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I sat down with fellow Minnesota entrepreneur and Internet strategist Steve Borsch this week to talk about my company VISI. He wrote a very nice summarization of our conversation on the increasingly popular Minnov8 blog. Thanks Steve!
I attended VMWorld 2008 in Las Vegas believing that the event would be scaled back compared to the 2007 effort in San Francisco. With VMWare’s stock price down, the general economy suffering and new competitive threats on the horizon there is no way they could make this event bigger and better. I was wrong.
The Venetian in Vegas was a perfect place to hold this year’s VMWorld conference. I thought the conference digs were an upgrade over San Francisco’s Moscone Center. The flow of people between conference sessions and the overall layout of the conference seemed more orderly to me. You just can’t beat the strip for dining and entertainment options. The conference is moving back to San Francisco next year.
I focused more on educational sessions than the vendor expo this time around. Frankly I didn’t see anything new in the vendor area. I was much more interested in learning about VMWare’s future product strategy and the future of virtualization technologies in general.
The keynotes this year were given by new VMWare CEO Paul Maritz and CTO Stephen Herrod. I thought that Herrod’s keynote presentation on the second day was a little sharper. His presentation contained more details about future product strategy and his presentation style was a bit more polished. The problem was that both presentations were a little cloudy regarding the details. Yes they both talked about building cloud computing architectures using their virtualization technology, but they attached no timeframes to their future initiatives. Herrod gave a demo of a technology they are now calling VMWare Fault Tolerance which allows a shadow copy of a virtual machine to run on a second server. The thing is we saw this technology demoed at VMWorld 2007. So where is it? When are we going to see these new technologies baked into released products? Nobody seems to know.
The takeaway from VMWorld is that VMWare has a number of technology initiatives they are pursuing — vNetwork, vCompute, vStorage, vCenter, and vCloud. Their strategy seems smart given the fact that virtualization is now a commodity technology. They are focusing on the layers of the solution stack that are traditionally hard to manage and scale. VMWare wants to become the data center operating system. And I think they are moving closer to this reality every year.
Check out more coverage on the VMTN Blog
I’ve been suffering all week from a terrible cold I picked up while in Vegas last week. I suppose it serves me right with all the late night carousing I enjoyed. I hope to file a report on last weeks VMWorld and ICE Summit conferences tomorrow.
I’m headed back to Vegas this next week to attend two conferences: VMWorld at the Venetian and the ICE Summit at the Mirage. Both conferences will cover virtualization technologies in detail. The ICE Summit, sponsored by 451 Group, is more focused on cloud and grid computing initiatives from an enterprise or service provider perspective. I hope to blog from the conferences next week but I’m only planning to take my blackberry with me. So right now I’m trying to hunt down a workable solution for blogging from a blackberry.
I was browsing Minnov8 one of the many interesting local tech blogs today and came across an linked article predicting the collapse of the SaaS industry. The interviewee in the article was Harry Debes, chief executive of Lawson Software — a local Twin Cities company that “done good”.
I’ve never met Mr. Debes but I have to believe he is a pretty smart fellow with a bio full of laudable deeds. But I believe some of his analysis in this article was off the mark.
First, he compares the SaaS phenomenon to earlier technology efforts:
This on-demand, SaaS phenomenon is something I’ve lived through three times in my career now. The first time, it was called ’service bureaux’. The second time, it was ‘application service providers’, and now it’s called ‘SaaS’. But it’s pretty much the same thing, and my prediction is that it’ll go the same way as the other two have gone: nowhere.
The problem with this comparison is that back in those days a fast Internet connection was 56k and companies like Google and YouTube didn’t exist. Some of the basic concepts supporting SaaS existed ten and twenty years ago. But we didn’t have the technology infrastructure to support it. Now we do.
An industry has to have more than just one poster child to overhaul the system. One day Salesforce.com (CRM) will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse.
Five years ago there were a handful of SaaS companies. Today there are well over 1000. You will have a hard time getting funded in the Valley if you are a software company without a SaaS play. You can add one more company to the growing SaaS list — and it’s a biggie — Microsoft. Okay, they call their version “software+service” but let’s call it even.
But, as we did the maths, we realized we could get killed. It was going to take us seven to 10 years before we made any money. That’s nonsense. So we reversed our plans. I’m very glad that happened because now we can sell the software in both models. We wouldn’t have to wait 10 years to make a profit.
Lawson created a product that was designed and marketed for specific types of enterprise environments. You have an internal cost structure you have to maintain in order to support your product and be profitable. No problem. But why did you think that same cost structure would align with the SaaS-world? It’s obvious that smaller, more nimble SaaS companies can establish profitability in less than 10 years. Your challenge is that you need to think “smaller” like your friends at SAP, Salesforce.com, and Microsoft. Your go-to-market strategy needs retinkering.
When the sunk costs have been fully depreciated, customers effectively run the software for free, thereafter. Whereas, if they went to Salesforce.com, it’d cost them a million a year because they’re paying for ongoing licensing and maintenance.
Mr. Debes would have us believe that companies don’t pay for annual software maintenance agreements (usually 15-20%), software updates, custom code development, testing and staging environments, production environments, and IT staff to maintain the application environment. SaaS allows companies to effectively share those costs because the code, infrastructure and people are all provided by the SaaS provider.
I talk to small, medium, and large companies every week that are looking to outsource parts of their infrastructure. I know at least one service provider that manages Lawson deployments for companies in their datacenter. That’s a hop-and-a-skip away from SaaS in my book. I’m not trying to say that SaaS is the answer to all our problems. Larger enterprises, some of whom are probably Lawson customers, will certainly have to tread carefully into SaaS. SaaS definitely has potential and to ignore it is a risky bet.
