SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Archive for September, 2008

Jimmy Carter the Poster Child of Execution?

Posted by Bob Warfield on September 30, 2008

I was with Sam over on his Go Big Always blog on what it takes to go big right up until he made Jimmy Carter the poster child of great execution.  Yes, Carter has built a lot of houses, but he sure didn’t accomplish much during his Presidency.  If you need a political figure, how about Gandhi or someone that really changed the world by executing?

Who should the Einstein of great execution be?  Demming?  Not a recognizable face.

Posted in saas | Leave a Comment »

Why Apple Might As Well Be A Bank: We’re All On The Same Boat Together

Posted by Bob Warfield on September 29, 2008

Tough day in the markets today.  One of my favorites, Apple, is way off, along with almost everything else.  Why?  Because everything is so interconnected that when a potential disaster (evolving rapidly to being a real disaster) is big enough, it gets everyone’s attention.  Everyone starts figuring out what it might mean so they can get ahead of everyone else.  Before you know it, Apple’s earnings are revised downward without much comment from the company just because there is so much smoke that it looks like Rome is Burning.

The sick irony is Rome may very well be burning.  Everyone plays the same game.  Whether they feel the pain personally, they watch how others are reacting and decide they’d better take steps right now.  That rapidly spirals into everyone pulling in their horns while they wait to see if the pain reaches them.  Unfortunately, it virtually guarantees the pain will reach them.  First, by not buying, they insure sellers feel the pain.  Second, whatever assets we all have that make us feel flush enough to buy more than perhaps we should are being rapidly devalued.  In some cases we may regard the earlier value as inflated, perhaps in housing.  In others, perfectly good stocks still making as much money as they had the day before are dinged for fear of what might happen.

The group of bloggers I participate in, the Enterprise Irregulars, has been discussing whether they feel the impact of this “nuclear winter” economy yet.  The vast majority said no, many said best year yet, but everyone was universally worried about it and expected it would have an impact and 2009 would be a tough year.  Jason Calcanis is apparently predicting the nuclear winter will kill 50-80% of all startups, though he later asked the posts on this be taken down (thanks to Loic LeMeur for that inside and screen capture).

Welcome to the world of crowd hysteria and feedback loops.  Ain’t it wonderful?  Over the weekend I read a note by JJ Cramer (you have to pay for a subscription to see it, so I won’t link) where he was making the point that the time to punish those responsible has either passed or has yet to come.  Rather than punish them, the issue to focus on at the moment is survival. 

Unfortunately when a wounded animal is crashing through the forest, it is sometimes hard to think in those terms, but it sure seems like we are dealing with matters of survival.  I hope we can get it together to stem this negative spiral before it destroys so much wealth that it becomes impossible to avoid a massive depression. 

I wish I had more confidence we weren’t just playing political football and that our leaders had a clue.  It’s depressing to read Phil Windley speculate that Nancy Pelosi knew the vote wouldn’t pass, wanted it not to pass, and wanted it to be seen not to pass for political gain.  If true, and if others are playing this game, I’m all for clearing that slate at the earliest opportunity and getting some people in who care a little more about who suffers on the sidelines.  More realistically, we may be our own worst enemies if we’re telling Congress not to pass this bill without giving them anything better to work with.  It gets back to Cramer’s survival issue again.

The news is not all bad.  Mathew Ingram writes that while it was the biggest point drop in the Dow’s history, percentage-wise there have been much worse.  We lost 7% versus 23% in 1987, and we had gone up by 7% when the bailout was first announced.  I read that as there is still time to fix it.

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If You Had the Opportunity to Steal, And Someone Stole, Are You Guilty?

Posted by Bob Warfield on September 25, 2008

That’s essentially the case the RIAA brought against Jammie Thomas.  Because she listed 24 copyrighted titles on a peer-to-peer network, and because the judge issued an order to the jury that they did not need any proof that anyone downloaded those titles, she lost her original trial to the tune of a $222,000 penalty.

Interestingly, the same Judge Davis who presided went back and reviewed the case again and has declared a mistrial.  As Wired points out, this means the RIAA has never yet won a case in its 5 year campaign.  Davis became uneasy about that directive to ignore whether the theft had occured, calling it a “manifest error of law.”

