I don’t pretend to be able to see into the mind of Steve Jobs, however, if I could I suspect that one of the cleverest things I would see is how he has couched the current discussion of the iPhone as being about – well, phones and the mobile phone market to keep competitors off guard. However, to me it seems the iPhone is really least about a phone.

The Blackberry started it for me. Those day long business trips. How many business trips had I hauled my laptop through the airport, on planes, in cabs and in meetings only to never really use it (absent a presentation).  I’d look at my blackberry and think “Maybe I can get by with just that this trip?” However, fear always overtook me. What if I had to review a spreadsheet in a crunch? Edit a Word document? Starbucks and my laptop were my safety net.

It seems to me that Apple saw the same thing and said “People need a small big computer.”  That is what the iPhone is and will continue to become with the 2.0 version on the horizon. Hmmm, email, browser, video, maps, weather, Facebook access, big enough to view real docs….oh and even have a few spare episodes of “Ice Road Trucker” on there should I get stuck in an airport. I guess “iSmallbigcomputer” just doesn’t have the same “ring” to it (pardon the pun).  I bought one so I didn’t have to go upstairs to my home office to check email in the evening when someone sent me a document or a website link that just never worked well on a blackberry.  (Blackberry of course is running like mad to catch up with wireless capabilities now etc.)

I think the same is true of social networks. To follow my opening approach – Let’s call a spade a spade and a social network an extension of your personality or “status.” It’s going to be a similar statement to the car you buy, the town you choose to live in, where you decide to vacation. I believe that there’ll be an ever increasing degree of interoperability between sites breaking down the need to be in one place or the other. Much of your data will be transportable so you’ll be free to choose where to reside.

Social networks are NOT about advertising to me. Not unless you’re the type who likes to vacation at timeshares and be pitched to while you’re trying to relax (although those blankets and a bottle of Kahluha do come in handy). Google is a tremendous success because they capture someone who is searching. When you’re searching for something there is a good chance you’re interested in a product or service. That’s a tremendous amount more concise than a flyer in the mail or cold call at dinner time if you’re seeking prospects. In addition, you don’t mind being pitched to because you’re looking for something.

Social networks won’t be a success because we fine tune the advertising – although it won’t hurt to make advertising “suck less”. They’ll be a success when we grasp that they’re a status statement. Once we nail the right way to market them as a reflection of status we’ll unlock exponential growth. What would a consultant “pay” per month to indicate to the world that he or she has more than 25 endorsements on LinkedIn? How much would a Facebook member pay per month if a “ring tone” of their current favorite song went off when you hit their profile? How much would a personal trainer in zAthlete pay per month to indicate they’d been a certified trainer for more than ten years?

I think one of the reasons social networks have failed to live up to much of the hype is that we started at the wrong place to begin with. The iPhone is a tremendous success not because we needed a new phone, or even a new PDA for that matter. It’s a tremendous success because we needed a real smallbigcomputer. Google works because it’s the right time and place and the world (both sides) loves a qualified prospect. I believe social networks will work when we provide valuable services that allow individuals to differentiate themselves amongst the other 100 million members. Advertising will always play a role - but to really be successful we’ll have to unlock the key to status.

Justin

Hello Everyone,

For those of you interested in comparing SaaS models (like Intraware’s) vs buying licensed software I thought this article would be of interest. Obviously we’re biased here but I thought this raised some intriguing issues.

Enjoy,

Justin

I’ve asked Joe Mordetsky, CTO of Uniloc, to write an article for us discussing our upcoming roadshow and why folks might want to attend. Thanks very much Joe!

“Next week Uniloc is participating in a road show with Intraware to highlight Uniloc’s new SoftAnchor Insight product suite. I’m pretty excited for the show, as SA Insight has come a long way since its original inception to become what proves to be an innovative look at how the software industry understands what happens to their intellectual property post-sale and how their applications behave once they are installed on a customer’s machine.

The SA Insight products aim to help software developers stop making educated guesses regarding their user behaviors and installation practices and to empower them to gather cold hard facts on compliance, over installation, piracy, hardware platforms and application usage patterns. That was a lot to say all in one go, but the Insight suite is a comprehensive set of APIs that puts answers to common questions that plague software companies:

* Are my enterprise customers currently in, under or out of compliance with my license policies?

