Sunday, December 16, 2007

Fast Typists help Solidcore!

I received some interesting comments about my previous post, one of which enquired about Solidcore's innovation. Its time I responded to that. Much like our biggest competitor, our roots are in security and despite a shift in strategy to focus on the compliance and control market space, our original product continues do extremely well. In fact, a good 40% of all ATMs in Germany will be using the Solidcore Embedded product by end of 2008 for Change Control. The same product has hockey-sticked in Japan where all new Printers, Point of Sale machines and ATMs are shipping with Solidcore. But, the icing on our cake was Bsquare's recent announcement that the they'll OEM our product to provide security for "embedded devices in the marketplace that are vulnerable to several types of change control risks, ranging from traditional threats like viruses and malware, to internal threats such as employee sabotage"

So, why is this product taking off in these markets? I talked to one of our customers from Japan and they gave a very interesting factor that led them to us. Apparently, in the fast paced Japanese markets, retail branches are made (or broken) based on how quickly they can service their customers during checkout. This has forced all the checkout clerks to learn to type extremely fast. Turns out, some branches/stores were performing much better than others and a detailed analysis by our friends helped them realize that the anti-virus software on the checkout systems would often slow down the programs. This slowdown, often imperceptible, was however, just enough to ignore some keystrokes of fast typists. This led to billing errors, which led to a longer service time, lost business and ultimately a thriving business for Solidcore. Clearly, we did not lose out any momentum in our first product, even though we chose to focus primarily on Enterprise Change Control.

Saturday, November 17, 2007

Marketshare and Product Innovation

One of my biggest challenge as a Product Manager is to prioritize the features, enhancements and bugs to be fixed in our product. Around the same time last year, my goal was to get a polished and well-designed product to market. During various releases, there were times when I felt we could have done better - fixed more bugs, enhanced the usability of the product, introduced new features, etc. Oftentimes, Sales and Marketing dictate time to market and Product Managers have to make the best use of limited time and resources. Looking back, I feel that we did a good job because we have been able to sell and deploy at a very rapid pace in the last 12 months.

Having been involved in various decisions that brought us here, I feel very proud when I hear stories from the field about how quickly our customers learned to use the product and how valuable it is for them. I also know that the base product, without any further modifications, will continue to sell because of the value it delivers. However, as a startup with deep roots in technology (our CEO has a PhD in Computer Science), we continue to invest significantly in product innovation and also make enhancements requested by our customers.

Interestingly, our biggest competitor, Tripwire, has adopted a completely different approach. I have seen various demos of their product, but have always come back with the impression that Tripwire's strategy is more focused on product positioning than real product innovation. Any IT admin who has used their product will tell you that their latest product is not significantly different from what they were selling 2-3 years ago. What has changed is their Marketing message - In Nov 2004, they pitched Availability, Nov 2005 was all about Change Auditing, they followed us in talking about Change Control in Nov 2006 and their current theme is around Continuous Compliance. I am sure they are doing extremely well, selling more and more licenses every year with minor tweaks to their branding. Guess we just have very different operating philosophies.

There is one other product that I have used for the last 5 years which has hardly changed - Microsoft's Outlook. Outlook is a great product for collaboration, but has some significant limitations - primarily around search. Ever tried searching your 2GB Outlook mailbox for an email and compared its speed to a similar operation in the free Gmail? Have you ever lost messages when your Exchange server's files got corrupted because no one likes to delete their older messages? Its not as if Microsoft does not know about these issues, but they probably don't see any value in fixing these problems. Now, Microsoft is hardly a company that you can accuse of sloth, but I'd hate to be the Product Manager for Outlook now. Microsoft seemingly prefers to encourage the development of a productivity eco-system around Outlook than incorporating basic features in their own product :(

I have tried some of the productivity tools over these years. Lookout, the one that Microsoft bought, had its power in its simplicity. They used Lucene to index the mails. Keyword search was very fast, but advanced search features were not really well supported. Google's Desktop Search uses some really fancy technology to index emails and all files on your desktop unobtrusively, but their approach is too generic and not oriented towards email search. As an example, there is no easy way to locate an email and drag n' drop it into a new email draft. This is such a common operation and the lack of support for this feature made me look at other products. X1's search and interface are really powerful, but you've to pay $50 for a single-user license. Not a steep price for its functionality, but still a greater barrier than the free products. Some of my colleagues use Copernic and NEO. Copernic, like Google Desktop Search is a full computer search tool and NEO is primarily an email organizer, but with better search capabilities than Outlook. I'm sure there are a few more such utilities, but these are probably the major ones.

