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

Archive for October, 2008

Amazon Cloud: Lock-In or No Lock-In?

Posted by Bob Warfield on October 19, 2008

I’m reading with interest as Dare Obasanjo and Tim Bray try to make the case that there is lock-in with Amazon Web Services and Google’s AppEngine.  The lock-in argument from Bray’s end basically boils down to the API’s being so heavily embedded in your application that it’s hard to switch out of them or to the unavailability of commercial alternatives ready to go now.  Obasanjo doesn’t add much to the argument except to point out that any cloud apps you use (such as Google Apps or Zoho, competitor’s to his Microsoft Office apps) need to be able to ship their data without loss to other cloud apps, a point I do agree with.

So what’s up with all this?  Is the Amazon Cloud fraught with lock-in, or not?

Frankly, I don’t see Bray or Obasanjo’s arguments as holding much water.  I recently wrote that lock-in can be avoided for Amazon if you focus on buying virtual hardware and leave the more proprietary aspects of the service out of you plans.  Neither of these new posts brings anything of substance to that earlier discussion.

It took my company, Helpstream, a grand total of an afternoon to make our app run on Amazon.  The only real missing piece vis a vis our datacenter implementation is that we hadn’t pulled the trigger to point the DNS at the Amazon implementation.  It’s pretty hard to call that locked in.  Perhaps if we had focused too much on Amazon’s SimpleDB or other more proprietary services, we would have a problem, but we specifically have not.  As I explained in the other post, we want to take maximum advantage of commodity computing, and that means we have to avoid lock-in.

There is another argument that has been raised that even if the API’s are portable, it doesn’t matter until a real commercial alternative is ready to go today.  I see this as equally groundless.  Not only are the API’s easy to retarget (they are so simple you don’t need transparently compatible API’s), but there are commercial alternatives available today.  They range from other cloud vendors such as IBM and Sun, both of which offer virtual machines ala EC2 and virtual SAN ala S3, to various alternatives provided by hosters.  Or, you can just go back to having your own data center.  It would be expensive, but that’s what you’re stuck doing anyway if you don’t adopt the Cloud, so why are we holding that as a point of lock-in?

Posted in cloud, platforms | Leave a Comment »

Why Are Startups Running at a Level Where They Can Lay Off 1/3?

Posted by Bob Warfield on October 18, 2008

Hard times are on us, and we’re all watching with some concern how this impacts the High Tech Startup World.  It’s terrible to see the grim heart to hearts investors are having with their portfolio companies, and worse still to read the constant announcements where another startup is laying off a bunch of people.

I was chatting with someone recently about exactly how they were determining who should go.  It should be a terribly difficult thing to decide for a startup in my view.  After all, startups should be lean and mean, right? 

If you’ve ever been at a large company that had to layoff, you’ll be familiar with the notion that you can always cut the bottom 10% and little harm wil be done.  One hears this refrain constantly in those situations, and its accurate.  But I have a hard time understanding why it should be accurate for a startup.  When we’re talking about laying off 1/3 rather than 10%, it becomes even more outlandish to contemplate.

Startups need to have laser like focus to succeed.  They need to find leveraged ways of doing things.  It’s useful to outsource anything outside the startup’s distinctive area of competence.  These days Cloud Computing makes it possible not to even have to own a data center.  We know that smaller more agile development teams work better.

How then are we still creating startups that can afford to shed 1/3 of their staff and still survive? 

It would seem to me that the goal for any startup should be creating an organization that wouldn’t survive if 1/3 of the people had to go.  After all, startups should be lean and mean.  They should be focused on being nimble and doing less with more. 

How to go about doing that?  Here are some thoughts:

–  Hire fewer, more senior people.

–  Hire doers, not managers.  Every person in a startup should be capable of producing some form of content–writing code or at least specs, helping test the software, closing deals, writing marketing content, and so on.  It’s a warning sign if you have someone in the organization who has to look to others either inside or outside the company for every single deliverable.

–  Outsource everything that isn’t your distinctive competence and that you can find competent outsourcers to handle.

