Smart Software

Everyone's a "Vice-President"

MSNBC has a news video called "Title Wave - Everyone's a Vice President." The video points to a 22-year-old Japanese female and recent college graduate, who is a vice-president of HR operations at a US software company (TopCoder). Donald Trump actually says in the video that he gives away vice-president titles in lieu of salary increases to retain top talent.

When I first looked into the "facebook" of classmates of my MBA program, I was stunned to find that perhaps half or more of my classmates have VP titles or equivalent or better. I soon learned about the phenomena of title inflation, especially in the finance industry, where investment bankers two years out of college are commonly handed a VP title. The video above states that Goldman Sachs has 6,500 vice-presidents; in fairness, these junior VPs often have salaries exceeding those of genuine vice-presidents in other industries.

I always thought that the vice-president title may have some legal significance, such as indicating authority of a company officer. I know that it's important to use one's correct legal title in company documents, because the misuse of certain titles (eg, partner, CEO, member, manager, owner, proprietor) may confuse other parties and introduce personal liability in a court case where there would otherwise have been none. Many financial companies are/were limited partnerships, so actually a vice-president title is perhaps legally empty in comparison to a "partner" title.

It is easy to get a VP title by joining a startup; it's even easier to get a CEO title by filing an application for a new company. Some companies even mock the vanity of these titles by coming up with new hilarious ones like "Chief Yahoo." (Pardon me. I can't really recall any better titles, because of their infrequency and uniqueness.)

SBIR (Small Business Innovation Research) Grants

During my MBA program, I investigated government programs for granting money to small business programs to conduct and productize technology research. There are two programs (SBIR and STTR) in which eleven different government agencies provide two billion dollars in grants to small technology companies.

I actually wrote a preliminary proposal, which was modeled on a copy of a successful proposal provided to me from one of my classmates, Holly. The proposal was sent for developing feedback-controlled sports bra for SmartWear, Inc. While she was not the "principal investigator," she wrote the proposal, which led to a National Institute of Health grant in 2001 of $100,000 for six months to a year of work.

I never sent in my proposal, since, at the time, I missed the proposal deadline which was infrequent (once a year) and estimated my chances of success at being low, since it involved natural language. The large companies (IBM, Google, Microsoft) have hundreds of researchers, developers, and linguists, compile massive amounts of data and pour millions of dollars into research. With me, my credentials and my product ideas are in doubt; I am not going to convince anyone reading my proposal that I have a better way especially with a $100K grant.

The couple, who developed the Dragon Software speech-recognition technology, subsisted for seven years during the 1980s through government grants, before they were able to release version 1.0 of their software.

I have been thinking that my static analysis tool could actually fare better. I have working technology right now as well as demonstrated commitment using my own time and funds. My background (schooling and prior work experience) is very good. There is still quite a bit of work that I need to do to take it to the next level.

The government agencies examine proposals more frequently, four times a month, with DoD solicitations arriving in Nov 1 and the next proposal deadline in January. However, proposal writing and benchmarks are a time sink, and I could probably just do better organically by keeping focus on my development and funding my research through internal cash flows. I do wish that I had submitted a proposal last year.

Release Early and Often

Below is the blue theme that NStatic applications uses.

I just went through removing a number of nonessential features from my product in order to focus on timely delivery of the first version. These features will appear in a later free update, but their presence in the initial version is simply delaying my revenue stream. 

This issue of “release early and often” arises frequently in blog posts; some of the more memorable posts I have read on the topic include the following:

Eric Sink answers through his Business of Software series post “Finding Product Ideas” on how long it should take to build the product.

You also want to get to market as quickly as possible. How many months will you need to build version 1.0 of your product? It is usually better to keep the 1.0 feature set as small as possible so you can get your product out in the market sooner. If you can't get a sellable 1.0 out the door within six months or so, look carefully before you leap.

One of my own personal favorite product ideas has this problem. The market position is good, and I know the product would sell. But it would probably require around two years of full-time effort before I could release version 1.0. That's a long time to wait for the first dollar of revenue and the first real customer feedback.

Aaron has a contrarian post on Release Late, Release Rarely, supported by Don Dodge’s own view of the evolution of software companies in SaaS delivers functionality faster and cheaper.

 

Crowdsourcing

I used to think about the day (ever so closer) when I release a product, amass more money than I could deal with, and start hiring my first employee.

However, my thoughts over the past year have leaned towards building a virtual company, built on outsourcing and personal offshoring, as I have written in the past. This I think is the model for future business in general… It also offers great opportunities for the individual, would-be entrepreneur, not just for “greedy” megacorporations, salivating at the prospects for more layoffs.

Wired now talks about crowdsourcing as an emerging new approach to business.

Technological advances in everything from product design software to digital video cameras are breaking down the cost barriers that once separated amateurs from professionals. Hobbyists, part-timers, and dabblers suddenly have a market for their efforts, as smart companies in industries as disparate as pharmaceuticals and television discover ways to tap the latent talent of the crowd. The labor isn't always free, but it costs a lot less than paying traditional employees. It's not outsourcing; it's crowdsourcing.

 

Software Industry Directory

I previous wrote about a directory of software companies back in 2004, which I found very useful for market research, listing various company information such as revenues, employees, products, etc. The original directory seems to be out of print, but I found another one called the “2006 Software Industry Directory” by Software Business Online.

I haven’t look inside the new directory. While it doesn’t appear at first glance to be as comprehensive and organized as the original, it should be more current.

ComponentFactory

A new MicroISV, ComponentFactory, has just released its first and free (?!) product, Krypton Toolkit. You might want to grab the toolkit before the owner figures out a sustainable business model. The company develops user interface component libraries (google juice) for Visual Studio 2005 and .NET 2.0.

The founder, Phil Wright, maintains a blog (old blog), which I have been following since inception when it was listed in MicroIsv.com, detailing his entrepreneurial endeavors from initial startup such as designing his website and logo. His blog description says it all:

Join me as I take a journey from concept to real world business. Is it possible to create a viable microISV on a shoe string budget and working only in your spare time? Let's try...

Almost as a continuation of my prior posts on High-Tech Outsourcing and Personal Offshoring, he talks about the choices that he made as to whether to make or buy such things as a blogging package. He also mentions his experience with auctioning his website and logo design through www.RentACoder.com, www.Guru.com and www.DesignOutpost.com.

(Speaking of outsourcing, I found an interesting new website, www.TechStudents.net, that mines college campuses for low-cost tech-savvy labor to connect with small businesses. It’s a more politically correct option to promote domestic rather than foreign labor.) 

Phil is also engaged in some viral marketing by offering a free copy of DotNetMagic user interface library via a marketing tie-up with Crownwood Software until December to any preexisting .NET blogger that mentions the new toolkit on his blog. Personally, I am already satisfied with the SyncFusion libraries I already own, but the library, which normally costs $399, may be valuable to other bloggers.

 

Get Your Butt Outta Bed and Build Something

In one of my entrepreneurial posts, a reader chastises me for not delivering any product so far,

OMG! You've been talking about starting this business forever! You have a penchant to just talk talk talk. How about do do do? Stop wasting e-ink and start hauling your e-ass outta bed everyday and build something... or maybe I misread you for something else than a part time pundit

The reality is that my product and libraries run only on the Whidbey runtime and Whidbey had been delayed a year and a half late. I am also not allowed to ship a product based on a beta runtime, small or large.