Does this mean that a company, once it has established itself as the market leader, finds no incentive to innovate? Both Microsoft and Tripwire went into sustenance mode because they maneuvered themselves into a position of strength. However, they are now facing a lot of heat from highly innovative and nimble competitors and I expect to see some major enhancements in both Outlook and Tripwire very soon. This maybe either through organic product enhancements or through integration with other tools.

Saturday, October 6, 2007

AJAX and Bandwidth Savings

One of Solidcore's components is developed using Google Web Toolkit (GWT). GWT was introduced about 2 years ago and allows developers to develop web applications using Java. Though Java was used for server-side development even before its introduction, GWT pioneered the concept of a java-to-javascript compiler that allows developers to develop and debug in Java using their favorite IDE and tools. The compiler is used to convert the code into javascript which can then be deployed on an application server. Click here to know more about GWT and if you've already played with GWT and want to meet the team behind this innovation, you may want to register for this event

Our GWT application is extremely user-friendly and uses AJAX to provide a great experience to the user. I had never imagined that such functionality could be delivered through the web browser! Not only is the user experience better, there are some ancillary benefits like bandwidth savings. By obviating the need for full page refreshes, AJAX helps reduce the amount of traffic. This article uses simple examples and does the math to explain how large-scale web applications can derive significant cost savings. However, the best is yet to come. Our application results in a single javascript file, which together with gwt.js, is nearly 150KB in size. If we could optimize this to fetch the javascript functions on-demand, we could make the startup times faster and further reduce the bandwidth. Here's an excellent article describing this in case you are curious about how this can be done.

Saturday, September 22, 2007

Disruptive Innovation

I have been following Apple's introduction of the iPhone with great interest. The story actually begins with the success of the iPod - a great story of stupendous growth being driven by organic innovation, something we rarely see large companies do. Though the technology and marketing was innovative, the most critical thing that Apple got right was targetting a highly fragmented and underserved market for digital music players.

The success of the iPod helped bolster Apple increase its marketshare in computers, bolster its bottomline and made it an investor favorite. Apple, more than anyone else, probably knew that the gains could not be sustained just by introducing smaller and sometimes crippled versions of the iPod. The introduction of the iPhone gives us a great insight into where Apple is headed over the next decade or so.

Those who have read Clayton Christensen and Michael Raynor's "The Innovator's Solution" will notice many patterns that make the iPhone a disruptive innovation in the classic mould, including the targetting of non-consumption of legal digital music, the innovative approach to licensing music through iTunes, the use of proprietory (interdependent) architecture to get better performance and integration with iTunes. In fact, the last point about how Apple's proprietory and integrated architecture, which was its bane in the PC market, turns into a key strength, is also predicted in the chapter on commoditization.

The authors argue that a proprietory architecture is critical to the success of new products as customers will demand the best performance for their investment in the product. A proprietory or integrated approach will be better optimized to provide better performance than a modular one with components and software from different vendors. However, as the market matures and more entrants join the fray, the marginal improvements in performance or form factor (a la, the iPod mini, nano, micro, pico, etc) will not always lead to better price or margins. The product will eventually become a commodity, with the focus shifting to volume away from high margins.

This phenomenon will slowly shift the balance away from proprietory architectures to modular ones which are better suited for higher volumes. Fortunately for companies like Apple, this is phonomenon is cyclic in nature. As the product becomes a commodity, companies will focus on new markets which play to their strengths. Apple may have found a new market and the right product (iPhone) to do just this. For now, Apple seems to have the Midas touch and if you were thinking of investing in technology, Apple is a stock that I'd highly recommend ...

Saturday, September 8, 2007

Referral based and Skillset based Hiring

Solidcore has been growing rapidly and in the last few months we have more than doubled in size. I have averaged about 2 interviews per week for the last 3 months or so and would like to share my thoughts about how the size of an organization affects its hiring choices.

Until very recently, we could track the lineage of every employee and without exception every one of the earlier hires came to us with stellar references from ex-colleagues, friends or investors. Our hiring process would often start with a resume arriving from one of these sources and following a few rounds of interviews, we'd typically extend offers to the candidate. The quality of the referrals were very high and we managed to recruit top talent this way.

Such an approach meant that all the employees were no farther than 2 degress apart from most of the others, all being part of a small, well-knit silicon valley community. Most of us had startup experience and knew fully well the risks and thrills associated with building companies. Some had already been part of successful startups and others had tried following their dream. Though individual reasons for joining a startup varies, a common and inviolable goal for everyone was to help build a great company through hard-work and perseverance.

