I wrote recently that Google is losing its Anti-Gravity Ray.  By this I don’t mean that Google is by any means over, merely that it will increasingly have to obey the ordinary laws of physics and deal with delivering real financial results that include a close focus on profitability and not just growth.  It’s not a harsh sentence at all, rather it is what the vast majority of public companies deal with every day, and Google certainly has the momentum and wherewithal to be right at the top of that heap.

Today I read a post by New York VC and famous blogger Fred Wilson, which directed me to a post by his VC partner Brad Burnham.  Fred describes Burnham as, “the big thinker at our firm.”  In addition to talking about a new investment in startup Meetup, Brad lays out some very significant changes in the firm’s thinking about where to invest.  In essence, he is signalling that the Anti-Gravity Ray for Web 2.0 startups may be weakening.  It will no longer be sufficient to drive traffic at any cost and hope to monetize that traffic at a later date using advertising.  There is concern in the VC circles that the pure Web 2.0 game may be about over:

Something is changing on the web. We have lost some of the giddy enthusiasm that has surrounded the web since 2004. It was then that Tim O’Reilly defined Web 2.0 as a platform that leveraged collective intelligence. There is still a ton of interest this idea, but many of the recent conversations we have had about the web are colored by concern.

We’re at that “What comes next?” stage of consolidation.  “What comes next?” will be the next period of punctuated equilibrium as the innovation world oscillates from innovation to consolidation and back again. 

Meanwhile it may not be a good idea to be too focused on more of the same.  As Brad puts it:

Two things will need to happen if the recent pace of innovation on the web is going to be sustained over the next few years. The next generation of services will need to have an impact on the real world and the real economy, not just an attention economy driven by self expression and discovery online. These new services will also need to reach real people, many of who use few if any web services today.

Burnham clearly wants to see the Web 2.0 world much more firmly engage with the real world by producing real revenues driven by a willingness by customers to pay real cash presumably because a real problem is being solved for them.

I wrote recently about this with respect to Communities on the Web for Business.  A recent study commissioned by Deloitte has shown a tendency for these communities to fail to reach anything like critical mass.  The reason, I believe, is that they aren’t grounded in solving a real problem for people.  Rather, they attempt to solve a problem for the business.  At my company, Helpstream, we are focused on solving real problems for real people with Web 2.0 and Communities.  That’s the biggest reason why I joined, together with the awesome team and the product that team has put together.

The web brings us two things:  lots of choices and a short attention span.  Those two things and the musings of these VC’s, when tTaken together, this means that if you don’t solve a real problem with your Web 2.0 technology, you probably won’t succeed.  Businesses, in particular, need to focus on solving real problems for their customers with these technologies because they typically need to show results much faster than startups, particularly in this economy.

I noticed a sudden flurry of posts from Loic Le Meur of Seesmic this morning in Google and wondered what was up with that.  I didn’t actually check on it, but it seemed like a lot of posts for Loic, at least relative to other times.  In addition, he invoked the sacred god of blog traffic by link baiting Robert Scoble.  Seeing the Scoble post, the first thought to go through my head was to wonder whether he was having a traffic problem.

So I brought up the curve for Seesmic on Compete.com:

Seesmic Traffic

I’ve no idea whether this is the source of the flurry of posts, but there is a bit of a downtrend from the peak.  It bears watching…

Do you read the curmudgeons?  I’m not exactly sure what else to call them, but these are the posts that tell you the new new thing is actually not very good at all.  There is always a willing audience for these sorts of things that are the large audience feeling threatened by the new new thing who would like it to just go away.  There is little downside risk of being found out wrong because they typically write about the new new thing early enough that there is still time for that new thing to screw itself up.  Very often they do too.  Every shiny new thing does not take over the world.  But even if one does, by the time the new new thing is the established way of life, the curmudgeon’s post has faded from memory.

Playing the curmudgeon is a time-honored way to get traffic.  It’s a link-baiting tactic that existed before there were links to bait.  I bring this up having just read Sarah Lacy’s  and Nick Carr’s posts about how terrible the on-demand business is.  Yeah, that Sarah Lacy that didn’t do so well playing the curmudgeon face to face with Facebook’s Mark Zuckerberg.  When you want to play the curmudgeon its usually important not to have too many representatives from the new new thing present, it’s best if they can’t take part in the dialog, and they certainly shouldn’t be as smart as the Zuck is. 