So, I spent my time developing my product with little regard for delivery dates. Since the product is the first version, the schedule is feature-driven, not date-driven; there’s also a significant research aspect to it as well, so making scheduling by dates difficult.

Now, that Whidbey has shipped, I no longer have an external excuse for not shipping. My original product concept is still quite a bit away. Because of the product’s size, I face considerable testing work and the prospect of a buggy first version.

The release of Whidbey provides more options. In order to get money coming in sooner and earlier external testing and feedback, my current strategy is to deliver a number of useful “subproducts” based on various portions of my main product. I aiming to deliver the first such subproduct in a month and a half time.

So, when the Big One does go into beta, much of the product will already have been tested and used by customers. This strategy of parallel development and testing is more organic and iterative.

 

That's Impossible

I developed my software idea and worked on my business plan for over a year during my MBA program. As I was explaining my ideas, I had a number of students who expressed doubts based on “common sense” heuristics about my ability to produce the technology my business is based on. The doubts were centered on two things:

• The technical difficulty and “millions of dollars” in costs of creating a new desktop application.
  • If it were so easy, Microsoft would squash you like a bug…
• The heavy reliance of AI technologies such as natural language processing, coupled with the difficulty that people have in comprehending that computers can actually “understand” natural language.
  • Japanese companies spent and lost billions during the artificial intelligence craze in the 1980s.
  • Companies and universities have research labs and tons of resources that you can’t compete with. Why haven’t they come up with anything yet?

One student remarked that if you can pull this product of, the fact that potential competitors do not even believe that the product is possible to build is a major competitive advantage.

Rather than follow common sense and empty generalities, I repeatedly question assumptions and investigate the issues involved. I come up with proof of concepts and shoot down impossibility arguments by offering counterexamples.

One of the early pioneers of computer technology remarked that his supervisor asserted that computers would never be able to perform mathematical calculations. Everyone would agree that computers can perform calculations today, but most still probably believe that computers will never acquire language ability because such activity would seem fundamentally human and conflict with notions of consciousness.

In assessing the technical difficulty of delivering software, people forget that I was once a software developer at a very big company. Microsoft has a much higher bar to pass than all other software vendors—internationalization, compatibility, accessibility, etc. I know that in the two and half years that I spent to add a few PivotTable features to Excel 97, I could have developed a serious application. I should also point out that I am licensing decades of work from various institutions.

As for the failed Japanese experiment of the 1980s, AI is such a broad term, anyway, and the Japanese appeared to have been focused on unrelated areas like fuzzy logic. There’s also the impact of Moore’s law—more computer processing power and memory, better and more productive tools and languages. My machine readable dictionary, which takes several megabytes of memory, would not be able to fit inside either the high-end RAM or external storage of the time.

There’s also the efficiencies of a focused development process and a holistic application design. By “holistic,” I mean that any weaknesses in the AI can be ameliorated by the design of the user interface—something that I will talk about in a later post.

I have noticed that researchers often try to obtain the general solution and don’t think about creating commercially viable software. In particular, I look at the OpenCyc project with its massive knowledge database, and wonder if they even know what their goals are. Companies like Microsoft and Google have limited vision and apply their research narrowly to search engine queries and command and control.

Zombie

Part of my desire to be an entrepreneur is driven by fear—the fear of becoming some kind of zombie, working without passion, living on a treadmill. Some people use other terms like “rat race,” “wage slave,” and “mid-life crisis.”

Growing up, I was afraid of acquiring the overhead of a stay-at-home mom with kids and a mortgage and working for a job, I didn’t enjoy, with the highlight of my day being, figuratively speaking, to “punch the clock” at the end of the shift, only to come home to additional pressures and count the days till I retire.

Anand Vishwanath blog (I might die soon) includes a post “Does everyone’s life start and end like this?” 

… Late 30s… No sooner, you are all of a sudden just another person around the block, with all the cool ideas you had buried way down in a pile of responsibilities. You look back and see, if only you would not have taken that one decision, how different your life would have been today. But alas, it’s too late! It’s just another life now!

One commenter remarks:

Life is suffering my friend. You have to make the most of it before it's over. You have to spend your time wisely and doing what's count. According to Buddhism, you have been doing this in a countless life before. Talking about endless cycle.

 

Getting into Microsoft (as a Company)

I often wondered what it takes to get acquired by Microsoft. I have often heard the refrain “talent and technology” in the annual report of Microsoft and other technology companies, so it seemed that all that was needed is to bring together a group of smart people and develop an interesting, innovative technology.

Don Dodge, from the Microsoft Emerging Business Team, has a couple of recent posts called “Does Microsoft Invest, Partner or Acquire” and “Microsoft Will Acquire My Company?” In it, he confirms the Microsoft’s penchant for smart people and IP, but he also adds that, to get the high valuation, the company needs to have established market leadership in a new product space.

In a related note, Paul Graham gave a talk “Hiring is Obsolete” about a new alternative to getting hired by Microsoft. He elaborates further in his blog essay.

Most CS undergrads hope to get a good job when they graduate. But as the age of startup founders creeps downward, I foresee an alternative path for the most ambitious: instead of going to work for Microsoft, start a startup and make Microsoft buy it to get you.

This change will do more than make some young hackers richer. It will fuse recruitment with product development. Instead of applying for a job and then being told what to work on, you join the company as a complete development team, with a beta version. Results: (a) a shift in power from companies to hackers, and (b) an increase in the rate at which new technology gets developed.

Obviously this new model will be a better deal for the best hackers. But I think it will also be better for the Microsofts. The few tens of millions extra that they'll pay will be a bargain for what they'll get.

This was exactly the route taken by a fellow classmate of mine who turned down a job offer from Microsoft to work at Vermeer (FrontPage), only to be acquired a year later by Microsoft with, effectively, the signing bonus of a lifetime.

This reminds me of Eric Sink’s blog entry "Just how big is that big empty office?" in November 2003. In it, he reported that Microsoft was looking for a development lead for Visual SourceSafe, and Eric suggested his company SourceGear. I suspect that Eric, already knew that Microsoft was going forward with VS Team System edition. That post was written about the same time that he later claimed to have been informed about the direction of VS by Microsoft.

In my MBA program, Microsoft was a favorite topic, and its acquisition strategy was actually a significant piece of a course I took on Digital Strategy. The course professor, Professor George Geis wrote a book, Digital Deals, which explains how companies like AOL, Intel, and Microsoft planned and executed partnerships, alliances, investments and acquisitions. Geis, seemed especially obsessed with Microsoft and Intel, as he created a website called Trivergence.com (Alliance Infographics), which lists every Microsoft and Intel investment and alliance and shows them graphically. Some of the older content is available for free, but the remainder is password-protected for a fee.

I learned from the course that Intel’s policy, for example, was to “only” invest in companies that simultaneously provide both a strategic and financial upside. In determining the strategic value of an investment, Intel considered not just its direct benefits, but also the impact of a new technology on the broader ecosytem of the computer industry (ie, whether it would stimulate long-term demand for hungrier processors.) 

Microsoft thinks long-term and places far greater emphasis on strategic objectives. Financial concerns often go on wayside, sometimes with disasterous results, as in the case with the billions of dollar that Microsoft lost in its cable investments.  One of Microsoft’s report lays out its focus on emerging technologies (aligned with its own vision) as well as demand generation. In acquiring companies, Microsoft seeks and extracts out the “talent and technology” and discards all the business functions and the corporate shell—more like an asset purchase than a merger.

