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.

Over on SmartDisorganized I've been tracking and playing with spreadsheets, particularly the online variety. I'm becoming increasingly impressed by the potential of online spreadsheets as containers for mashups and widgets. In particular EditGrid which comes with embeddable queries to Amazon and Ebay "out of the box" seems to be pointing in a very interesting direction.

Whereas the online equivalents of Word or PowerPoint are more or less dead-ends, as I've said before spreadsheets (in particular Excel) are grossly underexploited powertools, not to mention the repositories of most of the world's semi-structured data.

I've also said that Excel is so good that this is all Microsoft's market to lose if they screw up the transition to a new kind of spreadsheet : the spreadsheet as front-end / dashboard to all the enterprise's information streams. A flexible mashup builder which can be configured by a reasonably smart / well trained user or the IT department or an integrator.

We are a hairsbreadth away from the socialized spreadsheet fulfilling this destiny. But I'm waiting to see who's going to give it to us. Will Microsoft succeed in reinventing Excel? Will Google pump up the capabilities of their spreadsheet to compete? Will an outsider with a technically superior web-native sheet (like EditGrid) manage to sneak in-front of both?

Winer is thinking hard at the moment. Couple of goodies :

Twitter business model

What's news? What's its business model?

What will kill Microsoft.

Craig Mundie:

If you want to focus narrowly on saying, as perhaps we should, "We're just a software company and we intend to make a business out of software" -- then I think his statements are true. It's obviously a little bit more complicated than that. But, at a conceptual level, the idea that software is not an intellectual property asset is something that we do not agree with. We spend billions of dollars a year to make [software]. Most of the established countries in the world accord it intellectual property status and we work hard to develop patents and uniqueness.

Apart from that, he makes some good points.

Dare Obasanjo on walled gardens and the social network os

It's the usual stuff ... (same as I was discussing with Umair some time ago)

Of course, Facebook and its ecosystem failed to find the value that I presumed that private networks could provide. And now looks to be in trouble. Does this mean I was wrong?

I don't know ... no one is doing what I thought they'd do ... but I still can't shake off the feeling that it's possible.

We'll see ...

Wisdom of Clouds has a great overview of the "big 4" cloud offerings.

Facebook's coming payment system

Dare Obasanjo on whether the Yasn-as-platform is dead. (channeling Alex Iskold)

Eeek!!! Has one of the major planks of my understanding and prediction of the software industry just turned turtle and sunk?

Well, I still believe in the widgets and YASN-as-Platform model. But some things clearly went wrong in Facebook's case. Is this in relation to their being evil?

Or is it an issue when giving away access to your platform : applications must pay somehow. What does this bode for GAE or Amazon or Faceforce or Microsoft's Azure? Presumably paying apps. earn their keep.

Meanwhile, it turns out that Java never made money for Sun. Which shouldn't surprise anyone. But does raise the question, what was their strategic objective? It's one thing to have had a sound strategy and just been beaten (eg. by Microsoft's C# or the free-software movements swarm of "scripting" languages) but it's very hard to see what on earth they were expecting from Java.

My first thoughts on Microsoft's Azure ended up at Folknology.

Basically, it seems to me that M$ aren't clear what they're aiming for. An Amazon-like generic hosting option. Or a GAE-like integrated experience. I'd be more impressed if they'd produced a great hosting story for ASP. At least then you'd feel that they had the something that they believe in. Dropping hints about PHP or Rails on the one hand, while pushing tighter integration with Visual Studio on the other, just sounds dissembling at best, and downright deliberately misleading at worst.

Cringely reads the tea-leaves of a recent Samsung announcement : that they are getting out of high-end SmartPhones from which he infers "nah, all phones are gonna be smart, but Samsung want to get out of smartphones with expensive (read Microsoft Windows Mobile) software".

And on the future of mobile platforms :

If I had to bet right this moment on the mobile 85-10-5 of 2011 I'd say iPhone, Android, then RIM, Symbian, or something completely new from behind Door Number Three.

To recap ... Microsoft are in real, real trouble. M$ are a company built around a particular vision that Bill Gates had in the 1970s : that with the right intellectual property protection, a company could be a pure software company, independent of any hardware vendor or service provider. And that vision was spectacularly successful for two decades.

But that business model is evaporating. As Cringley points out : on mobiles, two of the big platforms (Android and Symbian) are now free. The third, and (to-be) biggest (iPhone) is an appendage of a hardware manufacturer.

On the exploding netbook category the contenders are Linux and Windows XP, the product Microsoft is desperate to kill. (Here's a hint to Microsoft. Fix a couple of problems in XP, rebrand it as "XP3" and keep it alive for netbooks.) If M$ are stupid enough to kill XP, and Apple get into the game too, there's no guarantee Microsoft will have much presence here either.

And that's where all the growth is going to be in personal computing over the next few years.

Update : Bonus link to developer view.

Well known troll Andrew Keen argues the case for money in the great "money vs. something else" platform war.

My response :

Surely if something gets scarcer, it's value goes up, but, by definition, consumption goes down.

If there are fewer pancakes, we may obsess over pancakes, we may dedicate our lives to the great pancake chase. But most of the time, we'll eat bread.

In a recession, the thing that's got scarce is money. And whether we like it or not, we'll have to make do with less money, and more of something else. (Whether that's scrip, LETS, doing each other favours, growing our own food or donating our time to free software.)

Your argument is effectively based on the idea that demand for money is "inelastic" ... that however expensive it gets, people just gotta have it and so anything else will be sacrificed for it. I don't agree.

If there's less money, companies aren't going to start splashing out on *more* software licenses. People aren't going to start buying more CDs or DVDs. *Consumers* will either adapt to go without, or to pirate, or to consume free versions.

And whichever of those three they choose, the effect is the same : less money will change hands while people manage their software and content requirements. And there'll be less money going to programmers and "content creators".

This is true for any other product too. We don't imagine that a recession means more paid work for people in the steel industry. Why imagine that it will mean more paid work for journalists?

The only difference is that we know that when there's no money to pay for steel production, the quantity produced and consumed goes down. Because information isn't scarce in the same way, we don't know whether total production and consumption in the information industry will go down or whether amateurs doing it for free will pick up the slack.

How to add third party widgets to SocialText