new dog old trick

Coming soon: The Real Story of Informix Software and Phil White

Just saw this on Jeff Nolan's weblog.  I'm jealous that he got a pre-publication copy for review.

Link: Venture Chronicles by Jeff Nolan: Book Review: The Real Story of Informix Software and Phil White.

Steve Martin (the author of this upcoming book) is an old buddy who worked in sales at Informix for a number of years before moving on to even greater success as a sales VP and now as an author and speaker.  My company was an Informix OEM and Steve was our sales rep.  Phil White was a  charismatic leader who fell prey to the "dark side" in his quest to keep Informix growing.  I'm looking forward to reading Steve's take on the rise (and fall) of Phil White and Informix and will report in more detail once I'm able to get a copy of the book.   

Big Tech Deals: Oracle/Siebel and eBay/Skype

Two big tech acquisitions got announced today.  One I understand; the other not so much.

Oracle took out Siebel in a deal that has been rumoured several times over the past months.  This may well be the last big acquisition in the wave of consolidation that has been underway in the enterprise application software market for a couple of years now.  There will be more deals before this wave of consolidation ends, but they will likely be smaller, more vertically-focused extensions and add-ons to the product lines of the remaining major players.  All two or three of them.  This must be bittersweet for Tom Siebel.  Larry Ellison has just added to an already massive multi-dimensional integration project: integrating organizations and integrating product lines and technology from Peoplesoft, Retek, ProfitLogix, and I-Flex with Oracle.  Still, this transaction takes out the largest single player in the high-end enterprise CRM application market and continues Oracle's drive to best SAP as the leader in applications.  They are not there yet but they are clearly on a mission. 

The other transaction, and the one I must admit I don't grok the logic of, is eBay's acquisition of Skype.  People who have thought about it include Om Malik, James Enck, and Ross Mayfield.  Ross says the logic is simple - I still don't quite see it.  One thing does seem clear to me though.  I've read some things indicating that the Skype management team and investors had a choice of a totally up-front buyout or a deal structure with up-front cash plus a performance-based earn-out.  They took the earn-out, with $2.6B up-front and the potential to earn another $1.5B over the next 3 years.  If it's true that they had a choice and settled for the earn-out, then it's clear that at least those folks see the logic and potential in the combination of companies.  It will be interesting to track the performance of this combination over the next couple of years. 

The train is leaving the station

My career is moving on, beyond the software industry where I have worked for the past 25+ years, but every once in a while I find a tidbit out of that world that catches my interest.  Some are applicable to people in other industries - I think this is one.  Ed Sims on his BeyondVC blog has an interesting post on date-driven vs. content-driven strategies for software release management.  The same dilemma and solutions can apply in many other industries.

Link: BeyondVC: The train is leaving the station.

As Ed explains:

There are a couple of different ways to manage engineering releases. One engineering release is date driven, the other is content driven. In a date driven release, the team knows when the next release is out but does not know exactly what will be in it.  The release runs like a train schedule, whoever makes it to the station on time is part of the release.  The other release is content driven; the team knows what is in the next release, but does not know the exact ship date. The release runs more like an airplane shuttle, it takes off only when full.

Ed has a strong preference for date-driven releases - and I do too.  In my days in the software business, I spent 20 years or so going through the debate over whether to adopt a date-driven or a content-driven strategy roughly every six months or so.  I had the challenge a couple of times of being dropped into grossly behind schedule releases to try and rescue them and get them out the door - every time, it was a content-driven project that had to be rescued.  So give me a date-driven release philosophy every time.  In my last three companies we actually explicitly used the train analogy that Ed refers to.  We used to plan to have the "trains" (a new release) leave the station on a regular interval (six or nine or twelve months, depending on the product).  A feature that missed the cut-off for one train would simply catch a seat on the next train.  But read Ed's post because to make a date-driven model work you have to sync up your product management approach with how you run sales and marketing. 

However, there is another side to the story.

SAS - the power of pay as you go licensing

I just posted a piece triggered by a news article about SAS (scroll down for my first post). That article prompted another thought about SAS and its success and the example it provides to today's young software companies. That relates to the power of a pay-as-you-go, or subscription, licensing model for software.

Now of course subscription-based software licensing is today's revealed truth - just ask Marc Benioff at salesforce.com - but the reality is that a "pay as you go" model is as old as licensed software. Back in the day (god, I sound like some old fart reminiscing on the porch, watching the Apple IIs, TRS-80s, and IBM/360s that are sitting up on blocks in the front yard rust) there was lots more software licensed on a monthly or usage basis than was licensed using the perpetual-use model that came to dominate by the 1980s.

SAS - The Anti-Google?

