Software Startups

From the abstract of an article by MIT Sloan Management Review :

For years, startup software companies have assumed that bringing a product to market first and then investing more than their competitors in sales, marketing and product development was the road map to a winning outcome. However, a new study charting the common characteristics of both successful and unsuccessful software companies claims that, on average, winners are not first to market and do not spend more on sales and marketing or product development. Rather, successful companies become large, profitable businesses for a variety of unexpected reasons.

A key finding is that sales-force productivity is an excellent predictor of long-term success. Sales-force productivity is the critical differentiator, says Crisan. In successful firms, sales forces are 80% to 120% more productive than in unsuccessful ones.

Moreover, the authors found that, on average, total sales and marketing expense had no relationship to long-term company success. Successful companies spent about the same on sales and marketing as companies that failed. In fact, operational research conducted with Jim Maikranz, former senior vice president of sales at SAP AG, and Michael Krupka and Jeffrey Schwartz, both managing directors at Bain, has led the authors to conclude that sales success is not about how much a company spends.

Its about developing a finely honed, repeatable sales message that will resonate with customers, Crisan points out. Only after this has been achieved can a software firm effectively grow both its sales and its sales organization.

The authors [also] suggest that new software firms should emulate the tactics of successful ones in several ways. For example, they advise companies to build products to solve a well-defined customer problem; to charge a high, sustained initial price to reflect the value being provided; and to limit product complexity to only essential features. They also suggest that a sales force be developed with a targeted industry expansion in mind, only staffing fully when a company can articulate a clear, repeatable sales message to its customer base. The common traits for success, say the authors, can be used as benchmarks to gauge a companys progress.

Opsware Interview

Forbes has an interview with Marc Andreessen and Ben Horowitz of Forbes, which according to Forbes, “makes software to help large corporations manage their information technology operations, has emerged quite the technology phoenix.” Excerpts:

Horowitz: As companies move to web-based computing they get a lot more servers, which are difficult to manage and control. All kinds of problems can arise–security, quality and worms. There is a huge cost to managing all of the new software and equipment. Opsware helps to systemize all of that by automating the data center. Think of it like automating an auto-manufacturing shop. There are huge benefits, but it is a comprehensive effort.

Andreessen: Organizations spend hundreds of hours and hundreds of thousands of dollars installing and implementing huge servers, new Web sites and applications. They have to continue to do that, but they also have to clean up the mess of the ’90s. There is a need to cut costs, improve security and build a platform for the next five to ten years. There is a constant need for new systems and new software. People who spend a lot of time following where technology goes understand what we do.

Andreessen [on Tangram, which Opsware acquired recently]: It’s like the flip side of what virus scanners do. Norton hunts down the 6,000 potential viruses you might have. Tangram hunts down the 30,000 software products you might have on your machine. The top corporations have hundreds of thousands of computers. Big organizations with 30,000 to 50,000 employees have 5,000 to 10,000 servers. Odds are in the 1990s they completely lost track of what they have or what [these machines are] running. How many copies of Oracle or Microsoft Office do I have? Are programs like KaZaa [free music sharing software] on my network? Tell Tangram what software to scan for and it will find it. If you want to prohibit people from using KaZaa, you for scan it and can outlaw it on your network so people can’t run the program..Software companies come in and do audits. You’re licensed for 10,000 copies, but you’re running 15,000. Independent users aren’t criminals necessarily; they’re just doing what they think they should do to get the job done. Tangram allows you to know what your employees are doing.

IM in Corporates

PCWorld writes about how companies are benefitting from the use of Instant Messaging:

Throughout September and October 2003, Forrester surveyed about 1000 companies to see what their purchasing plans were for IM in 2004. Root says 25 percent of these companies already had some sort of IM up and running; about 50 percent didn’t have any plans or didn’t know what the company’s plans were; and the remaining 25 percent were considering purchasing or piloting an IM product in 2004. Two-thirds of these companies had annual revenues greater than $1 billion, while the remaining 33 percent had annual revenues between $500 million to $1 billion.

“Right now it’s kind of like the wild, wild west out there. The companies that are progressive are really going after [IM] and are trying to find solutions very quickly,” Root says.

Today, IBM’s IM users average about 3 million messages per day, up from 2.5 million messages per day in 2002. The company has also seen a 4 percent reduction in telephone use, and a reduction in the load on its e-mail servers.

