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.

Join me for “Social Media Boot Camp” on Tuesday, December 4 at 10:00am PDT

Join me for “Social Media Boot Camp” on Tuesday, December 4 at 10:00am PDT.  It is webinar hosted by The Horn Group about putting social media to work in 2008.  We’ll hit these topics that you’ll not want to miss:

• Is social media right for you?
• Keys to using social media in your communications program
• Avoiding the pitfalls of social media
• Grasping social media by the horns – a case study

 To register for the event, go to http://www.horngroup.com/email/webinars/SocialMediaBootCamp/index.html See you Tuesday!

Horn Group zAthlete interview

Our communications partner Horn Group does a regular video segment called “Innovator Insights”, this week they featured Intraware’s CEO Peter Jackson:

Innovator Insights Interview

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

Tale of Two Cities

As Intraware embarks on our social network development efforts it’s natural for our existing customers to ask “What does this mean for me?”

We wrapped up our SubscribeNet User Group Conference (“SNUG” in Intraware parlance) two weeks ago. By all accounts it was our best ever. We had customers, partners and prospects attend. Both customers and prospects told me that letting the two mix together freely was a testament to our overall confidence in SubscribeNet. There was also a lot of interest, and frankly some concerns, about what our new endeavors in social networking might mean for our enterprise technology offering - SubscribeNet.

Many customers applauded our efforts. After all, we’ve spent ten years focused on optimizing the online experience for their end users in regards to secure data exchange. Why not leverage that into what is clearly an ever growing new trend - Social Networking. A bigger and stronger Intraware only makes their life easier when it comes to their annual vendor check list exercise. However, one or two customers also connected the dots and asked “If successful, I’m sure there’ll be advantages that feed back into SubscribeNet too?”

It’s hard to believe now but SubscribeNet was a radical idea in its day and really pushed the envelope from a technology perspective: a purely hosted solution built on these “new” technologies such as Java or web application servers. Weblogic and Netscape were companies still less than 5 years old at that time. Heck, at one point over a two year period we probably saw four different company logos on our data center invoice - and we were still in the exact same facility and cages! Now of course many of these concepts are accepted or even becoming the norm. With nearly 2 million end users and handling roughly $10 billion per year in revenue fulfillment on behalf of our customers you need to have a very stable environment. Stability and predictability is key – yet customers still expect you to innovate and improve the offering.

We already can see exciting new applications of technology within our Z platform that we will migrate to SubscribeNet. Some of it is pure scale and muscle. As Z expands, our overall demand for infrastructure increases which in turn gives us better bargaining power overall with our vendors. We can experiment with new, low cost solutions in a production environment that we could never risk with our SubscribeNet user base. Although believe me cost reductions get many of our customers excited, more exciting are new technologies - particularly in UI functionality.

In some respects Z is changing the way we look at SubscribeNet. Start to think of SubscribeNet as a Social Network site with 2 million end users with very granular and attractive profiles and you begin to see the opportunities that exist. Are we helping them connect in networks? Are we allowing them to exchange information as fluidly as possible? Are there different ways we could be communicating ideas that impact revenue opportunities?

Our SubscribeNet end users are our customers end users. So we have to have their complete involvement and cooperation. Having said that, I am already excited when I imagine the way the service might look and how the dynamics will have changed for our next User Conference in a year from now.

Regards,

Justin

Press Release on Z Athlete

Exciting news from Intraware today about the launch of zAthlete a social network for athletes, recruiters and coaches. David Esquer, the Head Baseball Coach at the University of California told us, “Through zAthlete, I can consolidate all the pieces of information I need to follow an athlete in one private site: video, transcripts, SAT scores, communications, and statistics. Now all those pieces are organized as I forward them through our recruiting process for various coaches and administration. This meets our needs by cutting travel time and allows me to filter to the best players available.”

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

SaaS and the Sub-Prime Market

Larry Ellison let his feelings be known on SaaS vs Perpetual licensing on Oracle’s last investor call. He noted that Oracle won’t be doing SaaS anytime soon because “so far no one has figured out how to make any money at it.”

You can imagine that coming from a man of Ellison’s prestige that comment isn’t one to take lightly. I personally would have thought after having watched what happened to Siebel at the hands of Salesforce.com Larry might be a little more concerned about the possible threat of SaaS. Obviously though this is a person who’s done very well up to this point without my advice.

I did find a fascinating blog entry though that I wanted to share with you. It compares SaaS with Perpetual licenses. It discusses TCO, believes that ISV’s only do well during bubbles and that SaaS companies will fare much better doing a recession than non SaaS technology companies.

Enjoy. I’m off to our User Conference this week.

Justin

Platforms

Hello All,

I spent some time this week at the Amazon “Startup Project” event in Cambridge. I joined around 100 developers, business development managers and venture capitalists as we listened to Amazon’s overview of their range of offerings. We also heard from several startups that use Amazon’s services.

While much is made in the regular press about Google and the possibility of their entrance into the CDN/services market, Amazon has quietly jumped in with both feet. Amazon would probably cringe if they heard me say this, but if Amazon had the “sizzle” that Google has right now, theirs would be a much bigger story. You have to credit Amazon for execution, though. Their services exist today, are currently being used and really are going to change the way many startups go to market. Over time, I believe non-startups will also move in this direction.

When Intraware began over a decade ago, we were on the cutting edge of hosted web applications. Salesforce.com, NetSuite and other companies were still several years away from building out their web, hosted offering. We had to go out and procure datacenter floor space, build out redundant hardware and software capabilities and hire a group of people for whom this was a core competency. Every dollar or hour we invested in our infrastructure was a dollar or hour not spent focusing on enhancing our core value proposition – to be the best software and license management service on the planet. While we’ve refined and improved the process, this is still the fundamental dynamic in place today.

Today, startups can get all of this infrastructure “on-demand” from Amazon on a purely “pay as you go” basis. To me, the single most important result of this landscape change is creativity. Startups have significantly lower barriers to entry. Five years ago, to launch your new-world-changing on-demand application you probably needed a minimum of $1 million in hardware, software and people costs. Today you might only need around $5000 and then scale as your demand actually follows. If you build it and they don’t come…..well at least you don’t have to sell your old equipment on eBay for pennies on the dollar! To be sure, many of these services are in their infancy and it will take time before they’ll be suitable for larger organizations. However, the potential is clear.

The Internet was the original platform that made it possible, if you spent a lot of money on your infrastructure, to reach the masses “for free”. Now, accessibility to the fundamental building blocks of web applications such as computing power, storage and throughput, is driving those costs much lower. Facebook is doing a similar thing to the world of social networking with their open platform. All this seems driven by a relentless focus on the idea that people should be freed up to focus on the important part – their value proposition.

Justin