Hardware, software, consumers and Apple

I’ll admit that I’m part of an ever increasing group of Apple users. I could stretch the truth by pointing out that I wrote my resume for my first job at Intraware on a Mac but the truth is I really switched to Apple around two years ago. The switch was primarily to take advantage of the built in video capabilities.

As a historically enterprise software focused technology company you wouldn’t expect too much that Apple does would impact our world. However, two things recently caught my attention as very pertinent.

The first was - the MacBook “Air” did away with a DVD drive. It’s all about digital downloads now. Ironically, to set up your “Air” you need to install a DVD in your older Mac if you wish to move data over, but we’ll cut them some slack on that.

Secondly, at a recent breakfast in a restaurant the waiter asked me if I liked my iPhone. He proceeded to tell me he had one too. This guy was clearly younger and hipper than me. I’ll always mentally compare my iPhone’s pros and cons against my Blackberry. However, this chap was clearly thinking more in relation to other consumer mobile devices. His comment was “I love my iPhone because they update the OS/features so regularly via iTunes”

I thought to myself that’s really true. I remembered that part of the excitement of getting a new phone every two years (yes and getting locked in) was that the new phone usually was light years ahead of your old one when it came to the UI, web browsing, checking email etc.

What do all these things have in common with Intraware? Well, by successfully integrating a complete digital experience within their products Apple is creating a competitive advantage. The “Air” is partially only viable due to its reliance on data moving digitally and the iPhone is an attractive device because it can be a little different/new/better every month you own one. All technology companies, and hardware companies I know are really interested in creating a much truer end to end offering, can learn from these lessons. Not everyone can be Apple - but perhaps we can help you get closer

Justin

Changing Landscape

We at Intraware tend to sell our SubscribeNet service to corporations larger than ourselves; sometimes much larger, as in the case of IBM, EMC or McKesson. A question from them over the years has been whether Intraware would be around to support them in the long run. Today, given our customer base, cash position, and recent quarterly news, our existing and potential customers are no longer asking that question from a financial perspective, but from a concern regarding the current climate of consolidations. It is a legitimate concern and a question for which there really is no answer – we’ve all watched large companies like PeopleSoft, BEA, Macromedia or Business Objects get gobbled up. So, no one is safe.

Our particular market place has gone through some interesting change in the last few months. Macrovision, a company with which we’re deeply entwined for a variety of reasons, decided to sell it’s software division. So that which was much bigger is now much smaller – although still a large participant in our field. Whether their new management will choose to focus on the competitive elements of our respective offering or the complementary components is yet to be seen – certainly the previous groups’ response was focused on the former at the expense of the latter.

We also saw OCS, a competitor in the licensing space, come full circle and return to their roots. OCS was originally a spin out from Modus Media and is now part of CMGI or ModusLink. Going into this fiscal year our sales team believes there is increased interest from hardware and device companies in software and license delivery. We view the OCS acquisition partly in this light – validation that others perhaps are seeing an increase in interest from similar quarters and their existing customer base.

Lastly, we saw LTG – part of ASAP software – acquired by Dell. Although more of a peripheral competitor, it was part of an interesting year of regular change in the competitive environment. Speaking of peripheral impacts, it was a highly turbulent year in the CDN market with the “arrival” of Limelight. While we’ve seen some settling down in that arena of late it certainly added to an overall feeling of significant change over the last twelve months.

That leaves us heading into a new fiscal year where our core business is still firmly founded in a belief that a combination of our hosted model, financial stability, customer base, entrenched partnerships and experience give us the confidence to continue to compete in an ever changing market place. This could be a very trying year from a macro perspective and one that reinforces the benefits of having recurring revenue streams and large customers.

Hardware companies embracing software updates

An interesting article on the increasing role of automated software updates for ever more elaborate hardware devices:http://www.wired.com/gadgets/miscellaneous/news/2008/01/macworld_hardware

Facebook: The Next AOL?

The growth of Facebook is fairly astounding no matter which metric you use. Profiles, valuation, visits….it’s impressive to staggering.