IBM employees communicate primarily with each other, but can also communicate with certain applications. For example, Reuss-Caton says there are several apps, including a dictionary and the corporate directory, to which users can send IM queries and receive responses. For example, if Reuss-Caton queries the database with an employee name, it would return all the employee’s details, including presence awareness information telling her whether that individual is online.

Clayton Christensen interview at MIMC

Dan Bricklin writes about Scott Kirsner’s interview with Christensen:

Scott asked about not always following current customers. Clayton’s response: Any given customer can only lead you in a certain direction. So you need to listen to non-customers sometimes.

Another observation: A competitive strategy that uses lower cost only works if there is a high cost provider around. As soon as the high cost provider leaves the market, the prices collapse. So, you must constantly move upscale to attack the higher cost providers that have moved there. Dell needs to move up and up (as they are with servers and related hardware) and needs Sun to be there.

Scott asked about the low cost airlines. Clayton then discussed the two strategies for competing with disruptive technologies: A Low-Cost strategy and a New Market strategy (selling to people who are not buying in the category). He said that Southwest Airlines went after the type of people who used trains and buses and/or used out of the way airports. That was a New Market strategy. The other low cost airlines are mainly using a Low-Cost strategy. He feels that they can only last 5 years, because the incumbents must go after them on the cost front — the incumbents can’t go up market.

When asked about Linux and Google, he discussed how Linux is more modular than Windows and that you can fit it in an appliance or tailor it to an application better. What I realized is that the open source development model encourages a more modular design than many traditional development models, but the customizability of the source code eases application-specific tuning breaking the modularity barrier if you want. This model encourages platform designs that can be molded by small groups for their purposes. Modular architecture is an advantage for certain disruptive products and in mature industries. Interdependent architectures have advantages when you are pushing out every ounce of performance.

With regards to Google vs. Yahoo and others, he sees portals (like Yahoo and AOL) as vulnerable to specialist providers (seeing Google as a search specialist in this case). He gave the example of how department stores (like Sears) gave way to specialist stores (like Best Buy). He says things change once you know where to go for things. In the early days you go to the “have everything” place, but later go to the “best” place for each thing.

Clayton sees some of the industries that haven’t been disrupted recently as education, legal services, and healthcare. They have high cost, variable quality, and low satisfaction.

In 2004 there will be a new book he’s collaborating on: “Seeing What’s Next”. He says that traditional business school teaching has enshrined data driven decision making. But data is from the past. Seeing the future needs theory, not looking at the past. The book is about this.

Ten Technical Communication Myths

Geoff Hart writes:

Myth #1: Knowledge of Specific Tools Is Vitally Important
Myth #2: Sans Serif Fonts are Always More Legible Online
Myth #3: Audiences are Static
Myth #4: Minimalism Means Keeping Text as Short as Possible
Myth #5: The Optimum Number of Steps in a Procedure is 7 Plus or Minus 2
Myth #6: You Can Make a Bad Interface Easy to Use Through Superior Documentation
Myth #7: We Can’t Talk to the SMEs
Myth #8: Usability Testing is Prohibitively Expensive and Difficult
Myth #9: Single-sourcing Means Dumping Printed Documents Online
Myth #10: Documentation is a Cost Center

NewsMasters

Jon Udell points to Robin Good writes on the need for a new type of professional to “to concert, orchestrate, edit, and refine quality search formulas that tap into the whole RSS universe and beyond, and that filter out relevant content based on selected keywords, sources, type of content, ranking and many other possible criteria.”

The guy I am envisioning is a new type of webmaster who specializes in crafting uniquely powerful magic search formulas generating continuos RSS feed on narrowly selected topics by:

a) selecting and aggregating valuable resources (like a normal aggregator does)

b) creating advanced search queries in the blogosphere ( a la Bloglines)

c) creating advanced search queries on the traditional Web content at large

d) creating advanced search queries on the overall pot of content derived at points a), b) and c) and generating new highly filtered RSS feeds matching specific content and quality criteria.

Searching and identifying key valuable sources and complex filtering formulas will be the outstanding job of the new information gatherers and publishers online: the NewsMasters.

Their ability and craft will be in identifying the query formulas that when cleverly combined and refined by trial and error will allow for powerful automatic news gathering formulas. These formulas need not only to identify the keywords/keyphrases that generate the best and most relevant set of results but need to grow through the intelligent use of multiple filtering criteria and precisely targeted inclusion/exclusion mechanisms.

