Silicon Grassland

I’m blessed to live in one of most beautiful places in the country. The Dakotas are home to serene prairies, the beautiful black hills, a winding Missouri river, and wide open spaces. We have world class pheasant and big game hunting that draws gaming enthusiasts from around the world.

The world turns slower here - the agriculture lifestyle that the Dakotas are built on stays strong, and farming remains very successful. The bottom line is this: our quality of life is outstanding. I’ve lived here for a dozen or so years, and I’ve grown to love the place.

I also happen to love technology. Many have asked me why I’m not in Silicon Valley. It’s a simple reason: technology thrives where great minds thrive, not just in San Jose. I love Silicon Valley, and I travel there every year. However there is so much untapped potential right here in the Dakotas. DataSync has thrived on amazing people who have either grown up here, or enjoy the lifestyle outside of work that this area offers. We’re a web software company, so working outside the office in beautiful weather is an option for us. Although we’re very driven at DataSync, productivity is enhanced by an active, healthy lifestyle. The uncrowded, open environment of the Dakotas enhances this balanced lifestyle.

The high-tech community here is small, a benefit I’ve grown to appreciate. As I sat at Monk’s with a collection of innovators last week, I again appreciated the small, tight-knit community of people who are passionate about building the future of technology. Competition for great talent is reduced here, so it’s easier to find great people. We live in a small state, so people’s reputation guides hiring decisions. Cost of living is lower, so building a startup is less expensive.

As I look out my window onto the untamed prairie, I’m thankful that I’ve landed in this wild land. Silicon Grassland is a great place to build a company that will change the world in it’s own small way.

The election results are officially in, and Barack Obama will soon be at the helm of our great nation. He’s built “change” into his mantra, a theme that’s also closely tied to technology. Indeed, Obama built the largest internet-driven grassroots campaign movement in history, has 2.5 million Facebook friends, and is frequently seen typing on his Blackberry. However Obama faces a daunting challenge to  modernize our government’s IT systems.

It disturbs me how many manual “paper pushing” processes still confront me when I deal with our government; processes that have long been fully automated in the business world. For instance, when I voted yesterday, my name was crossed off a paper list and I filled out a paper ballot. Databases and computer terminals have been around for 30+ years, why aren’t we using them for voting? The savings of a fully automated system would be in the tens of millions!

Technology has the potential to help our government become drastically more flexible and responsive. Leveraging technology can also help our government become much more efficient, saving taxpayers money and cutting deficit spending.

What are Obama’s tech claims? According to Obama’s campaign website, he intends to appoint our nation’s first CTO (Chief Technology Officer). The federal government is currently plagued with a highly proprietary and legacy technology system that isn’t connected. In the past, each government agency has chosen their own tech infrastructure, making many systems incompatible and isolated. Creating a centralized decision making body for IT in the US makes sense.

The challenges facing Obama and his administration are immense. In our experience working with government entities, the problems inherit in integrating highly customized and proprietary systems are daunting. Convincing highly opinionated technical people to work together on a national information system will be a frustrating to leaders as well. Technical people like myself are known to society as inflexible and focused on pushing our opinions on implementation, not on moving forward. Technical leaders throughout government must shed this attitude and work together closely to implement a stable, integrated, secure, and flexible government IT architecture. Obama must also deal with “old school” government officials that do not understand or embrace technology. The United States is now competing in a global economy, and to compete taking advantage of efficient systems is a must.

If successful, these changes will eliminate paper forms, standing in lines to register vehicles, voting registration and many other manual tasks. This could all be done online from a single secure interface. Disasters could be quickly assessed and responded to with unified communication, asset allocation, and satellite driven systems. Vast information pools that are stored today in isolated data centers could be connected, organized, and accessible by all areas of government. Intelligence could be gained on-demand through properly networked law enforcement and submitted by qualified individuals.

Although our government today is at the dawn of these capabilities, a properly designed and managed system could give America the edge to win in the long-term global economy. I hope Obama and his new administration will follow through with promises to use tech to improve our economy and government. The benefits to America both financially and to the lives of its citizens are immense. Achieving success will be daunting. Good luck, President-elect Obama!

It seems these days that the fear mongering has taken over the news, and a lot of people’s minds. I’ve been hearing from every corner of business lately that the world is ending. It’s not.

DataSync had it’s best month ever in terms of new subscribers last month, and we’re already past that in October. People haven’t stopped doing business, but they have changed how they do it. We happen to host and integrate open source software, which is a much more cost effective alternative to expensive onsite proprietary software.

For those of you in businesses that deliver little value with high upfront cost: beware. The world is ending for you. Our professional services business has slowed significantly, and our hosting business has picked up. I would guess that we’re not the only ones. Businesses are cutting back on expensive consulting projects and moving towards more flexible open solutions.