Was justice served?

On the one hand, clearly music has been stolen using these peer to peer networks.  There can be no doubt.  On the other hand, it feels to me an awful lot like what I said.  Jammie had the opportunity to steal, we know things were stolen, we have no specific proof she did steal (i.e. no proof anyone downloaded her titles), but in the original trial she was “convicted.”

I recognize this is a Civil and not a Criminal case, yet it still seems wrong under our system to convict on that basis.  The RIAA argues its impossible to tell with these systems how exactly the theft is going down, but that does not seem to me a reason to waive the rights of the defendant. 

My view of our system has always been that we adopted a fundamental principle that it is better for many guilty men to go free than it is to convict a single innocent.  The system is intentionally designed to overwhelmingly favor the defendant, even though it means many of the guilty go free.  That’s okay, because we’re a nation that favors individual rights.  The Home of the Free.

There are many areas of our legal system that have escaped this simple principle.  Patent litigation egregiously favors the plaintiff.  When I was involved with a recent Patent Troll case, I was told by our counsel that it would cost us $1M to get to the first court room appearance if we fought it.  I asked what it would cost the plaintiff and was told, “about $150K.”  There is an asymmetry for you!

Counsel went on to advise us that proving a patent was invalid, whether because it was overly broad or that there was prior art, was prohibitively expensive.  They estimated the defendant could spend upwards of $4 million on that task and still might not be successful.  Because of that, their counsel was that to fight a patent at all would generally require one to demonstrate that what they were doing did not infringe the patent in any way as it was drafted.  That’s nearly impossible too with the junk patents that are out there these days. 

So the trolls get paid.  There are public companies that make their business on nothing but this sort of practice.  It has gotten so lucrative that individuals once engaged in creating intellectual property are increasingly being lured into the business.  Nathan Myhrvold’s Intellectual Ventures owns 20,000 patents and has so far returned over a billion dollars to investors.

This sort of thing is much more damaging to innovation and IP rights than anything the RIAA is up to.

Related Articles

If you agree with the sentiment here, be sure your representatives in Washington know that you DO NOT supoort the Enforcement of Intellectual Property Rights Act of 2008 (EIPRA).  That ridiculous piece of proposed legislation would force the DOJ to sue both criminally and civally against private individuals on behalf of the RIAA and others, and then give the proceeds to the RIAA and others.  In short, it makes the DOJ a pro bono lawyer paid for by you the taxpayer to act against you the taxpayer.  Ars Technica has more on this.

ReadWrite Web on the matter.

Mathew Ingram notes that the judge also implores Congress to reduce what he sees as egregious penalties.  He sees a $200K plus penalty as out of line with sharing just 24 titles.

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It’s Hard Being a Feature and Not a Product in Tough Times

Posted by Bob Warfield on September 24, 2008

Automatic (WordPress) are acquiring IntenseDebate, a Disqus competitor.  These products are add-ons to blogging tools.  They enable richer commenting facilities for the blogs.  Interestingly, these tools reach across blogging platforms and give comments a life of their own.  ReadWriteWeb predicts that the popularity of WordPress, combined with the ability of IntenseDebate to work with other platforms could make it the de facto standard for commenting pretty quickly, a real problem for competitors like Disqus who don’t have that level of access to the market.  Mathew Ingram also thinks things are tough for Disqus, and he uses it.

In older times, VC’s used to ask whether you had a feature, a product, or a business.  In the minds of many, having a feature was something not worth investing in.  You needed at least a product, and preferably a vision for how that product would lead to an entire business with many products. 

The Internet Bubble clouded those waters considerably.  Investors work making money investing in features, and they preferred lighter weight development efforts that could get to market and demonstrate real traction sooner.  As the old saying goes, “A rising tide lifts all boats.”

Now here we are in what some are calling the “nuclear winter” economy.  The rules are changing quickly.  The tide is no longer rising.  In fact, there’s a lot of pressure on companies.  It’s a tough time to be raising money at the moment if yours is not one of the deals that qualifies as a “flight to quality.” 

Yes, it validates the market, yada, yada.  However, even in good times, Disqus must now cope with the danger that IntenseDebate can grab market share so much more quickly riding the coattails of WordPress that it’s hard to impossible to keep up.  That can lead them to be acquired.  And so on.