From the course, I was actually surprised with the sheer number of acquistions that Microsoft made, most of which don't make the news. I was personally close one of the acquisitions in my time in the Excel group, that of an OLAP company from Israel, I believe called Maximal Intelligence. Actually, after FrontPage was acquired and became part of the Office division, I did meet up with one of the founders, who was nice enough to chat with me and give me one of the original copies of the business plan. 

The founder of the company, Charles Ferguson, tells all in his fabulous book, High Stakes, No Prisoners : A Winner's Tale of Greed and Glory in the Internet Wars.  Despite Vermeer only being able to sell about 200 copies of FrontPage and on the verge of collapse, the product was valuable for Microsoft in entering into the Internet client development space very quickly to tap into the rapidly emerging Internet market. Vermeer had really smart engineers and it also secured a few patents such as FrontPage Server Extensions. Charles also claimed that, having been based entirely on Microsoft technologies such as MFC and Office user interface, FrontPage was readymade for Microsoft and therefore very attractive for acquisition; however, other recent acquisitions by Microsoft indicate that look and feel is not a prerequisite.

Other observations:

• Most of Microsoft’s Office products, FrontPage, Visio, PowerPoint, Project have been acquired. Microsoft Access may also have been acquired, but Visual Foxpro definitely was. Dodge’s post points to a list of additional Microsoft applications that originated externally.
• Microsoft frequently purchases companies to achieve expertise in a new domain such as for speech recognition, natural language processing, gaming, message and database analysis. Historically, Microsoft’s schedule-driven culture with generalist programmers has been better suited for development than research; for example, early attempts at in-house development of games failed, forcing Microsoft to acquire companies with domain expertise.
• A number of acquisitions, both in application and in system software, such as Visio, FrontPage, RenderMorphics were essentially platforms that exposed an API to developers.

 

Low-Risk Entrepreneurship

In my post Nation of Entrepreneurs, I lent some support to Paul Graham’s claim that there could potentially be ten times the number of entrepreneurs that there are today.

With increasing infrastructure and education to support entrepreneurship, I raised the possibility that setting up new companies in the future may involve fairly little risk. One reader disagreed…

I agree that it is much easier to start a company these days due to the services and infrastructure that have sprung up with the internet and the business services industry. However, I have to disagree with your desire for "low-risk" entrepreneurship. The whole point of entrepreneurship is risk taking to achieve higher returns on the investment of time and money. There is less risk, and thus less pay, in simply getting a job.

I do think that entrepreneurship is becoming exponentially easier over time alongside advances in technology. If it became easier to make money on one’s own, the risk/reward relationship would still hold. Companies might have to compensate by paying employees more and/or by becoming more of a flatter virtual company, outsourcing non core-work similar to the just-in-time manufacturing practices of companies like Dell and others.

In my HR class, we studied transactional cost economics in which influential economist Ronald Coase wrote a book The Nature of the Firm which asked the question “Why Do Firms Exist”—why do whole organizations form in place of markets, when markets are effective (and should theoretically be efficient) in coordinating economic exchange? His answer was that the costs of renegotiating contracts, inspection, settling of disputes in markets was often greater than the cost of managing economic exchanges with an organization. Firms and markets are complementary ways of conducting business and each co-exists in dynamic equilibrium in which the size of a firm is proportional to the cost of conducting transactions in a market.

Now if the risk/reward equation of entrepreneurship changes, the cost of acquiring compensating people and organizing will increase, leading the business environment to become more market-based. Indeed, large businesses have already begun downsizing and moving to market-based approaches in the 1990s because of globalization and advances in information technology; the cost of labor became more expensive compared to outsourcing and new technology.

Implicit in the commentor’s remark is the assumption that corporations and entrepreneurship maintain a fixed eternal relationship. However, ways of doing business have alway been changing. One should not forget that historically modern corporations are a recent phenomenon. Corporations became legal in all the states in the 19th centuries. The first regulatory agency for interstate commerce in the US was created in 1887 and Sherman Antitrust Act was passed in 1890.

 

Fail Fast

“Fail Fast” is a common refrain that I have heard from Eric Sink, Kate Gregory (via Julie Lerman) and others. Using the words of Julie Lerman,

“this is basically about the value of trying something out and getting it over quickly if it’s going to fail rather than debating the possibilities endlessly or pursuing the project in a way that you won’t find the point of failure until pretty far into the game.”

My issue with this statement is why fail? I view life as a cumulative process, where work and learning from one stage can be reused in a later stages. In my past, I have often tried to choose paths in life that accomplish multiple simultaneous goals to reduce the possibility that my experience would not add to my personal or career growth.

For any sufficiently long software project, it probably makes more sense to design it, so that all one’s investment in effort, time and money is not wasted if the project does not meet original goals. At the very least, one should have learned a great deal from the experience, but, better yet, such work should be salvageable and reusable for other purposes, so one does not start from square zero. This approach also takes advantage of the tendency of the value of development work to appreciate exponentially over time. In effect, the project has not failed but simply been transformed into another project.

While I may appear to have fallen into the “Sunk Cost Fallacy,” I have not simply because the output of the first project is reused or repurposed into a second plausible project rather than simply being completely abandoned. 

For this to work, the codebase needs to be more general than its initial application. There should be ways to repurpose the software for a plan B and C—which is why niche software may not always be a good idea. This also makes it easier to develop a line of products.

Ecommerce Providers

After coming back from Shareware Industry Conference, I met with a number of e-commerce providers—Esselerate, Digital River Network, Plimus, Apptastic.NET and Avanquest. The great thing about the conference is that I can meet face-to-face with the associates that I would be dealing with. I previously signed a contract with Esselerate and later met with the representative I spoke to a week later at the conference.

Aside from the lectures, I also networked with a number of shareware vendors (some of whom were looking for bundling opportunities), received free software and discounts, and met with a number of companies that provides services in marketing, documentation, download sites, and packaging/fulfillment; I talk more about that in a few posts.

Each of the e-commerce providers have different strengths. Digital River is the largest e-commerce provider, primarily through a dozen or more acquisitions. Its flagship service appears to be RegNow, followed by ShareIt. Esselerate, second to Digital River, is very fast and innovative. Both of these companies provide substantial marketing services and perform research. Plimus was the least expensive provider charging as low as 4.5% commission, but the services are few; they are probably best for digital products that won’t have a lot of marketing. Other providers were Protexis and Apptastic.net, but they didn’t put up sufficient marketing dollars in the conference to garner my attention.

If you want a Microsoft-like presence, Avanquest takes world-class software packages and provides a whole range of services beyond e-commerce—localization, sales representation, market analysis, customer support, quality assurance, package design, markey analysis, production, fulfillment and so on. They push software through many different channels such as retail and OEM.

One thing that I gathered is that the choice of providers can have a major impact on sales, because the provider may be performing additional marketing for your product through affiliates and partnerships with download sites, magazines, etc. For example, DR has an exclusive agreement with eBay to sell digital downloads and Esselerate partners with CNET. So, it is important to look beyond the fees.

LaughingBird Software, which only makes simple, inexpensive logo creation software, provided this testimonial some time ago for Digital River: (Their second product, Cover Creator, just came out last week well after the testimonial.)