This burning ambition and an all stars team have helped us time and again overcome tough situations. Now, we have reached a stage where our growth demands us to fill openings quickly. A booming job market and an immediate need to fill the openings means that we are now open to considering resumes from recruiters and not just the ones that come from internal references. Making this change is part of our transition from being a startup to a larger and more mature company. This does not, however, mean that the hiring process is any less rigorous. We still continue to attract and hire great people.

This phenomenon which forced us to change our processes from a referral based hiring to skillset based hiring is very interesting. Employees are mostly replacable in large organizations. Their hiring processes also reflect this with most open reqs emphasizing specific skillsets and experience. The ideal candidate is one who is seen as good fit for the team and company culture. Leadership qualities are never considered for entry level and sub-senior management positions. Under such circustances, even exceptional employees find it difficult to progress up the corporate ladder. The impatient leave for smaller companies and many others get on the MBA bandwagon.

On the other hand, smaller companies place a premium on leadership skills. I know of a few instances where offers were extended even when there was no open req in the particular business unit. One may think that such behavior borders on fiduciary irresponsibility, but if you consider that one of the biggest assets of startups is its people and the IP they help develop, this approach does not seem illogical. Counterintuitive maybe, but definitely not illogical :)

Does this mean that larger organizations cannot or should not hire leaders? The answer is a categorical no. Leadership at all levels is key to the long term success of any organization. Larger organizations use different mechanisms to find and cultivate leadership in their organizations. Hiring is mostly focused on immediate needs and market needs. The best hires are eventually promoted and groomed for leadership. However, the pace at which this happens in a large organization makes one feel that leadership is not an immediate concern. Does this make you think of moving to a smaller organization? Do check out our open positions at

Saturday, June 30, 2007

Ski Rental and Value Propositions

Most of us (esp. in the US) would have rented items like Skis, Camping Gear, etc. from time to time. For the occasional skier or camper, this is an obvious choice. However, the more serious enthusiasts have an interesting problem - to rent or to buy? This is a well-researched topic and the math proves conclusively that the optimal strategy involves renting until the aggregate rental cost equals the cost of the ski equipment.

Now consider the following -

1. I bought a pair of roller-blades after taking my first lesson while attending Grad school. Over the course of a couple of years, I became a very proficient skater. Much like the researchers predict in their paper, I had a major accident that required 18 stitches over my left eye. Purchasing the rollerblades outright gave me the option to practice at short notice in my free time (an extremely valuable commodity in grad school) and is a decision that paid off well. Once you master rollerblading, many other sports like Skiing and Ice-skating are easy to learn and enjoy.

2. Taking a similar approach, I bought a cable modem for $200 in 2000 when I moved to the Bay Area. Comcast was renting these modems for approximately $10 a month and I reckoned that I'd my investment would pay for itself in less than two years. However, within a few months of my buying the modem, Comcast reduced the rental price to a ridiculous $2 a month, making me kick myself. A good 6 years after buying the modem, I still haven't broken even!

These examples illustrate why
the ski rental algorithm is great for the average case. Given the amount of skating that I did, I'd not have spent much more had I followed this approach while buying my rollerblades. With the Cable modem, I'd definitely have freed up precious resources for investment elsewhere.

Now, step back a bit and consider a startup (with scarce resources). Following the ski rental algorithm gives the startup great leverage in conserving its resources and investing in the most critical areas. At an early stage, leasing desktops from Dell/HP helps the startup free up capital to invest more on the product. Capital Expenditure can be done later after the product has stabilized and the revenue stream starts picking up.

This idea is also the cornerstone of many SaaS offerings. What do you think is the primary value proposition of I'd argue that the primary value proposition of is not CRM and its software, but the lower cost of ownership of such a solution. As I've noted in my earlier posts, comparable solutions from Siebel, SAP and Peoplesoft were very expensive to procure and had a very high TCO.'s innovation lie not in providing a hosted service, but in identifying that the Ski Rental algorithm is such a no-brainer.

Wednesday, June 20, 2007

Cars, Planes and the Airline Industry

One of the most popular keywords in the software industry today is to Software as a Service (SaaS), popularized by’s Marc Benioff. Marc has done a tremendous job positioning his company and its eponymous website as an inexpensive and indispensable tool for many small and medium businesses. However, will this trend catch on? Is there sufficient play in the market for more SaaS vendors and is that got lucky?

There is a close parallel between the various software segments – consumer software, enterprise software and SaaS with the transportation industry – car manufacturers, plane manufacturers and airlines. Drawing out the analogy on some aspects brings out the challenges faced by each of these segments and clearly shows that the SaaS vendors have a tough challenge ahead.

