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Archive for October, 2007

Web Credibility

Tuesday, October 30th, 2007

I was looking around at some sites and was reminded of some older, but still relevant work done by the Stanford Persusive Technology lab on web credibility. I would have like to see the research updated to include some guidelines for UGC (User Generated Content) sites - but even so it is still very relevant. There are also a nice set of charts that describe captology here,  and web credibility here.

Another reason that I was reminded of the persuasive computing work is that I keep hearing from Israeli VCs the notion of “ease of use” being a key ingredient in the Web 2.0 world, and you need to make sure that Web 2.0 enterpreneurs understand that. IMHO that is a mistake - ease of use is the minimal bar - without that you don’t get to play… The real need is to make sure that developers and designers  understand that the real goal is “Joy of Use” - sure it has to to be easy and intuitive to use, but users also need to have fun using the technology - otherwise you won’t succeed.

The Long Road towards Integration – Appendix

Sunday, October 28th, 2007

I was at Journey 2007  (E&Y’s yearly conference for startups and VCs) last week – it was an OK conference, a good way to catch up with people I haven’t seen for a while. I did sit through one interesting panel on Mergers and Acquisitions, and heard some additional insights that I would like to add to my “Long Road to Integration” series. The points reiterate some of the points I have made before, but I thought it was worth posting them anyway – since the whole panel more or less agreed with them.

The first is that there is no such thing as a merger of equals – the larger company ACQUIREs the smaller company – and make sure you understand that before you go into the transaction. Also, the bigger size difference between the company, the greater the chance for a successful outcome.

Even though you may need to let the CEO go, make sure you keep on the 2nd a 3rd level management at the company. They are what keep things ticking.

Finally, since culture issues are a large culprit in the failure of an acquisition the acquiring company should appoint a SPOC.

Email and Enterprise 2.0

Wednesday, October 24th, 2007

I just read an interesting post on The state of Enterprise 2.0 and it seems like the various technologies that make up Enterprise 2.0 (RSS, Blogs, Wikis, Mashups, Communities) seem to be gaining acceptance and some traction in the enterprise.  Not surprising - I think the big losers will be the traditional enterprise portals. At the moment you can’t really find a complete Enterprise 2.0 stack, but it is clear that the writing is on the wall - and the Enterprise\Web 2.0 versions of the stack are much more useful, entertaining and engaging then the standard enterprise portal solution.

As I stated in an earlier post the Web 2.0 world is starting to penetrate into the enterprise, defining new ways to collaborate and raising ease of use expectations - things that are not usually at the forefront of existing enterprise portal technology.There was one specific quote in the article that intrigued me “The biggest impact of this lesson is that these new tools are so different and generally support such different types of knowledge than usually captured, that impact to existing systems seems to be minimal. Interestingly, you might see a decrease in the use of e-mail or ECM when the conversations that formerly happened on those platforms make a more natural home in Enterprise 2.0 platforms” (the emphasis is mine).  This got me thinking, since one of the main selling points of Web 2.0 technologies is that they will eliminate (or at least substantially decrease) email usage.  I have never seen any numbers to bear out this claim. My gut tells me that the number of emails in enterprises is growing, not shrinking (see “Intel flirts with No Email Fridays” for at least anecdotal corroboration), and I just don’t see why these technologies will change that substantially. Enterprise 2.0 technologies  may end up slowing the growth of email a bit, but are certainly not turning the tide.

My guess is that email is too pervasive, too general, too useful and too simple a tool to ever be replaced. I only wonder if as with the “paperless office” - where computers and technology were going to replace the need for paper, but instead only seemed to increase its usage - enterprise 2.0 technologies won’t actually generate additional uses for email…

Subprime Mortgage Crisis and Startups

Monday, October 22nd, 2007

I am not sure why we haven’t heard more about the effect of the sub-prime mortgage crisis on startups and VCs, but it seems clear to me that we will see an effect. The bad 3Q results (and bad 4Q forecasts) for many financial institutions will have a delayed effect on many later stage enterprise software startups. 