–  Analyze every new hire by asking whether they are better than the median person in their group.  If so, you’re raising your standards, and that’s a good thing.  If not, why are you making that hire?

–  Look for people comfortable wearing more than one hat.  It makes load balancing much easier and it improves organizational harmony by getting more people working together outside their silos.

–  You should almost never hire capacity in anticipation of demand.  Fill all the basic functions well with good people and then hang on to the tiger by the tail.

–  Do not measure people by how quickly they hire.  Measure by how well they hire.

These rules apply even in good times, but most of all in bad times.

Related Articles

Mike Arrington says, “Some CEOs see this as a once-in-a-startup opportunity to get rid of the deadwood in the company.”  Wow.  I couldn’t ask for a better reaffirmation of what I’m saying above.  Why did you hire that deadwood, Mr Startup CEO?  Worse, why did you let it stack up so high?  Granted, some startup CEO’s are very inexperienced, but hiring someone is a very serious matter.  There are few decisions you’ll make that matter more.

Seth Godin weighs in very much in the same camp I am with “too small to fail.”  He points out that even when a company is relatively big, there is tremendous advantage in thinking small.  Read his great post for more insights.

Posted in venture | 4 Comments »

Both Barack Obama and John McCain are Far From High Tech Concerns

Posted by Bob Warfield on October 15, 2008

Sam Diaz suggests over on his ZDNet blog that we shouldn’t expect Obama and McCain to spar over net neutrality and other matters that interest the high tech world.  These are just not issues that feature prominently on the national agenda, particularly not in these economic times.

Likewise, when the Technosphere (Techcrunch at least) gets all up in arms about George Bush and the Pro-IP Act, we have to get a little perspective.  We’ve lost the plot first in that the Senate voted unanimously to pass this monstrosity.  It wasn’t just W that doesn’t get IP in the digital age, it was apparently every member of the Senate.  And guess what, that means Senators Obama and McCain also didn’t lift a finger to head this thing off.

The reality is that nobody in a particularly strong position of power in our national government understands what we do in High Tech.  We lack the lobbyists and the voting homogeneity to get their attention.  Same on them?  No, shame on us.  At best the politicians throw the occasional tidbit our way, but it’s more about their desire to appear trendy, young, or innovative than it is any deep-seated acknowledgement that the technology matters.

The digerati care deeply about many political issues, and love to debate our political biases, but in the end, we’re not a particularly effective part of the conversation.

Posted in saas | Leave a Comment »

The Internet Has Trained Me to Hate Advertising

Posted by Bob Warfield on October 3, 2008

I’ve noticed increasingly that on radio and TV I change the channel if there is too much advertising.  In fact, sometimes I find myself getting quite agitated, usually on TV, if I’m trying to get through a program and it seems like there is more advertising than programming.  Likewise, when I click through a search result to some annoying full page ad with a microscopic “skip ad” link, or one of the ads that suddenly levitates right over to what  you’re trying to read, I’m annoyed. 

At the same time, I find I am more likely to notice the ads on a Google search page and wonder whether they won’t get me closer to what I want.  If I recognize a name there, I might even click one sometimes, though still rarely.

The Internet has trained me to hate advertising by presenting me with tons of rich media and no requirement that I deal with the ads.  I can ignore most of it, and a lot of the valuable media I seek, such as blogs, has little to no advertising.  Lately there is a trend for some to start injecting ads into my reader stream, and I immediately delete these without looking.  If they get too numerous, I’m sure I’d take the blog out of my list.  As Techcrunch points out for Twitter, such behavior would be annoying.

Posted in Marketing | Leave a Comment »

Cloud Competition, Lock-In, and Why Richard Stallman is All Wrong

Posted by Bob Warfield on October 2, 2008

As often happens, this blog post is born of threads coming together from many directions at once.  It is pure serendipity, because no one thread is something I’d write about, and perhaps the threads exist only in my own world model, but nevertheless, I must write.