Nick Carr has a long history of curmudgeoning too, although he swings his bat both ways and frequently attacks the status quo as well.  He’s very comfortable attacking the on-premises world with an entire book (”The Big Switch”) and then writing a post like this one that proclaims, “Anyone who thinks the software-as-a-service business is a gold mine is wrong. The economics are fundamentally different from those of the traditional software business - and not in a good way.”  Darn!  Whichever way you want to deliver software isn’t going to work according to these conflicting views.

The Germans have a word for this curious phenomenon of enjoying the pain of others.  They call it “schadenfreude”. 

Let’s put the schadenfreude aside and ask, what would a Marc Benioff or Steve Singh be telling Ms Lacy if she was unlucky enough to be plying this “SaaS is a brutal slog” trade while personally interviewing one of them in front of a large audience as she did Zuckerberg?  Let’s review the major points Lacy is making about SaaS along the way.

Software sold “as a service” over the Web doesn’t sell itself, even when it’s cheaper and actually works.

AMR is quoted as saying “The challenge is you have to spend 50% to 100% plus of revenue in sales and marketing cost,” he says. “You need this [limitless] amount of cash to forever feed the growth machine.”

There’s just one problem with this statement, and the argument that somehow the marketing and sales costs of SaaS make it “a brutal slog.”  The problem is that on-premises software is an even worse slog, except for the very largest brands like Oracle, SAP, and Microsoft.

Think about it.  Every quarter is a scramble to make the number for on-premises vendors.  And when that number is made, the entire license is recognized and the next quarter the company starts over.  At best, there is recurring revenue from maintenance that is perhaps 20% of the original license price. 

SaaS, by contrast, has recurring revenue.  If you didn’t sell a single additional license in a quarter, so long as your customers are happy, you’ll still get the recurring revenue coming in.  Which one sounds like a worse slog to you?  I can tell you from having talked to a number of on-premises companies wondering if they should endure the horrors of a switch (ask Steve Singh of Concur what that’s like) that they’d prefer to deal with the SaaS slog.

Don’t take my word for it, or even theirs.  Take a look at what it costs public companies in terms of Sales and Marketing dollars to sell an incremental dollar of revenue:

Isn’t it interesting that the red squares, representing perpetual companies, are almost all to the right of the other symbols representing SaaS companies?  And isn’t it interesting that the reds wind up even past the point where AMR said the costs were so prohibitive?  It’s actually cheaper for SaaS companies to acquire revenue than similarly sized perpetual companies, and I’m surprised that Lacy and AMR didn’t do their research better to find that out.  The data has been here in this blog for some time for anyone that wanted to look.

And vendors are continually tweaking their software, fixing bugs, and pushing out incremental improvements.

Lacy says, “Great news for the user, but the software makers miss out on the once-lucrative massive upgrade every few years and seemingly endless maintenance fees for supporting old versions of the software.” 

Hold on just a minute there, Sarah!  First of all, the upgrades are almost always included for free in exchange for paying maintenance.  That massive upgrade revenue blip almost never hits, and when it does (for example with Peoplesoft 8), customers are so unhappy that the vendor dare not ever do it again.

As for all th e tweeking and bug fixing, let me tell you something about that.  There is a huge overhead associated with on-premises.  Engineering management colleagues whom I’ve hashed this over with estimate that overhead at about 40% of development cycles.  Yes, Sarah, it will cost you 40% more in ongoing R&D to do on-premises than SaaS. 

Why?

Building the first version may very well be harder for SaaS, but after that, you’re only paying the cost of bug fixing and innovation.  Meanwhile, on-premises has those same costs, but it’s much worse.  The reason?  They have to support multiple platforms and versions in the field.  Let me tell you, supporting Oracle, SQL Server, and DB2 simultaneously, a typical Enterprise makeup, is a lot of work.  Add to that multiple app servers, web servers, and whatever else factors into your platform stack.  With SaaS, it’s one platform all the time.

What about those bugs?  It so happens I’ve surveyed a number of On-premises technical support organizations and asked a simple question:

How many of the bugs reported are already fixed in the latest version of your product when they are reported?

The number was staggering, and ranged from 40-70%.  Imagine that your customers just never encountered 40-70% of the problems.  That’s very good for customer sat.  Even better, imagine you didn’t have to hot fix and patch any of those problems because customers were transparently upgraded in your data center.  Further, imagine no problems due to new untrained IT trying to run the app.  You run the app according to the best practices you’ve established.  I can’t imagine a happier place to be from an Engineering cost standpoint.

