MyStrangeWorld’s public blog

Have you ever examined an entrepreneur’s business plan or sat through a pitch and wondered why it has to be so complicated?

Does the idea need to be complex to be good?

In our recent post, Angels and Startups, Turn a MISS Into a Hit, this exact question was put on the table.

The quintessential examples of how simple leads to success are easily displayed in Diapers.com and icanhascheezburger.com. These sites have achieved success simply because they’re simple and they either make people happy or make things easy for their customers. They both hit on the old standard of giving people what they want.

Too many an entrepreneur tries to develop concepts that disregard market demand and instead plan to launch an entire strategy based on creating rather than acting on market need.

Complexity Doesn’t Guarantee Dominance

Perhaps the complexity that so often arises is born out of a desire to be the next Google or the next Starbucks. If so, these free-thinkers are really missing the point.

Neither Google nor Starbucks are complicated approaches to success. Both companies developed their business model on simply giving the customers something they want.

Sure, the founders might offer a better way of doing it, but it doesn’t require hat tricks and complicated algorithms to achieve ultimate market success. (OK, so Google does use algorithms – but you get the point.)

It doesn’t matter if the business is a physical location or a new website – entrepreneurs have to capture attention, make an impact, and complete the conversion. An effect way to do all of these things is to keep it simple.

Simple is not outdated and should never be overlooked as worn out if the idea and the market are both viable.

"Simple is not outdated and should never be overlooked as worn out if the idea and the market are both viable."

For those entrepreneurs looking to make a living from open-source software, Index Ventures general partner Bernard Dallé has some advice: get thee to a cloud strategy.

Bernard Dallé

(Credit: Index Ventures)

Why? At a time when enterprises may be less willing to spend on software, they're increasingly interested in spending on the operation of that software through cloud computing, an interest that can be bought...and sold.

The cloud isn't simply a clever way to provide social-networking services, either. As Dallé suggested in a phone interview on Wednesday, cloud computing may well be the best way to monetize enterprise-facing open-source software.

(..) So when Dallé says that as much as 70 percent of the investment opportunities they see now are cloud-related, and that this bodes well for open source, it's worth paying attention.

Given that the cloud renders software less visible to end users, I asked Dallé if cloud computing spells the end for open-source businesses. Far from it, he said:

I think it's good news. I don't think open source is going away. It's here to stay. The world is increasingly moving to a hybrid world: a combination of on-premises and cloud computing. We're not going to see a 100 percent cloud world.

(..) Open source provides a convenient on-ramp and off-ramp for customers, helping them evaluate the software at low to no cost and also gives a free (as in cost and as in freedom) exit in case things go wrong. Between that entrance and exit is a ripe opportunity to make a lot of money by delivering value to customers.

Dallé further explained that open source helps vendors reach customers through low-cost distribution, but cloud computing, importantly, makes the open-source software palatable to a class of customer that finds open source too risky, yet has no problem using it when hosted.

If this sounds like a potent mix, it's because it is. It's also a highly efficient, low-cost way to start and build a company. Dallé elaborates:

The other big trend, not related to open source, is cloud-on-cloud: cloud services running on other clouds. It used to be that everyone ran their own data center, but now an increasing number of companies are happily running their services on Amazon EC2 or other public clouds. This dramatically lowers the cost of starting a service, and starting a company around it.

This might raise the concern that we'll see too many open source/cloud companies, not too few. Dallé isn't worried: "The quality of an investment always comes down to the quality of the people involved and their execution."

If Dallé's correct, the right place to look for open-source businesses to flourish is at the nexus of on-premises open-source software and cloud computing. It could prove to be a potent mix. And while the cloud might not be the right delivery platform for some software, it probably does have a high degree of salience for many.