* How much license revenue could I really recoup if I decided to implement more stringent license policies?

* How much real (hacked application) piracy do I have? What markets does this piracy take place in? Is there a high possibility I would recoup some of this revenue if I implemented more powerful anti-piracy tools?

* How much license revenue am I losing through disk sharing, key sharing or over installation?

* What sort of hardware is my user base using? What is lowest set up I should support?

* What features of my application do the majority of my user base take advantage of? How can I better segment my products to take advantage of these usage patterns?

* How do I establish a closer dialog my customers in an age when emails are either caught by spam filters or disregarded as noise?

* How do I use advertising to support new or alternative revenue streams in my thick client software applications?

Anyhow, that’s a brief introduction to what we’ll be discussing. I hope to see you there.”

If you’re Larry Ellison, the answer appears to be “Yes”. Here’s an interesting article on Larry’s thoughts on the SaaS model. Feel free to leave your own comments here…..

“Webkinz” is one of those words you either immediately relate to or causes you to scratch your head. Parents of children between the ages of 5 and 12 might recognize Webkinz as one of “the” places for kids to hang out on the internet.

The idea behind Webkinz is that you purchase (”adopt” in Webkinz parlance) a physical toy in a store that has a unique identification tag or number. Your children come home and login to the Webkinz website where they “adopt” the new pet by using such identification number and begin to take care of it online through interactive games and other activities.

If I had to guess, I bet some clever people sat around Ganz, creator of Webkinz, and thought “This cheap website trick will be a great way to ensure we can get very healthy margins on stuffed toys. We’ll put something online with some basic functionality and that interactivity will help us beat the competition.” I’m sure they had no idea that the opposite would occur. My children don’t ask for me to buy them new Webkinz stuffed toys, but I sure have trouble prying them from the kitchen laptop.

Over its life, Webkinz has grown in sophistication. I must confess, at the risk of being branded a bad parent, I let them spend a lot of time on Webkinz. I bet I’m not the only parent out there fascinated by the entire experience.

It’s the games that really hook them in. Part of the concept is the need to raise money to help support their virtual pets. There are many games built around that concept. Moving to the much “hipper” world of Facebook and guess what? Games are now all the rage. Start ups are getting funded and the SNS are encouraging games as they create strong metrics around time on site, loyalty, average session time etc. There’s even a pretty good new blog devoted to covering the space.

I’ll share more soon on my thoughts on games and zAthlete but my point here was that Webkinz strikes me as being i) ahead of the curve and ii) a little more sophisticated than much of what I see in the way of games on Facebook. I wonder if Webkinz is the real reason Microsoft backed out of it’s Yahoo deal…..

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

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

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

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

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

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

Justin

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

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

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

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

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

We just completed our Roadshow on both the West Coast and East Coast this week. I want to thank all of the customers, prospects and partners that attended. I had a lot of fun at our Boston (Bedford) event. James Brentano led the way for us on the West Coast.

There’s an old expression when it comes to sales meetings: “If you’re telling you’re not selling” It means if you’re doing the majority of talking, and very little listening, you probably shouldn’t have it in your forecast at much greater than 10%. So it was definitely great to hear our customers and prospects take over the discussion. The only major criticism I received was that it was “too short”! Better that than the other way around of course.

Ours is a relatively small market so the challenges faced by hardware or software companies resonate with Intraware and non Intraware customers alike. License management, channel and partners, “virtual machines”, 3 to 4 GB files, resources required to implement and then maintain a service etc. Even the “grizzly old veterans”, whom I rely upon to help drive these user group type events, always come away with a new trick or two.

So thank you to those of you who attended, we missed those of you who didn’t and I hope to see you all at our next one. I shall leave you with a comment we received via email:

“Good timing, good location, good guest list, good food and drinks, good facilitated conversation”

In 1998, I raised some money from the notable venture capital firm, Kleiner Perkins Caufield & Byers (Kleiner Perkins). I learned a lot about investor perception in the weeks prior to that agreement. Kleiner Perkins had done some extensive work reviewing our business model and seemed intrigued enough to begin negotiations on valuation. Meanwhile, the buzz of an imminent deal began to trickle through various other top Silicon Valley venture capital (VC) firms. About 18 different firms reached out to me, interested in participating in the upcoming round of financing.