“By taking advantage of Digital River’s network, I was able to forge valuable partnerships and create promotions with companies whose products were complementary to mine - something I couldn’t easily do as a sole proprietor. I went from making $6,000 a month on my own to making over $25,000 a month by leveraging Digital River’s e-commerce expertise and network. Outsourcing to Digital River was just what I needed to alleviate my workload so I could focus on product development.”

Thus, I may try to sell the same software package through both DR/Regnow and Esselerate to take advantage of the unique marketing opportunities of each and also to compare

Another good reason for a provider instead of rolling your own is that a provider, especially one with international experience, is essential for selling to different countries. Major software companies like Corel and QuarkExpress have highly ineffective order pages for the European market because of issues like VAT taxes and local purchasing patterns; these pages simply mirror those of the US. People in one European country don’t buy over the Internet, but rely on phone service for orders; a majority in another country don’t have credit cards and instead use an entirely local system for payment.

 

The Lure of Free Software

I just recently purchased a myriad of software for operating my MicroISV and accelerating my time to market. I spent a considerable amount of money on these intangible, invisible goods. Where I would normally hesitate to spend a few hundred dollars on real physical goods for my business, I find a way to rationalize the cost of an information good. Even stranger, often I regret the software purchase, since I wasn’t able to put it to effective use—this is usually not the case with physical goods. Physical goods are also easier to resell, not the least because physical goods are sold not licensed.

Eventually, the impact of software purchases on the bank account becomes apparent. While at Microsoft, I was spoiled. I was able to get Microsoft software up to a tenth of the retail cost.  As an ex-employee and member of the Microsoft Alumni Network (MSA), I still do get heavily discounted Microsoft software at employee prices but with a little over half the budget of regular employees.

I spent a little over $300 for my last MSDN subscription, the price Microsoft employees and contractors can get it at. Since I am neither now, I have the option of using the ISV Empower program to obtain an MSDN subscription or getting a special discount for ex-employees recently negotiated by MSA.

The perks distorted my buying patterns, causing me to rely on the less powerful but easier Microsoft packages (eg, tax and financial software) in place of the industry standard packages. I, for example, held on Microsoft Digital Image Suite for some time before I actually purchased Adobe Photoshop.

The perks clouded my thinking and probably those of many other Microsoft employees. It’s easy to disregard open source software as “inferior” software and not a threat, if we don’t feel the financial impact of purchasing software. (I put “inferior” in quotes to indicate the perception from within Microsoft, not necessarily the reality.)

If it weren’t for the perks I still enjoy, I can imagine myself opting for freer alternatives (StarOffice, GIMP) especially if I had a number of employees. Human nature dictates that I care less about employees’ experiences with less usable software than I do my own, while the almighty dollar demands my constant worship. I would still stick with Microsoft Windows operating system, though, as I have little choice, if I want to sell a commercially viable application.

This, apparently, is the motivation for the ISV Empower program, enabling new developers to get started developing commercial software for the Windows platform without forgoing a sizable fraction of one’s salary before seeing any revenues.

 

Personal Offshoring

Slashdot had an post a few years ago about a developer who was able to get paid $67K for an assignment, in which he outsourced to India for $12K. This post caused a stir in India, who felt underpaid.

I just came back from the Shareware Industry Conference, where I met someone in the shareware business, who made millions ($3,000 to 6,000 a day) from his first product in the mid-90s selling for $10 – 15 dollars a simple program that changed two registry keys to make Internet browsers perform faster. He had only learned to use a computer a few years earlier. (Note: His sales rate grew from an original $300/day because of RealNetworks promotionin its website in exchange for a cut.)

This entrepreneur is not a developer, so he had to pay a student to develop the application. In later years, he hired developers from Russia and Israel to produce additional applications, since they were much cheaper than hiring one from the states. Having written earlier about outsourcing, I inquired about how he was able to find such developers, but he didn’t give any details.

Last week, Guardian Unlimited had an article on Swift and Offshore which describes how individuals can make cost and time savings by offshoring their own work. Examples include using RentACoder.com to hire a Belorussian developer to produce two-weeks worth of code for 200 pounds, or using templatekingdom.com to hire a Bangladesh developer to produce a website design for 30 pounds.

Shareware Industry Conference

I am heading off to the Shareware Industry Conference this week in Denver. I hope that this will be an educational experience and point me to the most efficient way to make money in the software business. I plan on spending most of my time on business-related panel and less on those related on software development and web design.

Some More Entrepreneurial Fodder

Motivational presentations and essays help keep me going in my quest… I share some recent finds.

How To Make A Million Dollars. Via MicroISV, Marshall Brian, founder of How Stuff Works, gave a presentation on how to become a millionaire to Duke students, if they can’t win the lottery, inherit money, marry wealth, or sue for injuries.

How To Be Successful, Happy, Fulfilled and Drive A Totally Hot Car. Via Jeff Atwood and Steve Makofsky, the founder of Delicious Library tells how he succeeded writing Mac software, and, in the process, indicates how you can too.

You Got To Find What You Love. Steve Jobs in a Stanford commencement address last month stated to graduates, "Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of other's opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."

It’s A Great Time To Be An Entrepreneur. Bnoopy says “Excite took $3 million dollars to get from idea to launch. JotSpot took $100K.” Although the analogy may be a little flawed, but the message is correct.

Small Is The New Big & More on Small. Seth Godin points out why you might small companies can out perform larger established companies.

Messed Up Private Lives

Via MicroISV, Harry Netwon gives some advice based on his years as an entreprenuer when compared to his former Harvard Business School classmates. Messed up private lives: When I graduated from Harvard Business School in 1969, half the class went into investment banking. The other half went into management consulting. I didn’t. I became an entrepreneur, and for that, was universally derided. By our 20th reunion, I was gaining respect. By our 25th I was being consulted. My classmates’ “careers” had hit a wall. They’d been passed over for boss. the younger kids had fresher ideas and worked harder. My classmates had lived beyond their means. They were onto their second and third marriages. They had no savings. They were overweight and out of condition. And now there were no jobs for 50-year plus gray-hairs. What could I recommend? Sadly, little. Could I help their kids? Now, I increasingly do that. I give my standard talk: + Learn a new skill every six months. (Samples: negotiation; computers, investing, Excel.) + Get involved with business startups. Ultimately being an entrepreneur is what will give you peace of mind in your old age. + Save at least 10% of your income every month. Invest it in a wide variety of ventures. + Learn how to pick ventures. + Stay healthy. Lots of exercise and no over-eating. + Give back.

This will come in handy next time my family and friends wonder what I am really doing and whether I am making a mistake by leaving Microsoft and developing my own software. While I may be behind, its motivational to think that I may eventually become the turtle that beats the hare to win the race. At least, I am not burned out, and my health and sanity is better. I am also beginning to feel that I can die now or in the short future and not regret that I haven’t enjoyed or taken full advantage of my life as for the past five years I have been fully in control of my own path, pursing my own dream, and not under the dictates of another person.

