3 Low-Competition Niches In Retail Software (guest post)

My first guest post (ever) 3 Low-Competition Niches In Retail Software has been published by Andy Brice on his blog Successful Software. Special thanks to Andy and his wife for the tremendous polish, they have brought to my initial draft.

Stack Exchange 2.0: epic fail?

It's a sad thing to see a pair of brilliant entrepreneurs going for a probable epic fail with best intentions in mind.

IMHO, the recently announced Stack Exchange 2.0  has a high probability of failure, and worse (as far I am concerned) it might marginally hurt my business due to the lack of ongoing commitment for the forum I did setup for my own company a few months ago.

Let consider the situation:

• Stack Exchange is an excellent Q&A engine, something that the market had been waiting for a long time, as illustrated by the success of Stack Overflow.
• Stack Exchange 1.0 had a very reasonable business model, announced with an entry price of about $120 / month.

Now, Stack Exchange 2.0 for a business plan that urgently reminds me of the 37signals announcement of their $100 billion valuation:

When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation.We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!

So let start by discussing the arguments proposed by the SE team to go for a free service:

1. SE had not enough enough beta volunteers. They were expecting "thousands of sites would start to sprout up on every possible topic" (sic)
2. People were prone to create "ghost-town sites that nobody visited" (sic).  "Allowing anyone with a credit card to make a site" (sic) wasn't a good idea.
3. People were prone to "multiple sites on the same topic" (sic).

Expecting an overnight success

Well, as far point 1 is concerned, that was just plain unrealistic expectations. Yes, I am 100% sure that SE 1.0 (Stack Exchange 1.0) could have ultimately had thousands of happily paying customers, but it turns out there is no overnight success. Stack Overflow was a quick success because it benefited from two famous bloggers with huge 100% focused audience.

Yet, SE 1.0 is a B2B product, and needs to be marketed and sold accordingly; and it turns out that the SO (Stack Overflow) is definitively not the right audience to market SE. All the SO folks happen to be software developers: little wonder that you get half a dozen SE spawn focusing on startups (but we will get back to this point).

Hence, SE 1.0 had not even been marketed yet, not to the relevant audience anyway.

Then, the beta branding is sufficient to scare away about 99% of all B2B prospects; software tools are sort of a one-of-a-kind exception here. Thus, to even get a chance for SE to succeed, it would need to branded as v1.0 then start charging for it.

Companies don't trust "gratis" stuff, and rightly so. B2B is the contrary of B2C: you have to start charging for it to succeed (open source entered the business the day people started to charge for it).

What about the ghost sites?

Building a community is a very significant investment. It takes a lot of time, typically years, and thousands of hours of work. SE 1.0 was beta. How could it be expected any reasonable organization to push such a commitment on an unproven solution? For most businesses, a solution becomes proven when someone gets charged for it, and this person claims that is was money profitably spent.

Then, the SE team implicitly assumed that low traffic means implicit failure: those guys with credit cards they don't know what they are doing.

The market gets it wrong, and we are going to do it better.

I am very skeptical when anyone (even bright people) pretend to know more than the market. If somebody is selling Luxury Yatch, then a single answered question might be worth millions of USD if it makes the difference to close the deal.

If people (like me) are ready to be pay $100 / month for low traffic websites, then there might be another explanation than those people don't know how to spent their money.

Pushing the point further, how do ghost sites hurt the SE business in anyway? Companies pay for the websites, nobody looks at those websites, nobody gets hurt by those websites. Take the money and stop whining.

Websites on similar subjects are created

Considering that SE was primarily addressed at a near monolithic audience (software developers), it's little wonder to see that many people had the same idea at the same time.

This is old behavior inherited from Economy 1.0: it's called competition.

And so what? Software editors sell their products to companies who happen to compete against each other. This is a healthy situation. At some point the market may decide to elect a "outstanding" winner, but most of the time, market does not, and competition keeps going.

Again, pretending to know more than the market is a wild assumption.