Meanwhile Dare Obasanjo chimes in that Partners can’t take a SaaS switch

Dare comes closest to the real problem for on-premises vendors with this.  Sarah Lacy appears to buy Larry Ellison’s claim that SaaS just isn’t profitable enough.  That’s actually far from clear because no SaaS vendors have reached remotely the size of Oracle.  We don’t know what effect total brand domination can have on their sales and marketing costs.  We know there is a pronounced knee in the curve for on-premises vendors that starts at over a billion dollars.  Those companies can sell more cheaply.  We don’t know the effect when you’ve taken so much market share as the big guys have that you no longer are struggling to hit the kinds of growth numbers we see with Salesforce and other SaaS vendors.  Most importantly, we don’t know the impact after 10 years of recurring revenues keep coming in.

What we do know, is that it is extremely painful to switch.  There is huge channel conflict, both internally and externally.  Businesses that want to switch have to endure a couple of years of brutal slog, to use Lacy’s words, to get there.  But once they are there, they never look back.

I’ve seen a number of on-premises companies trying to get to SaaS.  Have you seen any SaaS companies trying to convert to on-premises lately?

There’s a whole series of blog posts out on a Deloitte study that shows the vast majority of customer community sites fail.  The reasons are interesting.  Part of it has to do with the question of whether the business understands that some community uses are “destination” uses and others are “casual uses”.

For more on this, see my post over on the Helpstream Corporate Blog.

When a company has a monopoly on an extremely valuable franchise that is growing rocket fast, all sorts of unreasonable things happen.  That company levitates.  Almost no amount of spending can bring it down to Earth.  Until, that is, the growth begins to slow.  At that point the anti-gravity ray starts to fade.  What usually happens first is a profitability crisis.  Often the company’s revenues are still growing impressively, but they’re not blowing away analyst’s estimates.  When that happens, attention focuses on profitabililty instead of unbridled growth.

So it was with Google today.

They hit the revenue growth number but missed the profitability number by quite a bit.  The market will punish them severely for it.  Google, for it’s part, will now have to live in a world without anti-gravity.  It wil have to manage itself more efficiently by the numbers, in other words.

The company is legendary for continuous hiring, giving people 20% of their time to work on projects of their choosing, and projects that get built at considerable cost but do not see the light of day or produce meaningful revenue.  All courtesy of the anti-gravity ray.  Unless they can restore its effectiveness, all of that largesse must inevitably slow to a halt.  After all, when a company makes its revenue numbers, but misses its profit numbers, its because expenses are too high.  Fiscal conservatism will have to be put in place.

It will be interesting to see how the innovator’s culture deals with this new challenge.  A crack down on expenses usually doesn’t happen all at once.  Google strikes me as a place that will consider its options carefully before doing anything precipitous.

Om Malik says its a sign Silicon Valley should be worried.  Indeed, an awful lot of the Valley’s economy is associated with ad revenue in some form or fashion.  But there are vital other areas.  SaaS businesses, for example, seem to be doing pretty well from what I gather asking around.  They’re raising money quite successfully and the smaller SaaS players are growing like weeds.

Overseas spending is also an important area that is bucking the trend.  In this day and age, having an effective global strategy is crucial.

If you don’t have an anti-gravity ray, try selling service (Software as a Service or the old fashioned kind–IBM did well on services this quarter) and make sure you’ve got overseas exposure.

Remember how much college textbooks costs?  Maybe you’ve bought some recently.  It’s horrendous!  And the reason is not that many are printed.  These tomes are not best sellers in most cases.  They’re thick, they have illustrations, and they are expensive to print.  Double expensive because the printing runs are not for very many copies.

Enter Amazon’s plans to introduce a new Kindle with an 8 1/2 x 11″ screen.  Perfect!  Kindling (sorry Fahrenheit 451 fans) textbooks is brilliant.  Radically lower the cost of delivery by eliminating printing and going digital and you can sell them cheaper and still raise eveyrone’s margins.  Plus the kids were raised in a digital world, so they’re ready for it.  On top of all that, those old textbooks are heavy!  I would so like to carry a Kindle instead. 