Putting a valuation on the company did not appear to be an issue, but determining how much we could have was challenging. Due diligence by these investors varied but for the most part as long as Kleiner Perkins was leading the charge, it seemed that beyond the simple, “what do you do?” the decision to go forward was based on the terms and conditions of the investment.

I felt pretty good about things. I was talking to the top guys at the top funds in the nation and I could feel the momentum building for Intraware. We were quickly coding SubscribeNet,an on-demand service designed to help companies convert from a physical supply chain process to a digital one. We picked up a major contract from Netscape and revenues were growing faster than plan. 

Kleiner Perkins set up a meeting in November 1997 to have me present to all of their partners. The partner on our account let me know that this part of the process was necessary but really was nothing more than a “rubber stamp.” The other VC’s were aware of the presentation and began to commit up to $8 million dollars and the size of the round started to look like $15 million vs. the $2.5 million we were initially looking for. 

I knew that one weakness in our business plan existed: Most of our potential customers were in no hurry to convert to digital supply chains. They enjoyed a quarter or two of padding by shipping products to their two-tier distribution. Once they filled the channel with physical goods they could recognize revenue. Our process would bring actual use of product to real-time.

I presented on a Monday morning and was told that they would figure out the financial figures later that night.   By midday on the following day, I had received plenty of calls from the other VC’s committing millions of dollars, even without knowing what Kleiner Perkins was committing.

Kleiner Perkins called back at 2 p.m. Tuesday afternoon saying that their partners had a few issues and couldn’t get comfortable with funding the round. After a dozen calls to the other VC firms, I realized that the word was suddenly out and all of the other VC’s quickly declined as well.

I didn’t sleep well that night but was delighted by a call I received from Kleiner Perkins the next morning indicating that they had gotten past their internal differences and were ready to fund.  I declined additional funds from the other VC’s and closed the round solely with Kleiner Perkins in December and opened a new round at two times the price three months later. A year later we were public with a $500 million valuation and two years later our valuation was $2 billion. 

Then the bubble popped, and we popped with it. SubscribeNet hadn’t grown and we tried to play in multiple other markets only to build overhead to a point where a $0 valuation seemed imminent.

That was six years ago.  Today I can sleep at night knowing we are a much stronger company, with a leading technology and expanding market opportunities.  We went from sizable debt and a couple dimes in the bank, to growing cash with no debt. With strong working capital, positive cash flows, and over $35 million in federal and state NOL’s, the company’s financial position is secure.  We have seen tremendous traction in the end users leveraging our trusted platform.  And, while Netscape represented 95% of our business in 1999, the company does not have one 10% customer today.  Intraware is successfully converting technology providers of all sizes including some of the larger software providers in the world to its SubscribeNet service. 

Intraware’s solutions provide a single on-demand platform for managing all critical digital assets. Our entitlement management engine that powers our on-demand services meets emerging market demands in many digital media markets.  We have moved past just delivering enterprise software to managing multiple forms of digital media including consumer software applications, games, maps, consumer entitlements, and hardware entitlements and licenses on behalf of our customers. Our on-demand offering continues to have expanding applications in the market as the world moves digital. In addition, our SubscribeNet offering provides a very credible and defendable ROI that has historically met customer demands in times of economic stress.

For years, yes, Intraware looked like a duck, walked like a duck, so it was a duck. The partners at Kleiner Perkins must have smelled “duck.” But, they somehow got past it, as they did see something long term. Eventually warehouses of DVD’s would be replaced with a more economical process for distribution. Old boxes of retired versions of software would no longer crowd our landfill.  To date, 99% of the Fortune 500 companies have received software from Intraware in over 160 countries.  Our model’s rapid time to value and platform independence has been winning over skeptical purchasing organization as web-based applications have emerged.  We continue to leverage our experience in hosting on-demand applications and we are positioned to benefit from the video and social networking markets that depend on a provider that is here to stay and able to provide leading innovations.

Intraware isn’t a duck anymore. The numbers are beginning to reflect it and the great plan of eleven years ago is finally here.  We are focused on continuing to build long-term value for stakeholders, and are confident that our value will continue to reveal itself even through tough market conditions.       

It won’t be long until this duck is really seen as an Eagle.

 Peter

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