Barely two years ago we debated whether little-known Zoho was worth paying attention to. The majority view was that their Office applications were weak contenders that would never challenge the Microsoft suite’s position. I think I was in the minority stating that I really did not need more than 10-20% of Word or Excel’s functionality, but online-anywhere access and collaboration made the switch worthwhile.

Today Robert Scoble reports he is seeing online applications wherever he turns:

Today I’d say the skill set is shifting once again. This time to something like Zoho Writer or Google’s Docs. Because if you visit Fast Company’s offices in New York, for instance, they want to work with you on your copy in live time. Fast Fast Fast is the word of the day. It’s in our title, after all. Now some people still use Word, but last time I was there one of the editors told me he was moving everything over to Google’s Docs because it let him work with his authors much more effectively.

These are no longer yesterday’s wannabe applications. Zoho Sheet recently added Macro and Pivot Table support , going way beyond the average user’s needs (and certainly exceeding my spreadsheet skills, which are stuck somewhere at the Lotus 1-2-3 level). Zoho Writer today added an equation editor and LaTex support. Heck, I don’t even know latex from silicone, what is it doing in my editor?
As I found out it’s important for Zoho’s academic and student users, once again, going way beyond an average user’s needs. (the other update today is mass import from Google Docs: nice, special delivery for Dennis, but I still would like to see a list of all my online docs, be it Zoho or Google, open them, edit them, and save to whichever format (and storage) I want to.)

Online applications have arrived, they’ve become feature-rich, powerful, and are the way software will be consumed in the future. They also change the business landscape.

Software margins choked by the cloud? - asks Matt Assay at CNet, pointing out a shift in Microsoft’s tone about cloud computing, recognizing that in the future they will host apps for a majority of their customers, and that their margins will seriously decline:

There’s not a chance in Hades that Microsoft will be able to charge more for its cloud-based offerings–not when its competitors are using the cloud to pummel its desktop and server-based offerings. This is something that Microsoft (and everyone else) is simply going to have to get used to. The go-go days of outrageous software margins are over. Done.

Matt cites Nick Carr who in turn recently discussed

…the different economics of providing software as a Web service and the aggressive pricing strategies of cloud pioneers like Google, Zoho, and Amazon.

This is fellow Enterprise Irregular Larry Dignan’s key take-away from the Bill & Steve show, too:

Microsoft CEO Steve Ballmer acknowledged the fact that a lot of computing is happening in the browser and not in applications. He also said that the future of software will have “a much more balanced computational model” and that Microsoft will have to compromise.

Of course it isn’t just Office. The obvious business application is CRM, where Salesforce.com pioneered the concept and delivered the first On-demand product. But now a funny thing is happening: the pioneer is increasingly being replaced by more inexpensive competitors, including my Client, Zoho. Yes, SaaS disrupts the traditional software market, but there’s another equally important trend happening: the commoditization of software.

Commoditization is beneficial to customers, but a death-spiral to (most) vendors. Except for the few that drive commoditization. Zoho makes no secret of doing exactly that.

Tags: business model, cloud computing, commoditization, crm, excel, microsoft, On-Demand, SaaS, salesforce.com, Software, Web Applications, word, zoho, zoho crm, zoho sheet, zoho writer

I was very lucky in the early 90’s being in an industry that was not only shielded from recession, in fact it was thriving.  Corporate America was taught to fight their way out of the slump by Business Process Reengineering, and what better way to execute it than by implementing new integrated business information systems.  The slump for the rest of the country was a major boom for SAP, and the entire ERP industry born in their footsteps.

Today we’re amidst another technology change, one that may just ensure relatively smooth sailing through a recession for the Software sector - at least those who are on the right side of the change.  The belts will be tightened, says the New York Times, but technology will still grow, just at a slower rate:

Overall growth in technology spending may fall from 7 percent last year to 4 percent or less this year, according to estimates by IDC, a research firm.

But that won’t be nice 4% growth for the entire industry; I strongly believe pioneers of Software as a Service (SaaS) will be amongst coming out of a slow-down as winners, leaving others in the dust. 

TechCrunch is optimistic for the entire Web 2.0 business:

All of those Enterprise 2.0 startups out there, or even Amazon trying to sell Web-based computing infrastructure, are actually at an advantage. Customers are more likely to try cheap cloud computing when they can no longer afford the alternatives.