And why aren’t University libraries being set up around Kindle technology?  Why keep all those crazy books?  Set up a server in a basement somewhere, create some sort of library checkout licensing scheme (Amazon would administer this), and voila! Everything is computerized.  Books are still checked out, so only 1 (or however many the license allows) can have a book at a time, the computer can force the return of the book when it is due. 

Huge potential for digital books going forward.  I’m going to watch Amazon closely.

Salesforce will be unplugging the last of their Sun Solaris servers from their SaaS operations this week, according to TechCrunchIT.  That’s quite a big change for Salesforce, and a bit of a PR blow for Sun.  It reflects some important operational realities that the rest of the industry and corporate IT should be watching carefully.

First, vertical scaling is hard in the multicore crisis era.  When cpus no longer get twice as fast with every Moore Cycle, scaling is harder to come by and hardware gets commoditized.  Future scaling has to come from software architecture changes.  Horizontal Scaling, in other words, not Vertical Scaling.  The multicore crisis brings us to an era of many small computers rather than fewer more powerful computers, and its up to the software guys to figure that out.

Second, for a SaaS company, the cost of service delivery is an absolutely critical factor.  Once you have software that runs well and scales horizontally on cheap commodity hardware, you’ve created a huge cost advantage for yourself.  As we speak, the cost to deliver service for the various public SaaS companies is all over the map, but Salesforce has always had one of the lowest if not the lowest cost on the map.  This allows them to either show greater profitability or reinvest the savings in faster growth.

This brings me to my other point.  How long can it be before they investigate swapping out Oracle for MySQL?  As the TechCrunchIT article mentions, Salesforce started with Oracle but there’s been no mention recently about the current status.  It would be a logical further development in reducing costs if they had chosen to eliminate or were working on eliminating the cost of Oracle licenses.  For many SaaS vendors, this is a huge piece of their Cost of Services. 

Can you build industrial grade software without Oracle?  In a word, yes.  Many highly scalable web sites have done so and lived to tell the tale.  It’s more work, but once you’ve done the work the payoff can mean huge savings.  At a prior employer we were actually quite surprised to test several Open Source DB’s and learn their performance was actually not that far off of Oracle’s.  My current employer, Helpstream, has built everything on an Open Source stack and the benefits have been enormous.

How long will it be before we’re hearing that Salesforce has dropped Oracle too?  What’s your company doing to leverage commodity hardware and Open Source databases?

Related Articles

Fellow Enterprise Irregulars Dennis Howlett, Vinnie Mirchandani, and Thomas Foydel (who first raised the point about brand comfort) make some excellent points on this subject, particularly the issue of switching off Oracle.

One key point that I have personally heard before is that SaaS vendors like to offer customers the comfort of knowing the solution runs on Oracle versus Open Source.  It’s a more conservative stance that plays well in the Enterprise.  Brand matters.  Sun is working hard on the MySQL brand, but they certainly haven’t caught Oracle yet.  As Vinnie puts it, the question is, “whether SaaS vendors benefit from at least the perception that Oracle is more “bullet proof” or do SaaS customers just want results (high uptime, performance etc) and don’t really care what the underlying  technology is - especially if the economics are more attractive?”

Dennis adds some other unique thinking.  If Salesforce wants to be acquired by Oracle then it should stick with the Oracle stack.  The only thing I’d add there is it’s pretty easy to switch from MySQL back to Oracle and much harder to do the reverse.  I think they’d be fine in an acquisition if they were simple careful not to emphasize a switch to MySQL.  They did work reasonably hard to keep the Dell switch quiet, so they may already be on that path.

The second thought Dennis has is that licensing is very complex on these things.  Here again I have to agree.  Just dealing with the legals and other aspect of a relationship with a large Enterprise vendor/technology partner is expensive for a startup.

In both cases, Vinnie’s post title fits:  Does SaaS need Oracle more than Oracle needs SaaS?

Good insights, guys!

It should have been predictable, I guess, but the iPhone activation servers have failed and I ran afoul of it this morning.  Before heading in to work I thought I’d just download the stuff and see if there wasn’t some interesting new app worth installing.  You can download the new iTunes, download the firmware to the phone, resync the data to the phone, and then BAM!  The phone can’t contact the activation servers to complete the process.

This leaves you with the phone in “emergency” mode where all it can do is dial out a number you specify.  No other access seems to work and the phone says “no service”.  AT&T is actually sending customers home with their new iPhones and telling them to activate via iTunes (which was originally not supposed to have been an option).  BTW, I don’t have a 3G, just the original flavor.  I’m in activation purgatory because you can still upgrade an old iPhone so it can run apps.