For many, Facebook is becoming “The Web” or a large part of it. You have an inbox for communicating with friends, you can play interactive games (instead of watching TV game shows at night you can actually participate in an interactive online game show with your friends!), reconnect with lost friends and, via the choices you make, project a “virtual” image of yourself to the outside world. I have heard that users outside the U.S. view Facebook as more of an utilitarian and effective tool. “Less chicken throwing, more networking” might be another way to illustrate my point.

Entire businesses are springing up on Facebook. If you’re a Facebook user, check out “Mesmo TV”. It’s a small but growing company (started by an ex-Intrawarian) that is now run pretty much exclusively within Facebook. Yes, you know Facebook is a bona fide hit when you can say “I know someone who has started a company running on Facebook” at cocktail parties.

The risk of course for Facebook is the AOL dilemma. AOL took advantage of a new way of communicating - the Internet. Whereas the World Wide Web at that time was very hit and miss in terms of quality and content, AOL made it easy for the masses to use with graphics and rich content.

Yet over time the “closed” nature of AOL was its downfall. Both end users and content providers wanted freedom. In addition, AOL became very “uncool” and was considered a tool for parents: “The Internet with training wheels.” Lastly, advertising ran unchecked for the most part and, along with spam, greatly impacted the end user experience.

Similar arguments are being made today with respect to Facebook. These arguments focus on the fact that Facebook has a proprietary development language. Just as companies had to develop “an AOL version” and a “Web version” in the late 90’s, today companies are required to develop a version of their application to run on Facebook’s proprietary markup language. This was at the core of the recent “Open Social development platform” announcements prior to Christmas.

Yet one key difference between AOL and Facebook remains. Facebook allows developers who build applications to reap 100% of the revenue they derive from those applications. Perhaps an analogy to the physical world is that you have 20 acres of land and you want to set up a market. One model, the traditional one, is that you charge every vendor 30% of their earnings by way of payment. Your alternative is that you could divide the lot in half and let the vendors keep all their earnings and charge $5 per hour for parking. Then over time you select the most popular vendors and once you have a reputation established you raise your parking to $10 per hour…

AOL clearly followed the first path - demanding big fees to be present within AOL. Facebook is focusing on the second. However, one of the key differences between the physical and virtual world is that Facebook isn’t constrained by only having 10 acres. You would think that is a good thing. However, in this case it might actually become a problem. There’s no quality control and many Facebook pages I visit now appear to be “drowning” in data. I think that’s been LinkedIn’s point all along.

These are pertinent questions as we continue with the ongoing development of zAthlete. It’s a new frontier. How do we take advantage of the most exciting elements of social networking while avoiding the potential pitfalls. It’s an interesting challenge and the stakes are high. There are so many pundits on Facebook that weighing in hardly seems valuable. Maybe the best question is “What was the biggest reason for AOL’s downfall?” It will be interesting though to see if Facebook is another Google or AOL.

Let me know what you think.

Justin

Dust Off Those Digital Camcorders!

Not too long ago, digital camcorders were all the rage. After the digital camera boom, it naturally followed that electronics manufacturers would evolve their new cameras into ones that could shoot videos, leading to consumers wanting to replace their oh-so-last-century tape-based camcorders. You probably received or gave one of those slick (and expensive) new digital camcorders not too many holiday seasons ago. But they aren’t so hot anymore. I looked on Amazon’s top sellers list in Electronics, and there was only one digital camcorder in the top 50 (and that was a very inexpensive model). People aren’t replacing them like they do digital cameras. The reason is not that they aren’t prone to breaking or obsolescence, it’s because people aren’t using their old ones anywhere near their original expectations; they feel like the original investment in one was bad, and they don’t want to make that mistake again. You didn’t buy a new one this holiday season, did you? Everybody loves to watch videos and shooting a movie is as easy as can be. So what went wrong?

If you have a digital camcorder, you know what the main problems are: 1. storage, and 2. delivery to friends. Videos are large files and they chew through your memory cards very quickly. Even though camera memory is cheaper than it used to be, it is still costs $25-$50 per hour of video camcorder storage. So you naturally want to offload the storage to your computer. But then you find that you start to run out of space on your hard drive. You see the effects of digital TV, movies, and videos all over the place: on your DVR, on your video iPod, and on all of your computers. That digital camcorder is so fun and easy to use, but the results quickly zap all of your storage. The second main problem may be an even bigger one. You’ve got all this great video content (assuming you had a place to put it), but now you can’t seem to share it with your friends and family since the video files are too big for email. They are too big to upload to YouTube and, in fact, as you get them off your camcorder, they are too big for most people to play over the Internet, even if you could make them available. Most existing video websites require that you first compress your video into lower quality of shorter duration. And then, those websites make your videos available for the world to see. Even if you jumped through the hoops to get your videos YouTube-ready, do you really want your daughter’s ballet recital to be shown to the entire world of unknown viewers?