"a hybrid world: a combination of on-premises and cloud computing. We're not going to see a 100 percent cloud world." and " open source helps vendors reach customers through low-cost distribution, but cloud computing, importantly, makes the open-source software palatable"

Status quo seekers in publishing are now talking about delaying Kindle and other ebook editions of their new books. The idea would be to come out with a hardcover, then a few months later an ebook, then a year later a paperback.

This is lame-brained thinking on many levels, one involving teaching the market a lesson. Leaving that aside, it ignores the magic of dynamic pricing.

When you produce a physical good like a book, it's really hard to change the price over time, especially if there are retail stores involved. But changing the price on an electronic good is trivially easy.

So, for example, you could charge $24 for the Kindle edition for the first two weeks, then $15 for the next two weeks and then $9 for the year after that. Once it's a backlist classic, it could cost $2...

Or, thinking about how you might create launch excitement, you could reverse it. $2 the first day, $5 the first week, then $9 later. Better hurry!

Or, to get more sophisticated, you could reward the market for getting excited. What if the price for everyone drops if enough people pre-order it?

This isn't just about books, of course. It's about anything where you have the ability to change pricing based on time or demand... tolls, music, phone calls, consulting... We need to stop assuming that digital goods are just like physical goods, but shinier.

Technology puts a lot more pressure on your imagination and creativity, even in pricing.

Technology puts a lot more pressure on your imagination and creativity, even in pricing.

(...)

The keynote hall was full of customers and prospects — a thousand or more altogether — and I’m guessing that, even though Salesforce.com always makes a big deal of multi-tenancy and how fundamental it is to cloud computing, very few of these business people really care what technology the platform is built on, so long as it delivers the goods.

I believe SaaS and cloud vendors have got to move beyond talking just about the technology and instead talk about what cloud computing delivers — which in any case will shift the conversation onto ground where the pureplay, multi-tenant cloud solutions are better placed to win the argument, (...) The trouble with talking about multi-tenancy itself is that it draws you into an abstract debate with conventional software vendors over the relative merits of alternative deployment platforms for a given application. This immediately brings the debate onto their home ground — a place where applications are discrete, deployments happen as a batch process and you have to get the system up-and-running before you even start thinking about meeting the business requirement. That’s not where the cloud is at.

(...) to put the technology cart in front of the horse? The driving, motive force behind customer adoption of cloud computing is the business need to be out there on the Web, interacting with their customers in real-time, having their fingers on the 24×7 global pulse of the market, able to react and respond instantly to changing competitive threats and opportunities. And how are they to do that if their business systems are cloistered somewhere off the Web, safely tucked away behind an enterprise firewall whose main purpose in life is to keep the Web at bay?

Cloud computing is far more than just multi-tenancy. The technology is core and it’s essential, but it’s not the whole story. What matters is a raft of capabilities and concepts that I prefer to group together under the umbrella term of ‘platform bandwidth’, all of them concerned with a cloud platform’s capacity for unremitting, uncapped and continuously improving web connectivity.

When evaluating a cloud platform, rather than starting with multi-tenancy, I’d suggest buyers check through the following list of questions:

• Will it remain capable of sustaining high-bandwidth connectivity with all of your customers, suppliers, employees and other stakeholders, even at times of unexpected peak load?
• Will it stay up-to-date with every new technology development (opportunity or threat) that emerges in the global Web ecosystem over the next days, weeks, months and years — without ever making you wait for your own implementation to catch up with the state-of-the-art?
• Can you choose to participate in a community of other platform users, exchanging information and perhaps extensions and add-ons, all referencing — and ready to run on — the same shared infrastructure?
• Will it give you freedom to connect to the widest potential range of third-party services available in the global Web, and to connect to the most popular of them over a shared integration infrastructure instead of having to custom-build your own?
• Will you be able to access limitless capacity on-demand to meet all your computing needs and still only pay for what you use?
• Will your provider monitor usage in real-time and continuously tune platform performance to ensure the infrastructure remains as secure, responsive and cost-effective as possible?

