In the last few weeks we’ve started to come out of our stealth shell. We republished our corporate website with a little more detail of what we’re building. We started blogging, sprinkling in a little of our product vision. We’ve started letting people give us their email address so they can receive alerts and be invited to try the beta version of blist when we’re ready for that.

Over the last few days an interesting thing happened. Some of the key folks at Dabble DB signed up for our alerts and to join our beta. I like Dabble DB. Of all the web-based databases - Trackvia, Quickbase, Zoho Creator, eUnifyDB, Caspio and a few others, Dabble DB has been the most innovative. Clearly we plan to compete with them when we launch, but that’s not the focus of this post. Some of the guys on the blist team asked how we should respond. Should we suppress them from our email list? Should we email their founder and ask him what motivated him to sign up? It provided the impetus for a good philosophical discussion.

I think startups focus way too much on competitors and not nearly enough on customers.

Here’s a real world example from our early days at MessageRite. Email archiving services are comprised of two functional areas:

1) A set of processes that parse email messages and store them in an archive
2) A user interface that allows people to search for and review messages

When we started building the MessageRite service, we figured out how to parse and archive messages. We really had no idea what the user interface should do. Sure we knew that it needed both full-text search and some kind of structured search (for example, “find all email messages from Henry Blodget between April 5, 2001 and June 14, 2001“) but we didn’t know what else it should do. We could have taken one of two paths to solve that problem:

1) We could have done what our competitors do
2) We could have asked customers to tell us what our application should do

We chose the latter, not for any grandiose strategic reason other than I enjoyed talking to customers and was a little intimidated talking to competitors. While competitors want to annihilate you, with customers there is a win-win equation somewhere to be found.

You might think it would have been awkward to conduct sales calls while not having a very feature rich user interface. We turned it into an opportunity. We positioned it as “the fist companies to sign up for our service are going to have great influence over how the application works.” You know what? Prospects loved the idea. Finally a vendor was listening to them. What we learned over the next few months is that all email archiving solutions in the market suffered from the same inadequacy - poor compliance workflow. All of these prospects-turned-customers told us they were suffering real pain in fulfilling the obligations of reviewing emails and satisfying discovery requests. So that’s where we focused and how we differentiated ourselves in the market. Within 6 months we went from zero customers to turning customers away (due to our bandwidth limitations). It was a nice problem to have - much better than having built another me-too product nobody wanted.

By focusing on customers, not competitors, you have a much higher probability of creating a product the market really wants and that’s the key to not only startup success, but professional satisfaction.

startup anecdotes, focus | 4 Comments »

In late 2002 I founded a company called MessageRite, developing and offering email archiving as a service. In 2004 we merged MessageRite into FrontBridge Technologies and in 2005 Microsoft acquired us. The email archiving service we built is now Exchange Hosted Services’ email archiving offering. One of the motivations for creating MessageRite was that I felt strongly that email archiving should be delivered as a service. As head of a technology unit within Smith Barney, I was already wrestling with an out-of-control storage growth problem in my Exchange farm. Who wants another storage management problem in a local archive? Not me. Delivering our software as a service was also a key differentiator. At the time almost all developers of archiving software sold shrink-wrapped software and hardware solutions.
 
It turns out we were right and customers adopted email archiving as a service in droves. Over the last few years we’ve seen companies embrace even more core applications as a service. Salesforce.com is a huge success delivering CRM as a service. Concur, Basecamp, Constant Contact and PayCycle are just a few software companies showing phenomenal traction in delivering core business functions as a service.
 
This post isn’t to persuade you that software as a service is the best delivery model. Rather it’s to persuade you as an entrpreneur to pick your delivery model and focus on it. I went to a software demo event here in Seattle yesterday. This company is on the 6th major release of their software. I don’t know anything about their customer traction or the success of their company, but I think they’ve been doing reasonably well. Through version 5.0 they delivered their client/server software in the traditional, shrinkwrapped way. It ran only on Windows. For version 6, though, they’ve made a few radical changes. Now it’s exclusively web-based software not a client/server app. You can buy it shrinkwrapped for the Windows IIS and SQL Server stack. You can buy it for shrinkwrapped for Linux/Apache/MySQL. Or you can subscribe to it as a service - they run it for you in their data centers on the Windows stack. The crazy thing is that none of the three versions is the native version. They develop in one language and run it through a code converter to generate C#/ASP.net for Windows or PHP for Linux. Their hosted version wasn’t designed to be multi-tenant at all. It’s the same software they would deliver to you, but they run it on your behalf. Multi-tenancy is a fundamental characteristic of software as a service. You simply can’t scale or deploy software changes effectively if every customer has their own database and DLL’s. I fear that this previously successful company is in for a tough time with their new release. They lost their focus.
 
In 2004 I flew to NY and demonstrated MessageRite’s email archiving service to Goldman Sachs, one of the largest, most esteemed brokerages in the world. They liked what they saw. They loved our UI. They loved the compliance workflow. But they absolutely hated our software-as-a-service delivery model and asked us to deliver it to them as shrinkwrapped software. The revenue opportunity from Goldman Sachs alone exceeded our total revenue at the time. It was hard to say no, but that’s what we did and it was the right thing to do. Why? Because our delivery model was part of the evangelistic story we told and was a key differentiator from our competition. If we “sold out” for Goldman Sachs, what would we have stood for? It was the right thing to do and while Goldman Sachs still wants to control every byte in their domain, about 95% of the rest of the world has now adopted email archiving as a service.
 
Creating shrink-wrapped software employs a different development and test methodology than developing for software-as-a-service. To run software-as-a-service at scale, operations must be a core competency. Don’t dilute your efforts or your message by trying to be all things to all people. Pick your delivery model and do it better than anyone else.
 

focus | 1 Comment »