As final point of the analysis of SE 1.0: the outlook was bright, it needed an official v1.0 release, some meaningful marketing outside the software crowd, and SE 1.0 was very likely to become a profitable business. Dropping the SE 1.0 at this point almost look like a bad case of Fear of Success.

Outlook on Stack Exchange 2.0

The SE 2.0 business model claims that service will be offering for free. Yet, there is nothing as free in business. Most likely SE 2.0 will be paid through the advertising tax which happen to be extremely expensive.

In particular, this business model will be way to expensive for most organization to commit any significant resources.

Basically, SE 2.0 is positioning itself in the attention sharing economy trying to re-introduce the old byzantine usenet rules. The intrinsic problem is that creating a community is very different from actually creating business value.

For example, Wikipedia is a worldwide community success, but it's actual business value is zilch: you might donate to Wikipedia, but you can't invest in Wikipedia and expect any financial reward.

Then, SE 1.0 had low profile unknown competitors; SE 2.0 is getting up ahead a direct confrontation with big guys: Google, Facebook, LinkedIn which will - no doubt - deliver their own variants (if SE 2.0 prove to get some traction) to be marketed much more effectively using their social communities.

As a final note, I am hoping, if the SE team sticks to its plans, that the market will quickly fill the room left empty by the now defunct SE 1.0. Contenders are already in place.

No excuse for not disclosing your roadmap

Software is a fast-paced industry. New technologies soon become obsolete ones, and you need keep your mindset in Fire and Motion mode to move forward. Yet, when something really big emerges, say cloud computing, you end up in a crossroad and you need to make a choice about the future of your business.

This future depends on the 3rd party technology you decide to rely on. This is true for software companies buying software components, but it's also true for brick and mortar companies moving to the next generation ERP.

Trying to push my own little company forward, we can't afford reinventing the wheel. Thus, we are relying on loads of 3rd party tools and technologies; most likey any software company I guess - with the notable exceptions of Microsoft and Google that are nearly self-sustained.

There is nothing wrong in itself depending on other business. Specialization has been a driving force behind business growth for the last two centuries. Yet, in order to take good decisions, I need to be informed about future plans for key technologies that we are adopting.

Plainly put: I need business & technology roadmaps.

A roadmap helps to understand:

• where the company is heading.
• if it fits your own business vision.
• if it matches your upcoming requirements.

Looking around me at companies who disclose their roadmaps, I realized that roadmaps are strong drivers to establish trust and commitment. It shows to your customers and partners that you are committed to move forward with them; not just to leverage status quo.

Yet, it's still sad to see that many companies adopt the Absolute Radio Silence strategy of Apple. It might work in the case of Apple, because they have become expert at leveraging the media buzz around their own plans; but it looks to me a total nonsense for B2B markets where relationships last for years if not decades.

The average lifetime of an installed ERP is 8 years.

Hiding behind the argument we don't want to over-promise  to keep your customers and partners in the dark looks to me a lame excuse. The roadmap represents a best effort attempt at summarizing directions, not an exact schedule. Obviously, it comes with a level of uncertainty. In B2B markets, your customers are smart enough to understand that.

Thus, I have decided to publish a public Lokad roadmap for 2010.

Obviously, one can argue that this roadmap is going to benefit to our competitors. Frankly, I don't think so. If disclosing a 3 pages document is sufficient to put your business in trouble then it means that your intellectual property is really weak in the first place.

The roadmap tells what you are going to do, not the fine grained details to make it work. As usual, ideas are dime a dozen, many investors would even offer them for free, execution is everything.

http://stackoverflow.com/questions/913417/will-winforms-be-deprecated-in-favor-of-wpf

Cloud 2.0, what future for cloud computing?

Almost one year ago, I posted a a personal review about Azure, Amazon, Google Engine, VMWare and the others. One year later, the cloud computing market is definitively taking shape. Patterns are emerging along with early standardization attempts.

