We spend a lot of time (rightly) on the capabilities of our products – identifying valuable problems and compelling solutions.  This focus is ideal for addressing the needs of our users.  But what if people abandon our products before trying them?  First impressions matter – both for buyers and users.

SXSW BizSpark Accelerator

Microsoft sponsored the BizSpark Accelerator at SXSW this year, where several startups competed by giving a 2 minute presentation of their products / companies.  The panel of judges emceed by Guy Kawasaki and Brad King.  The contestents were the top 20 from 200 submissions.

First Impressions

I was lucky to attend part of the event, focusing on the eight finalists in the Innovative Web Technologies area.  I recorded the presentations, but the camera shakes so badly in my hand that watching them is like trying to listen to a lecture while riding a rollercoaster.

Two minutes is barely enough time to make a first impression.  Each presenter had 15 minutes of Q&A with the panel, where they could get into more details and provide feedback to the entrepreneurs.  First impressions, however, are made by the very first thing you say.  Here’s the first sentance from each of the presenting finalists:

• klout.net – Hi everyone, I’m Joe.  At klout, we measure influence across the social web.
• OtherInbox - Thanks everybody, my name is Josh Baer, and I’m here to tell you about OtherInbox, which helps you save your real inbox for real people.
• Piryx - The idea is that you want to wake up, create an account, run for public office, and change the world. [Note - I lost the first sentance when recording, but this is the first substantive sentance]
• Ribbit.com – My name is David Lee, I am the director of strategy and business development for Ribbit Corporation. Ribbit is a cloud service for enabling communications innovation, bringing together the internet, voice, and data.
• Ringlight - I’m here to talk to you about my company, Ringlight.  My name is Brandon Wiley, I’ve been working in peer-to-peer for a decade, from the first peer-to-peer application, freenet, to the most popular peer-to-peer application in the world, bittorrent.
• Thrive - My name is Avi Karnani from Thrive.  I’m going to show you a new feature we’re about to launch called behavioral budgeting.
• YouData - Let’s talk about internet advertising.  [something garbled as the speaker had trouble speaking clearly into the microphone]
• Zoomorama - Hello, my name is Franklin, and I’m president of Zoomorama.  Zoomorama comes from panorama, the wide open space, and indeed zooming is not just about details, it is mostly about space. [Note that in parallel with the speaker, the display was showing some compelling image zooming technologies]

Every one of these presenters made a first impression.  klout, OtherInbox, and Zoomorama (and maybe Piryx) tell you what their products do in the opening sentance.  Ringlight and YouData both set the tone by identifying an existing space.  Thrive lets us know that whatever it is, we haven’t heard of it before, and Ribbit shared a lot of jargon words.

Elevator Pitch

When I was in presales, I learned how to craft an elevator pitch.  What I had not heard of before this year’s conference was the one-floor/two-floor pitch. 

An elevator pitch is a presentation of what your product (or company) does, that is short enough to be delivered while conveniently riding on an elevator with the really important person you want to hear your pitch.  It is a powerful image, used to remind us that people will usually give us a brief opportunity to get their attention.  To get more time, we have to earn additional attention.

The one-floor elevator pitch is a variation of the elevator pitch, but imagine your audience gets off the elevator after one floor.  You really only have time to get out a sentance or two – just like the above quotes.  

Which of the eight presenters, after giving the quotes above, would get invited to follow their listener down the hall, and which would have to stay on the elevator?

I saw the full presentations, and one of the presenters is a client, so I won’t share an opinion.  Would love to hear yours.

As a product manager, what would you have wanted the presenter to say for the one-floor elevator pitch?

It’s fitting that I’m writing this from the exit row of an MD-80 this evening on the way home from a customer visit.  I almost didn’t get the exit row, but I did.  I tried for an upgrade to first class, but I was 15th in line – it was a busy flight with a lot of high-status frequent fliers ahead of me.  But I’m thrilled to be in the exit row, with the lap-room available to type up these tips that will help you travel.

You can love to travel or hate to travel.  Either way, there are a lot of little things you can do that make travel easier.  At first, many of these seem like small inconveniences, but over time, you can adopt many of them as habits.  And the rewards add up – every little thing you do that makes it easier to be on the road makes travel better (or at least less onerous).  This is my first trip in almost a year – I’ve been doing all of my traveling for 2008 virtually – with GotoMeeting, WebEx and DimDim.  I’ll be back on the road again, so I’m dusting off what I remember from my road-warrior days, to make it easier now.

Frequent Flier Programs
When I first started traveling, I was on the road every week.  My travel agent suggested that I sign up for every frequent flier program, and every hotel rewards program.  So I did.  Over time, I found that focusing on a single airline provides the best payback – because you earn status that lets you

• Go through shorter security lines at the airport.
• Get on the plane first and grab the luggage space you need in the overhead compartment.
• Reserve the “premium” seats – like exit row.
• Get “bonus” mileage credit for the travel that you do – leading to free flights or upgrades later.