The Finance industry is a very large consumer of technology, and in many cases willing to be an early adopter of interesting technology. Of course, as with any downturn, new initiatives are always an easy target, and usually the first to go. Many enterprise software startups pin their hopes on selling their products to large US financial institutions. Those that have already signed deals- congratulations! Those that have deal propects in the pipeline, but haven’t signed the deal - don’t count your chickens, at least until the banks start growing again. 

No matter how the larger economic issues play out - the subprime  mortgage crisis will be a bad deal for startups.

The Long Road towards Integration – Part 4

Sunday, October 21st, 2007

I am sort of surprised that I am back on this subject again, but when I read that Microsoft’s Ballmer plans to buy 20 smaller companies next year (Ballmer: We Can Compete with Google) it drives home for me the importance of being able to integrate well in the aftermath of M&A. My best guess is that those 20 companies will include 1-2 large companies, the rest being small and midsize companies - companies that are “innovating in the marketplace” (a term we used to use at IBM Research). So Microsoft is effectively outsourcing a good portion of their innovation, and placing a big bet on being able to integrate these acquisitions into the fabric of Microsoft.Thee types of smaller acquisitions seem to be in the cards for IBM and Google - and I think more and more technology companies will be outsourcing their innovation this way - augmenting internal “organic” growth with external  ”inorganic” growth. Oracle seems to have gotten this down to an art (though they tend to swallow whales rather than minnows), and even SAP has jumped on the bandwagon. One issue that will clearly come with these acquisitions is how the acquiring company doesn’t kill the spark of innovation that exists in these smaller companies  (of course that is assuming that they want to keep the innovation alive, and aren’t just buying a specific technology or existing product.I had the opportunity the other day to speak with someone that was on the Corporate side of an acquisition and discussed what was their thought process at the time of the acquisition, and how that differed from how things turned out after the acquisition.One thing that struck me was that both sides were fooled since they were (paraphrasing Bernard Shaw)  ”two companies separated by the same language”. The company being acquired thought they were communicating important information about the acquisition, but it turns out that they were using internal shorthand to describe people and situations, which were interpreted completely differently by the other side. This was probably exacerbated by the fact that one side was Israeli and the other American - but it could have happened with any two companies - especially when there is a high impedance mismatch between the two (or in English - the companies are of very different size). . For example when one company said a manager “kept the trains running on time” - they meant a clerk that could keep to a schedule - while the other side thought  they meant someone could manage a complex system with all its nuances and make sure that it keeps working. Understandably these kinds of miscommunications caused a lot of faulty decisions to made during, and right after the acquisition.In my experience it takes about 9  to 18 months until the sides really start to understand each, how the other side works - and how they need to work together. That is assuming that everything goes smoothly. If you try to speed it up too much - you will end up killing the innovation, and you may end up killing any possibility of a successful acquisition.So what is the bottom line? Assume that you will need to keep the current structure of the acquisition intact for about a year before you can make any drastic structural or strategic changes. See the rest of my recommendations in previous posts - and perhaps hire a consultant that has been there and can help smooth the transition.

‘‘I think I can, I think I can’’: Overconfidence and entrepreneurial behavior

Wednesday, October 10th, 2007

I actually “borrowed” the title from an interesting article in the Journal of Economic Psychology’s January edition. Not a journal that I usually read, but my interest was triggered by a post in Marc Andressen’s blog. When I first saw the article (especially the introduction) that explained that “The strongest cross-national covariate of an individual’s entrepreneurial propensity is shown to be whether the person believes herself to have the sufficient skills, knowledge and ability to start a business. In addition, we find a significant negative correlation between this reported level of entrepreneurial confidence and the approximate survival chances of nascent entrepreneurs across countries.”

So I thought to myself “aha – I finally understand why there are so many high-tech entrepreneurs in Israel” – the national trait of over-confidence is actually causing the Israeli propensity to create startups. This actually fit pretty well with the findings that I mentioned in an earlier post on Age and the Israeli Entrepreneur. Then I looked a bit closer at the numbers in the article.