Customer Expectation - customers expect good quality, but also understand that there will be the occasional failure. Failure of parts in a car is relatively inexpensive to fix, even if the manufacturers have to do a mass recall. However, airlines expect a very high quality product when they buy a plane and will not buy even if a few parts have quality issues. An airline must ensure high reliability of their planes and also offer great in-flight service in order to stay in business. Even though the quality of software from enterprise vendors is often not as high as their customers would like, the expectation of quality in a SaaS tool is the highest – the software must provide Quality of Service guarantees and also be highly available.

Lifespan - The average maximum lifespan of cars is around 10 years, of planes 30+ years. Typically, we expect airlines to outlive various airplane models by adapting newer technologies. It is not that consumer or enterprise software companies have failed to build a sustainable business, but a SaaS vendor will be required to adapt more quickly to the massive technological shifts that occur so frequently in our industry.

Maintenance - car dealers and even unauthorized mechanics can do an oil-change for cars, whereas only well trained engineers with appropriate tools can do so for airplanes. Airline carriers have trained engineers who perform routine maintenance on the planes very frequently (a few thousand miles or so) in order to make sure that the planes are flight-worthy. A SaaS vendor should not only have the best architects and engineers building the product, but also an extremely capable bunch of administrators. Neither consumer nor enterprise software companies have to worry about training or recruiting administrators for their software.

Sales - In the plane market, most deals are big and a win/loss can alter the landscape of the market and profitability of the company. However, a few lost deals do not make a big difference to the pecking order of the car manufacturers provided they do not let it aggravate. The airline industry is the one with the highest volume of business and the lowest margins. The current rate for even sophisticated tools like is less than $100/month per seat and this is a huge stumbling block for SaaS vendors. Why would they build great software and settle for lower margins, if they could instead sell the software for a much better price?

Market – the car market is flooded by many manufacturers with models for every segment, whereas the airplane market is dominated by fewer players - Boeing, Airbus, Llockheed. Airline carriers are slowly specializing in the international, budget domestic and hi-end domestic markets. Not sure how the SaaS market will shake out and grow, but it is possible that we may have vendors offering custom services to larger organizations with strict SLAs and smaller players that target the mass market. This may already be happening with large IT vendors like EDS, IBM Global Services, Infosys, etc. developing and maintaining custom applications for large clients like GM, GE and others. I’m sure they are already thinking of the next big thing after services and this is an area with a lot of possibilities. The biggest challenge before smaller players like is to sell to the larger enterprises, as they cannot risk selling to only small and medium businesses.

The bottom-line is that very high customer expectation for quality and the general dynamics of the market make it very difficult for small startups to offer Software as a Service and build a sustainable business. Its probably for the best, because the few that do so, will have a clear and distinguished value proposition. As a corollary, I would not dream of starting a SaaS startup unless I have a clear and distinguished value proposition.

Saturday, May 19, 2007

Challenges in Building Products

I just completed 7 years in the software industry in various roles - Implementation Engineer, Technology Evangelist, Software Engineer, Architect and Product Manager. In these roles, I have worked on software projects of varying complexity, maturity and in teams as small as 3 Engineers and in bigger ones (40 Engineers). It is interesting to look at some of the major challenges faced by these products at different stages in their life-cycle. To set the correct context, I must add that I have worked in the Enterprise Software space for most of my career.

Mature Products
: I started off as a Research Assistant in the Condor team and my first big project was to understand the requirements of the UW Hi-Energy Particle Physics (HEP) computer simulations and modify our Grid Computing software - Condor - to support the HEP simulations. Condor is one of the longest running university research projects and even in 2000 it was very mature with excellent documentation, user groups and large user base. During my stint with the Condor team, I learned that even mature products may require customizations and also about the importance of having a strong Implementation Engineer or Professional Services Team supporting the implementations and funneling back requirements to the core development team. If you are considering developing Enterprise Software, make sure you factor in travel and support costs of such an Architect or Team. Depending on the maturity of your product, these costs may be as much or even higher than the budget for your core development team.

A disappointing fact about Condor (at least to me), is the fact that it missed many opportunities to move into a mainstream market. Based on my interactions with Prof.Livny, I am nearly certain that he never intended to build a business out of his research project, but the entrepreneur in me rues the missed opportunities :( I must add that I tried mightily to evangelize this product when I worked for Prof.Livny and also when I worked at Optena.