E-Commerce News: Boardroom: SAS Workers Won When Greed Lost

Interesting short article on SAS. SAS is the biggest, most successful high tech company that you've never heard of. SAS is private - proudly and stubbornly so. Yet they are a billion dollars plus in revenue and the clear leader in the analytics market. Still run by the founder, Jim Goodnight, who also owns about 2/3 of the company. The other 1/3 is owned by the co-founder. SAS is one of the great counter-examples of the grow fast or die, venture-funded, Silicon Valley mentality for high tech start-ups. Not that the Silicon Valley model is wrong - but there are other ways to build a successful high tech company.

SAS may be the anti-Google...

Crooked execs on parade...

I couldn't let the news that three finance execs at Computer Associates have plead guilty go unremarked. The CA legal problems have received relatively less attention than those of Enron, Worldcom, Martha Stewart, Adelphia, et al. But it feels like the feds are working their way up the org chart towards the top.

The WSJ Journal seems to think so too in this article (subscription req'd - sorry) from Friday titled CA Ex-Executives Plead Guilty, Call Fraud at Firm Pervasive....

Three former high-level finance executives at Computer Associates International Inc. pleaded guilty to federal criminal charges, telling a judge that accounting fraud at the software maker was pervasive as the company struggled to meet Wall Street's earnings projections in the tech boom.

One of the three, former Chief Financial Officer Ira Zar, the highest-ranking executive so far netted in the two-year-old probe, pointed to two other, unnamed "high level" executives who conferred with him frequently at quarter's end to determine whether the reporting period should be kept open to help make numbers. The admission raises the prospect that the probe could widen beyond CA's finance department.

[snip]

Mr. Zar's plea, made before U.S. District Judge I. Leo Glasser of the Eastern District of New York in Brooklyn, is crucial to investigators because the 21-year CA veteran was seen as influential. In charging Mr. Zar, prosecutors took pains to note that he reported directly to Sanjay Kumar, CA's chief executive, though they didn't identify Mr. Kumar by name.

Mr. Kumar was one of three executives, including company founder Charles Wang, who received a $1 billion restricted stock award in 1998 that was contingent on a rising stock price. Mr. Wang has denied any wrongdoing.

[snip]

Like the others, Mr. Zar reached a plea deal with prosecutors, and lawyers say it is unlikely that they would reach such a deal with a high-ranking executive if they didn't believe he could implicate central figures. The U.S. attorney for the Eastern District indicated in a statement that prosecutors would continue to go after top figures. The pleas "demonstrate the corrupt culture in Computer Associates' management," Roslynn R. Mauskopf said.

I think that I've read elsewhere that at the time of the events that these three have plead guilty to that Kumar was not CEO yet and that CA founder Charles Wang was still in that role and Kumar was the COO.

I have to say that it sounds right that there are more shoes to drop in this case. It sounds right for several reasons. First, as mentioned above I can't see prosecutors agreeing to a deal like this with Zar if he was the big fish in the case. Second, I just find it very, very hard to believe that you would have three guys in the back room of the finance department, even the CFO, massaging revenue recognition like this without the fact being, at a minimum, widely known within the sales organization and among more senior exec management. And knowing what the end-of-quarter pressure is like at a public company, I don't personally believe that this could happen with just with the awareness of more senior exec management, I think that it's much more likely that it was with the active connivance or even at the behest of higher level execs.

I think this is even more likely at CA, where Charles Wang was notoriously hands-on. I remember stories from the early 90s, when CA was in the process of acquiring the company at which I was at the time running European operations for my division out of London, of Charles sitting in front of a PC in the boardroom at our headquarters personally going through the list of over 1200 employees deciding who to cut and who to keep when the transaction closed. Not the kind of guy to delegate more than he had to. Is that the kind of guy who would be hands-off and unaware of what was going on during those last few crunch days at the end of the quarter? Yeah, that's what I believe too. (Disclaimer - I have no personal knowledge of any of what went on inside CA in the time period in question - I'm just projecting from my own personal experience at public software companies.)

This isn't a case, like, say, Enron, where there actually were circumstances that would lead you to believe that the CFO had the opportunity and incentive to be working the numbers to his own personal, private advantage (given Fastow's personal interest in some of Enron's off balance sheet financing vehicles). In the CA case it sure looks like it was much more a case of senior execs having a very strong interest in exceeding their target numbers so as to drive stock prices up and thus the value of their personal stock incentive grants.

Mr. Kumar was one of three executives, including company founder Charles Wang, who received a $1 billion restricted stock award in 1998 that was contingent on a rising stock price. Mr. Wang has denied any wrongdoing.

Also, for all of you who are pushing for the expensing of stock options because you believe that stock options are the root of all executive compensation and ethics evil, please note in the above quote - this was a restricted stock grant, not stock options. The new rules say nothing about restricted stock grants. To the extent that the CA case is more fuel for the fire of executive/CEO misbehavior anger and excessive compensation envy, there's nothing that expensing stock options will do that will prevent exactly this sort of restricted stock grants in the future. In fact, it is already clear that lots of companies are shifting to restricted stock grants for execs.