There is a discussion among the Enterprise Irregulars about Cloud Computing and Amazon as I shared my latest Amazon post on Windows support with them.  It’s an interesting discussion as there is much back and forth about how good or bad the Amazon and other Clouds may be.  Some have heard of people moving off Amazon because it was too expensive compared to their own data center.  Some have heard of performance problems of various kinds, though others comment they’d heard that early on and not so much lately.  Still others jumped in to talk about the advantages of the platform their company has built versus Amazon.  The latter led to a further discussion about whether Amazon adds enough value to justify its price, whether elasticity is really important to very many apps, what services should these platforms provide, and a general yada, yada.  Good stuff!

Another piece of the puzzle comes from venture capitalist Bruce Cleveland’s excellent post on proprietary platforms such as or Netsuite’s platform.  Cleveland hits on two critical themes when he talks about SaaS companies using someone else’s Platform as a Service.  First, since SaaS has slender margins to start, it is imperative that they be able to drive costs down to a small percentage of their fees.  Traditionally this has been done by building your own data center and taking advantage through multitenancy of the fact that every customer doesn’t need every available cycle all the time.  It takes less hardware than if everyone installed their own on-premises solution, in other words.  Elasticity from a service like Amazon can offer the same benefits, provided the service is cheap enough relative to owning a data center.

A bigger issue for Cleveland is one I’ve raised in the past as well:  Will there be a downstream conflict of interest with your PaaS vendor?  After seeing you business succeed, will they want to take it away from you, and will they have an unfair advantage to help them take it away?  With some platforms, this is particularly easy as they dictate the data model and many of the objects your application uses, so they have the ability to access all of your data.  Other platforms that are largely offering virtual hardware, such as Amazon, are far enough from the data that it would be a much bigger project for them to intrude, and likely it would look very bad for them if they were sued over it.

At the same time, I’m reading that Richard Stallman, he of the GNU Open Source “Nobody Owns Software” movement, feels that Cloud Computing is just another evil plot to create a massive proprietary locked down walled garden.  It’s a trap that must be avoided by any right thinking Open Source believing denizen of the digitopia.  Like any hot meme, that one flew right up to prominance on Techmeme in no time and had the blogosphere buzzing.

Stallman says, “Do your own computing on your own computer,”  lest you lose control of your data in the Cloud.  BTW, Valley Wag, the site I just quoted Stallman from, and a lot of others lately don’t do Trackbacks.  The link love with them is one way only.  I gotta figure Stallman would frown on that too, but we digress.

Fellow Enterprise Irregular Zoli Erdos sees no fundamental conflict between Open Source and the Cloud, and I agree.  Heck, a lot of what is Amazon is Open Source and the platform has certainly favored Open Source software up until they’ve announced Windows support.

Nick Carr humorously juxtaposes Stallman’s issues with Cloud Computing against his campaign to convince people not to buy Harry Potter books.  When you put it that way, it does make Stallman look a little extremist!  Nick’s is another blog with no trackbacks (my own personal crusade), incidentally.  Mathew Ingram similarly dismisses what he calls Richard Stallman’s “Chicken LIttle Routine.”  In fact, most of the posts I’ve read are dismissive of Stallman’s stand against Cloud Computing while occassionally pointing out that he is still a very smart guy and a legendary figure in computing.

Okay, so there’s the threads, but what do they have to do with one another?

Just this:  I think Stallman and some of my Irregulars colleagues are just not thinking about what Cloud Computing really is (or at least versions of it are).  Stallman is a software guy and wants to see it as software.  What if instead of viewing it as software, we simply view it as a new form of hardware?  After all, we live in an age of virtualization, and a lot of Cloud technology really is nothing more than virtual hardware.  That’s certainly what Amazon EC2 boils down to. 

When you buy hardware, you generally avoid the really expensive proprietary hardware that will only run a few kinds of software unless you really really have to have it.  The supercomputer industry learned this the hard way some time ago, as did makers of specialty graphics workstations such as SGI.  Commoditization rules the hardware world.

Now given that we need some kind of hardware somewhere on which to run our software, why would Stallman see cloud hardware as somehow less open than any other hardware?  In fact, I think that the right Cloud infratructure looks exactly like extremely open hardware with a much better payment plan involving elasticity.