I noticed that a few of my MBA friends, who went on to highly esteemed companies, the ones that are career “destinations” with highly lucrative compensation packages, decided to leave those same companies volunteerily. One woman left “Goldman Sach,” a top investment banking company, and another man left “McKinsey Consulting,” a top consulting firm. This also make remind me of another classmate, a vice-president at Merill Lynch (the financial industry suffers from title inflation) before attending business school, decided to take a drastic salary and lifestyle cut to work in the entertainment industry. Closer to home, my brother graduated from Columbia Business School and was offered two different high-paying jobs(I’m talking $300K ballpark) at Merrill Lynch after finishing a summer internship there and instead opted for a career at the Federal Reserve, which is not as lucrative. He chose it for reasons having to do with quality of life such as ethics, career satisfaction and intellectual atmosphere. I wouldn’t be surprised if he made less than what he pulled before attending business school, although I doubt that. Two of my relatives are doctors who intensely dislike their professions and are only in it for the income potential. Both openly question whether they made the right career choice.

Ultimately, I think people are more interested in maximizing the quality of life than in acquiring total wealth, but often they don’t realize that until after they have made their career choices and faced the consequences of their decision such as despression, low motivation and poor health. Often, acquiring wealth and maximizing quality of life go hand in hand for obvious reasons, but not always.

Average life expectancy is around 75 years based on a longitudinal analysis of death rates of various age groups today. Actual life expectancy is likely underestimated due to lower mortality in the future. A person will lose over five years in quality life due to poor health and suffering, which leaves 40 years of employment and 10 years of retirement to enjoy. A person in a high-paying profession will spend most of his waking hours at work prior to retirement (60 hours of work, 56 hours of sleep, and 52 hours of biological functions/errands/leisure). Based on these numbers, a person who engages in unenjoyable and stressful, but high paying, work, probably isn’t maximizing his overall level of happiness across his lifetime, especially if life is cut short in the middle.

Focus On What You Want To Have Happen

Bob Parsons of GoDaddy.com recounts his entreprenuerial journey in his blog post “Success Key: Focus On What You What To Have Happen (Waiving Goodbye to $30,000, Making $60,000 Instead.”

Windows Marketshare

I decided that I won’t bother developing for the aging Windows 9X operating systems. My software may work on those systems since the .NET framework insulates much of the differences among the operating systems, but I don’t plan any heavy testing on those systems. I may need to do a cursory walkthrough to catch any showstopping bugs just in case anyone runs on those earlier systems but my software won’t be advertised to work with them.

Even though I killed off support for Windows ME, my software will still work with Windows 2000, which is six months older. The differences between Windows 2000 (version “5.0”) and Windows XP (version “5.1”) are mostly cosmetic, and Windows 2000, surprisingly, still has 25% more users than XP. Window ME wasn’t very popular and had only one year of air before it was finally choked off by XP.

I just looked at an AssetMatrix statistics on the market share for various Windows operating system. Windows 2000 is the most popular operating system with a 48% market share, followed by Windows XP with 38%. Windows 2000 computers—no surprise—dominate in businesses, especially large businesses, although Windows XP does have a majority in small businesses with less than 250 employees. These two operating systems have a combined 86% market share, which is only getting larger.

Windows 95 and 98 are both under 5% of the user base, which is still millions of people, but these people are technology “laggards,” who are unlikely to buy additional software anyway. Their systems probably wouldn’t have enough memory, at least 64 megabytes, to run my software anyway. That report leaves remaining 9% broken down between Windows NT, Windows ME, and Windows 2003 Server.

(These facts make me wonder: By initially planning to make all new technologies Longhorn-only, Microsoft may have created the perception in businesses that Windows XP is a deadend incremental OS for consumers and slowed its adoption even as Longhorn continuously slipped further away. Assuming many companies don't buy subscription packages from Microsoft, there's probably money to be made just from converting existing Windows 2000 computers to XP. Recent moves to backport the Longhorn feature set to XP may be an attempt to hasten this conversion especially in light of security holes. Basing Longhorn more on the XP code also reduces dependencies and development uncertaintities that could impact the ship date while providing a stable base for building newer APIs like Avalon and so on.)

Selling on the Web

Normally, I don’t like context-switching between programming tasks because of the long setup after each switch, but I am enjoying alternating between my regular programming activities and web activities. The low-intensity of the latter balances out the high-intensity of the former and adds some variety to my routine.

Content Management Systems

On the web front, I had to make some decisions on how I plan to design my website and how I plan to sell software and other items.

I previously mentioned that I was looking into some content management systems (CMS), DotNetNuke and Community Server, since those were already set up by GoDaddy.com, one of my three hosting providers. Community Server (formerly, .text) is really a community blog and forum software; it’s fast and really good at what it does.

DotNetNuke is used by a number of sites and is quite an sophisticated piece of software for building your own professional-looking portals without code. One of my concerns is that I do want to do some coding, such as when I have to later integrate the look of my site with other e-commerce services. The other two concerns are performance and reliability. Pages don’t feel springy enough. After playing around with the blog module, my test site behaved erratically as if it were in some inconsistent state; for instance, while attempting a simple “hello world” site without even writing any code, some of my pages failed to completely render and instead reported “null instance” errors. I am also having trouble finding attractive skins; and I don’t know how to create my own. Despite these issues, I am willing to experiment with it for a few more weeks based on its potential to develop a rich site quickly. 

I also obtained a free ASP.NET 2.0 beta account at MaximumAsp. The first crop of hosting providers offering free or low-cost ASP.NET 2.0 beta sites are listed in MSDN. There are more promised next month. (In the future, I will hesitate to tie my fortune to a future Microsoft software release off in the distance as I have with Whidbey.)

Selling Software

I was also anxious to ramp up on electronic commerce. My only forays so far have been through Amazon affiliate links, which generates about $5 for each blog entry I add links to. Interestingly, blog posts that contain the Amazon graphic generate more revenue than those using simple text-based links.

I sometimes wondered if developing and selling my own set of software is mathematically less profitable than some e-tailer who sells other companies third-party on the web and doesn’t need to incur development costs.

For selling my software, my options include using a registration service or relying a merchant account (with possibly shopping cart). I believe that there are four major services, Digital River (a network of site), Esellerate, ShareIt and SWReg.

I opted to go for Esellerate, which Nick Bradbury uses, because the terms seem very reasonable (better terms than other sites I examined) and the company provides a comprehensive set of features.

• Esselerate charges 10% to 15%  royalties, no fees
• APIs to support various level of integration inside the software as well as the website
• Complete customization
• Customer and order data can be exported and is not owned by the service
• Miscellaneous: registration keys and activation, CD-shipments
• Advanced marketing support programs—portals and affiliates

I went through a free one-month trial at Esselerate, which I don’t understand the need for except as a marketing tactic, since there are no fees to join. I played around my trial account with the multitude of options; every concern of mine was completely anticipated.

I also ordered a standard Shopping Cart system to becoming familiar with the process of selling over the web from end-to-end and to determine what value registration services provide. The shopping cart had support for listing products in eBay and Froogle, but you could just as easily do it yourself. 

With my shopping cart package, I set up catalog and product information, then purchased my own software application, and then tracked my order both from a vendor and a customer perspective. The experience was transformative: It allowed me to visualize the entire process of selling to customer completely. I got out of this whole experience the ease of actually selling a product on the Internet.

Anyhow, I concluded that the registration service was still well worth the additional money over the merchant account/shopping cart from time saved and features offered.

Selling Merchandise

I also planned to sell specialized merchandise through my site. The web makes it easier to sell items over the internet from dropshipping programs, which allow people to sell third-party products without maintaining any inventory, because the manufacturer ships the product directly to customers.