Status is a key component of the loyalty/stickiness programs that airlines run.  They need a way to differentiate their “fly from A to B” product from everyone else’s “fly from A to B” products.  As you fly more and more in a single calendar year, you increase in status from ‘regular passenger’ to ‘acknowledged passenger’ to ‘appreciated passenger’ to ‘of course we can, Mr. Sehlhorst.”  On American, that path goes from ‘Aadvantage member’ to gold, then platinum, then executive platinum.  Once you earn a particular status in a given year, you retain that status for that year and the following year.  Each year, your status, if not re-earned, drops one level.  So if you earn platinum status in 2008, you keep it for 2009, then drop to gold status for 2010, and back down to ‘regular passenger’ in 2011.

The right airline for you may be different than it is for me.  The airlines that fly into your “home” airport may be different than mine.  And the flight schedules from your home airport to wherever you tend to go may be more or less convenient on one airline or another.  Personally, I fly American Airlines whenever I can.  I know and like the planes, I like the “by price and schedule” implementation for booking flights online, and I especially like the service I’ve received as a platinum status flier over the years.  Apparently the customer service is even better for people who reach executive platinum status, but thankfully, I don’t have first hand knowledge.  Always a bridesmaid, never a bride.

American also has a program where once you reach a million miles (traveled or otherwise earned), you become “gold for life” – so even when you travel infrequently, you still have some status/perqs.  When you reach 2 million miles, you become platinum for life.  As someone who’s halfway between the two, who has enjoyed the benefits of platinum off and on (mostly on) for the last decade, I find that carrot to be pretty compelling.  Traveling with your family at the holidays is SO much easier when you have status, if something goes wrong one year (and it has).

I’ll add a connection, or wake up an hour early or pay a few (but not a lot of) extra dollars to fly American on any given trip.  Knowing I’m a little closer makes the trip better for me.  For you, picking the best schedule, or the cheapest flight, might be better.

My most valuable tip: When someone else makes a reservation for you, you usually get bad seats.  First – make sure your frequent flier number is associated with the reservation.  Second – fix your seats.  And if the flight is really full, check again 96 hours and 48 hours and 4 hours before your flight, a better seat may have opened up.  That’s how I made it to the exit row a few hours before my flight tonight.  I was in a middle seat on an oversold flight.

Frequent Sleeper Programs
The hotel chains have the same game going as the airlines.  “Stay at our hotels, and earn status and points.”  I probably have a dozen memberships, and they vary in quality.  Rather than go into details, I’ll say that I feel that the Starwood chain (Sheraton, Westin, W, St. Regis) has the best program.  As a Starwood member, I have never been prevented from reserving a room using “points” instead of cash (aka a free room).  When I was a platinum Starwood member, the complimentary room upgrades were always a very nice surprise, and happened frequently.  The only downside is that I can’t always find a Starwood property where I’m travelling.  If I can’t, I lean towards Marriott and Hilton as distant second place competitors.

Frequent Driver Programs
Is there anything other than Hertz?  I can always find a good rate on the cars I rent, usually get a one or two class upgrade on the car, and don’t have to wait in line – Hertz gold is free, and you get “status” from them for your tenth rental in a given year.  Your 40th rental in a year gets you “crazy status.”

Did I mention that I don’t wait in line to pick up (or drop off) the car?  Maybe every rental company has that service these days, but I’m blissfully unaware.

Frequent Traveler Intelligence

Bar none, the best place to learn everything about being a frequent traveler, and to get the best intelligence and insights about all of the programs is flyertalk.com.  Check out the “miles buzz” forums – there’s one for each major airline, hotel, and car rental chain.  Once you get good at maximizing the rewards you get from the travel you have to do, you get exposed to the extreme sports version of frequent travel – the mileage run.  People actually figure out the cheapest ways to fly 16 segments from Boston to Tokyo and back over the weekend, so they can earn that next level of status for the year.  It is an insane world.  The next time I’m on the edge of executive platinum, I might just try it.  I’ve let that brass ring slip through my fingers year after year.

You also learn really obscure stuff – like the sequence in which meals are passed out in first class (it varies by flight direction) – so if you are really craving the glazed chicken, and hate the idea of veggie pizza, pick the right seat.

Another very handy site is seatguru.com.  You’re trying to pick your seat for a flight on an MD-80?  Where do you want to sit?  Seatguru shows you a map of most planes, as they are configured by the different airlines.  On that map, you see if a seat has shortened or extended legroom (it varies within the planes), has a power outlet for your electronics, or if anything else is especially good or bad about a particular seat.  Desperately need power on that late night flight home so you can write your blog post?  Better make sure your seat has a power port.

Weather.com has proved to be really useful too.  Every time I travel to a new city, I bookmark the weather.com page for that city in my browser.  Over time, the list has become pretty long, but with all the banner ads and animation that clutter the site, I love that I only have to click once to find out how to pack.  There are probably some much better desktop widgets that you can use to find out the weather without ever going to the site – but what was around 10 years ago was never compelling.  Add a comment or shoot me an email if you have a favorite weather-checking solution.

