Day: June 2, 2005

DIY Economy

Fortune writes:

A number of factors are coming together to empower amateurs in a way never before possible, blurring the lines between those who make and those who take. Unlike the dot-com fortune hunters of the late 1990s, these do-it-yourselfers aren’t deluding themselves with oversized visions of what they might achieve. Instead, they’re simply finding a wayin this mass-produced, Wal-Mart worldto take power back, prove that they can make the products that they want to consume, have fun doing so, and, just maybe, make a few dollars. “What’s happened is a tremendous change in awareness,” says Eric von Hippel, a professor at the MIT Sloan School of Management and author of the recent Democratizing Innovation. “Conventional wisdom is so strong [in business] about find-a-need-and-fill-it: ‘We’re the manufacturers; we design products; we ask users what they need; we do it.’ That has begun to crack.”

Numerous currents have converged to produce this reaction. Bloggers, those do-it-yourself journalists, showed big media that the barriers to entry (like owning a printing press, say) didn’t much matter. Podcasters took radio into their own hands, creating audio shows and putting them online. Amateur music producers, using software that was once the province only of major labels, invented mash-ups: combining songs into totally new ones, then giving them away or selling them. And with the advent of services like Google AdSense, which let people easily put advertising on their sites, these tinkerers couldwhile not vaulting themselves into Bill Gates territoryat least break even.

Microsoft Media Juggernaut

David Berlind thinks it is unstoppable: “First, its announcement with Philips and second, the launch of the next version of its mobile operating platform (code-named Magneto, but officially Windows Mobile 5.0). Not to mention that Microsoft Chairman Bill Gates served notice to Apple and the Podderati (Dan Gillmor agrees that the iPods runaway success is unsustainable). After you add it all up how deeply entrenched into the global infrastructure (computers, other devices, telecommunications networks, content providers, etc.) Windows Media already is, what will happen as a result of the Philips announcement, and the Magneto news is there any doubt that Microsoft is not only poised to repeat its successful Windows formula, but that that success will, over the long run, actually dwarf the companys success with Windows?”

Thesis Driven Investing

Bill Burnham writes:

In such a competitive and complex environment the most promising way for VCs to ensure themselves of rising above the tide is to move from a passive deal-flow based approach to a proactive thesis driven investment approach. This approach stresses taking the initiative to develop an investment thesis based on focused expertise and then using that investment thesis as the basis for a directed deal acquisition campaign designed to either ferret out those existing start-ups that fit into this investment thesis or to help create new companies that can take advantage of an identified opportunity.

In this model, VCs do not passively sit back and let deals come to them, but they go and out and turn over rocks actively looking for deals that fit their investment thesis in a particular space. VCs, even ones with no brands and experience, can compete with this strategy due to two simple facts: 1. Entrepreneurs respect VCs that understand their market space/business. 2. Entrepreneurs rarely refuse to talk with VCs that proactively call them and tell them that they are potentially interested in investing in their business. The goal is not to wait for companies to come and ask for money, but to find good companies in good spaces and then try to find a way to put money into them when appropriate.

In a way, I am doing exactly that in trying to build out the Emergic ecosystem. More on this soon.

Mobile Search

The Mobile Technology Weblog writes:

My opinion is that search on mobiles will polarise into two distinct and sizable markets – maybe even dominated by different types of companies.

The first area is Location-Independent Search (LIS), which is very similar to the type of search you do on your desk top. After all, if you’re looking for ringtones to download to your phone, the location of the retailer is of little importance. Distance is dead and all that.

But if you want the name of a shop or restaurant, as an example, location is probably a very important factor indeed. Thus, you’ll want to undertake a LDS (Location Dependent Search). The default location will be where you’re standing right now, but you’ll be able to over-ride this by inputting another location, if you wish.

So the LIS sector could well end up being dominated by Overture or a company like that – I can’t see Google standing by and letting them win though. And the LDS sector should be the heartland for Yellow Pages or other locally organised directory service.

TECH TALK: The Coming Age of ASPs: The Problems

Having discussed all the benefits of the ASP model, it is only fair we look at some of the problems associated with it. They are five key issues the two most important deal with Customisability and Integration. In an article last year, The Economist laid out the arguments and the responses:

[There are] two main arguments against the ASPs. First, software as a service is much harder to customise for the special needs of big firms. Second, it is harder to make it work with a firm’s existing software applications. Companies want their CRM to integrate with their billing system and everything else, says George Ahn, the CRM boss at PeopleSoft. Salesforce.com’s mottoNo Softwareis thus hot air, says Mr Ahn, because it takes lots of software and fiddling to get it to link to the rest of a client’s systems. There is no magic pixie dust that makes integration go away.

Mr Benioff shrugs (note to regulators: this was before the quiet period). The evolutionary advance of the second generation of ASPs over the first is precisely that customers can now customise their pages, as easily as consumers arrange their Yahoo! or AOL pages to their liking. And the task of integration too has been solved. In fact, argues Mr Benioff, clients can do themselves a favour by letting Salesforce.com worry about hooking their various systems together. Increasingly, the vision says, all that users need to understand is how to navigate a web page, leaving them to get on with life. That is the same for Salesforce.com as for Google.

The third issue deals with Performance, which is related in part to the bandwidth available, and the fact that a rich client interacting with a local server will always be faster than a browser talking to a server over the Internet. The bandwidth bogey has been there since early days. While it is not much of an issue in the developed markets, it is still a serious issue in emerging markets like India. But the good news is that telcos and Internet service providers are working to bring down the cost and improve speeds. With regards to the rich client, technologies like Ajax hold promise to bring the experience ofa rich client within the browser.

The fourth issue deals with Security. Can enterprises trust a third party with all their mission-critical data? The response to that is: we already are. Banks hold our financial information and provide us online access. There are many sites which have our credit cards. Some of us even use public email providers for our business mail. In fact, all our email is sent unencrypted over the Internet. The success of ASPs like Salesforce.com (nearly 14,000 enterprises and over 200,000 individual users) is testimony to the fact that we are getting more comfortable using online services. But this still means that ASPs will have to demonstrate that they have adequate safeguards in place before customers can trust them with their confidential business information.

The fifth issue deals with Data Lock-in. What is the ASP decides to shut down? Or suddenly increase its rates? Wouldnt business users be locked in because they may have no option? To tackle this issue, customers need to ensure that ASPs have standard mechanisms to export data out should they wish to move. This needs to be verified before the business starts using the ASP as part of its processes. With technologies like web services, this should be much easier to ensure.

Tomorrow: Looking Ahead

Continue reading TECH TALK: The Coming Age of ASPs: The Problems