My own personal guess is that the cloud computing market (not the technology) will somehow be reaching a v1.0 status at the very end of 2009, when the latest big player - that is to say Microsoft - will have finally launched it's own cloud.

My personal definition for cloud computing v1.0 is a complex technology mash-up that involves a series of computing resource abstractions:

• Scalable key-value storage (1)


• Scalable queues


• Computing nodes on demand (1)


• Scalable functional CPU (ala MapReduce)


• Scalable cache (2)


• Sharded relational DB (3)

(1) Both storage and computing nodes come in two flavors depending if the cloud supports geo-localization of its resources. In particular, read-only geo-localized scalable storage also known as content delivery networks provide advanced automated geo-localization; while computing nodes are still manually geo-localized.

(2) At present time, virtually no major cloud provider support distributed cache - but considering the success and community interest in Memcached, I am guessing that all major cloud providers will be supporting this service by the end of 2010.

(3) Again, virtually no major cloud provider support sharded relational DB at the moment, but considering the importance of relational data in virtually every single enterprise app, I am also guessing that most major cloud providers will offer that by the end of 2010.

With those services in place, I will consider that the cloud v1.0 milestone will have been reached.

Guessing what lies further ahead, beyond 2010, is a difficult game as the cloud computing technology is still under a very fast paced evolution.

Yet, I think (or rather I guess) that there will be two major forces for cloud computing 2.0:

• Drastic productivity improvements though mature environments.


• Fine grained geo-localization for near real-time latencies (say 10ms).

Indeed, at present time, cloud computing is mostly an option available for projects carrying little or no legacy, as the migration toward the cloud represents a complete redesign of most apps.

Furthermore, cloud computing v1.0 involves loads of hard-core development skills and a significant amount of knowledge about distributed computing. This is a vast barrier that will slow down the adoption rate of the cloud.

Thus, a key aspect of cloud computing 2.0 will be to obtain drastic productivity improvement through mature programming environments that will significantly facilitate design and testing of cloud apps. Considering the breath of issues to migrate existing apps toward the cloud, I believe that this task will require no less investments than the actual design of the cloud v1.0.

Then, if cloud v1.0 is vastly scalable, it's also still far from real-time interactions (*) as latency is, at best, only marginally better than what is obtained with classical server setups. Indeed, geo-localization is made available, but at a very coarse grained level (typically continents) and rather with a spirit of compliance with local regulations, as opposed to latency fine-tuning.

(*) Check OnLive for an early attempt at low-latency cloud infrastructure.

I feel that the potential for on-demand computing resources made available in nearly locally allowing nearly real-time interactions - from mobile apps to urban commodities - is huge. UI responsiveness is addictive, and the competition between cloud providers will reflect that.

Yet, lowering the latency will probably mean multiplying cloud data centers around the world so that most people (who will remain as blissfully ignorant about cloud computing, as they are about water supply) can enjoy loads of services with improved user experience.

To achieve that, I suspect that major cloud providers will end-ups with dozens (and ultimately hundreds) datacenters starting with the largest/wealthiest cities.

Considering that data centers typically costs hundreds of millions of dollars. Cloud 2.0 will represent investments no less important than what has been made historically to setup the power grid.

Discovering Twitter

I have been hearing a lot about Twitter for a long time. I am still puzzled a bit by the concept, but apparently a significant percentage of the registrants at Lokad do have a Twitter account. So now, I can start wasting time on Twitter too while pretending it's company work :-)

More seriously, it appears that a couple of competitors, prospects, customers are actually discussing of sales forecasts out there, so it might be worth keeping on eye on that.

Thanks to Rinat, a twitter account for Lokad had been setup a while ago. Since this account is intended to be a company account, we need to handle several users here. Sharing passwords isn't such a great method, so I have decided to give a try to CoTweet.

I have also setup a personal twitter account, although, since I am already lagging behind with my various blogs (including the present one), it's not clear if I will be able to keep up with the frequency that appears to be expected by the Twitter community.