You can also check flight status online or have your airline send you a text message (or voicemail) if there are changes to your flight schedule.  Those can be pretty handy things.  You can even request an upgrade to first class over the phone while you’re driving to the airport if you want to try for an “impulse upgrade” at the last minute.

Your Computer on the Road
Over the last couple of years, I’ve increased my use of software as a service for my computing needs.  It turns out that this provides some interesting benefits when you’re on the road.  Being able to backup (and more importantly, recover) your work on the road used to be almost impossible.  You had to carry two laptops (or one laptop and two hard drives).  But if your bag was stolen or lost, you were in trouble.

My “solution” is a work in progress, as I try out different services and different behaviors.  Here are some things I do, and how I get value from them.

Taking Notes

I use Evernote instead of OneNote.  I got hooked on OneNote a couple years ago – for me, the compelling feature was good search and an intuitive organizational metaphor.  Evernote does that too – with a slightly less polished UI.  But Evernote allows you to syncronize your notes across machines.  So I can access the tool on my client-provided laptop, my personal laptop, and my desktop.  And they stay synchronized.  If I’m on the road, and my laptop dies, I can access my notes from any machine through a web browser.  After a brainstorming session, I can take a picture of the whiteboard and stick it in a note (and Evernote will index and search the text within the photo too!), and I don’t risk losing the insights from that meeting.  Oh Evernote has an iPhone client app too.  That might be the killer app for some of you.

Disaster Recovery

My off-site backup is done with Carbonite.  I pay $50/year, for unlimited off-site disaster recovery – currently at 184GB.  Using Carbonite is dead simple – I installed it, and then any directory I wanted to back up (work documents, family photos, whatever), I just right clicked and added it to Carbonite’s list of things to back up.  Every file in that directory (and every directory underneath it gets backed up).  Add more files to that directory, and they automatically get added to Carbonite’s backup.  I’m in the middle of re-ripping our CD collection for the third time now (after hard drive failures over the years).  This will be both the third and the last time.  This takes care of my primary computer at home, and happens all the time, in the background.  For $50 per year, I have a ‘never think about it’ solution – most importantly protecting our family album, personal records, and work files.  It is also highly secure (the data is encrypted before being transmitted, and is stored in encrypted format).
On-the-road disaster recovery

I am currently using subversion (and TortoiseSVN) to make archival backups of all the files I create for work while I’m on the road.  This may be too geeky for most people, but it is free for me (since I already pay for the server to host tynerblain.com).  If I finish a presentation late at night, then someone accidentally drops a piano (or a fog lifter*) on my laptop the next morning, I can still wow the client.  I have to explicitly backup each file I want to save.  It looks like you can subscribe to a hosted subversion service for $50 (and up) per year, if you don’t want to install it (for free) on your own server (various prices).

*A fog lifter is a quadruple-espresso that friends of mine used to drink to start the day (or extend the night) when they worked on-site at a client in Cupertino years ago.

Back-From-The-Road Backups

I have used Scooter Software’s Beyond Compare tool for years.  It is a file-comparison tool that is great for what it does.  When I was programming a lot, I got addicted to it.  It is also extremely good at copying files and synchronizing directories between computers.  And it can be scripted, so you can automate processes.  I use Beyond Compare to push updates from my laptop to my desktop when I return from a trip.  If subversion is a scalpel for refined work, this is my backup chainsaw, where I just keep a current copy of an entire directory structure backed up (weekly-ish) to the desktop.  And that structure is then backed up off-site by Carbonite.  This helps a bunch when moving to a new laptop, replacing a failed hard drive, or just upgrading your hardware.  I have used SyncToy too, which is also good, but seems to take a lot longer when dealing with very large sets of files.

After files are synced to my desktop (backup  #1), Carbonite backs them up offsite automatically (backup #2).  And for those urgent files while on the road, subversion is there too (backup #3).  On-site, off-site, controlled-by-me and recovery-as-a-service.  Overkill?  Maybe.

Email

I do a lot of email.  I have personal email accounts (Google, Yahoo, and OtherInbox), I have client email accounts (MS Exchange, Google Apps, and Lotus Notes, so far), and of course Tyner Blain work email (Google Apps).  I’ve used both Thunderbird and Outlook as IMAP clients to (1) give me the ability to read and write email while offline, and (2) provide an “onsite backup” of my data that otherwise lives only in the cloud.  There’s no clear winner for me yet on the email front.  Probably Thunderbird, but frankly, I don’t spend a lot of energy worrying about “backing up in case GMail goes down.”  And when I am away from an internet connection, it makes for a nice break from email.  If I absolutely have to draft an email, it is probably for a client, so I’ll use their solution (usually Outlook).

