Posted on October 25, 2008
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Many of us have heard the quote about "not having lived through the great depression" or even more recent history like the bear markets of the mid-1970’s. Technology companies and investors however have fairly fresh memories of the "dot com bust" of the early 2000’s. We have seen that in the past week with a raft of fairly aggressive and swift cuts of staff and burn rates at even very small venture-backed companies.
Companies are suspending expansion plans, shifting workers from full time to freelance, work from home staff. (Possibly exacerbating an already narrow number of employees who get healthcare benefits from their employers.) In some cases company managements are preparing their firms for survival through 2012 even if revenue fails to materialize between now and then. Staff cuts of 10%, 20% and even 40% are common.
Venture capitalists have also been vocal about the need to clamp down and are restricting their investments. Besides the weak economic outlook the proceeds from exits are certainly down from where they once were and the IPO market remains virtually non-existent.
To cope with the doom many are pointing out the obvious. This is pretty good news for the future and getting back to seeing attractive returns again. We’re just beginning to see examples of private investments that have 10x or better returns as fairly likely outcomes over multiyear periods. (Of course in this environment it doesn’t mean they will get funded!)
Technology should remain one of the better growth areas coming out of this recession. Some companies that are cutting staff are simultaneously increasing some of their investments in technology because they can improve productivity and lower operating costs. There isn’t enough of this type of spending to save us all from a downdraft in overall IT spending but it’s still an instructive example.
So for us and our clients and friends who can look a few years out this is also a time that is sowing the seeds for future wealth creation. We’re adding to our portfolio of names as we work our way through the crisis. The good news is that managements in most cases are taking the situation very seriously because they remember the bust of only several years ago. This will create leaner, more profitable and higher return companies than we would have otherwise.
Posted on October 22, 2008
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We’re out and about meeting companies and attending some technology conferences in Europe this week. One thing we have heard a few times suggests that Salesforce.com may be looking more like legacy enterprise software than a new SaaS or PaaS platform.
To be clear nothing we heard suggests that it’s "game over" for Salesforce but rather that there appears to be a more robust market for more advanced, more flexible and lower-cost solutions in this market.
It’s been over a year now since we first started hearing from corporate customers that their annual costs for Salesforce.com were out of line what they felt was justified and what they could get from other offerings. Since people just about always prefer to pay less we didn’t think too much of it at the time.
Today we heard from some more organizations saying that they are finding Salesforce.com to actually be *hindering* and *slowing down* their sales process. This was a bit of a surprise for us but when they took us through the reasoning it had much to do with the rather clunky interface of Salesforce and their continued lack of real integration. (There is still a great deal of cutting and pasting involved in doing anything realistic.)
At the same time we are hearing from consultants and integrators that they are increasingly recommending to clients that the consider options and even build their own systems.
Although just a few pieces of evidence have some forward we generally find they are indicative of some emerging trends. As more software gets developed and deployed in the cloud it becomes much easier to build applications based on open technology services. This will put some pressure on Salesforce to modernize their products and architecture. Their efforts to transform to a platform company isn’t looking very promising.
At the same time this is probably a more fertile area for new companies than we thought a few weeks ago.
Posted on October 13, 2008
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A healthy subset of the global geeks are settling into Berlin later this month for a stream of web-technology-focused events. As "obvious" as is the inevitability of cloud computing may be to most of us there are still a huge number of technical and user obstacles to overcome before it can really be called mainstream.
Setting raw bandwidth speed and coverage aside for the moment there will be plenty of discussion of the software and service-based issues facing cloud computing adoption at the Web 2.0 event in Berlin. In particular we’d highlight the following:
1. Cross platform: There’s been some splintering of client-side technologies like IE, FF, Safari, iTunes/iPhone and now Chrome to name a few. How will they get harmonized? What about Adobe Flash, Flex and AIR?
2. Scaling: Amazon and Google have started efforts to try and lead the way here but the ability to create, run and scale cloud applications is particularly difficult given the sheer size of the user population. The cloud may be "elastic" but how long does it take to stretch and contract? These companies will be in Berlin to talk about this and how smaller firms like RightScale and Elastra may help.
3. Development Vision: What are the right sets of server-side technologies to build on for the long-term? Location-based services are increasingly being integrated into applications as the virtual and real world applications meld together. How is that going to come together over time?
There’s no doubt that there will be much more to cover in the three days we’ll be in Berlin and for those interested in an even deeper dive their are events like BarCamp that precede the Web 2.0 event and some special after-events aimed at further socializing and human collaboration.
As a reminder feel free to use our Research 2.0 discount code "webeu08gr63" for a substantial discount on registration.
Posted on October 7, 2008
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Ciena held their analyst meeting in NYC today. Although we were around town we still attended remotely which is more useful than being there, but that’s another RealVR story.
Although the company has well-known customer concentration issues and overpaid for WorldWidePackets management articulated some very intriguing developments in the metro space that we think position the company well for some of the adoption trends we see coming. This is a very interesting, long-term and pervasive area for development for metropolitan areas and the technology convergence that will go on there. Ciena sees it and is getting positioned there while it sees it’s stock crater to the single digits.
Management wasted a trip in coming to talk to typical securities analysts who focused on useless near-term questions like: "Are you going to do a stock buyback?", "Can you give us full year future guidance?", "Are you going to take the company private?" All we can say is: Analyst, please!
Obviously the company doesn’t know or can’t say. How about engaging on the material they came to present and so some of your own work on the name. Companies should just do these analyst meetings online.
At the same time we hope the company has a good 1-on-1 schedule where they might even have a discussion about what’s really going on in the business and how it can play out over the next 12-18 months.
If not they should do these from HQ using video and collaboration which will be more efficient and drive the kind of bandwidth they are positioned to supply.