You’d think this would’ve occurred to them to beef things up, but whether or not it did things aren’t beefed up enough. 

Doh!

What a soap opera.  Aren’t you getting tired of hearing about it?  And which is worse, the drama between the players themselves (counting Carl Icahn as a player), or all the hangers on and armchair quarterbacks?

Michael Arrington is mad.  Boy, do you remember those old TV commercials?

“Hi.  My name is Eddie Childs and I’m mad.”  (Amazingly, could find no links on the Internet–short memory!)

Michael thinks Microsoft is being a bad actor now for pulling its bid “just as Yahoo was about to accept.”

Come again?  Just about to accept?  How the heck could he possibly know whether they were just about to accept?  To most of the rest of us it looks like Jerry Yang sacrificed billions in shareholder value just to avoid it.  If Yahoo was all about accepting it, why then is there such a mass exodus on from the Big Purple ‘Hoo?  Clearly the internal Yahoo is not so confident about that acceptance. 

But I’m sure Michael, with all of his connections, feels like he has some kind of inside track because somebody told him something.  Maybe he is right.  Maybe Microsoft is playing nasty Machiavellian games to get the milk for free without paying for the cow. 

Now he just wants Microsoft to put up or shut up and quit trying to help Icahn take over the board.  Just one problem Michael, from their perspective they already did that dance and Yahoo drank every bottle of poison in site just to make sure they were completely unpalatable.  Microsoft wants to make sure they’re dealing with a group that actually does want to sell, as the current group has made it painfully expensively clear to everyone they did not.

Obviously not everyone takes this completely seriously.  I got a real chuckle out of Larry Dignan’s list of 10 things Arrington can do in protest.  Larry is pointing out in a humorous way that the actual power Techcrunch has to stand in the way of what’s happening (”I won’t stand by quietly while Microsoft destroys what’s left of Yahoo just because it can.”) is pretty limited.  Are these guys serious or just trying to get attention? 

Heck, I’m not even sure if I’m serious, but let’s face it:  None of us has much control over what’s going to happen.  It isn’t even clear the players themselves are in control.  They’re bouncing around the ring grunting and struggling like 3 Sumo wrestlers, each trying to gain a decisive hold on the others.  Watch the spectacle if you must, but please, don’t try to step into the ring.  It just eggs the Sumos on.

The blogosphere is such an interesting place.  Read one article and it casts you out into several others, each of which in turn may lead you to new treasures.  Fred Wilson’s “Thinking About Groups” took me on such a journey.  He is writing about whether the world needs any new products for the groups sector (e.g. Yahoo or Google Groups et al), but at a higher level, he’s endorsing the idea that Less is More.

I’m a major consumer of Groups for all my special interests, so I read on with interest.  I’m not going to dwell too much on groups other than to say I think Fred reached a conclusion I want to analyze carefully.  He references Charlie O’Donnell’s excellent post on groups for some insights on the current Groups state-of-the-art.  Charlie’s view is that every group wants to be different, so there can be no single piece of software that is all things to all groups.  Customization features prominently in Charlie’s dicussion, whether that be the look and feel (e.g. the branding) of the group or how it chooses to communicate and what tools are available within the group. 

Charlie makes a lot of sense to me.  Most groups are too vanilla, especially the Yahoo/Google style.  You have to strain to get the essential goodness and uniqueness of the group out of the bland presentation.  Many people opt to participate with such groups entirely via email because going there in person doesn’t yield that much better an experience.

Fred then quotes another post, Stan Schroeder’s “Why Less is More and How to Unlock the Web.”  This post starts from a strong manifesto:

Features, I’ve recently come to realize, can be obstacles. Problems. The more powerful an application is, the more specialized it is, and thus with increased power its intended audience shrinks, and ironically, it becomes more, not less, vulnerable to competition.

Like any good VC, Fred Wilson wants to sift the world for patterns: common threads that can be teased out of the matrix to provide a keener understand of how the world really works.  Schroeder’s view that the things that start from less win seems like one of those threads, so a quick combination with Charlie’s minimalist list of group features as being the simplest group product possible and that becomes Fred’s proposal for the best way to attack that market.  It’s certainly not a bad start, and yet the world hasn’t really played out that way most of the time, so it bears further scrutiny.  The “less is more” mantra often doesn’t win.  It isn’t quite how the computer world works.  Lord knows we have wanted it to be, but it just isn’t. 