Look for more acquisitions of startups by startups in these tough times.  It’s times like these that cash is king.  Either public companies with lots of cash acquire heavily devalued players, or startup companies use cash to acquire really distressed properties at pennies on the dollars.  I predicted this trend would accelerate last month, but I see it accelerating even more in this economy.

Meanwhile, those that do not wish to be acquired (or worse), will need to focus on putting together the best possible execution they can.  Some will be tempted to hunker down, but I am not a big believer in that strategy for tough times.  Startups and software companies cannot cut their way to growth and success.  They may merely prolong themselves in crude suspended animation to slow the deterioration.

Everyone, in tough times, faces this question of whether to hunker down, or drive forward.  One of my favorite Jack Welch quotes is this one:

“The time to put the pedal to the metal is when everyone is hunkering down…this is a chance to widen the gap…we just breathe in our blood everyday, now’s the time to change the game.”

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Fred Wilson says it’s not “game over” for Disqus, its just game changing.  Fred shows a nice graph of why IntenseDebate would want to be acquired (they were way behind Disqus).  He goes on to say:

I firmly believe that most innovation comes from companies that are fighting for their survival and new customers without a safety net. And that certainly describes Disqus.

Wilson is an investor in Disqus, so he’s putting a brave face on it, but you have to conclude the valuation just dropped tremendously.  He quantifies total penetration for these kinds of services as 50K-100K.  WordPress has millions of blogs all by itself and has made some of the pivotal features of IntenseDebate and Disqus automatic for all of those blogs.  Suddenly Disqus will be the one far down on Fred’s usage graph.

Posted in business, strategy | Leave a Comment »

Living and Dying on Golden Crumbs

Posted by Bob Warfield on September 16, 2008

Many are watching with horror as venerable financial institutions in our country collapse one by one due to the demise of the sub-prime lending industry.  But this is nothing new, though perhaps bigger more public names are being dragged down.  The financial world regularly flirts with this kind of disaster because they’re drawn like moths to the flame of using leverage to deliver increased returns.  It’s their business, but it’s a dangerous one.


When an industry makes its revenue collecting “Golden Crumbs” (I love that line from Bonfire of the Vanities), it takes extremely large transaction volume for the crumbs to amount to much.  The only way to achieve those volumes is through ridiculous amounts of leverage.  It starts with the financial firms needing the leverage before the spread on extremely low interest rates adds up to interesting revenue.  It moves on from there to extending leverage to allow customers to do more and larger transactions so the market can grow further.  Pretty soon the PhD quants have analyzed it, bought the appropriate derivatives with more leverage, and decided there is no way to lose, even the Nobel prize winners like Long Term Capital (which precipitated a crisis involving major bank bailouts in 1998).  Eventually these enterprises become indistinguishable from a garden variety Pyramid Scheme if enough capital is leveraged. 


“Dear Customer, if you’ll give us your banking information we’d like to deposit a large sum of money there that you may use to buy a valuable asset.”   Hmmm, I get something very similar from Nigeria that is outright fraud. 


People think it is incredibly reckless to buy stocks on the margin.  Yet, part of this crisis involved buying an asset with ridiculously more margin (right up to 100% margined zero money down).  Worse, it’s an asset you have to own if you want a roof over your head.   As we all remember from discussion of stock market margin, the margin compounds our losses.  It magnifies them, just as it magnified profit for the financial institutions.  If we could not afford to put much money down on a house (because we bought a ridiculously expensive house thinking you can’t lose on real estate in a time when the stock market has been fickle), how can we afford those losses?


So now we have a problem fixing it.  There are too many snared in the web to just make it go away any time soon without lots of casualties on both the customer and vendor side.  Wealth is being destroyed much faster than it was created.  It’s a non-linear system that can dish out results much worse than a zero sum game.  In a zero sum game, somebody gets to keep the wealth, it’s just a matter of who plays the game well enough.  In this game, the wealth simply evaporates.


Meanwhile, I like Fred Wilson’s “Leave Wall Street, Joins a Startup” post.

Posted in saas | 1 Comment »

Does Agile Development Work for Sytems Integration?