Blogs

I know most people like Google Reader.  Fine.  Keep using it.  I’ve become impressed with Omea Reader as an offline feed reader.  I like having access to the blogs I follow, even when offline.  It allows me to “surf the web” when on a plane.  When I have access online, I start with the product management river of news.  Offline, I can manage those subscriptions as a sub-folder in Omea.

Entertainment

I keep a 2.5″ external hard drive in my laptop bag.  It is the drive I had left-over when I upgraded my laptop drive.  I stuck it in a $12 case (hooray Frye’s!), reformatted it, and put a bunch of mp3 files (ripped from my home CD collection, sync’ed with Beyond Compare) on it, and installed winamp.  Sometimes, you just need some Velvet Revolver, Vivaldi, Erin Ivey, or Diana Krall while you work.  For travel, I have some cheap Sony earbuds for regular use, and eShure noise-isolating headphones for the flight.  Both are easy to slip in a pocket or laptop bag.

Edutainment

I have become truly addicted to my iPod shuffle.  But I never use it for music – I never shuffle.  I use it for listening to podcasts and audio books.  On the way out on this trip, I listened to the Tipping Point by Malcolm Gladwell.  On the way home, a Rymasoft webinar with Luke Hohmann, president of Enthiosys.  I also would rather listen to This Week in Tech (or whatever) than listen to whatever happens to be on the work-out-room tv when I’m slogging it out on the treadmill.  Also – bring a book.  For this trip, User Stories Applied, by Mike Cohn.  Sometimes, you just need the feel of a book.  Also – if you fall asleep listening to a book, you’ll never find your place again.  Much easier with a book.

That’s way too much.  The first flight was too long, I guess.  Hope some of these ideas help you make travel a little less painful or a little more enjoyable.  Any tips you want to share with folks?  Add them below.

We all have seen the commentary from economists, speculators, and journalists.  The messages vary from gloom-and-doom to best-opportunity-ever.  Warren Buffet talks about being afraid when everyone is buying, and buying when everyone panics.  Jason Calacanis talks about tightening our belts (but also talks about opportunity).  The general message from venture capitalists seems to be “stop being silly, and start making rational business decisions.”  So what are you seeing in your neck of the woods?

Economic Impacts Across The Globe

When it comes to software product success, the rules of the game have not really changed.  Deliver distinctive value for your customers, and they will want your products.  The playbook, however, may have changed a lot.  Or not.  I would like us to share some anecdotal data with each other.  Tyner Blain is read by thousands (can you believe it?!) of people around the world.  People from 115 countries have been here just in the last month.  176 countries if we start at the beginning of the year.  That’s a lot of global perspective.

Is your corner of the world on fire?

What about your industry?  Your company?  Your customers?

Starting the Discussion

I’ll start the discussion with a couple anecdotes of what I’ve seen in my corner of the world.  Check out the comments below and chime in with what you’re seeing.  And thanks in advance for sharing!

Is SaaS a broken model, with integral flaws, doomed to failure in the next two years?  Lawson Software’s CEO, Harry Debes, thinks it is.  Perhaps the structural elements of the SaaS reality just break Debes’ business models.

Reports of (Predictions of) SaaS Demise

…are greatly exaggerated. The SaaS is doomed thread has been circulating for a couple weeks, ever since ZDNet’s Victoria Ho interviewed Lawson Software’s CEO, Harry Debes.

Here’s a quick “get caught up” set of interviews and editorials.

• Victoria Ho’s interview, where Debes is quoted: “People will realise the hype about SaaS companies has been overblown within the next two years.”
• Hat tip to Gopal Shenoy, who said: “Debes made the prediction that Saas software model is bound to collapse in two years.”
• Joshua Greenbaum at Enterprise Anti-matter wrote: “But if Harry had said the SaaS model will collapse because a pure-play SaaS model is, in the long-run, untenable, I would have to agree.”
• Joshua actually takes a reasoned position, he also wrote: “all in all SaaS will end when customer choice ends, and no sooner.”
• Jeff Kaplan at Seeking Alpha wrote: “the SaaS movement is being fuelled by genuine customer demand and is experiencing accelerated growth because of widespread customer satisfaction”
• Krissi Danielsson at eBizQ wrote: “The idea that SaaS would fail because there were less profits in it sounds silly to me.”

First, let us (apparently) be the first to point out that Debes didn’t say the SaaS market would collapse in two years.  He said people will see through the hype within two years.  Big difference.  Debes made a handful of other unimpressive comments, but not the one he’s being vilified for.  There is other stuff to criticise, but his point about the hype is spot on.  Anyone who’s followed the agile movement as it moved into the mainstream has had to undo the damage of overblown hype in conversation after conversation with clients and stakeholders.

Second, while Krissi humbly discounts her opinion as being “less expert” than others, she makes the most succinct points about the value to the customer trumping any other perceived dynamics.