Mainstream and Extremely Successful Products: Tom Siebel built his company and an entire market on his idea of Customer Relationship Management. Granted, he may not have been the first one who thought of this, but he brought an extremely feature-rich and useful product to this market and through aggressive sales and acquisitions built Siebel Systems into a well-known ISV in the space. Though I joined Siebel Systems only in 2002, I was friends with many of the original architects who started with Tom and my observations are based on my conversations with them and also my own experience working at Siebel Systems from 2002-04. Siebel's biggest challenges (in the post-2000 era) were -
  • Managing Growth and Product Quality- After a spectacular IPO, Siebel lost the wind in its sails following the 2000 bubble burst. The HR team definitely did not do Siebel any good by hiring (and firing) in what seemed to me to be a very random pattern of behavior. Maybe it was the fear of a wardrobe malfunction, but when Siebel made the switch from a Client-Server model to an Internet based architecture by introducing version 7 of its product, Ms.Quality Under-appreciated never attended the launch party (or any other parties - maybe I should say funerals - thereafter). I have heard horror stories of how Siebel 7 would not even install off of the CD that was shipped.
  • Implementation Costs and ROI - Bad Product Quality meant that customers had to hire pricey consultants to install and configure the software. It was not uncommon to hear about a customer spending $5 million in software acquisition and a further $15 million in deployment. This is just plain wrong - no matter, how good a product you have, if your implementation costs are not less than 20% of the sticker price of the product, you are going to lose the market - Period.
  • Lack of Faith - It is not uncommon for even the largest and most innovative companies (or individuals) to go through a bad patch, but the differentiator of winners and losers is often their perseverance and ability to work through a bad patch. It is in this aspect that Siebel Systems failed misearbly. When Siebel realized that hosted CRM vendors like Netsuite and Salesforce were drumming up a vigorous business, it decided to reintroduce its hosted offering (it may interest you to know that Siebel was one of the first players in the hosted CRM space with its offering, which it withdrew because of lack of business!). It also brought in a senior IBM executive - Mike Lawry - as the CEO to correct course and build new businesses. However, it never had complete faith in these (as well as many other) initiatives and ended up being swallowed by Oracle. In the same period, has seen a steady increase in its market-cap and has hired many of the ex-Siebel architects and engineers.
New Products/Company: This is one of the most painful chapters in my career. I quit Siebel and joined Optena as the first member of its engineer team. Optena's vision was to commercialize Condor based technology. Based on this experience, I now know about the following pitfalls while starting a company -
  • Beachhead Customer - The importance of the beachhead customer, who is willing to experiment with a very new and potentially immature technology is extremely important to a product's success. In the absence of such a customer, the product gets built in a vacuum and there is no way of prioritizing or even verifying whether the features are useful or not. Insisting beachhead customers to pay you may not be the best option if you realize the risk they are taking by using an immature product in production. If they are willing to pay, only charge them the fair-market price for the value and not what you expect your product to sell for 2-3 years down the line when it has established itself.
  • Innovation - Small companies must keep innovating, even if the beachhead customer wants only a few minor feature enhancements to the first version of the product. If you focus yourself on the enhancements required by the first few customers and stop your innovations, you'll end being a one-trick pony and will never be able to take the product to the next level in its lifecycle.
  • Hiring Successful Entrepreneurs - Optena lost its funding just when it was about to get a couple of major deals. The VCs realized that even with the new deals, Optena would never be a billion dollar company (this was shortly after Google's IPO). I daresay the VCs would have continued their funding if we had even one person on our rolls who had a successful trackrecord in building companies.
The interesting aspect here is that only one of the issues here was a real product problem with the others being strategic mistakes made by us.

Emerging Products: Our biggest challenge at Solidcore is ....

Sorry, I cannot talk about my role or the product at Solidcore as we are in an intensely competitive market that is growing rapidly. I promise to keep you posted on our progress.

Thursday, May 3, 2007

How Fedex became 'The Verb'

Article contributed by Anjana Rajamani.

I was hoping that a quick look at their respective websites to check out their product offerings, compare service levels and a few random checks for customer experiences, would provide me with clear, obvious reasons as to how FedEx ‘out marketed’ its centuries old competitors - UPS and USPS. Has FedEx out marketed its rivals? Clearly, becoming a $34 billion company in a short span of 35 years, FedEx has grown much faster than its rivals UPS (revenue $43 billion) and USPS (revenue $69 billion) and made their revenues look smallish relative to their century (ies) old existence.