The creation of dedicated information channels, originated by independent publishers and not by vested commercial interests or mainstream media conglomerates may create the opportunity for a true renaissance of culture, learning and to a multiplication of our abilities to manage large amounts of rapidly changing information.

Search specialist and librarians who will craft with time investments appropriate queries to get at the information they were looking for, will be generously rewarded with a eternal fountains of relevant info for the time to come.

The act of search evolves from a mere set one-time shots at finding something just-in-time, to the start of a collective refined meta-filtering process that generates better information for everyone.

I think some of the best bloggers are already that. I can also imagine some of the educated Indians getting into this.

TECH TALK: As India Develops: What Others Say

The Economist writes in its recent survey of India:

The most fundamental long-term reason for optimism is demographic. More than half of all Indians are under 25 years of age. It is the sort of bulge in the numbers of people in productive age groups that produced explosive growth in China and South-East Asia.

The reason India is expected to outperform Brazil, Russia and China as well as the rich world in the Goldman Sachs forecasts is that it is the only country where the population will continue to grow for the next 50 years and where the proportion of working-age people will increase well into the 2020s.

Mr [Mukesh] Ambani [of Reliance Industries] thinks India is undergoing a silent revolution: our young people want to fend for themselves, and the government is getting out of their way. What troubles many is that this revolution is changing the lives of only a small urban section of the population. Even Mr Ambani is worried by the widening social disparities. India, as Nehru wrote 60 years ago, is a bundle of contradictions held together by strong but invisible threads. Modernisation and globalisation, far from imposing, as some have feared, a bland sameness on India, are sharpening some of those contradictions.

The challenge is both to make India as a whole richer faster, and to find better ways of distributing the benefits of more rapid growth. As India’s population expands, that challenge will become ever more urgent, and ever harder.

The next few years should offer the Indian government its best chance yet to tackle it. Rarely has India enjoyed such favourable international prospects: of peace with Pakistan; of enhanced integration in the global economy; and of being accepted as an important world power. At home, this is helping generate a new self-confidence which, rightly managed, could produce a virtuous circle of private-sector investment, rapid economic growth and liberalising reform. That in turn might allow a reshaping of the government’s budget, and of its role in the economy: as less of an employer, subsidiser and borrower, and more of a provider of the infrastructure, health care and education its people deserve. That is indeed a shining hope.

From a recent Morgan Stanley report:

The liberalization program pursued in the 1990s in the form of reduced capital and trade controls is enabling India to participate in the global labour arbitrage trend. The increasing integration of the Indian economy with the rest of the world is evident in the significant rise in openness (imports plus exports as a percentage of GDP) to 32% in 2003 from 17% in 1991. Although India was always present in a limited way in manufacturing goods outsourcing, this trend is now increasingly spreading to a wide range of sectors, including IT software, IT-enabled business processing services, pharmaceuticals, engineering, design and research & development. We believe this trend is poised to accelerate significantly, unless there is an increase in protectionist measures by the developed world.

Though the opportunities in IT and Pharma should create employment, this will account for a small share of people entering the workforce. We believe the take-off of manufacturing and major reforms in the agricultural sector is critical to improving India’s employment levels. China can be a good example to follow. Over the last 10 years, it has provided a larger section of its work force with higher-quality job opportunities through outsourcing in manufacturing as well agricultural sector reforms. In China, the share of employment in the low income-generating agricultural sector has reduced significantly to 45% in 2001 from 68% in 1981. In comparison, in India the share of agricultural workers has reduced to 58% from 67%. We believe that simultaneous progress in manufacturing will be necessary for balanced economic development ensuring participation of lower-income earners in economic progress and social stability.

In our view, the key measures which the government has to adopt to improve the manufacturing environment are:
(a) Removing infrastructure bottlenecks
(b) Create an environment to attract FDI
(c) Labour reforms
(d) Creating skilled labour by improving education opportunities

In a world with increasingly mobile factors of production, India’s rising surplus labour will continue to create opportunities for MNCs and raise of the issue of protection. However, to make full use of this opportunity, India will have to initiate key reform measures, which will enable the manufacturing sector to gear up and provide jobs to the millions likely to join the workforce each year.

Tomorrow: What Others Say (continued)

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