Knocking Down Barriers To Entry

Debes points out, correctly, that (hosted) SaaS vendors do not have the luxury of the barriers to entry that they can create when they sell on-premise solutions.  Debes describes the situation – after you have sold software to a customer and deployed it, it becomes very hard for that customer to ever move to a competitive solution.  If your product provides a value of 10 units, and a competitor has a product with a value of 15 units (50% better), you will probably lose out on a competitive new sale.  If it costs a company 6 units to change (deploying new software, training, etc), then you probably will retain your current customers.  Those customers lose out on the “better” solution, because the incremental value is only 5 units (15 minus 10), but the cost to change is 6 units.  This is a barrier to entry that mutes competition.

Take a look at his exact statement:

Getting signed up as a SaaS customer is fast, but getting out is just as fast, whereas traditional software is like cocaine — you’re hooked. It’s too difficult and expensive to switch providers once you’ve invested in one. If it were easier to jump ship, a lot of people would’ve hit the eject button on SAP a long time ago.

Where Debes is off the mark is that he uses the above to reach the conclusion that SaaS is flawed.  What he really is exposing is a weakness in some company’s business models.

Any company that is dependent upon that barrier to entry (of high switching costs) for survival is doomed.  The great wall of China worked fine against enemies on horseback.  Not as effective today when cavalry implies helicopters instead of horses.

SaaS Creates a More Competitive Market

Because switching costs (both to and from) a SaaS solution are much lower, the market becomes much more competitive.  Consider the following comparison (from a customer perspective) of the total costs of ownership for SaaS subscriptions versus packaged software licenses.  This is from our earlier article on the economics of SaaS.

Debes’ barrier to entry is visible in the bottom chart – you have to clear that high barrier to justify a software purchase.  And if you’re already getting much of the value with an inferior solution, it is harder to to financially justify the change to the superior solution.  Customers have to live with their mistakes.

With the SaaS model, costs are incremental (in comparative scale).  If, at any time, you desire to change solutions, you only have to deal with data migration and training costs.  You may have to pay an early-cancellation fee (like with cell phone service) if you have signed up for a long-term subscription (to get a lower monthly rate).

From Debes’ perspective, that is apparently very scary.  Anyone can come along with something just a little bit better, and steal his customer.

From your perspective – all you have to do is make something a little bit better than your competitor, and you can win that customer for yourself.  This is great.  Instead of looking at market-penetration to see how many customers are left, you look at the size of the market to see how many customers exist.

[Red alert!  Logical flaw!]

There’s one problem.  The barrier to entry is removed as soon as one of Debes’ competitors has a SaaS offering.  As long as the customer can export his data from Debes’ tool, and decouple/recouple any interfaces to other customer systems, the barrier is removed as soon as a competitor offers a subscription pricing plan.  So this is not a good argument for why Lawson should not have a SaaS offering – it is a plea to their competitors not to.

Conclusion

You may want to discourage your competitors from adopting SaaS models, or they might just take your “addicted” customers when they introduce a better product.  Or, you can seize this as an opportunity to build a better mousetrap, and liberate your market from their past mistakes.

From The Customer’s Point of View

If you’re selling software as a service, you hopefully don’t need a Foundation Series introduction to SaaS.  If you’re considering purchasing software as a service, then maybe you do.  This article is not an article about the challenges of product management for a SaaS product, nor is it about multi-tenant architectures and other SaaS implementation details.

This article looks to simply compare, from the customer’s point of view, software purchased as a service versus software purchased as a product.

Software as a Service?

Software as a service, is an interesting name.  It implies that instead of purchasing the software, you are purchasing a service – and that service is the ability to use the software.  You are also (usually) purchasing a hosting and infrastructure service.  The SaaS provider will maintain the hardware, perform upgrades, backup your data (sometimes), and otherwise perform all of the “keep the lights on” services and activities required to keep the software running.

Imagine a typical, 1990’s style software purchase.  You buy a source code control system.  You set up a server somewhere, and install the software.  You have ongoing support costs – providing power to the server, keeping the server cool, applying security and operating system updates to the server.  You have costs associating with administering the hardware.  You also, when you get updates to the software, and when you purchase upgrades to the software, have to spend money (labor costs) to update the software.

You also carry the risk of a botched upgrade.  And you carry the risk of a hardware failure causing downtime, or causing you to lose data.  You also have to bear the costs of security – do you allow your people to access the software (on the server) from other computers on your network?  Do you allow them to access the software when they are not on the network (travelling, working from home, etc)?  You have to invest in designing and maintaining a secure system – to prevent your competitors from stealing – or even worse – destroying your data.

Now imagine that you’re outsourcing all of the “keep the lights on” activities above.  You pay an IT services firm to manage the hardware and the software for you, including the security model – and you just use it.  That’s one of the benefits of purchasing software as a service.  To really grasp the economics of SaaS you have to contrast it with the economics of software license purchases.

