Paul Graham : Could VC be a Casualty of the Recession?

Some useful conservatism on the cloud threat to M$.

I think the cited report both overplays the real problems of switching from M$ Office, and is slightly disingenuous - I mean even if you think the cloud is going to be huge, you still think there's going to be a mix of cloud and locally hosted services for the foreseeable future. But that dodges the question of the combined effects of SaaS AND free-software AND Apple AND Adobe AND local caching for web-apps. Yes, hosted office apps are not going to replace the requirement for local apps. But if Google Apps. play well with Open Office and can be run locally on Gears on occasions when your connection drops, you can have an excellent company-wide standard which provides everything you need.

Nevertheless, the report might be right about the real human reluctance to shift.

Quick notes on 2008 :

1) Apple proved they were brilliant ... in an old fashioned way. But nevertheless brilliant ... and dominant in the mobile device-swarm and PCs for the aspirational elite of pretty much all smart professions. Their 2009 story is (sadly) about Steve Jobs' health.

2) Google revealed that they now run the world. That their 20%-time distributed R&D gives them an accelerated entry into everything new that's going on. But it also revealed that they are mortal and capable of mediocre me-too-ism. The story of 2009 will be some of Google's services losing to better rivals and failing. Does Google know how to handle that?

3) Amazon showed they were visionary (in clouds and Kindles) and focused enough to execute. Their 2009 story is about making the cloud work. And whether the Kindle ecosystem can take off.

4) Nintendo were vindicated, demonstrating again that genuine creativity and innovation sees off the mere imitators in gaming.

5) Microsoft showed that they are walking dead. Void of ideas or courage to drive innovation forward. Their 2009 story is going to be whether they face up to the threat which is, to them, existential : the end of "software as a stand-alone product"

6) Sun were revealed as clueless.

7) Sony clunked. They have technical ability but lack inspiration.

8) Asus turned out to be more innovative than any other PC maker ... and now Netbooks are going to conquer the world.

9) Facebook revealed they were evil after all. But they're still a force to be reckoned with.

10) Unlike Yahoo, who aren't. I'd still be intrigued if Apple bought Yahoo and tried to remake it in their image. But I can't see it.

11) Adobe have a great thing with Flex and AIR. But everyone can see that. Microsoft will throw a *lot* of resources behind Silverlight to try to take Adobe's place. And Titanium looks a very interesting free-software alternative to AIR.

I was proved wrong in thinking that the browser was no longer interesting when Google came out with Chrome. The full impact of this is yet to be seen.

12) In fact, Platform Wars was generally busted ... the two big trends I've been watching for : the YASNS-as-platform and the device swarm didn't really materialize as clearly and distinctly as I expected. Apple's App. Store was perhaps the nearest we saw to both these trends coming to fruition with Apple providing a popular device and distribution infrastructure to specialist developers. Google have got all the pieces (GAE, Android, FriendConnect, Gadgets, Orkut etc.) but haven't put them together in quite the right way. Maybe next year, fumbling around in competition with Apple and Facebook the pieces will start coming together.

Of actual devices, only the iPhone really excited attention. LiveScribe came and didn't change the world. Nor did Chumby or Nabaztag. Possibly they're too expensive for something so specialized ...

13) Trends to watch in 2009 ...

a) Cloud providers trying to make their clouds profitable while signing up real clients.

b) Microsoft wrestling with its soul.

c) The rise of the online spreadsheet.

d) Energy efficiency.

e) Google having to handle (localized) failures.

f) Who gets the good bits of Yahoo?

g) Applications built for the browser (or AIR/Titanium/XULRunner etc. desktop virtual machines built with the same Javascript / HTML / CSS / jQuery technology) will continue to expand. Development of ordinary desktop software will crash.

Few people or companies will find it worth developing desktop applications.

What's in store for the future of netbooks?

Twitter does deals with Google and Facebook but not MySpace.

How advertising people see widgets.

Read this.

Estimates vary, but the global software industry probably generates annual revenues of about $500 billion. Industry analysts are saying that up to 25% of new software sales will be delivered as SaaS within the next few years. That implies a shortfall of some $100 billion of license revenue that won’t be collected upfront any more, along with whatever it takes to buy and set up the infrastructure to operate it — maybe another $100 billion?

These are scary numbers, and others can do a better job than I of validating them, but let’s say they’re even half accurate. Will the industry have enough nerve collectively to fund that revenue gap, not just for a year, but over a period of several years as the big switch to cloud and SaaS accelerates? Especially if such a huge financial shortfall coincides with the tail end of what is starting to look like it will be a deep, traumatizing recession?

Dave Winer : Soon it will be time for the next cycle

Update : Actually the "data-portability" initiatives from Google and Facebook (mentioned in the Dave piece) are the natural unfolding of "user-is-the-platform" thinking.

And now, with the soaraway online advertising market threatening to stall, comes news that Google's software engineers are going to get less time to spend on pet projects and are being told instead to hunker down and work on money-making tweaks to the core business.

Depending on how serious this is I can't see this is a good idea. 20% time is Google's brilliant distributed research and innovation project. Killing it off a) makes Google stupider, and b) pisses off all the people who are currently emotionally invested in their projects.

Far better for Google to cut other perks (free food, toys) or even salaries than cutting 20% time.