig Cmehil also thinks it’s awesome, describing Zoho Creator - the place where you can develop apps for Zoho and the foundation for the marketplace as:
For quite awhile I guess you could call me a “ZC Pusher”, it was like the little kid selling lemonade outside of their house for 5 cents or something like that. Zoho Creator captured my attention and on many levels still holds it fast. What started as me pushing for a roadmap, turned into a relationship with the Zoho folks that has been simply awesome over the years. They are responsive and interactive so it made it easy working with them.
In closing, Zoho never ceases to amaze me with its speed to market, its inventiveness and downright utility. It makes you wonder why the Microsoft’s of this world appear like lumbering elephants in all senses of the word.
September 29th, 2008
Zoho bitterness at the credit crunch…and a solution
I have a lot of sympathy for Sridhar Vembu. CEO of AdventNet, the parent company behind Zoho. His last two posts reflect much of the fear and frustration behind what I am hearing in the startup world. But amid the gloom, Sridhar offers a glimmer of hope. A few snippets. From We’re all Japanese now:
…don’t confuse libertarian economics with the “free market capitalism” claptrap coming out of the Wall Street financial complex; when Wall Street gunslingers touted the miracles of “capitalism”, what they really meant was their government-conferred right to borrow easy money from the Federal Reserve, leverage themselves up 20 to 1, even 40 to 1 while speculating with that easy money, paying themselves tens of billions collectively in bonuses, finally inflicting hundreds of billions, soon to reach trillions, of losses on the taxpayer when those speculations predictably failed . The Wall Street version of financial capitalism has about as much to do with real savings and investment led capitalist wealth creation as alchemy has to do with with chemistry. The alchemy analogy is particularly appropriate: much of the Wall Street “business model” was really transmuting pools of highly risky, toxic mortgages into nearly risk-free “golden” securities.
That’s one of the best summations I’ve read about the mess that is Wall Street today. About the only thing it misses is the extent to which Wall Street financial engineers managed to swell their pockets by manipulating the tax system. But that’s for another blog and another day. As I’ve said elsewhere, even relatively simple control questions could have surfaced the problem. But they didn’t. This is the myopia that develops when money seems to be pouring from the skies. We eventually become blinded by the golden glow of a seemingly never ending stream of funds.
Roll back one post to Sridhar’s Surviving the financial crisis:
It seems clear that we are heading into another nuclear winter, this time led by housing and financials. It is going to impact the tech industry, but this time as suppliers not as direct bubble-blowers. Companies that have a strong balance sheet (we prefer zero debt), and the ability to adapt and flex will survive the wreckage. Customers are hurting, so attractive pricing is a must - there is going to be price deflation in tech. These are the rules we live by at AdventNet & Zoho.
Over the weekend, Jason Calacanis caused something of a stir with his long email newsletter that was posted to Silicon Alley Insider, only to be torn down later (and at Techcrunch) Calacanis predicts that 50-80% of startups will fail in the coming 18 months and that the ‘depression’ will last years. To his credit Jason offers a menu of sound advice - everything from belt tightening to hiring the best and generating revenue.
It is this last part that is a worry. Many of the startups we’ve seen in the last 18 months have been headed down the ad supported route. I’ve never believed that’s sustainable except for the very largest sites. The money simply isn’t there to go around.
By definition, that means very few survivors, huge cash burn for those that are building mind share but ultimately a two finger salute to the ‘build it first, figure out business model later’ brigade of VC buccaneers. If you have any doubt then check what the market thinks about Google’s near term prospects. (Hint: it’s trading at a 52 week low and as I write this, is off some 5.6% from the previous close.)
What about enterprise startups? Zoho is the poster child for bootstrapping, taking on the big boys and still managing to do well. Zoho has the benefit of having lived through a past storm, learning from the lessons such experiences deliver. The same goes for Jason Calacanis (and you wonder why he raised all that money?)
Survival will mean a sharpening of the price pencil. Services that today seem modest at $20per month compared to on-premise pricing will come under pressure. If Zoho can do it, so can you.