Widespread Misunderstanding

There is a widespread misunderstanding about purchasing software.  In the last section, we used the word “purchase” but that isn’t actually correct.  You don’t purchase a copy of the software – you purchase a license to use the software (with restrictions).  You probably have heard the phrase “site license”, which means that you are purchasing the right for everyone in your building (or company) to use the software.  Sometimes software is sold in terms of “numbers of seats” – the number of people that are licensed to use the software at any one time.  You could have 100 engineers, who all share ten seats (single-seat licenses) of analysis software.  Since each engineer only spends about 5% of their time using the software, they can easily share licenses.  At any given time, five engineers (on average) will need to use the software.  With a license for ten simultaneous users, each engineer is likely to be able to use the software whenever they desire.

The point of these examples is to point out that even when you think (or say) you are purchasing software, you aren’t.

Now that we have that behind us, the idea of purchasing a service is not as different from purchasing a license.  In neither case are you purchasing software.  In both situations, you are purchasing the right to use the software.

Economics of Software Licensing

There are an infinite number of creative ways to purchase a software license.  The most common situation is that you purchase a license, and then later purchase upgrades.

An obvious example is Microsoft Office (productivity software).  Microsoft releases a new version of Office every couple of years.  If you own the previous version, you can purchase an upgrade for less than the cost of buying the software for the first time.  You are not required to purchase an upgrade, but you may want to.  If the people you work with all upgrade, you may want to upgrade too – so that you can use the documents that they create.  Microsoft does a good job of providing free utilities to read documents from the newer versions, and allowing people with newer versions to create documents that can be used by people with older versions.  Microsoft, therefore, gives you a choice.  They rely on market forces to create the pressure to upgrade, but you never have to upgrade.

Intuit, makers of Quickbooks (small business accounting software), is a little pushier.  They release a new version of the software every year.  And you can continue to use your old version.  Unless, however, you use one of the services that they also sell.  Intuit sells services that integrate with Quickbooks.  And at least with some releases, when a new version of Quickbooks comes out, they will stop supporting the integration of those services with older versions of Quickbooks.  If you need those services, you must upgrade.

When companies sell software (licenses), they usually sell a version of the software, and then make updates to that software with some frequency, from daily to annually.  Companies also manage those updates as two distinct types of updates – major and minor.  Minor updates are usually free, and major updates usually require you to purchase an upgrade.  Minor updates might be bug fixes, or features that were intended to be in the major release, but were delayed.  Or they might just be the introduction of capabilities with “small” value to their customers.  A lot of software will automatically notify you, download the update, and install it for you.  That’s great service.  Major updates are usually more significant – they introduce capabilities that have “large” value to their customers, or are intended to make the product appealing to additional markets.

To understand the economics of software license purchases, you have to look at both the value over time and the costs over time of purchasing a software license.

To keep this simple, we’ll assume the model described above – minor updates happen frequently and are free, and major updates require the purchase of an upgrade to the latest version of the software.  We’ll also assume that every new update introduces something valuable to you as a customer.

Starting with the value model for the software, from the software company’s perspective:

The axes represent increasing value (up) versus the passage of time (to the right).  Time starts when you purchase a license to use the software.  You’re immediately getting value.  As minor updates are made (and minor releases are made – sharing the updates with customers), the value gets marginally higher.  Whenever a major release (a major update) is made, the value curve jumps up dramatically.  This represents the introduction of new, valuable capabilities.

As each new customer purchases a license to the latest version of the software, the company gets more revenue.  As each existing customer purchases upgrades to their existing software, the company gets more revenue.  A company makes money from finding new customers and from keeping existing customers.  Companies make more (per purchase) from finding new customers than from getting existing customers to upgrade.  Until a product builds a large base of existing customers, the company’s financial focus will be on finding new customers.  Satisfying existing customers is at risk of becoming a secondary priority, purely based on economics.  And yes, this is an incomplete picture, there are indeed other factors.  But it is absolutely an influence.

Software License Benefits

We started this article with a promise to look at this from a customer’s perspective.  If the model above represents how a software company views its products, here’s how a customer would view the same thing.  Remember – in our example, we have a perfect product manager – every update has the same perceived value to customers as it does to the company.  This chart shows the same value-model, but overlays your purchasing behavior as a customer.

As a customer, you make an initial purchase (the left-most callout), and then get free incremental increases in value from each minor release.  You also purchase an upgrade to the latest version of the software as soon as it is available.  You then start getting incremental value from the minor updates to that version of the software.   The older version does not keep getting updates, so if you don’t purchase the upgrade, you don’t get the benefits of the latest minor releases.  A second major release happens, but you don’t purchase it for a short while.  Then a minor release is made, with a fix to an annoying bug that really bothers you.  So you purchase another upgrade.

The value to you looks like the following:

The green area represents the value you get*.  Notice that you did not get the value of the last major release until you actually purchased it.  You also did not get the incremental value of minor releases that happened after that release.  Once you did purchase the upgrade, you immediately got the benefits of all the minor releases.  You got “back in the game.”