Beyond figures, FedEx has done much more than capturing a sizable portion of the market from its rivals – it has captured a significant portion of ‘mind share’. FedEx has become eponymous for ‘anything that you can’t deliver in person’ as Xerox did for photocopying. FedEx is recognized (or very close to being so) for what it has sought to identify itself as – in its own words – “absolutely, positively” dedication to providing specialized solutions for every shipping, information and global trade. Clearly, this is not any different from what any other logistics company would try to do and in most cases, already do so to a fair extent. Why then has FedEx enjoyed such an unprecedented level of success? How has it beaten its more established rivals to become ‘the verb’?

Looking for answers, I realized that there are few things more difficult than explaining success stories. While in the cases of failure, it is often possible to identify and attribute a cause, or at best a few causes which paved way for the ultimate fate, so is not case with success. Even the staunchest of non believers in ‘destiny’ would agree that success is a phenomenon, which is too big to be attributed solely to our actions and rather rare to result from circumstances alone. Success requires a rare collusion of actions with propitious external factors, which provide the right trajectory. The reasons for success are hence not as linear and easy to identify as those for failure. With this disclaimer I set about in my attempt to explain the FedEx success story.

To start with, there are 3 broad parameters on which a business such as this can be evaluated – Product offering, Service level & Customer Experience. These parameters should explain a significant part of the FedEx success story, though the reasons for success may not limited to these. Given this, here is my take on how these 3 - should I call ‘brands’ stand on each of these –

Service level in the business of logistics and delivery, quite obviously includes pricing, compliance to strict timelines, accuracy of delivery, ability to limit damages to the consignment, movement tracking – has become fairly basic hygiene factor and hardly remains a differentiator in this line of business. After all, all of them have user friendly interfaces that provide you with options to open a customer account and manage and track all your interactions with them, promise delivery with in a fixed number of working days depending on the location, allow you to track their movement and even allow you to choose your kind of packaging, without much differences in their pricing! With a service level below these, one would hardly be in the race and these being major players one need not expect a significant deviation in their service levels (of course, providing for the one of cases).

Customer Experience, which includes everything right from the way the personnel at the office speaks to you to how the delivery man handles your package to how soon your phone gets picked up while you are trying to log a complaint, is the most diffused of the three parameters. There can be no one set of people whose experiences will be representative of the performance of a given brand. In my limited research, I have come across almost an equal number of positive and not – so – positive for each of these service providers. Given that customer experience is hard to measure, it is best to allow for a normal distribution of customer experience, assuming that few providers are more positively skewed than others.

Product offering – finally, here is the one where I see some significant difference between FedEx and its rivals. Well, what is the product offering in this case? – After all, we are talking about taking a package (at the minimum) from one and delivering it to another! By product offering, I mean the number of options a customer, be it an individual, a small business or corporation has in sending his or her consignment.

Product offering depends on the way one defines different group of customers. Most logistics providers tend to group their customers into the usual categories – Individuals, Small Businesses and Corporations. How significant is this classification? Well, it decides everything from how your consignment gets sent to when it gets delivered. While it is true that the needs of these broad groups of customers are similar, they need not always be so. Companies like FedEx seem to cater to the existence of sub-classes of customers within each of these groups.

FedEx allows the customer to decide how he needs his consignment to be sent depending upon his need for expediency and how much he is willing to pay. For example, all consignment to Canada from the US need not be sent over ground, a customer can air freight it if he wants it so. Ultimately, the customer pays for having the package delivered the way he wants it to be.

However, in the case of UPS and USPS business proceeds as per standard definitions. Their operational convenience seems to come at the cost of customer options. As long as you fall into one of the 3 silos (Individual / Small Business / Corporation), they know what is best for you. All packages in a given customer category receive the same treatment irrespective of the need for expediency or any other such demands a customer might have and is willing to pay for!

Rather than providing very few options and getting the customer to pay for what the logistics provider chooses, by not taking over all the decisions from the customer, FedEx makes the customer pay for services he / she chooses. Provision of such options, may seem too insignificant to contribute to the growth in popularity of FedEx, but in the long run it does contribute to the view that FedEx is more customer friendly than its rivals.

This is a great example of how a startup, through good product differentiation, was able to win significant mindshare and grow faster than older and bigger competitors. Now, does that sound like Google vs Microsoft?

Sunday, April 22, 2007

Of Verbs and Strategy

"Timothy, Can you please FedEx the latest documentation to Plano to reach them by tomorrow morning?", set me thinking about why I "FedEx-ed" documents instead of "USPS-ed" or "UPS-ed" them. Solidcore uses all three services from time to time. Though much smaller than UPS or USPS, FedEx is THE VERB in their category. Is it because, "FedEx-ed" sounds much better than "UPS-ed" or "USPS-ed"?