Turns out the article is about new business in general, not just high-tech, and Israel has an relatively low percentage of entrepreneurs that perceive that they have sufficient skills, knowledge and ability to start a business (only 30% of respondents, as opposed to 61% in NZ, 55% in the US – but only 11% in Japan, Israel is in the bottom third of the countries mentioned). So clearly it isn’t a national trait, but one that seems more localized to the technology community. Given that, I think there may be a different trait involved rather than just self-confidence. Since the Israeli technology community is relatively small (and pretty close knit – many having served together in the Army) I think another factor mentioned in passing in the article may play a larger role in Israel’s technology startup phenomenon - “Knowing other entrepreneurs is also positively associated with start-up propensity.

Personalized Feeds (or more on Open APIs)

Friday, October 5th, 2007

 I just read an interesting study on the problems with existing news RSS feeds from the University of Maryland’s International Center for Media and Public Relations. I think it is a great example of how user’s can’t depend on the organization that creates the content to provide access to the content in the form or format most useful for them, and why the ability for users to create their own feeds is so valuable. To quote from the study:

“This study found that depending on what users want from a website, they may be very disappointed with that website’s RSS.  Many news consumers go online in the morning to check what happened in the world overnight—who just died, who’s just been indicted, who’s just been elected, how many have been killed in the latest war zone.  And for many of those consumers the quick top five news stories aggregated by Google or Yahoo! are all they want.  But later in the day some of those very same consumers will need to access more and different news for use in their work—they might be tracking news from a region or tracking news on a particular issue.

It is for that latter group of consumers that this RSS study will be most useful.  Essentially, the conclusion of the study is that if a user wants specific news on any subject from any of the 19 news outlets the research team looked at, he or she must still track the news down website by website.”

Bottom line, as long as we depend on publishers as both content providers and access providers we as consumers of content won’t be able to get what we need in the way we need it - just like with APIs.  The only way to solve the problem is to allow users or some unaffiliated community to create the access to content (or API), as opposed to limiting that ability to only the publisher.  As web 2.0 paradigms catch on with the masses, turning more and more of us to prosumers, this will become more and more of an issue.  Publishers that try to control access will lose out to those that provide users the to tailor the content to their own needs. Publishers need to understand that this benefits both them and the users.

I see signs that this is actually starting to happen (in a small way) with the NYTimes and WSJ both announcing personal portals for thier users. The jump to personalized feeds isn’t that unthinkable…

The Death of Enterprise Software Startups?

Tuesday, October 2nd, 2007

In Israel, it has become close to impossible to get an investment for an Enterprise Software startup, even worse than in the US. One of the main reasons is that enterprise software sales are hard, and expensive ( a lot of high cost man power, and long sale cycles) - which is true. Everyone is looking at models to get around those issues (e.g. open source, SaaS), but fundamentally it remains an issue.
Not that there aren’t problems or opportunities in enterprise software (see The Trouble With Enterprise Software for a nice overview of some of the issues), there are huge issues with enterprise software, and SOA (Services Oriented Architectures) are no panacea. So opportunities for technical innovation abound, it is just that most VCs don’t believe that it is a good investment of time or capital. Since VCs are awfully busy, and have more on their plate than they can handle, once this is a “rule-of-thumb” it is hard to get their ear.
I think this will have grave implications for Enterprise IT shops (and vendors). In last few years most large IT vendors have gotten into the habit of “outsourcing” their technical innovation - they buy companies rather than develop the technology in-house. If the VCs stop investing - then in a few years, innovation in the enterprise software market will dry up. Given the current state of enterprise software, that can’t be a good thing….
I think that things will change - since there is still a lot of money in enterprise software and large vendors need technology, someone will have to provide them with it. Enterprise software companies probably will have smaller chance at IPO - but given the relative lack of competition they should have a better shot at M&A. The trick is to have unique, innovative technology that solves a problem for enterprise IT departments – or even better, for the business. I also think the pendulum has swung too far, and will swing back in a couple of years - making any investment done now, much more valuable in the future