I found just the site (mentioned in the Wall Street Journal), cafepress.com, that allows one to build a website that sells specially designed merchandise such as t-shirts, cups, bags, hats, CDs—you name it. No merchant account is needed and your only responsibility is designing the products and marketing the website. All the grunt work is taken care of.

 

Getting Started on Web Design

In a prior post, I stated that I was starting to look at web design. While I have designed websites in the past, I found that designing an attractive and professional website is difficult and time-consuming. 

Let me test some of my assumptions with you guys. My goals with any new websites are multifold:

• Professional appearance. While I want the site to be attractive, I am not trying to win a beauty contest. Thus, I prefer to emphasize content over form, subtlely over garishness. I am also banning frames.
• ASP.NET-2.0–based. My sites will generate dynamic content, but I also want to minimize the server code I need to write and test, something ASP.NET 2.0 promises. I also like how ASP.NET abstracts away the differences of multiple browsers. I also like the simplicity of creating my own server and user controls or even use third-party controls.
• Maintainability. I am relying on CSS to separate content from presentation. This would enable to change the look of my site with touching each of the webpages. This also makes it easier for me to generated pages on the fly with XSTL transforms.
• Performance & Simplicity. Javascript code will mostly be limited to those generated automatically by ASP.NET. Java and Flash won’t be used except for product demos.

As for tools, as much as I applaud some of the efforts of Microsoft FrontPage 2003, I can’t help wonder if the developers and product designers have ever designed a commercial website. Thus my development is confined to Visual Studio and Dreamweaver.

Divyesh Jariwala, a reader and web developer, who has offered to design one of my sites, pointed me to a few introductory resources in which he mentioned the following:

• www.DesignOutpost.com. This is a site where one can set up a contest to have talented graphics designers compete to create a logo, template, and many other product. The cost is typically over $150–200 but you will able to view several alternatives logos, suggest changes, and select a great logo.
  
• www.BoxedArt.com. This is a site with a number of templates and graphics resources. Instead of paying 50–100$ for each template, one gets access to all the resources in the site for $50 a year.
  
• www.CSSZenGarden.com. This site is the place to go for design inspiration, if you plan to go the XHTML + CSS route. In this site, you can change to different style sheet (or no style sheet) and watch the page undergo dramatic transformations that you would normally expected to be possible.

 

Development

My brother recently ask me why my software development is taking very long.

I have taken a number of steps early to help get my product out faster. I rely heavily on declarative programming and code generation techniques. I opted to develop under Whidbey tools to take advantage of the more productive tools and language features. I have licensed the full set of user interface library components from SyncFusion with source code, three different linguistics resources representing decades of work, and a multiple collections of graphical content from Icon Experience and other vendors. I may eventually spend more more on web design, finishing tools (for demos, documentation construction and installation), and software marketing.

I also told him that some of the technologies that I am working on are pretty hard.

First, I am essentially writing the equivalent of a wordprocessor with proportional text handling, dynamic pagination, and advanced formatting with heavy on-screen controls. There’s a class of applications besides wordprocessors that need document services, but it’s time-consuming to develop such services. (Code editors, which traditionally have been line-based, could benefit, as I mentioned in past, from rich text and graphical layout.) I think opening up the document application space is the direction that Avalon is going in the document support, and, while it’s including a lot of nice features such as advanced typography, I doubt it will be extensible enough for my needs. (I wonder too if Word 2006’s text support might appear glaringly weak in the face of Avalon-based rich text controls.)

Second, I am building a robust natural language processor—one that can accurately and efficiently process both full and partial sentences, even those containing errors such as missing, extra or substituted words. Some other requirements such as that automatic correction and isolation of errors, word sense disambiguation, and the ability to encode ambiguity. Since errors abound in natural language and computer parsing is imperfect, I seek a graceful way to handle both errors and incorrect parses that will allow the rest of the sentence to be examined and manipulated. Basically, I view words and symbols as a graph of nodes and then turn chaos into structure by building links between each node to form a fully connected acyclic graph.

I argued to deaf ears that Excel could be made more content-aware and intelligent; instead, we have heuristic-based Intellisense. It’s probably why I ended up working in PivotTables, a feature for data mining and business intelligence. Speaking of intelligence, Excel 97 did introduce a cool feature called “English Language Formulas,” that is now off by default, but can be turned on through the Options dialog/Calculation tab/Accept Labels in Formulas checkbox.

 

Marketing Software

Sharon Hously writes about how she and her company, NotePage, launched a new software application, FeedForAll. I’ll summarize her successful marketing techniques with some of my own commentary.

Traditional product marketing

Traditional marketing was employed such as press releases and submission versions aimed at the journalists, coupons and time-limited evaluation versions for potential customers, and white papers to specific industry customers.

Starting at the beginning of the technology growth curve, NotePage marketed heavily to early adopters. For example, NotePage invited beta testers to email the company if they wanted a discount on the released version. They also reached out to user groups, with online discount coupons, product literature, and a free Power Point presentation.

Newsletter and Articles

A key part of the marketing strategy was time to market. RSS was an emerging technology, and, by arriving early and owning the education of a new and unfamiliar technology to the public, NotePage could emerge as a leader in the industry.  Newsletters were published regularly and frequently, and free articles were provided to opt-in publications and websites. These newsletters and articles, in turn, increased traffic and page rank and link popularity of NotePage. NotePage also added to the mix several free and popular RSS tools, further cementing themselves as the experts in RSS technology.

Around 1994, Charles Ferguson (founder of Vermeer Technologies, which produced FrontPage, the first webpage editor) wrote a prescient article about the growth of the Web in Upside Magazine, a popular hi-tech magazine of its day. At the time, websites was not current technology, and Ferguson often referred to web sites, especially in his business plan, as “online services.” The huge attention that befell his company because of his article led to its acquisition by Microsoft.

Portals

As part of the educational role NotePage filled, multiple portals were created that educated users in the different aspects of RSS and referred back to FeedForAll. These portals drew a lot of targeted RSS traffic, which was redirected back to the company and help improved its search engine popularity further.

This is the same strategy employed by Palo Alto Software which hosts multiple sites for their software, Business Plan Pro. A bplans.org site for business plans refers back to Palo Alto Software’s main site. There is also other sites focus on marketing plans and web strategy planning.

One other note: In employing the use of portals, content sites like ArticleCity.com include free content and articles that one can use to quickly build a full site or portal.

Partnerships

With the leadership position established, NotePage turned to partners for mutually beneficial marketing opportunities like link reciprocity and affiliate programs. NotePage’s partner program offered promotions in RSS portals in return for partners plugging FeedForAll in their sites, newsletters, blogs and forums.

Strategic Reassessment

Slate magazine has a article “My Days are Numbered,” which describes a Japanese number puzzle, sudoku, sweeping Britian (and poised to conquer the US). I download a trial computer program from sudoku.com. I spent a few hours playing it, although it’s about half as addictive as Tetris; the games take longer to play.

The owner expects to make a million dollars from his $15 computer game and book sales in the next year. What bothers me is that his software doesn’t look particularly difficult to write. I could probably whip an equivalent in a few days and bite off some of revenue stream… Tempting…

I trying to solve a hard software problem over a few years and ship a major application—something that looks and feels and has the richness of a Microsoft desktop application.