The key to being able to view the Cloud as hardware is in which services from the Cloud you consume.  Does the Cloud Platform you’re looking at present you with essentially virtual hardware, or is it focused on fairly proprietary services?  In other words, are these Cloud Services something that impacts your software architecture very little and is it easy to find extremely similar services from many vendors?

I would argue that Amazon EC2 and S3 qualify as virtual hardware while Amazon SimpleDB does not.  The first two are very easy to embrace, they make minimal demands on your software architecture, and it is likely that the changes you make will be useful on other clouds that have virtual Linux instances and archival storage services.  OTOH, SimpleDB is kind of an esoteric beast, as are the uniquely scalable equivalents like Google’s Big Table.  They’re tantalizing, and interesting, but in the end, they radically change your architecture versus using MySQL and once you’re locked in by these big changes to your software, you can only buy the service from one vendor.

When we view the Cloud as Virtual Hardware rather than software, we open the door to benefit in three ways:

– Not having to build a datacenter, a distinctive competency that is hard to grow and offers little competitive advantage until you get really big like Google or Amazon.

– Elasticity.  You can spin up and provision a server for hours or days, and then shut it down and quite paying.  There’s no need to ever touch the machine.

– Commoditization:  Because we’ve chosen only Clouds that offer virtual hardware, we can get similar services from a lot of places.  That drives prices down.

These three all add up to compelling cost savings for most organizations, and they’re built on a plan that avoids the potential lock-in risks some Cloud Platforms bring.

Posted in platforms, saas, strategy | 2 Comments »

Another Big Step for Amazon: Windows

Posted by Bob Warfield on October 1, 2008

The Amazon Elastic Computer Cloud is no longer just about Linux–you can run Windows too.

This is classic strategy because they’re making it tremendously easier for customers to pick one cloud computing and not have to choose.  As Stacey Higginbotham points out, this also eliminates a competitive advantage some other players had.  Aside from these smaller players, it also raises the bar on Microsoft themselves in terms of getting into Cloud Computing. 

There is the pesky issue of that it will be more expensive to run Windows due to the Microsoft licensing fees versus Open Souce Linux, but even that will benefit from greater free market exposure to competition.  I doubt Amazon will eat the cost (one option Stacey suggests), but it gives Microsoft the hard choice of discounting to Amazon to keep Windows vigorous on the Cloud Computing front or placing Windows at an unfair disadvantage versus Linux.  The early days really matter when a paradigm shift is underway and Microsoft knows that.

Nick Carr states the case succinctly:

Will Microsoft adopt a true utility pricing model for virtual computers running Windows, allowing Amazon to roll the operating system licensing cost into its hourly fee, or will the Windows licenses have to continue to be purchased separately? If it’s the former, Microsoft will have made a significant step forward into the utility world.

Meanwhile, Carr points out that Microsoft itself is announcing a new Cloud Operating system on the same day.  Here are Ballmer’s remarks to that effect from the London Register:

“The last thing we want is for somebody else to obsolete us; if we’re gonna get obsoleted, we better do it to ourselves.”

The important question in this competitive dogfight that Carr missed is whether Microsoft’s Cloud OS will offer Linux?  Amazon’s move really creates a more level playing field and is one more reminder to Microsoft it can’t afford to be isolationist forever.  It’s a masterful move both in terms of making customers happy and in terms of forcing Microsoft to choose between a set of unatractive options:

– Do we adopt cloud computing pricing on Windows and let Amazon continue into our turf unabated while we make less on each copy of Windows, or do we penalize Windows on Amazon by charging full price and miss out on Amazon’s great momentum in the Cloud?

– Do we make our Cloud OS Windows-only, and leave Amazon the superior platform because its open, or must we support Linux and thereby endorse it?

Related Articles

Amazon Web Services Blog announcement of Windows support.  Good technical detail here.

Posted in amazon, platforms, saas, strategy, Web 2.0 | 5 Comments »

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