As I have been in the past, I’m very bullish on all things open. As Matt Asay has mentioned, the recession will be kind to open source companies:

Open source breeds communities, which in turn add value to the software, making this innovation more of a group effort (and, hence, potentially a less costly effort). In turn, open source should be a big winner in this downturn, just as it was in 2000 to 2001.

I’ve gotta agree with Matt here, open source drives a lot of value in a down market. We’ll see what things look like in 6 months

Bear Sterns. AIG. Lehman Brothers. Even Goldman Sachs. The list goes on. Large companies are failing or having liquidity problems in droves. The mortgage crisis is impacting every corner of the global business climate. It’s an interesting note that Oracle is boasting record profits despite the tough economic situation. This will not last. Organizations will not put up with being ripped until they can move to something else. Oracle is nearing the end of it’s stranglehold on software. Why? Open source.

So what does this mean for IT budgets? Aggressive cost cutting. Everywhere. Firms are beefing up on cash and cutting expenses in every area, including IT spending. The first thing to go will be expensive software licenses and internal IT budgets. The problem is that CIO’s can’t eliminate software functionality. However they can move quickly to more cost effective solutions. Expensive proprietary licenses can be eliminated and IT staffing can be reduced.

I happen to run an open source/SaaS firm, and we’ve noticed an upswing in interest from a broad swath of businesses. Why the upswing? 3 major reasons:

1. Flexibility - Businesses are tired of getting locked into a feature set.
2. Control - If the vendor or solution doesn’t work, businesses want the assurance they can take their software and data elsewhere.
3. Cost - Our on-demand (SaaS) and on-premise solutions are 50% below market rates for closed-source solutions.

Let me make a bold statement: an economic downturn of this scale has the potential to change not only the financial sector landscape, but also the software development and delivery industry. High-cost proprietary vendors will have an increasingly difficult task of selling value to an increasingly cost-conscious business world. Open source software has the potential to offer robust software, compatibility and interoperability, and a price point that becomes increasingly attractive.

Software as a Service (SaaS) is also a trend that is poised to gain significant traction because of recent events. Organizations are looking to shed overhead and assets in favor of a dynamic model that can scale with their business. Investing in expensive IT equipment like servers, network equipment, and the staff to run it all is a fixed cost. You can’t run servers with no staff. SaaS solves this. Businesses can grow and shrink dynamically and connect IT costs directly to business size and objectives.

In a time where most businesses are taking big hits, I’m very bullish about the open source/SaaS market. I’m watching it on the ground level, and I see the value proposition growing stronger in many hurting industries.

This morning another historic event occurred: Lehman Brothers filed for chapter 11 bankrupcy. With $615 billion in direct liabilities, it will be by far the largest bankruptcy in history. Lehman is 158 years old, and a longtime pillar of Wall St. However in recent weeks the bank has come on hard times due to bad bets on mortgage securities. The resulting losses caused major credit downgrades and produced a situation that made it more expensive for Lehman to fund transactions than the revenue it created. The bank fell fast; it was only Friday that executives had an emergency meetings. Today they are in full chapter 11 (liquidation) bankrupcy.

A bankruptcy of this size is unprecedented, and it’s really unknown what it will do to the rest of the market. It could cause a cascading effect on other financial institutions and create a truly unstable financial marketplace. Another note: this is 2008, and the world is connected financially. European and Asian markets are already plummeting on news.

So I’m not a doomsday guy, but this level of instability is a little scary. It will be interesting to find out just how resilient our global financial system really is.

The next 48 hours or so will be fascinating to watch!

It’s finally official. The US government is now running the two largest mortgage backers. It’s more of a rescue than a takeover, as both institutions were forecast to go insolvent in the coming months. Collectively they back $5 trillion in mortgage debt, about half of the total mortgage debt today.

I was a little surprised when I read the news, as it was looking like Freddie and Fannie might just need a little additional liquidity to operate until the market stabilized. A full government takeover goes much further. To start with, the existing CEO’s of both companies are now removed, and finance heavyweights David Moffett (US Bancorp) and Herb Allison (TIAA-CREF) will be running the firms. Another interesting development is that the institutions charitable contributions will be reviewed.

It appears that the government wants to cut the fat and get these institutions back to doing their core function: providing stability to the mortgage market. All the special terms for acquiring financing may have caught up to the firms, and it once again shows that government favoritism for private entities doesn’t help anyone in the long run.

Watching this all flush out in the coming months will be fascinating. The losers in the end are you and I: US taxpayers. It will likely cost tens of billions before this is all behind us. This fiasco will be another line item on national budget that has an insane negative number with way too many zeros behind it.