At Intraware, we are attempting to solve these problems. We provide solutions for storing, organizing, and securely delivering your digital files. On zAthlete.com, you can upload your original video, no matter what the size, and our servers will store your original file for you and make a transformed copy that is suitable for playing over the Internet. Further, zAthlete allows you to organize the videos, along with photos, links, and other types of documents into albums, and then entitle which friends and family may to access to those albums.

So dust off that digital camcorder and try uploading a video from it to zAthlete.com. You might already have something cool trapped on the memory card just waiting to be shared. If you find that it is easy enough to securely offload your videos and share them with others, that camcorder might just end up being the shiny cool toy that you originally thought it would be.

Paul Martinelli, Co-founder and Chief Technology Officer at Intraware

Macrovision’s News

I am certainly feeling overdue to write a post for our blog. This is traditionally our busiest time of year and this year has been no exception, so my apologises for letting my duties here slip.

Like many, I was caught by surprise by the news of Macrovision’s acquisition/merger from last week. I confess that I still don’t understand the dynamics behind the deal and the only quotes I’ve seen around the value of the combined company haven’t helped at all. Needless to say, the executives behind this are experienced industry veterans and must have their reasons, so I assume in time all will become clearer.As our largest competitor, as well as an integral part of many shared customers, our relationship with Macrovision has always been complex. Now it appears that much of that has changed.

I’m left with three general thoughts or observations as a result of this news. Firstly, it’s obviously great short term news that we’ll see Macrovision recede as a competitor even more than we had recently. We had seen and heard rumblings about these types of changes directly and indirectly in the marketplace for the last 90 days or so. It also means there are several very smart decision makers out there who have decided over the last few years that it made more sense to bet on Intraware vs. a much larger alternative company in Macrovision. Secondly, it creates a vacuum for a legitimate new DRM provider in the software/technology vertical. This is a fascinating concept and it’ll be interesting to watch what plays out in the next 90 days.

Lastly though, it’s a problematic statement about the state of the software marketplace and reinforces many of the changes we’ve made within Intraware to expand our focus and portfolio of offerings. On a much smaller scale, customers and investors sometimes scratch their head when we discuss zAthlete in particular and our new market endeavors in general. I think Macrovision’s news, should this really prove to be an exit from the technology marketplace (and read any of the news coverage and see if you can find the word “software” and “Macrovision” close together - I can’t) reinforces the “maturing” state of the technology market overall. That maturation has resulted in a vertical that is growing less rapidly in general and thus is less attractive to many companies to sell to than has been the case in the past.

I believe Macrovision made some significant strategic missteps from a technology and cultural perspective that accelerated their exit from the technology vertical. However, there’s a lesson in this for all companies focused on selling to technology companies.Macrovision will remain a strong presence in our marketplace - if only due to their overall market penetration and depth of their legacy products. So, let’s all stay tuned as this one interesting announcement is more of the start than the end of this story I suspect.

Dear Al Gore

Dear Al Gore, 

Congratulations on your new job at Kleiner Perkins. I think your continued investment in “clean technology” will be successful in so many ways. Kleiner Perkins is the perfect partner; after all, they helped me create my own clean technology company back in 1998. 

Almost ten years ago, I built a company that allows software companies to digitally deliver software and licenses rather than shipping pallets of CDs, boxes of manuals, and truckloads of packaging. Now, I must admit that I wasn’t just thinking “green” when I did this (maybe some green in my wallet), but I did consider that concept as well as other things like efficiency and amazing returns on investment. We quickly recognized that we could build a company that could eliminate many layers of distribution, production costs, returns, warehousing, and personnel. Thank you Mr. John Doerr for sharing that vision. 