September 26th, 2008
Startup essentials: Dr. Pepper, coffee and accessories
One of my Irregular chums started a GoogleGroup thread about what you need in a job that requires you work from a home office. The same can be said for the 1-3 person startup. The conversation immediately became a discussion of the merits or otherwise of different coffee making facilities and cold drinks. Given the coffee culture associated with startups (I know one guy who roasts his own blend) it seems fitting to let you in on Irregular secrets. After all, some have worked at startups and many of us are micro business people.
Jeff Nolan kicks off recommending a Jura Capresso S9 espresso machine, 60″ plasma and a series III tivo HD. I’m sure there’s method in Jeff’s thinking, I’m just not sure how a startup person would find time.
Zoli Erdos always takes things that little bit further and suggested a poolside cocktail bar. Of course you need the pool first.
Jason Wood who has recently made a return to blogging after a nine month hiatus then turned the conversation to the merits or otherwise of Dr Pepper. As a Brit I find this beverage the closest thing to vomit inducing since the days when my mom used to force feed me with cod liver oil. Not the capsules I might add but the real McCoy. I understand Dr Pepper is an iconic drink in the US and Jeff quickly chimed in with:
I was thinking of you last night when I was swigging my diet Dr. Pepper… “damn that Jason Wood for shining a light on how good Dr. Pepper is!”
Not to be outdone, Bob Warfield offered these pearls:
“DiDip”, as we used to affectionately call it in my college days.
Another fine Texas product, and, like anything else, it’s worth straying from the mainstream favorites to see what else is out there. Try IBC root beer or Big Red, for example.
Sounds like a handy fridge in that home office is helpful too.
That’s one thing I can help with. I found a great second hand bottle bar. The only snag, you have to haul it over to the US. Bob also offered culinary tips on making your own root ginger ale, a personal favorite of mine. While on the topic of Dr. Pepper, Vinnie Mirchandani came back with:
I am surprised Brian Sommer allows any shipment of the beverage to go anywhere but to his house…I think he likes the sugared version though.
When I went to school in TX it had a cult following. I lost interest when some smart ass twisted the jingle to “I am a pecker, you’re a pecker too”
By this stage I was feeling like I was being well and truly peppered (sic) but fortunately, David Terrar came to the rescue with:
No thanks on the Dr Pepper - I actually identify more with the Matt Albie character in Studio 60 - constantly wired with a Red Bull in hand whilst working. Which leads me on to the coffee - I had a Jura Impressa (personally imported from Switzerland) for a couple of years but couldn’t find anybody to maintain it, so gave it to a friend back in Switzerland. Currently got a Siemens T55 (was £600 - about $1,100), which is a badged version of the original Gaggia Synchrony. The outfit that services it says that we drink more coffee than any of his industrial clients.
Out of the blue, SAP’s Mark Yolton chipped in via Twitter saying:
@DT = I vote for diet Dr. Pepper as the best thing in the world, in case my vote counts among the Irregulars … and “Blue Bottle” coffee.
Just when I thought the conversation was taking on a real shape, Vinnie comes back with:
Craig (Cmehil), you could always drink the HP ink-Koolaid, At $ 5,000 a gallon it is supposed to be pretty damn smooth :)
Ever the man of wise words, Sig Rinde brought this rigorous discussion to a close with:
Wow, the “carbonated-sugarbomb subculture of telecommuting”… hope
there is much running and cycling happening to burn all that off!No, ample supply of Badoit or San Pellegrino and Rosé should suffice.
And espresso of course (being lazy I do Nespresso).
So there you have it. The collective wisdom (ahem) of the Irregulars comes down to Dr. Pepper and whatever coffee machine your budget can afford. Still, I was a tad disappointed that we didn’t hear from Thomas Otter. In my opinion, he has written the definitive article on the topic: Simplicity, elegance and the Java bean. It’s a clever piece that ties this topic very neatly back to enterprise software.
What beverages would you recommend the aspiring entrepreneurial startup?
September 24th, 2008
Enterprise CRM “as in real life”
Last week I was told of the merging of HearMe, a leading desktop video/audio conferencing suite, and SugarCRM, an open-source CRM platform for improving relationships with customers; obviously really, that’s what CRM does.
Having a platform which allows customers to communicate with the providers of service is a massive improvement to after-sales and pre-sales service. Without these, the customer can feel alienated and without guidance; something an enterprise really wouldn’t want to happen. But by using a CRM solution to indentify customers, acquire customers, but also retain customers is something vital to an enterprise strategy.