I am in the midst of a strategic reassessment, where I am considering spinning off various components of my major application and releasing them as they ready, and, then, fusing them back together at some later point into one whole, when I am able to deliver the final product. My application is really like a fusion of several different small applications.   

I don’t really have a business if I am only developing software. I am just longing to sell something. The upside of selling early is that I make an early income and, also, get valuable customer feedback. The downside is increasing complexity of development and longer time to market for the final product.

I have been building a desktop application framework, based on the MVC paradigm with an efficient but universal document data structures and intended to provide a look and feel and a level of richness found in Microsoft Office applications. The application framework would embody 90% of shared code. I use a zero-cost model for features, where consumers of the frameworks do not have to worry about interactions between features and cross-cutting infrastructure code such as persistence, undo, cut/paste, and so on. This way I could write a second and third application quickly, even while the first application took forever. I could also simultaneously improve all applications by enhancing the framework itself.

I have also been building a companion symbolic AI framework intended to produce startingly and unprecedented application intelligence and provide a unique competitive advantage. ( I already have had a couple people, who have approached me about potentially licensing my AI technology. )

Eric Sink advised in one “Business of Software” series article that entrepreneurs should “fail fast”… My philosophy was to “not fail”—meaning that cumulative work I put into this enterprise should be fully reusable and retargetable into a second idea, if my original idea fails.  In other words, my framework is more general purpose than the original idea, but, in order for this strategy to work, the framework itself must converge to a highly functional and extensible application.

This framework is a real test of my beliefs on software development and addresses the inefficiencies and lack of reuse that I noted about Microsoft development. Although I admit, that Microsoft is held to a higher bar of standards that all other software companies with burdens of compatibility, internationalization, and customer requirements.

Over time any framework becomes less relevant. I have some concern about how much my framework will be obsoleted by Avalon. On the other hand, I should be able to easily port my framework on top of Avalon, if need be. Avalon is more of a presentation framework than an application framework, and I am not sure it will deliver everything I need in my document layout in terms of performance, memory usage, extensibility and functionality. If I can draw to a low-level device context in the same way that I do in GDI/GDI+, then it should be fine. I am still skeptical about building trees of elements and suffering through retained mode for an advanced document-based application.

I sometimes wonder if new applications can one-up Microsoft Office by building on top of Avalon. Microsoft Word, for example, probably won’t have access to the Avalon’s advanced typography, animations, transforms, 3D effects, or hardware acceleration in its document rendering. Office, which has, for years, pioneered user interface advances in Windows, could quickly become stale-looking.

Continual Education

One of my early concerns with working for myself was my continual education, since life-long learning is one of my goals. I soon realized that, when I was working at Microsoft, I found that most of my own education was self-initiated and outside my job role.

For fun in 1997, I obtained an MCSE and and MCSD certification after running through 15 different exams in one month. As a Microsoft employee, I had free access to the training material in the library and was able to purchase each test for $20. I was surprised that I could study for one or two day before the exam and pass it without any hands-on experience. (I did this, while taking two exams per day.) I learned about IT software development and network administration, but the certifications really meant nothing to me in my professional life.

Yes, I admit that I did learn a lot from the software development process and a lot about Microsoft technologies. There was also interesting conversation to be had from smart employees at Microsoft. In the end, I felt that I could still maintain the same rate of learning outside Microsoft, since I would own my free time and choose to learn generally useful knowledge with that time, rather than something that may only be particularly useful to Microsoft.

Even though it’s five years since I left Microsoft, it’s almost as if I still work there. I am still usually in the Microsoft campus an average of twice a week. I am also a member of the Microsoft Alumni organization, so I get the internal Micronews as well as Microsoft software as a fraction of the retail price at the company store. (The discounted software is not as useful as first thought, since I already get it all from MSDN Subscriptions.) I also have access to the Microsoft lecture series with some technology notables such as Jared Diamond, Pulitzer Prize winner, Peter Diamandis, X-Prize founder, and Dean Kamen, Segway inventor (yes, I rode a Segway). I am also given a chance to usability test the latest iterations of Microsoft APIs and software every couple months, with one or two free parting software gifts of my choosing. All my friends in Seattle happen to work at Microsoft as well.

Living next to Microsoft, I have also attended a recent three-day Whidbey Compiler Labs (with architects like Jim Miller or the recent IronPython hire), have dinner with the BCL team, and show up blogger dinners at Crossroads hosted by Robert Scoble.

I purchase about over 100 computer and business books a year, certainly not as much as Nathan Myhrvold, who buys $60,000 worth of book in one transaction. I also have accumulated  about a thousand electronic books on the computer science and business in my computer.

I got into the reading blogs and RSS in early 2003 because I felt that it would allow me to listen in and engage in conversations with other small people in technology. Shortly after, all of Microsoft jumped in the blogging bandwagon.

I also joined several different developer user groups such as the NETDA user group in Seattle. I listen in on lectures in University of Washington and Washington Software Association, follow MSDN Webcasts, as well as lectures on the Multi-University/Research Laboratory (now Research Channel). I regularly take a virtual course on MIT Open Course Ware, which are all of MIT Courses made freely available on the web!!

I have watch Rory present MSDN Events in Seattle four times and attended on DevDay on Smart Clients. I have my own MSDN Universal Subscriptions, so I can play with the latests betas.

I am a member of Washington Software Association, Association of Shareware Professionals, and Educational Software Cooperative. I was spending a bit of money in dues for ACM and IEEE Computer Society, but don’t actually utilizes the services of these organizations very much, so I temporarily leaving until I have an income.

One thing that I realize is that my lack of everyday social contact does not bode well for my communication skills. I felt like I lost the ability to talk when I was in at a recent CLR dinner in Bellevue.

My question is what more should I be doing or what should I be doing differently to maximize my overall learning?

Shareware Industry Conference

I am headed for the Shareware Industry Conference in July. With thirty different panel discussions across a range of business topics in three days, I reason that this would help shift me from a development focus to a business focus. There’s also an award ceremony (for which I would one day want to be nominated for) and exhibitor’s event.

This is my first time at the conference. Half of the sessions are focused on some aspect of product development and the other half on software marketing. I plan on completely eschewing the product development sessions in favor of the business sessions. I prefer to focus on my weaknesses.

It will be a good opportunity to meet others like myself. Some stars like Nick Bradbury, who recently sold his company that sells FeedDemon and TopStyle, will be there, speaking in panels. I also recognize in the schedule Jeff Sandquist, Dan Fernandez, and some other employees of Microsoft, which is, by the way, a major sponsor of the event.  Those two are planning to set up a Visual Studio Shareware Starter Kit--hmm... wonder what's that all about?

I’ll spill more details on the conference after I attend.

Speaking of shareware, the Association of Shareware Professionals is thinking of possibly changing its name to Association of Software Professionals. It seems that shareware doesn’t have very good connotations.

A Nation of Entrepreneurs

Paul Graham states his belief that there could be ten times more startups than they currently are.

If I were worth hundreds of millions of dollars and had a private foundation, I would pour my money into initiatives and programs that would spurred entrepreneurship. If I were a governor or a president, I would push for programs and legislation that would do the same. I guess that it is the role of the Small Business Administration, but my goals would be much more ambitious.