Posted by Bob Warfield on September 15, 2008

The gang of Enterprise Irregulars are currently wondering whether Agile can work for implementing Enterprise Software.  By implementation, I mean installation and integration of a complex package such as an SAP or Oracle ERP system.

It’s an interesting question.  I thing it could work, and work well in theory, but I think there are a number of factors that would make it extremely difficult to do in practice.

First, let me say I’m a fervent believer in Agile software development, and helped contribute some of its fundamental underpinnings early in my career.  One of the seminal papers behind the early Agile movement was a study done on one of my development groups that found productivity was off the charts.

With that said, Agile is not for everyone or every project.  There are some requirements for it to be successful that fly in the face of a lot of the established norms for IT projects and implementations.  That’s not to say you couldn’t use Agile for such projects, but unless everyone involved clearly understood the Agile requirements, it would not likely be an unsuccessful attempt.

What are these requirements?  In the context of implementations, I would see the following sorts of major conflicts:

First, Agile is the opposite of a boil-the-ocean project.  It recognizes that you shouldn’t even try to do everything in one release.  It argues for many small evolutionary releases, or if not releases, at least milestones where things are stabilized and accepted as complete before moving on.  In some cases overly ambitious goals that can only be met in a single humongous milestone are rejected.

Second, Agile recognizes that it is often folly to completely specify a system before writing any code.  As such, it seeks to be iterative, to get something built, to get feedback on that checkpoint, and then to iterate until the feedback is acceptably positive.  This requirement is particularly at odds with the normal desire on both sides to manage risk (apparently) by documenting everything in incredible detail before much gets done.  In my mind there is a false sense of security in long SOW’s and other documents that is no substitute for signing of small subsystems that you can actually use, test, and demonstrate are working.  But, this is what the world grew up on and is used to.

In many ways, Agile has a risk profile more similar to SaaS.  Consider a huge up front investment in specification to be the equivalent of paying an On-premises license fee up front.  Neither the spec nor the license are worth much until some software is written and working.

Lastly, Agile is not well suited to extremely large groups and it eschews heavy process quite on purpose.  It’s important to note that it does this not to enhance creativity as Vinnie fears, but precisely to enhance productivity.  It recognizes (as is called out in the Coplien paper I link to above) that the primary productivity bottleneck in software development is communication. 

The Mythical Man Month issue is the more people, the harder it is to keep them in sync.  If our bench is limited, we perforce select the best possible players to be on the team.  This again, is sharply at odds with the typical SI practice of having very few talented players and lots of grunts.  The talented players often move around constantly fire fighting.  An Agile approach favors using only the most talented players on small teams.  Clearly this interferes with the economics of most SI’s who want to bill as many hours as possible using labor that is as cheap as possible.

Posted in software development | 7 Comments »

Merchandising on the Web: True Genius

Posted by Bob Warfield on September 11, 2008

I read with interest Louis Gray’s post about iTunes 8’s new “Genius” feature.  It’s designed to enable to help you find new  music similar to songs you already like based on what other people liked.  It’s much the same as Pandora, which a co-worker jokingly refers to as the search engine for songs that gives you anything but the song you asked for.

This ability to make recommendations for you based on your preferences and those of others is basic merchandising functionality, but one could argue it can make a good franchise great.  Amazon benefited hugely from being an early innovator in online merchandising.  To this day their site continues to have some of the best options along these lines of anyone.  Another great example is Netflix.  They give you suggestions for new movies to rent based on your ratings of moviies you liked.

This stuff works amazingly well. I think of it as helping to make the Long Tail mainstream.  Who isn’t delighted to discover a new song, movie, or other product that is a surprisingly good fit for their tastes but that they hadn’t found on their own?

What can your web site or service do that’s along the same lines?

Posted in Marketing, Web 2.0 | Leave a Comment »

How Hard Could Syncing Calendars and Contacts Be?

Posted by Bob Warfield on September 10, 2008

Pretty hard, I guess.

Recently I wanted to sync up my calendar and contact info between my home and work instances of Outlook.  In fact, I was slightly more ambitious.  I thought this could be a good stepping stone towards moving off Outlook altogether if I could get everything sync’d to appropriate Internet cloud applications.  Little did I know!