ZDNet’s Dan Farber disagrees:

Most of the Web/Enterprise 2.0 startups can’t get a hearing with CIOs and tech buyers at corporations. While consumer applications are influencing corporate applications and coming in through the back door, Enterprise 2.0 apps (blogs, wikis, predictions markets, social networking, mashups, collaborative cloud-based apps and technologies such as RSS and tags) are just beginning to reach the radar of larger corporations, and they are not considered mission critical, which is where the money is funneled first

I think they are both right - and wrong.  I don’t agree that the entire Web 2.0 sector is immune to a down-turn: the advertising market will shrink,  the “lets-grow-insanely-who-needs-a-business-model” types will suffer. As Software VC Will Price says:

It may well be that Slide raising $55m from mutual fund companies at $500m+ pre-money will be the “what were we thinking” moment of the current cycle.

I also agree with Will, that a movie we’ve all seen will be playing again:

The last downturn saw the valley swing violently away from consumers to the enterprise - bastions of value, hard ROI, tangible value propositions, enterprise pain points and budgets, etc became the mainstay of investment decisions and the consumer, I kid you not, was literally a bad word…
The valley became all enterprise, all the time.

It will not be all, and not only Enterprise, but Business Software, whether for the Enterprise or small businesses will come back with a classic, “old-fashioned” business model of actually charging for value (product or service) delivered.  Of course there is still the dilemma of selling business software - much better if you don’t have to, it is getting bought instead.   Yes, Dan is right, “Web/Enterprise 2.0 startups can’t get a hearing with CIOs and tech buyers at corporations” and their  apps are not considered mission critical, but the whole point is that a lot of these Enterprise 2.0 tools are not sold at the CIO level.

The after-bubble nuclear period of “no IT spending at all” found me at a startup. We did not exactly hit it big, but did not go under, either, and that’s because our model allowed us to get in the door way below the threshold that would have required higher authorization. Not classic SaaS, rather SES (Software Enabled Service), we were essentially data providers and often got into an “enterprise” account at $3k for the first month … ramping up to $60-$100K annually.   Anyone familiar with Enterprise Sales knows the term Economic Buyer:  typically getting involved later at the sales cycle, approving or nuking the deal.  Well, we saw no Economic Buyer: being under the threshold, we sold to the User directly.

As Zoho CEO Sridhar Vembu adds to the discussion:

It is useful to remember that both Salesforce & WebEx thrived during the last recession - in fact they were relatively unknown during the last boom. Cost was a major part of the reason they thrived in the bust.

Indeed. Software as a Service and the typically associated pay-as-you-go model allows businesses - enterprise and SMB - to use software without the typical upfront investment the traditional model would require, therefore SaaS providers have a good chance of withering a Recession.  Another noteworthy idea in Sridhar’s response is that they really don’t have to have a “massive win”, a total move from the desktop to the cloud: a “marginal” business  is good enough.

Of course this “marginal business” is not as attractive to many startup entrepreneurs as fast forwarding to the IPO, preferably over $1.5B. In fact it’s really boring… building a business gradually; no IPO thrill; serving millions of customers, helping them actually conduct business.  Oh, and making millions of dollars of real revenue in the process - not bad, if you ask me.  And it’s quite bubble-proof.

Related posts: Vinnie Mirchandani -  Why it will be very different this time, Fred Wilson- This Time Will Be Different.

Update (1/28): Forrester Research predicts gains for Enterprise Web 2.0 apps in 2008.   Also read: Between the Lines, ReadWriteWeb.

Tags: bubble, business model, cloud computing, enterprise sales, Enterprise Software, entrepreneurship, On-Demand, recession, SaaS, salesforce.com, Software, Startups, webex, zoho

Ever get the feeling that some tech firms have run out of anything new to say?  So does fellow Enterprise Irregular Brian Sommer, so he offers a template for such companies:

XYZ Announces Nothing New

Nothing New to Become the New Industry Standard  

January 9, 2008 – Chicago - Today, XYZ Corporation is announcing ‘Nothing New’ a revolutionary, industry-leading approach to stall-ware, procrastination and marketing waste. “We believe this is the most important announcement we’ve made this year – maybe this decade”, says Jim Bigwind, CMO of XYZ. 

…

“This announcement is nothing short of extraordinary. It is, in fact, nothing” says XYZ customer Getz Fleeced Oftin at SoftTouch Ltd.

…

Blithering Media represents way too many tech firms and amazingly enough has no one on staff that understands the space. Blithering Media personnel are expert though at crafting press releases on just about anything (or nothing as in this case). For more info on Blithering Media contact us point.less@ blitheringmedia.com

I’m not giving away the full announcement - click over to Software Safari and enjoy.

Update (1/11): Wow, Brian is on fire: his next piece, Acronym Shortage to Adversely Impact Tech Sector is a must-read.

Tags: Humor, pr, Software

Probably the largest software crash in the World, live from Times Square. Credit: Andy Flynn (via Michael Krigsman)

Tags: adobe, application crash, billboard, new york, Software, times square, Windows