I defy anyone to build a cloud platform that can deliver all of the above without making it multi-tenant at every layer of the stack. But multi-tenancy is not enough on its own. Just as important are components such as: massive Web-facing bandwidth: an API that’s architected to interact with the widest possible spectrum of web resources; and an integrated operations and development team that’s committed to continuous enhancement of the platform to meet the constantly-evolving needs of its customer base. By focusing the debate on multi-tenancy rather than these wider considerations of platform bandwidth, we risk misleading our audience. (...) vendors building multi-tenant architecture for deployment on-premise. (...) others build single-tenant applications and deploy them to a multi-tenant infrastructure. Neither approach will equip their customers with business systems that allow them to compete and thrive in the real-time, always-on, fully connected, constantly evolving environment of the connected Web. Multi-tenancy is the foundation, but it can only deliver what customers today are looking for when it’s deployed in the full context of the Web itself.

This is on NewTeeVee:

Amazon.com just launched a promotion dubbed Disc+ On Demand that may well be the start to the industry’s first major multi-platform retail experience. Customers who buy select movies on DVD or Blu-ray will be offered the chance to instantly watch their purchase through Amazon’s Video On Demand service.

One of the biggest downers to any ecommerce buying experience is waiting for the goods to turn up and with this move Amazon eliminates that problem and delivers instant gratification so it easy to see why this makes sense, and might even help maintain DVD pricing in the short term (they are describing the VOD part as a “gift with purchase”).

Looking forward, if this offering takes off the implication is that people will be watching their films over the internet before the physical copy turns up at their houses.  From there it is a small step to ditching the DVD and just taking the stream.

We are seeing in the music industry that having music available everywhere is more important than owning it and I expect we will see something similar in movies and then books.

E-mail and social media top the list of marketing tactics respondents will increase spending on in 2010. Search came in third.

Combining social media and e-mail marketing is a growing trend. More than four in 10 business executives said integrating the two tactics was one of their most important e-mail marketing initiatives for 2010, just after improving performance and targeting and growing opt-in lists.

Around one-quarter of respondents had already implemented an integrated strategy, and another 24% had formulated a strategy and were researching how to put it in practice. But 18% of business executives wanted to add social components into their e-mail campaigns and did not know where to begin.

I never worry about action, but only inaction. - Winston Churchill

It's cheating to start a blog post with a quote from Winston Churchill. He was that good. But sometimes you need to cheat and I'm doing it today.

People ask me all the time about the traits I look for in entrepreneurs and action orientation is at the top of the list. I'd much rather back someone who makes 100 decisions a day and gets 51 of them right than someone who makes one decision a day and gets it right.

I believe that in startups, like venture investing, the cost of making a bad decision is not nearly as great as the benefit of making a good one. So I like action oriented leaders.

When you make a bad decision, you can always realize it was bad and change it. By being action oriented, you put a lot of things in motion and can evaluate what is working and what is not.

I am not advocating a "throw it up on the wall and see what sticks" approach. I believe entrepreneurs need to me more insightful and strategic than that. You need to have a game plan for sure. But within that game plan, I believe it is better to try more things than less things. And I believe that perfect is the enemy of the good.

Dick Costolo, co-founder of FeedBurner and now COO of Twitter, describes a startup as the process of going down lots of dark alleys only to find that they are dead ends. Dick describes the art of a successful startup as figuring out they are dead ends quickly and trying another and another until you find the one paved with gold.

It's another form of the classic direct marketing technique of test, measure, test, measure, test, measure. You can think and debate about stuff all day long or you can try stuff out and see what works. From my experience, the latter approach is a much better one.

There is a cost to action orientation. You need to be able to hit the quit button. You need to be able to deal with the broken glass that results from doing that. It's a messier way of doing business and some people have a hard time with mess.

A good example of that is hiring. If you are "action oriented" in your hiring, you'll make more hires and more of them will not work out. Which means you'll be firing more people and dealing with the inevitable headache and heartache that results from showing someone the door.