I started with Google Calendar Sync, because, “Hey, it’s Google!”  I did this leg at work and it appeared to be perfect that first time.  I got home installed it on the home PC, and low and behold about 60% of the appointments didn’t go through.  Doh!  I could see them get created and then almost immediately deleted.  It seemed like the more complex an appointment was (e.g. recurring, with a long note attached, with attendees, or whatever), the more likely it wouldn’t come through. 

I tried all the troubleshooting suggestions and then went into Google Groups to see if their community had anything going.  What a mess!  Lots of people just blasting out their problem.  Most of them didn’t seem to be getting any response.  Very little rhyme or reason.  I must’ve found 5 or 6 recent posts with the same problem as me.  None of them had any answers.  Clearly it was a common problem.  Does everything at Google get done in people’s 20% time?  I can’t imagine shipping a bug like this and just leaving it.

To make matters worse, Google syncs the calendar, but not the contacts, even though Gmail has contacts.  You’ll need another solution for that.  I reluctantly exported the Outlook and was resigning myself to exclusively using GMail for contacts.  At least iTunes synced the contacts from Google perfectly.  This is a blessing because there are a very limited number of places the iPhone could sync to with iTunes on my PC.  Guess I shoulda bought a Mac, eh?

When I got back in to work and found even my work Google Calendar Sync could no longer do the right thing, I uninstalled and went looking for the next thing.  I also resolved that if I couldn’t use Google Calendar, I didn’t particularly want to leave my Contacts in GMail either.  I prefer one-stop shopping for these simple chores.

I got the bright idea that since I was syncing two Outlooks perhaps I should look at Microsoft Live.  If anyone could sync two Outlooks, it ought to be Microsoft, right?  Wrong!  

Microsoft delivered this steaming mug of Fail:


Excellent!  The only thing worse than unreliable desktop software is unreliable cloud software.  I tried both in the morning and this evening as I write this.  No joy!

Onward, there are many more syncing options to try.  I downloaded two other programs from small startups.  One didn’t work at all.  One sort of worked.  I only synced for 3 days (nice to have the option not to do it all) and it appeared to duplicate appointments the first time.  I tried again and there were no more duplicates.  This was kind of okay, but I worried about the dupes and they were going to charge me about $30. 

There was a sojourn through Yahoo Mail and Zimbra, because a co-worker used Yahoo and pointed out iPhone could sync to it and because I’ve always admired the Zimbra apps.  But somehow, it just didn’t seem easy, so I didn’t even finish trying out Yahoo.  Plus, you never know where that crazy company will wind up these days.

“Let’s try one more,” sez I.  So I tried Plaxo because I read somewhere that it works pretty well for this.  Low and behold, it worked perfectly, both at home and at work.  My Outlook calendars and contacts are perfectly synced now.  I can view them online in Plaxo if need be.  I’m a little uneasy that this isn’t really what Plaxo is meant for (I see it more as a LinkedIn competitor), but what the heck, it works!

Now why couldn’t all these others get their stuff to work?  This shouldn’t be that hard.  My very first stop, Google, should have worked, worked well, and handled contacts.  I should never have even needed to try all the rest. 

And what does this say if I do want to abandon Outlook altogether?  Some would say it makes it easier just not to worry about sync, but I need to take my data with me when I drop of Outlook at the wrecking yard so that won’t work.  Oh well, onward.  Today’s primary problem, syncing, is taken care of.  Tomorrow I’ll worry about web apps.  It’s no wonder Microsoft still sells a ton of Office!

Posted in saas, Web 2.0 | 8 Comments »

Reports of Steve Jobs’ Death Are Greatly Exaggerated

Posted by Bob Warfield on September 9, 2008

Glad to see this report from today’s Apple event:

10 a.m. Steve Jobs takes the stage in his signature outfit. He looks good and jokes as the screen comes up with the message: “Reports of my death are greatly exaggerated.” Big applause.

Posted in Marketing | Leave a Comment »

Techcrunch 50 Having Technical Difficulties

Posted by Bob Warfield on September 8, 2008

Seems Wifi is nonexistant and nobody can get online.

How do they do the show without network connectivity?  Must be some for the presenters at least?

Posted in Web 2.0 | 2 Comments »