chris horn's blog

It is an interesting time for the world of “Software As A Service”.

At some sort of cerebral level, Dell has been an inspiration for those contemplating a SaaS go-to-market strategy. Dell was renowned in the PC industry for largely avoiding the cost of enterprise sales and retail distribution channels, by instead connecting directly to end purchasers – whether domestic, small/medium business, or enterprise – as much as possible. It is very interesting thus that last week Dell announced, for the first time in 15 years, a retail deal: this time, with Wal-Mart to put some of its low end products directly onto the retailer’s shelves, as its “first step” into a retail channel. Dell apparently needs a distribution platform – and a retailer which 90% of American shoppers use is more attractive than most other retailers – through which to advertise some of its products.

Also this week, Ray Ozzie of Microsoft has stated that it is no longer about “Software As A Service” but “Software And A Service”! He was speaking at the Mix07 developers conference, and primarily promoting the Silverlight technology for Rich Internet Applications. Silverlight will be a runtime for .NET in various browsers – IE, Firefox and Safari – and compete with Flash, AJAX and Javascript to – in Microsoft’s view – provide a much richer video and interactive graphics experience for end users. Ozzie noted that (“fat”) client software not only supports offline usage, but also offers “privacy, empowerment, anonymity and freedom” compared to the “monitoring, auditing and creepy behaviour” of some online services. I guess this was a swipe in particular at Eric Schmidt at Google who is currently promoting substantially enhanced search experiences for end-users, albeit with the consequence of maintaining (private) information about each user.

An interesting part of Ozzie’s presentation was his announcement that Microsoft Live is offering a Silverlight Streaming service providing 4Gbytes of free storage per Silverlight developer, so as to encourage the development and hosting of Silverlight applications. So, if you are a S(as/and)aS developer or independent software vendor (ISV), Microsoft is potentially offering you a rapid way to scale up to address a massive online audience, based on MSN and now not just IE but other browsers as well: up to 1 million unique end users can access your application for free (above that, its 25c per unique user). It will be interesting to see how Google responds..

IMHO we will continue to see a mix of pure software-as-a-service applications (with thin clients); online services with companion client applications (including rich internet access), and fat clients accessing remote services from time to time. There will continue to be a spectrum of configurations.

Regardless, I believe that a critical aspect of S(as/and)aS applications is the ability to scale self-service. Whether you use Silverlight Streaming, Google, Salesforce.com’s Apex or even Wal-Mart (as Dell is doing) to reach a potential audience of millions, I believe that a S(as/and)aS application will be unsuccessful if scaling of its adoption requires manual intervention for every transaction.

Self-service is key to S(as/and)aS – whilst at the same time ensuring that the customer’s experience is happy and helpful. Dell’s appearance in Wal-Mart may in part be due to reports of poor customer service with a purely online self-service store.

One example of online software self-service is of course the open source community. What could be more self-service than downloading source code, and playing and building it yourself ? A common open source business model is to extend self-service with technical support and training. But in turn, this customer support will best be implemented by at least some degree of self-service: witness IONA’s various support offerings for its Celtix family of open source products, including a self-service knowledge base alongside telephone and email support.

LeCayla’s self-service philosophy goes further. In providing SaaS metering and billing, LeCayla’s technology has to address two audiences. The first is end-users of SaaS offerings: LeCayla measures usage, and generates bills and invoices according to actual usage, and in accordance with specific business rules defined by a particular SaaS ISV or application software provider. Naturally, it is desirable that each end-user may use a self-service interface: eg to check her usage, or to change billing information such as a credit card number.

The second audience for LeCayla is the ISVs who want to use LeCayla to meter and bill for use of their software products. Each such ISV registers business rules (eg pricing information, usage tiers, etc) into LeCayla. Furthermore, each such ISV may wish to subsequently change its own business rules at any time – for example for a pricing promotion of a particular product within a particular geography. Naturally it is desirable that not only should end-users have self service to their own usage and billing information; but also that each ISV should also likewise have self-service to its own business rules, as well as to its market adoption metrics and usage information.

For Cloudsmith – the third software company in which I am involved – self-service is also key. As I noted in a previous posting, “sometimes creative developers have different configurations that they seek, or want to define, share and publish to the world. Can interesting new virtual distributions be rapidly defined, communicated and materialized ?”. Cloudsmith will enable developers to self-service find and use interesting software configurations, each frequently materialised from different software repositories (and sometimes using widely different repository technologies and build/make systems). Equally, publishing a new configuration, either to the entire world or to a private community of collaborating developers, will be a self-service activity.

Self-service seems to be intrinsic to scaling software services offered over the internet. Self-serviced services must naturally be scaleable: poor customer support and dissatisfaction will otherwise result. In a self-service, service oriented world, multiple business models are IMHO possible: for example, free access with optional paid-for support and consultancy (IONA’s approach with Celtix as per above); metered usage (LeCayla’s approach); or community based (Cloudsmith’s). I believe that scalable self-service underpins any viable service oriented business model.

Not all S(and/as)aS transactions should be self-service. But unless your S(and/as)aS business model facilitates self-service, then you may be scaleably challenged!

I was on a long haul flight last weekend, from Hong Kong to San Francisco – one of those wonderful flights where you land before you take off – on the way to the next installment of the Leadership For growth programme being run by Stanford Graduate Business School and Enterprise Ireland – see one of my previous posts for the background. Picked up the current issue of The Economist at Hong Kong airport, which I read on an occasional basis, the issue with Tony Blair on the front cover, to pass the time. There’s an interesting article on business schools, and how they are beginning to regain their lost vogue from earlier this decade.