I'd never have known that they were smaller than UPS or USPS, had I not seen the following bookmark (a piece of great marketing collateral) from USPS -

How is it that smaller companies like FedEx outmarket bigger players? Watch this space.

Wednesday, February 28, 2007

Why would you join a startup?

I feel great - shortly after I wrote my last post about KVM and Xen, covered the story in greater detail. I recently read a great article in the CIO magazine which set me thinking about the reasons I enjoy working at startups.

Based on my research, I found the most common reasons given by startup employees as -
  1. Make Money - I'd like to build a successful company and cash out
  2. Be King - I got tired of working for someone else; thought I'd start my own company.
  3. Don't fit - I lost the appetite to work in a big company.
I have come across other reasons also, including the inability to secure a promotion or a raise. I'd venture to guess that angst caused by such a failure is often exacerbated because the feedback/review mechanism never gave the employee a reason to suspect that they were not performing. This point is brilliantly made in the manhattan effect article in the CIO magazine. In his article, Jerry Gregoire makes the point that "Depending on the nature of your business or geography or whatever, it might be pretty tough to get meaningful feedback from your customers, but your managers and employees are a different story. If you're not getting meaningful feedback from them, there's no point in spending a lot of time wondering why. The reason is you."

Thinking about this made me realize that one of the things that I really enjoy at Solidcore is the fact that I get real-time feedback about my performance. I feel great when I head to work every morning because I know that I work at a real meritocracy. Do you?

Monday, February 19, 2007

What is a startup to do?

Another post motivated by happenings in the Virtualization space! I met some RedHat folks during the RSA conference a few weeks ago and quizzed them about the new Kernel Virtual Machine (KVM) that Linus merged into the main Linux Kernel. The answer was surprisingly candid and straightforward and was reinforced by a recent announcement by RedHat's CTO. Expectedly, RedHat is hedging its bets by bundling both Xen and KVM in its Fedora Core line of products.

Apart from the fact that RedHat seems to have good internal communication, this announcement has significant ramifications for all the big Virtualization players. Xen worked really hard to get RedHat to package it by default, hoping that it will help them establish a big footprint in the Linux market. They even had some disastrous PR failures when RedHat claimed that Xen was not ready for primetime (see here). And finally, just when their effort was nearing fruition, Qumranet sprang a surprise by getting its KVM technology endorsed by Linus and RedHat.

Though Xen has first-mover advantage as the default virtualization technology available in RedHat and is probably more mature than KVM, this news could not have come at a worse time. Bigger and more mature (read risk-averse) IT organizations that were looking at Xen on Linux will now prefer waiting for KVM to be available before investing heavily. Smaller enterprises may also pilot KVM to see if it will satisfy their needs or at the very least slow their adoption of Xen.

Now, what should Xen do faced with such a situation? They may still have some good ways of fighting VMware/Microsoft from upstream and KVM downstream -
  1. Learn from VMware - VMware was faced by a similar assault in 2005-06 from Microsoft and Xen. Xen was downstream and offering a free product and Microsoft, though not technically upstream, used its vantage position to make deep price cuts. VMware responded by giving away significant parts of its base virtualization platform for free and building out Management Infrastructure software that it is now the primary cash cow.
  2. Drive adoption of the platform in applications - One of the often underestimated drivers of VMware's growth its integration with applications. VMware has successfully evangelized many vendors (Vizioncore, Surgient, NetExam, Opsware, Leostream, etc) to use its APIs to build their application. Though this is arguably a small channel for VMware, Xen should not ignore this altogether as this market has a lot of potential. VMware has had better success in this area than the open-source Xen - can they do something about this?
  3. Don't lose track of your endgoal - winning a slice of the Virtualization pie. Face it, Xen - you came close to winning the Linux market, but looks like you will have to suffer a huge heartbreak! You'll never own the low-margin Linux server virtualization market - probably the best thing to happen to you. Stop running behind Linux and instead focus on out-innovating VMware in one or two niche areas on Windows and Solaris.
  4. Acquire smaller players - Xen should look at acquiring Virtual Iron or other smaller players to help fasttrack your move into Management Infrastructure or Application support.
Do you have any other ideas? Send them to me

Thursday, February 8, 2007

VMware to go public!

Word has just broken that EMC has decided to offer 10% of VMware stock to the public through an IPO (link here). This will definitely help EMC to raise more capital as VMware is one of its fastest growing subsidiaries. Tying VMware to EMC stock never made any sense to begin with.

My outlook is that VMware stock will do very well in the next couple years. Buy, Buy, Buy!!!

The shares will be available for trading from Aug 14, 2007 (Symbol:VMW)

Saturday, February 3, 2007

Is Google Really Innovative?