*The value is often a function of how much you use the software (enabling the benefit), and as such, it is a function of time.  The more you use it, the more value you get.  So showing this as an area is informative.

Software License Costs

Your costs over time are also important.

The obvious costs are the checks you write to the software company to pay for the software and for the major upgrades.  The chart above can be a little misleading – we are depicting “one time costs” that add up over time.  Showing this as a stair-step area instead of a series of spikes will make sense in a moment.  The key thing to appreciate is that once you make a purchase, your license purchasing costs do not go up again until you make another purchase.

At the start of the article, we identified several “cost of ownership” costs – supporting the software and hardware, for example.  It is critical that you keep those costs in mind when evaluating software license purchases.  These costs are ongoing costs – the more you use the software, the more the costs add up.

There are also training costs – the cost of lost productivity as people learn to use the software and adapt to changes in the software.

When you combine these, you get a model for the total cost of purchasing a software license over time.  The jargon term for this is Total Cost of Ownership (TCO).

As you can see, “purchasing” software one time actually has a continuously increasing total cost of ownership.  Different types of software will have different relative costs for infrastructure support, training expense, and license fees.  But generally, training expenses are much lower than the other costs of ownership.

SaaS – A Simple Definition

Software as a service is usually provided as follows:

1. A company creates a software product and hosts that product on multiple servers.  The company manages the hardware and software – and realizes the cost of that management.
2. Customers subscribe to the service – getting the right to use the software, for as long as they continue to pay the recurring subscription fees.
3. The company makes both major and minor updates to the software, and the customers automatically get those updates as part of their subscription.

There are many examples, some obvious ones are Salesforce.com, Kadient’s inciteKnowledge, and 37signals’ Basecamp.

SaaS Economics

Software as a service is purchased with the same mechanics as subscribing to a magazine or cable television or satelite radio.  You pay a recurring fee for the right to use the software, just as you pay a recurring fee for the right to watch cable television.  You might even get a discount for purchasing a longer-term subscription and paying up front.  When you want to stop using the service, you stop paying the fee.

The model for creating value with SaaS products is the same as with licensed software.

The graph looks the same as the first one in this article, because it is the same graph.  Where things change slightly is in the value model from the perspective of the customer.

There is a single trigger to the realization of value – starting the subscription.  You automatically get the minor and major updates “for free” by continuing to pay the subscription fee.

SaaS Costs Are Different

Where software as a service differs from the purchase of a license to use software is on the cost side.

The training costs associated with using software have nothing to do with the mechanism for payment, so those costs are the same.  The cost of subscribing to the service (blue cross-hatched region) is new, and goes up over time.  It is also typically higher than the training costs.  Note that there are no “large purchase” spikes in the costs – because you never purchase a license.  And there are no infrastructure costs, because the company that provides the service realizes those costs.

The idea is that this approach is more cost-effective when it comes to infrastructure costs, so the company can pass on those savings to you.

Comparing the two cost models side by side is the way to really see the difference:

Both models have costs that increase over time.  For many technical reasons, the SaaS architecture is more efficient and has lower costs for the software company – which tends to result in lower costs for the customers.  This is not always the end result, but it is directionally correct.

Another interesting factor to consider is the financial pressure on the SaaS provider.  Where a software licensing model creates pressure to prioritize finding new customers, a SaaS model creates pressure to keep existing customers.  SaaS providers get the same revenue from a new customer as from an existing customer, instead of the “new vs. upgrade” dynamic seen with software licensing models.  It is always cheaper to keep an existing customer than to find a new one.  The net result – financial pressure to retain existing customers.  This can drive a different behavior, more like that of a retail sales model, where keeping your existing customers is critical.

Conclusion

The SaaS model ultimately provides the same type of products as a software licensing model.  But with a better economic model – one that is lower in cost to me, and one that is structurally inclined to keep getting better for me with every new release.

Personally, I really like the idea of purchasing from a company that is financially motivated to keep me happy, not one who’s pressured to find another customer as soon as I’ve written my check.

The best companies try to reinvent themselves and improve their products continuously.  Over time, the best companies will move to SaaS models, which align their financials with their objectives.

Check out the index of the Foundation Series posts for other introductory articles.

Adam Bullied wrote a really good article about not losing motivation in the face of challenges. His closing quote spun us off on a philosophical tangent about being “good enough.”

Good Advice

I’ve enjoyed several great conversations with Adam over the past couple years. I thank this blog as the catalyst for introduction to him and other really sharp folks, many of whom generously contribute to the discussion that launch themselves from some of our articles. Thanks to all of you!

Adam’s article wrapped up into three general ideas for me:

1. Good general advice (don’t get discouraged by external events).
2. Good product management advice (focus on the problem).
3. Pragmatic execution advice (be good enough).

On the first point – just go read Adam’s article. You’ll like his writing, and you’ll find a new blog to read regularly (if somehow you aren’t already).