I was the Chairperson of the Irish Management Institute a few years back, which was a little strange because I have no formal background whatsoever in business management, economics or finance! One of the raging discussions we had at the board level of the IMI was what should be the future of executive education in Ireland, including the relevancy or not of business school teaching to the needs of modern entrepreneurship and global business development. I found The Economist article thus particularly interesting, since it alluded to discussions about whether international business schools have lost their way and value.

Then, by coincidence, Monday’s Financial Times had a supplement on Business Education, including its international ranking of the top global executive education schools. It carried several very interesting articles suggesting that the top schools have changed their product from business education to business advice, and almost to management consulting. Customisation of curricula and classes lead to faculty not so much teaching, but instead providing insight in a discussion about specifically how to address issues within a client company, and/or specifically how to apply a particular idea or theory within a client company.

One of the things I had asked myself during my years at the IMI was whether there can be such a thing as a management profession. A profession, by definition, implies some core knowledge, which may be expanded and refined over time by appropriate research and in the light of experience; a way of asserting that an individual has attained a particular level of competence in that knowledge, and therefore can be admitted to the profession; and a code of ethics particularly as to service to the public, including appropriate disciplinary actions if these should be broken (The Economist article makes similar comments). As a professional engineer in Ireland, I am comfortable that Engineers Ireland operates our national engineering profession accordingly. The medical and legal professions are of course similar examples.

But can there be a management or business profession ? Is there a body of knowledge, an admissions procedure, a code of ethics and a disciplinary mechanism ? Can there be a guardian organization for the profession ? In fact should there not be one, so as to protect the public and including shareholders and investors ? However would such an organized profession stifle innovation and entrepreneurship ? As The Economist observes, Bill Gates dropped out of university and would presumably never have made the grade to become a “professional business manager”.

Hmmm. So what is executive education all about ? Can business management ever become a profession ?

I hesitate to comment further in general for all industries, but I do have some views more specifically as applies to the software industry.

In the mid 90s I had the sincere pleasure of having John Cullinane on the board of directors of IONA. John, as I am sure you know, founded and ran the first software company to file an IPO, the first billion dollar software company, and the first company to do a Super-Bowl ad! His company Cullinet was well known during the 1970s and 1980s. John has written an excellent summary of some of his lessons from those years, which I believe are as applicable today to software companies as they were then, in his book “The Entrepreneurs Survival Guide: 101 Tips for Managing in Good Times and Bad”.

One of the things John said to me early on as a board member at IONA was “You know Chris, managing a software company is actually easy”. I did a double-take when he said this to me, but he explained what he meant and I now basically believe he is right. Certainly compared to companies with manufacturing operations, managing a pure play software company would appear easier. I personally believe – and I sure some may wish to disagree with me – that the key operations of a software company (in no particular order) - engineering and software development processes; distribution channels and sales management, including compensation structures and channel conflict resolution; market segmentation analysis and product marketing; product management; professional services fulfillment; pre-sales technical support; after-sales support; product maintenance and upgrades; financial management, including financial planning and administration; internal IT systems; HR management, staff compensation, and gaining staff commitment; corporate marketing and PR; corporate governance; board procedures; management metrics and key performance indicator analysis; customer care and stratification; even M&A post-integration – in summary, all the functions of a modern software company are now reasonably well understood. There is – arguably – a body of knowledge out there which I suspect many of us in the industry would agree represents best practice in the industry, accumulated over the several decades of the pure play software industry since Cullinet. Listening and participating in the year long Leadership for Growth Programme here at Stanford has re-enforced my view. Perhaps somebody should write a book some time to capture this current body of practical knowledge – how to run a software company.

I guess if what I suggest above is true, then in principle two rival companies with very similar product offerings, and very similar strategies, and of very similar sizes, in principle should be unable to out-execute each other. That is a controversial claim, since execution is key to the success of any software company: but I do believe that a professional experienced software CEO is unlikely to make mistakes in execution, since what is needed in execution is actually now reasonably understood across the industry.

Competitive advantage then in the software industry is increasingly unlikely to come from execution alone. Instead, in my view, advantage comes from strategic insight and analysis, from new products and new business models. Advantage comes from understanding the current state within a particular segment of the industry, and leveraging that to introduce new products and services, perhaps in new ways, and which add sufficient value to motivate the market to invest and customers to buy.

“Success is 10 per cent inspiration and 90 per cent perspiration” said Edison. I think that the 10 per cent inspiration to conceive of a new idea is perhaps right; the 90 per cent comes not from actual execution, but from analysis and consideration of whether that new idea is actually worth executing upon – building a strategic plan and getting comfortable with it. If the strategic plan is worth executing on, then the steps to actually execute, given the body of knowledge about modern software company operations, are reasonably straight forward to identify: it should be reasonably obvious what needs to be done, and it becomes a matter of trying to actually do it.

An accepted body of knowledge will not, in my view, stifle innovation. Bill Gates would not have suffocated had such a pragmatic tome been available to him.

Perhaps I’m just representing a personal bias. I get excited by discussions on the state and direction of the industry, and where the current leverage points and opportunities are. I get less excited by discussions about operational issues, which of course are important and critical, but reasonably obvious in what needs to be done. Innovation in the industry creates competitive advantage; sheer execution is increasingly unlikely to do so.

I’m open to counter-persuasion. Flame suit on. What do you think ?