Anyway, if there are more-senior execs at fault here, I hope the government hurries up and nails them. The sooner we get the guilty, whoever they are, from Enron, Healthsouth, Tyco, Worldcom, etc. prosecuted the better. Not only because what they have done is legally wrong, although that is enough. But also, to the extent that their actions have contributed to the pressure to expense stock options, they deserve to be moved in one or two more circles of executive hell - you know, front row seats at the furnace.

Listening to I Know It's Wrong from the album Dog House Music by Gary Primich

Interesting new software product

Someone pointed me to an interesting new software product - Onfolio. Ever had the experience of browsing the web while researching some topic and wanting a way to save links, images, snippets of text, and other little bits and pieces of things that you had found in one organized place? That's what Onfolio does. Last year I experimented with an online service called Yellowpen that did some of the same things and thought that it was interesting but I remember wishing that it was available as a product to run on my PC. Onfolio looks like an interesting complement to your search engine(s) of choice - check it out. Now, if they'd just release a version for the Mac.

Productivity Risks in Offshoring

Frank Scavo has a very good post in his Enterprise System Spectator regarding some of the risks in offshoring - specifically in offshoring IT/software work but many of the productivity risks he outlines apply to offshoring any type of work.

The bulk of this article (which links to a prior post by Frank on the same issue - I recommend that you read both posts) is from an email to Frank by a reader, Bob Boyd, who happens to be a VP at an outsourced services company that has operations in both the U.S. and Europe as well as its own offshoring lab in India. Boyd speaks from hard won experience in discussing some of the issues and pitfalls associated with offshoring. It provides a pretty even-handed evaluation of which types of IT/software projects might benefit from offshoring and which absolutely need to stay here.

This article reinforced one of my beliefs based on my own experience with offshore software projects - that there are natural limits to what can be effectively taken offshore. It's not an all or nothing proposition nor are the answers the same from one organization to the next.

Where DO good product managers come from?

My earlier post on Customer-obsessed companies, and the posts by Ed Sim and Fred Wilson referenced in my post, talk about the importance of a strong customer focus in building successful start-ups. We all mention the central role of the product manager in ensuring a focus on customer needs, not technology. (I think we're all talking explicity about software and related types of technology companies although I think the advice is true in a general sense.)

But one issue I've seen start-ups wrestle with, particularly software start-ups, is where to find a good product manager. The skills mix and knowledge mix for a good product manager is pretty broad. You need someone who absolutely understands the needs of the customers that you are targeting. You need someone who understands enough about the technology so that they can build credibility with the engineering team, so that they can translate user needs into something engineering can understand, and so that they can filter and evaluate the technology team's designs and schedule estimates. You need someone who is a good communicator and negotiator. You also need someone who can negotiate with the sales force and distinguish between the one-offs that every sales rep needs tomorrow to help close whatever big deal is in their pipeline from the true broad requirements that are going to improve the marketability of the product on a broader basis.

So where do you find candidates with this "walks-on-water" skill set? And where do you place them in the organization so that they can be successful?

EMC Acquires Software Maker for $635 Million

EMC Acquires Software Maker for $635 Million. (This link will rot in a week.)

An interesting acquisition in the software industry was announced today. VMware was one of the few emerging enterprise software companies to grow rapidly over the last two or three years. These guys had some very good technology and very limited competition. Microsoft bought Connectix about a year ago which gives them some competing technology but they haven't done much with it yet.

This continues EMC's string of software and services acquisitions but it is not clear yet how this fits within EMC. All of EMC's acquisition up until this point have been somehow related to storage. VMware has very little to do with the core EMC storage business or their recently acquired storage-related software and services businesses. Does this presage additional acquisitions of non-storage software and services businesses by EMC? Looks like it or it's going to be hard to justify the price premium paid for VMware. It also adds Microsoft to EMC's list of competitors. Also, my understanding is that IBM is a strong partner to VMware - what happens to that relationship given the competitive antipathy between IBM and EMC?

For VMware this was an alternative to an IPO sometime next year. VMware had been tipped as one of the short list of candidate technology IPOs for 2004, so this hurts the chances of rebuilding any momentum in the technology IPO market around high quality businesses. (I don't count Google as contributing to rebuilding the tech IPO market as I think Google is so large and such an exception for various reasons that it won't have long coat tails for the rest of the private technology companies that are looking to a potential IPO.) The VMware folks get a good valuation, eliminate the timing risk around an IPO, and don't have to deal with the huge distraction created by an IPO. Plus they don't have the headaches associated with running a public company in today's world.

Personally, I think we may see at least one more of the strong IPO candidates choose this route to liquidity over an IPO.