Lately I’ve been reading a lot about the recent lack of IPO’s, specifically in the tech sector. There have been only 4 tech IPO’s in 2008. That’s a really low number. Rackspace recently did an IPO, but it tanked. That’s not good news for little tech companies with a big IPO dream they hope will happen in the next year or so.

Most VC’s get into a deal with the hope of an IPO exit. Obviously that isn’t happening. That’s somewhat concerning for young companies like DataSync who need that mechanism to work to keep capital on tap.

It appears private equity has been eating most of the deals. Yes - big, mean, massive private equity firms that will do deals the size of a typical IPO. Is this good news or bad? We think it’s interesting, and not necessarily bad or good. What we do know from our experience in business consulting is that Sarbanes-Oxley is a pretty menacing issue for smaller IPO’s (typical for technology companies). The administrative overhead of being a public company is enough to kill the interest of a lot of companies from undertaking the task.

We think that the market will correct the regulatory requirements eventually, and the IPO market will take a turn for the better. Until that happens, private equity has a bright future in finding value that public investors can’t access.

Something great happened today - DimDim 4.0 came out. It’s the WebEx killer, and the guys at DimDim are even bold enough to put “WebEx is history” on their frontpage.

This web conferencing application lives up to expectations, and more. For months I have been playing with WebEx, GoToMeeting, Yugma (ug), and some other apps. I just couldn’t stomach paying a lot of money (WebEx and GoToMeeting) or using a crappy application (Yugma) for doing sales-critical webinars at DataSync. I’ve used DimDim in the past, but it just wasn’t quite there yet. Version 4.0 changes that.

First, the latest version of this app supports Mac desktop sharing, a requirement for me to function. Second, DimDim is now all flash and doesn’t require any client-side java application to function. It’s about time. DimDim supports whiteboard and PDF sharing inline, a really nice feature to get your audience involved on collaborative projects.

Here’s a a partial feature list from DimDim’s site:

• Share & Present Documents (PPT/PDFs)
• Share Mac & PC Desktops
• Share Whiteboards
• Share Mics (Built in VoIP & teleconferencing)
• Share Webcams (Live video & audio)
• 2-Way Video Chat
• Recording and playback of meetings
• Multiple Presenters (Host lets others share)
• Public Chat (Instant Messaging)
• Annotations and Markup tools
• Scheduled Meetings
• eMail & Calendaring (Outlook integration)
• Localization
• CRM integration (SugarCRM)

We’ve already looked at adding this app to DataSync Suite, and it’s looking really promising. I do webinars all the time, and it’s great to finally have an application that is open source, user friendly, and does exactly what it’s designed to do.

In my years dealing with Customer Relationship Management (CRM) software, I’ve learned a lot about two highly connected, yet highly diverse areas of life: business and technology.

Naturally I started on the tech side. I came out of the tech field and viewed CRM primarily as technology geared to solve a set of defined requirements. This made my challenge as a CRM implementor simply to execute on the requirements doc.

One problem: there was never a solid requirements doc. Why? Because businesses don’t have a hardline set of rules for running themselves. It’s true: almost every business gets things done by doing them, not figuring out how they actually do things. Almost every business, including our own, is very dynamic and runs on loosly defined proceses.

However CRM runs totally opposite. CRM, in our case SugarCRM, runs on a hardline set of rules for executing tasks and managing information. CRM itself is designed to guarantee that sales, marketing,  customer services processes are run thoroughly and consistently.

Therein lies the issue. Dynamic businesses need defined processes. I have found that the greatest need today isn’t better CRM software or more of it, but instead a complimentary alignment of both systems. CRM must be designed to be loose enough to fit dynamic business. However it must be defined enough to complete business processes accurately and repeatedly.

In my quest to build great software platforms, I am forced to constantly rethink how software is implemented in businesses today. Often software people and business people think very differently, and translating both languages is always challenging. When I completely figure out how both work I’ll let you know

The fear mongering is in full force. The news is full of bank failures, an ongoing housing crisis, and gas prices that won’t go down. Sounds gloomy, eh?

But it isn’t all bad. Open source is poised for a boom. According to OStatic.com, more and more businesses are switching to open source to cut costs and increase value:

“The adoption of OSS continues to increase among banks and investment services firms. Among the investment services firms surveyed, approximately 84 percent expect to be using open source software by the end of 2008. Adoption is most notable in this category because they are impacted by escalating transaction volumes and data processing requirements as well as cost pressures.”

Once again, economic pressures and recessionary environments force businesses to trim fat and get more efficient. This proves the value and long-term benefits of running an open infrastructure. The thinning years prove the meddle of any technology, and it’s great to see confidence in the open source model in times that test any business model.