I am not fond of transfers, entitlements, and redistribution of wealth but prefer, instead, structural solutions that are self-supporting over time. Carnegie poured money into building libraries and, in the process, educating the public. Gates focuses has a similar focus on improving education, bridging the technology gap, and advancing world health.

I feel that entrepreneurship is deeply woven in the fabric of America and that the country owes a lot of its growth, success and technological leadership to entrepreneurship. Embedded in our constitution are strong notions of private property as well as congressional protection for intellectual property (Article I, Section 8, Clause 8). I think Europe is more socialistic, because it emerged from a feudalistic society, whereas America was founded by a nation of pioneers in an unbounded frontier and also made greater use of slave labor.

I suspect that over a century ago that a much greater percentage of Americans were actually entrepreneurs than today, before the rise of urban life and large corporations. However, in recent times due to advances in information technology and the Web, it is easier than ever to start one’s own company. Bill Gates remarked that he is jealous of the relative ease of starting of a company today compared to the environment of the mid-70s when Microsoft was founded.

There is so much infrastructure available right now. I am currently a MicroISV operation, but it is easy for me to create a virtual corporation. I currently license royalty-free linguistic data from universities and software libraries from component vendors like SyncFusion. I can get some design work at sites like GlyFX or outsource some of my marketing efforts at Shareware Promotions. There are sites that help me with just about everything from documentation, software registration, customer support, and so on.

This infrastructure is not just limited to the digital world. In the past thirty years, we have all sorts of support centers for small businesses like Kinko’s, Fedex and Office Depot arrived on the scene. There are warehouses that will do drop-shipping for home-based mail order business, thereby eliminating the need for an proprietor to worry about inventory and fulfillment.

However, the problem today is the search cost to discover all the various services available. If only, there were a standardized way of find out what’s available. If a government or private corporation could provide an inexpensive, one-stop center for all small business needs from financing, product developments, and so on. This center would not do it all, but partner with the major suppliers and business services, and integrate their various services under one roof.

My hope is that, someday, entrepreneurship will be perceived to be “easy” and “low-risk.” There is a standard place to go to that addresses all of the needs of an entrepreneur. The mundane aspects of business—accounting, payroll, ordering, and fulfillment—can be easily outsourced, and one could focus on the enjoyable aspect of the job, which is the core product or service.

More people will become wealthy and lead happier lives. It wouldn’t be a zero-sum, where one’s wealth comes at the expense of another, but, rather, the direct result of an increase in total national wealth contributed through entrepreneurship.(I know that money doesn’t make people happy, but I do believe that, in addition to more material items, wealthier people tend to have better health, more available time, more and higher-quality friends, and more opportunities.)

There is also the issue of education: The educational system is primarily focused on training people to work as employees for companies, so young adults enter the real world without thinking that entrepreneurship is a realistic option. There is essentially no instruction on entrepreneurship in K-12 and very little in universities; most entrepreneurs come straight from an entrepreneurial family. (I don’t know what the state of education is today; most adults, like myself, were educated, decades ago, when entrepreneurship was definitely much harder.)

Planning a Product Years in Advance

When developing a new product that will eventually ship years after the planning stage, it’s important to remember that the competitive landscape will be very different when the product actually ships.

When Office 97 was originally entering the planning stages in 1994, Netscape did not exist and Microsoft employees did not have access to the Internet, consequently there were no Internet features. Lotus Notes, a platform that Lotus could leverage to sell SmartSuite, was perceived as the major threat to Office, so workgroup features—simultaneous editing, versions, document comparison and merging, revision tracking in both Word and Excel—became a major theme of Office 97 release.

The press was abuzz with the coming emergence of an Information Highway, but didn’t seem to equate that with the Internet. When Office 1995 (developed simultaneously alongside Office 97) shipped in 1995, the significance of the Internet became clearer, but the new suite offered no Internet features; an Internet Assistant add-in was cobbled together to enable Word to read and write HTML files.

Many in the industry began to see the Internet as the death knell for Microsoft, so much so that Microsoft had to arrange a major analyst meeting in December of 1995, where it announce several new initiatives like ActiveX, products and partnerships, such as the ill-fated Java partnership with Sun. A Bill Gates company memo “The Internet Tidal Wave” mandated that every Microsoft product now had to include Internet functionality. (There is a parallel today, where after a similar Bill Gates security memo, “Trustworthy Computing,” was released, where every product must now support security and undergoes a full security review prior to shipping.)

In Microsoft Office, several new Internet features were added after months after Code Complete. The Internet Assistant add-in was baked into Word. An Excel intern developed support HTML load/save late in the project. The Reading View, already in development, in Word morphed into Online Layout. (The original Reading View was apparently revived in the Word 2003, as the Reading Layout.) The Internet made the Notes juggernaut irrelevant. Old priorities like simultaneous editing in Word were dropped.

The lesson is that times changed. The software industry is dynamic; new competitors and products are always emerging. Products will face a different reality from when they were originally designed, so it is important to think ahead, when the product won’t be released for a long while.

My own product concept is very futuristic, probably ten years ahead of its time when I initially conceived of it around the beginning of 2001, although it really was the culmination of a decade of thinking since my studies at college. I didn’t actually start any design or development work until 2002, after spending a year constructing a business plan in my MBA program.

Every so often like this past week, I read an article, in the Wall Street Journal or New York Times, which sends chills up my spine as I discover that other players in the industry are moving ever closer to my space, but haven’t quite “gotten it” yet.

 

Purple Cows

I caught two interesting posts about software entrepreneurship.

One blog post reviews the book Purple Cow. The book argues that advertising as a way of growing a business is dead, and that a product has to be able stand out own like a “purple cow” and sell itself through word of mouth.

This has been my philosophy as well in my software development. Products that are remarkable and “pull” in customers are superior to “push” products, that require convincing and advertising to sustain sales. Remarkable products spur people and the press to talk about the products, resulting in free advertising; this creates a positive feedback loop, where greater awareness leads to greater discussion, which, in turn, results in ever more awareness until saturation occurs.

There’s a tendency for companies to build “me too” products, because there is an established market for the product and someone else has already thought about the interface design for that category. There probably is some truth to this as some marketers warn entrepreneurs to beware of markets with no competitors, because there may be no demand; the counterargument is that there is always a first product in any given category. The problem with “me too” products is increased competition. This reminds me of the one key takeaway from my MBA strategy class—AVOID competition. (For example, Walmart, for instance, overtook Target and Kmart to become the world’s largest retailer, because it has a monopolistic presence in rural towns across America that ensures itself a consistent and high level of profitability.) Anyway, a “me too” product can also succeed by differentiating itself significantly into a “purple cow” and redefining a category.

This leads me to the second post from microisv.com about the Delicious Monster in Wired Magazine. A startup of seven people developed a library cataloguing software and made $250,000 of sales in the first month of release, a run-rate of $3 million a year. Now, this software is written for the Mac platform; I suppose a Windows release possibly would have generated ten times the sales, simply based on current market share proportion.

Is Delicious Monster a “purple cow?” It certainly is a unique product. It does appears to have a lot of “pull,” not only because of its uniqueness but also because of its viral quality: The library software allows friends and family to view and check out titles from one’s personal library, which encourages more sales.

 

Taking on Category Leaders

It’s well-known that each software category usually has just two or three players, with a clear #1 gorilla whose products sales eclipsed all others combined. The gorilla emerges because everyone wants to buy the #1 product. Who would want t