We need to be really careful not to mistake the apparent simplicity of less for real simplicity that can lead to a paradigm shift.  Look at the history of software.  There have been endless attempts by the minimalist to topple the complex.  Minimalist word processors.  Minimalist spreadsheets.  Minimalist databases.  Even whole Minimalist Companies like Software Publishing with their PFS series for those who still remember that.  Visicalc was less than Lotus 1-2-3 which in turn was less than Excel.  All the lesser products lost to products with greater functionality.  It was just a cycle thing–the later products were still uncovering features that 80% of the audience cared enough to switch for.  Before you hang your hat totally on minimalism, make sure you understand how that 80/20 rule stacks up for your domain.

Schroeder hangs his thesis on examples like Twitter.  Why do people stubbornly stick to Twitter when it goes down so often and there are other more powerful sevices?  He bases his theory on the idea that it is because Twitter is nothing but a super-simple API, and hence a platform.  But he misses some very important steps when making that leap.  First, it may be that Twitter has every feature a micro-blogging product needs to be successful with 80% of the audience and no new features (not even working more often!) suffice to persuade that audience to switch. 

Second, application preceeds platform as people like Geoffrey Moore are fond of telling us.  Twitter was a great application before it was a platform.  It built it’s following as an application, not a platform.  This may be just another way of saying it covered the 80/20 functionality side well enough before it became a platform.

Third, Twitter is by its nature prone to network effects.  That’s a built in defense mechanism for the first mover in a space if they can get big fast enough because it creates enormous lock in.  Why would I leave Twitter when I have no way to reconstruct the network I’m involved in there?  Could I even do it if I wanted to?  Can I face starting over?  It’s not a matter of less being more, it’s a matter of more (in this case more network) being a lot more.

While I think capturing the 80/20 feature race was important for Twitter, at best I may agree with Schroeder when network effects are this strong that they trump that feature race.  In that case, it’s important to jump in and start swimming as soon as possible so as to build a bigger network faster.  Just remember that if every category was overridden by network effects above all else there would be no fast follower strategy.  No Facebooks, because the MySpaces would have done it all.  There are worlds where network effects trump all.  Twitter may be one, and eBay has certainly been another, but not all worlds function that way.  In fact very few worlds really have significant network lock-in.

It is a mistake to conflate “less” with the only reason for success.  One of my favorite UI design quotes is Alan Kay’s, “Simple things should be simple and hard things should be possible.”  Start from there and you can go a long ways to understanding simple.  Being the first on the block to raise the level of what is simple to do in your software is a tremendous advantage.  It means you can deliver more to people who can only deal with less.  If the more you deliver matters to enough of the market, and network effects don’t create too much switching costs, you will win over less.

In many ways the evolution of Web 2.0 has been exactly this story of making “more” simpler.  How else can we view Social Networks, Blogs, Twitter, and yes, Groups?  Aren’t they just successive iterations on how an individual or a group can have a web site that is tailored for what they want to get out of it very very simply?  In particular, isn’t it about dynamic web sites that change in some way and have behavior rather than just the old static HTML?  What these new sites have done is to make various previously difficult things simple, and in some cases, they’ve made hard things possible, though we aren’t very far along with that yet on the Web.

The process of making new things simple to win a market is a story that Apple understands extremely well, given their overwhelming focus on the user experience.  There’s nothing really very simple or very “less is more”, about the iPhone, for example.  Yet it gloriously made a bunch of clunky stuff simple and a lot of hard stuff possible. 

Talented UI designers understand these principles.  They know how to order the user interface to keep the simple at the forefront and to avoid confusing with the hard while still retaining the ability to do the hard.  It’s called successive disclosure.  But, to be successful in this way, you have to be absolutely rigorous about UI.  It’s why Apple seems so fascist much of the time.  UI can’t just grow organically or that complexity will seep out and poison the UI.  Companies that understand this have a huge advantage over those that don’t. 

By the way, for yet another take on groups, take a look at Bigtent.  They’ve made some things that were previously hard on Yahoo or Google Groups Simple.  It’s working well for them!   At Helpstream, we’re working hard to simplify customer service, and that’s working well for us too.  The biggest challenge with simple is that it creeps up on you.  It looks so simple until you’re done doing what used to be hard and suddenly realize you’re now ahead.