Nine years later, our customers can release version 2.0 of their software and their customers don’t have to throw away version 1.0. Our customers can “ship” a bug fix that doesn’t result in the creation of five million CDs. That’s sustainable development; fuel that isn’t burned, landfills that aren’t packed, and waste that never gets created. 

We have come far, but we’ve got along way to go. This morning I went into my daughter’s room and discovered that she had bought the new operating system from Apple. I was more upset about the packaging than learning that she had charged it to my credit card. It came in a cardboard box with protective stuffing. The software box was pretty slick with a shiny X on it. Inside the box were a manual, jewel case, and CD. 

Yesterday, we received 99 boxes like this at our office of software that we had already downloaded to keep our systems in top form. We called and asked why they had sent them “Oh sorry,” was the reply. “It’s just our systems. You can ignore them and throw them in the trash.” How much waste did this create beyond our company? How long will it take to make up for that damage to the environment? Is this happening everywhere?  I’m guessing the landfill numbers, gas consumption, and production waste behind physical software is reaching epic proportions.

Old habits die hard. The behavior behind not going digital is tainted by a few poorly thought out strategies. There is a belief that “the box” is a branding opportunity. “The box” represents a better way to get to retailers and a better way to get product accounted for even if it is not yet sold. I hear other reasons why technology companies can’t shake the physical shipment habit: “Our customers are not requesting that,” or “we don’t have a budget to make the transition.” 

I realize that there is an argument for physical distribution. I can understand the political dilemma faced by music and movie producers. Because Apple has created a pricing structure that gives them more power than either the producers or creators, many producers are waiting to go digital until there is parity in that supply chain. Companies like Wal-Mart still receive a large percentage of their revenue from physical shipments and do not have a way to convert to digital delivery, yet. 

Over the past decade, I have not wavered my commitment to create a digital world.  Fortunately, I had a lot of help.  I tip my cap to many who were quick to change and helped push our company to profitability.  Their drive to become green companies would make you proud. 

But we’re only in the first inning here. More change is needed. And frankly, Mr. Gore, we could use your help. 

Sincerely, 

Peter Jackson

Intraware, Inc.

Social Village

I have never liked the term “social network.” The word “network” reminds me either of networking in that clichéd business way, or as an extension of the concept of technical networks - like we’re routers or IP addresses on a hub when we join one.

The Internet of course is a fascinating phenomenon. Within the last ten years, from a communications standpoint the world has shrunk dramatically due to the ease of global access. With so much of the developing world still to come online, it strikes me that the next ten years will be no less dramatic in terms of this shrinking effect.

Yet as global as it is, the Internet of course is made up of individuals and individuals have very strong tendencies towards affiliations. My personal belief is that the success of Social Networks is ironically driven by a strong individual response to shrink the global nature of the Internet. The vastness of the Internet is overwhelming. The quest becomes to find like-minded individuals in this ocean of end users with whom the individual has something in common. Thus my opening headline “Social Villages”

I looked around the physical world for a good analogy and New York City immediately jumped to mind. Manhattan is a mind-boggling place full of people and an attack on the senses. It must have been even more so earlier in its history when it was growing rapidly. Nearly everybody came from somewhere smaller - rural villages or even small towns and cities. They were drawn to the high density of people within easy reach and the opportunities that created both personally and professionally.

Yet they also immediately moved into “villages.” Manhattan is defined by it’s cities within the City - boroughs, neighborhoods etc. People need to identify with a village and, for better or worse, be identified by their village. Within those villages they share stories, watch people grow and change, trade and share a common bond as their fortunes rise and fall.

Sport is a powerful symbol of identity. At its worst, it results in horrible violence between opposing fans. At its best, though, it unites people from all around the world with completely different backgrounds through a common interest.

As we build out zAthlete we keep those principles in mind. We want to create networks that are global in reach but local in nature. Adventure racers from as far away as China and Australia can connect and share thoughts through a common interest. (Pictures and Videos are free of the barrier of language.) Yet we can also have the local high school soccer team create a team page and parents share content, schedules and orange cutting duty! Eventually, we’ll facilitate trading so that those perfectly good ski’s that were rapidly outgrown don’t have to collect dust. Trading amongst humans has always been inherently risky and rewarding - trading within a trusted network can help reduce some of that risk.So back to work on the “Social Village”

Justin

Let’s go Vertical

A few weeks ago I got an email from an editor inviting me to join her www.facebook.com network. I know all about facebook; my children are “junkies.” Although I’m nearly fifty, I think like a kid, so I signed up.