Its a sensationalist title I know, but I couldn't resist the urge to respond to Rishi's comment that despite all the hype, very few innovative products have really come out of Google. A quick search (using Google :)) helped me find this link showing the market share of various Google products.

I completely agree with Rishi that Google has picked up some really nice products through acquisitions. However, I believe that a good acquisition strategy is almost as important to growth as organic innovation and in this respect Google is a real winner. Granted some of the acquisitions were based on very optimistic valuations, but by methodically acquiring some of the best web-based application companies, Google has indeed shown that it values innovation!

Now, the second aspect of Rishi's comments is more intriguing. Are Google's Research and Engineering teams really producing successful products? I have mixed feelings about this one. Google image search and Gmail were developed by Google themselves and have the second and third best marketshare amongst all their products. Though their marketshare is small, almost minuscule compared to Google search, they'd be considered very respectable for any other company. Besides, innovation and marketshare do not always go hand in hand. Apple, which has less than a 5% marketshare of the PC market is a great example of how innovation does not necessarily translate into marketshare.

That said, Rishi does make a very valid point that Google's Research and Development seems to be getting more mindshare than marketshare. We always hear about how tough the Google interviewing process is, how great an employer Google is, how every engineer is encouraged to devote 20% of their time to their own project, etc. The amount of press the products get pales in comparison to the "Google is Great" hype being generated today. Google is minting money through its search engine and everything else is insignificant to everyone - the press, the investors and most likely Google themselves. However, as a mature and very smart company, they are focusing on increasing their footprint and penetration of the web (which ultimately leads to more search revenues) through successful product acquisitions and also on putting a very positive spin on things :)

Tuesday, January 16, 2007

Yahoo-Google-Microsoft Acquisitions

I decided to look at the major acquisitions done by Yahoo, Google and Microsoft in the last few years (Note - this is not a comprehensive list - I've looked only at Web related technologies). Click on the image above to get a closer look. Microsoft has done a lot of Acquisitions in the Gaming market, ostensibly to provide more games for XBox. Google has worked on acquiring more content (Usenet archives, Youtube), bolstering their search/ad offerings (Kaltix, Applied Semantics, Zipdash) and more web services (blogs, maps, photos, spreadsheets, word-processor, wiki). Yahoo has concentrated on search (oveture, inktomi), Music (Musicmatch, Launchmedia), social networking (wretch, upcoming, Dodgeball) and some very diverse products (kelkoo, Konfabulator, Bix)

Monday, January 1, 2007

VMware - risks and opportunities

Many newsletters, articles and advisors issue investment guidances based on the financial statements of a company and their future outlook. In this post, I'm going to focus only on the latter since the financial statement analysis is available from many investment websites (Note - You'll have to look at the financial statements of VMware's parent company - EMC).

The last couple of years have been extremely good for not just VMware but also many other VM vendors. VMware's greatest threat has been its own success - sensing a huge opportunity, companies both large and small have moved into the VM space. However, VMware still has first-mover advantage in many fields and may still be able to outmaneuver their competition.

Notable among VMware's competitors is XenSource, whose flagship product is based on an another University research project. XenSource has been slowly making inroads into the market and has a lot riding on the next release of Redhat's Enterprise Linux (v5) which will bundle Xen's VM environment ( Acknowledging the importance of the technology, the Linux community has decided to make the Linux KVM project ( part of the next mainstream kernel. And finally, Microsoft is giving away its product ( for free and will most likely support native virtualization in their Vista server product line in the near future. These tactics are bound to put tremendous pressure on VMware in 2007-08.

These developments are but natural - as technology matures and becomes a commodity, its value reduces and vendors have to move upstream. In a bid to move upstream, VMware has been focusing on building software and infrastructure that make the management of hundreds of thousands of VMs easy. They have also been toying with other ideas like the VMware appliance ( hoping to create new markets. To avoid being a roadkill, VMware has also started giving a fair amount of their software away for free. Are these measures enough to outmaneuver their competition? I remain cautiously optimistic that VMware will be able to overcome what might be the biggest challenge they have yet faced. Whether they come out with their flags flying high or barely alive from the looming attrition wars remains to be seen.

Bottomline - VMware's parent is EMC, an 800 pound gorilla with a market cap of $30 Billion and annual revenue close to $12 Billion. Large-cap stocks like EMC are known more for being steady movers than exciting growth prospects. Given that EMC's stock prices have been stagnant over the last couple of years and also the serious challenges facing VMware, I would not buy their stock. However, If I'd already bought into EMC, I'd hold them for a few more months.