But as I've asserted earlier about startups, the benefits of making a strong hire vastly outweigh the costs of making a bad hire. Strong hires can lift an entire organization almost single handedly, especially when you are a small company. Bad hires can be toxic, but not if you recognize them quickly and move them out.

Great entrepreneurs are hard to work for. They jerk you around, change things up, and are always pulling the rug out from under you. And often a company outgrows that leadership style and needs a calmer more organized leader.

But if you want to create something great and do it faster than the competition, you need to be action oriented. You need to be decisive. And you should not worry too much about making bad decisions as long as you are prepared to recognize them quickly and unwind them.

The credit crunch has boosted adoption of colocation, as some companies who might normally have built their own data centers have instead leased colo space to conserve cash. But the majority of enterprise companies still want to build their own facilities, and will likely pursue either new construction or retrofits to meet their expansion needs in the next two years.

Those were some of the key points emerging from a session by Gartner analyst Lydia Leong at last week’s Gartner Data Center Conference in Las Vegas. Leong examined the expansion options available for companies with growing IT operations, and the economics influencing the choices in today’s data center marketplace.

“The colo market has seen a real upsurge over the past several years,” said Leong. “Colocation is where you go when you need space right now. Most people choose colo close to home, but it doesn’t have to be that way.”

National Search = Savings
She noted that colocation facilities vary in quality, meaning that it may sometimes be better to look outside your immediate area. “The greater your willingness to conduct a national search, the lower your costs will be,” Leong said. “We have providers who are terrible in one facility and great in another city. The difference is often the data center manager.”

The credit crunch has led many companies to forego data center construction projects that would require a significant outlay of capital. Some enterprises companies have opted for colocation, in which they lease cages or cabinets within a third-party data center.

Others have chosen wholesale data center space, in which tenants lease entire suites of data center space with dedicated power capacity. The wholesale market has been particularly attractive for fast-growing Internet companies, such as Facebook and Rackspace, who have been major players in the wholesale space. Most wholesale leases are in the seven to 10-year range, although Leong noted that a number of recent deals have featured five-year leases.

Both models have benefited from the credit crunch, which has made it harder for companies to borrow money. The tight capital market has meant closer scrutiny of construction requirements. In an instapoll of the audience, financial considerations were the top factor in company data center decisions.

Seven to 10-Year Lifespan
“If you want to be really honest, the lifetime of your data centers is 10 years, maybe only seven,” said Leong. “The cost effectiveness of a building with that lifespan is limited.” What about retrofits as opposed to ground-up “greenfield” construction. “The up-front investment is still pretty high,” said Leong. “These are for tenant improvements you’re going to make that you don’t own.”

Leong said the economics only make sense if a company needs at least 50,000 square feet of data center space.

But many attendees at the Gartner event appear undeterred, and say they will build their next data center. An audience poll found 34 percent indicating their preference for data center expansion in the next 24 months would be greenfield construction, followed by 31 percent preferring a retrofit. Twenty one percent cited colocation as their preference, followed by wholesale space at 15 percent.

Cloud Aptions Abound
What about cloud computing? “A lot of you will probably be thinking about cloud,” Leong said. “You’re going to have a wide range of options. Just about all the major outsourcers are building clouds. It will affect the way you think about servers, particularly if you have less than 50 servers. For most of you, the cloud will be a tactical option, and not your main option.”

What’s the number one mistake companies should beware of in planning data center expansions? Leong says it’s getting the power capacity right. “Power density is going to be your major limiting factor,” she said. “But most of you completely overestimate how much power you’re going to need. One of the best ways you can contain cost is by not overbuying power. If you overestimate your power needs, you can grotesquely inflate your costs.”

"Colocation is where you go when you need space right now. Most people choose colo close to home, but it doesn’t have to be that way.”
"providers who are terrible in one facility and great in another city. The difference is often the data center manager.”