CRM is evidentially popular in enterprise and business processes, because it’s a vital way of gaining and retaining customers. Not only that, having an audio and visual solution which complements the CRM literally gives customers a friendly face to be helped, guided and assisted where and when needed.
SugarCRM, even with its inappropriately frivolous name, seems to be unique to some extent by offering this to its customers. By integrating a video conferencing solution with a customer-relationship management solution creates an all-round service which you could only usually get if you acted like a total luddite on the shop floor.
HereMe has essentially taken off the front panel of itself and merged into SugarCRM, like a 30th-century DNA fusion experiment. The customer can now launch a meeting with a sales representative as well as share documents, such as a user manual or product factsheet with the customer.
By enhancing human interaction with voice and speech, text on screen and video, this solution can ease the customer through their purchases by having someone there to reassure them in what they want and need.
September 22nd, 2008
Smart Turn: blowing up inventory management cost
I recently spent time noodling around SmartTurn an on-demand inventory and warehouse management application. I also spoke at length with Jim Burleigh, CEO and Richard Yim, VP products and marketing.
Inventory and warehouse management is at once complex and costly, especially for tier 2 companies that have limited resources. An Aberdeen Group report published in late 2007 identified significant gaps in performance between best in class that make good use of technology to keep labor costs down and what they term the ‘have nots.’ An important barrier to adoption has been the high cost of traditional solutions. SmartTurn addresses this problem with a simple pricing model of $500 per warehouse per month, regardless of users and the functions they need.
That may sound too one dimensional to be successful in a world where we are accustomed to seeing multi-tier pricing but in the world of warehouse management software, (WMS) it makes perfect sense. It is impossible for instance to know with certainty how many users will be required for a given environment and therefore per seat pricing isn’t a viable option. Per warehouse pricing is much easier to understand yet also allows customers to share information with anyone they need to without hitting a licensing problem.
Burleigh asserts that the WMS market of today resembles the CRM market of 1999, a time when he was employee number six at Salesforce.com. The industry analysts have yet to be convinced there is enough uniformity in the market to allow for a saas offering but as Burleigh says: “With over 100 customers and 30 employees, we’ve proven them flat out wrong.” SmartTurn has addressed naysayers early concerns by providing a strong interface to bar-code readers, a staple tool in the warehouse environment. 
SmartTurn won’t be suitable for very large facilities. Instead, it is positioning itself for networks of facilities that are likely to be 200,000 square feet or less operated by the lower half of tier two down to tier four operators. It is what SmartTurn calls the ‘dark spot’ in the supply chain, that traditionally exhibits low levels of automation. Industry wise, it is better on the sell side of logistics and in discrete manufacture and FMCG.
SmartTurn solves the problem of communications within the network of tier two to four facilities by point and click permissions granting. That means the outbound shipment from one warehouse automatically becomes the inbound shipment to another in the network. At a stroke, this eliminates much of the errors that arise where manual systems are deployed.”That’s a natural by-product of having a multi-tenant system,” says Burleigh.
At a more general level, I was concerned to discover how SmartTurn plans to make the saas model work, given the nature of the solution is more attuned to a traditional sale with RFP’s, bag carriers and the like.
Burleigh and Yim insist the model works well because they can afford to turn to prospects and offer then a 30 day trial for free. “We’d rather let them try the software for themselves than go through some 50 or 100 page RFP. At this level, it either suits them or it doesn’t,” says Burleigh. Yim adds that: “Many companies we come across are frustrated they cannot get access to the technology so having a saas offering at $500 a pop with nothing to install, it’s easy for them to get going. Right now we’re growing organically within large companies too. There is so much unattended need out there we can have a very good business with what we’re offering.”
I like what SmartTurn is doing. This is a piece of the supply chain pie that has long been ripe for a radical injection of innovation, especially for the beleaguered tier two and under players. Attending to the basics that WMS should address with a saas model that tears down the barriers to adoption while offering collaborative opportunities is a great place to be. It sucks cost out at the point where the chain is mostly likely to be stressed. That’s genuine goodness and always welcome.
Dennis Howlett has been providing comment and analysis on enterprise software since 1991. See his full profile and disclosure of his industry affiliations.
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