Later that day, I requested that my children add me to their network. Wow, that didn’t go over well. It seems that their social networking world doesn’t include people over 30 years of age. I have to admit that since that day I have found little use for facebook other than reviewing the weekly requests from other “over-the- hill” people asking to join my network.

While facebook may be for the under-30 crowd, I see a dozen or so networks that will launch in the next year or so that target users by age and interest. When they go live, they will verticalize the social networking space. Some already exist. For example, www.linkedin.com is supposed to more my style, but I don’t want people to share my contact info. I already have enough solicitations.

Frankly, for me, a social network needs to address the things l like to do, but doesn’t include networking with people who want to exploit that electronic relationship and, frankly, sell me something.

I see many vertical social networks popping up that range from windsurfing to senior citizens. I believe that all kinds of generations will join these networks to improve communications, educate, network, and showcase themselves.

Seeing the value and interest in such networks, Intraware has been developing a set of applications with these new vertical social networks in mind. Since 1996, we have been building hosted applications that manage the delivery of private digital goods. I spent the last couple years working with alternative digital content outside the enterprise area. With www.digitalfastball.com we learned that there were many markets for such goods.

When combining that education with the birth of Web 2.0, we took a deeper look at social networking as a private way to distribute valuable content. While looking at vertical markets that could leverage such content, we found that athletes have one of the most diverse sets of content deliverables. Starting with 40 different types of sports, we found that athletes want to deliver everything from statistics, transcripts, photos, and high resolution video. We soon realized that the video function would be the hardest yet slickest part; it would give athletes the ability to create a private www.youtube.com network. And athletes of all ages seem to have lots and lots of video content to present.

Once we can perfect transcoding and presentation with athletes, we figure we can leverage a whole host of other vertical with this video functionality. We are already in discussions to deliver video resumes and TV shows. We are even working with companies that want to distribute cell phone video clips of newly listed houses to potential buyers.

As for athletes, we like the market since it is complex. As I mentioned, we can address multiple statistical algorithms from hockey to bowling. We can create a network where only accepted users can see that you shot an 82 at Pinehurst on Thursday and your handicap is down to a 9. We can allow you to create a network of master swimmers or soccer kids in your area.

Finally, we see large direct advertisers interested in reaching specific types of athletes to promote their brands and products. Easton is going after baseball players. Speedo wants
water polo players and swimmers, and perhaps triathletes. But is it important they all drink Gatorade or maybe Propel?

So let’s see how vertical sites do. Perhaps facebook and myspace own the profiling world. But until then, we are going to develop a set of vertical sites with great applications to help users maximize their social networking needs. If you wish to learn more, we have a nice press release that discusses it further.

Regards,

Peter

When Everything Old is New Again

Last weekend Microsoft’s Window’s Genuine Advantage service was down for 19 hours. This is an anti-piracy service that enforces Microsoft Windows online validation of the authenticity of several recent Microsoft operating systems and when downloading from the Microsoft Download Center.

Naturally the down-time was a significant inconvenience for millions of users who were trying to download updates etc. Being Microsoft there was no lack of people ready to comment.

One of the more interesting comments I saw was that this was a serious “black eye” for software as a service. John Dorvak, of PC Magazine, took this argument even further. He argued, what if SaaS have come first and “Desktop” PC’s had come later. He can see the marketing spin around “no longer do you have to worry about the network being down. Everything you want is right there on your local hard drive!” etc He goes on to deride the supposed value of Google apps and others.

He should have taken it one step further. I can imagine the argument the first time there was every any type of computer outtage. “This is why we should always keep our information on paper filed safely in the drawer where we can access it anytime.”

The amount of “comments” from IT engineering folks to this article made me realize just how threatened many still are around the concept of Software as a Service. It seems to center around “losing control” with the outsourcing these applications. It’s an important reminder for us that, despite ongoing validation around our model, (read this interesting dialog with the current CEO of Macrovision that was posted by a reader) there is still work to be done.