On the second, Adam says the following (the links are ours):

You need to just do a few things really well. In fact, things I’ve already mentioned:

1. Ensure you are solving a problem
2. Align things from top to bottom
3. Execute — quickly and with confidence

This “top-down” stuff I speak of is from the vision / problem identification, to the roadmap, to the requirements, to each release being pushed out the door.

Don’t Get Discouraged, Adam Bullied

Good Enough (For Now)

Adam’s third point, about being good enough, I believe, is an encouragement to make progress, and move the ball forward in the face of adversity.

Perhaps it’s my own character flaw, but my first instinct was to think of his comment out of context. I’ve always believed that “good enough” is the enemy of great. “Good enough” can be interpreted as “do less than you can.” That’s not what I think Adam is saying, although that’s the thought that popped into my head at first. Adam’s point is really a good one – don’t let the fact that you can’t make something perfect today prevent you from making it better today. Tomorrow you can make it better still. Add up enough tomorrows…

Maybe this distinction is why I like the underpinnings of agile (iterative) development. Find the most important thing you can do today and do it. Tomorrow, you will be smarter, having done something already and learned from it. You’re in a position to better understand importance. Use that learning to do the most important thing you can think of – even in the unlikely event that the most important thing you can do is refactor what you just did the day before. Over time, things get better.

Good enough for now means do the best thing you know how to do today. Don’t hesitate because you suspect there is something even better you could do, if you could only think of it.

Maybe this nuance is not communicated well by some proponents of agile development. Many smart people rail against the hyperbole of big-A Agile, and throw the baby out with the bathwater and discard small-a agile.

Present yourself with two possible approaches to deciding where you will live for the next fifty years. The first approach is to decide now (but you have a month to do research and make your decision), and no matter what, you have to live there for fifty years. The second approach is to decide now (and your answer must be given in the morning), but if you decide after a year that you want to live somewhere else, you can move. And every year, you get to re-assess and stay or move.

I like this better than the classic “build a house” analogy, because it represents both the cost of change and the impermanence of decisions in a way that is more aligned with software development. It also allows for some other analogies. If you know that you may decide to move again in a year, you’ll make different investments in your new abode. You may choose to live minimally to reduce the cost of moving again. You may become an expert at moving. And you can easily balance the cost of any particular move with the perceived benefit of making the move. “Not worth it?” stay where you are. As you learn more about where you live (and where you might live), you develop a better appreciation of what is important to you. My guess is that sometime well before the fifty year mark, you would have settled in on the “perfect” home.

Now what are the odds that the perfect home after several iterations of change is the exact same home you would pick with a month of research and no experiences?

Each home is good enough for now, and likely to be better than the last home (after all, you’re smarter each time you move than the time before). And you stop moving when the opportunities to improve fall short of the cost of making changes.

Found a potentially extremely cool plugin for Outlook called Xobni, that would make Outlook a much more powerful tool.

I have been looking for ways to improve the utility of my email client lately. It started with a quest to reduce the power that my inbox has over me. This quest has morphed into finding ways to make my email client more useful.

Xobni is a plugin for Outlook that provides some unique capabilities. You can watch the demo video to hear it in their own words, but in short, it appears to

• Infer the relationships between people with whom you exchange emails, providing improved ways to “find someone” – something along the lines of automating your contact management for you.
• Easily see the most recent discussion threads with any person.
• Easily see the documents that have been exchanged with any person.
• Improve searching within your email archives.
• Provide detailed analytics about your email

Xobni is currently an invite-only beta. That means it’s free, but you have to get an invite from them. To get an invite, all you have to do is ask (by providing your email address). Once you’ve requested an invite, the folks at Xobni provide three ways to get bumped to the top of the list, so that you get an invitation even sooner. I guess the list is “first come first serve”, except for those people who help them get the word out.

1. When you request an invite to Xobni, they give you a link you can forward to friends. When your friends click on the link and ask for an invite, you get bumped up. The link has a “friend code” in it.
2. They want to test some specific scenarios, so they ask a couple questions (how many CPUs do you have, how much email do you get per day, etc). If you answer those questions, and your system matches whatever it is they want to test, you get bumped up.
3. You can put a badge on your blog (like the one in our sidebar). When two or more people click on that link, and then sign up, you get bumped up.

If you want to help me get bumped up, so that I can use, test, and review Xobni sooner rather than later, then click on the link in our sidebar, or click on it here. This link gives me (Scott) “credit” for a referral if you then request an invite. It does not give me any cash or anything – but it may help.

Xobni Conga Line

Instead of having everyone click on my link, we can do something called a “conga line” – so that everyone here helps each other get an invite sooner rather than later. Here’s how it works.

1. The first person clicks on the link (from this post, or from the sidebar) and signs up for a free invitation to the invite-only beta program.
2. That person will then get their own link from Xobni (that they can use to get bumped up, as described above).
3. That person can then add a comment to this article. That person should include their friend link to Xobni in the comment.

You can just cut and paste the link, so it looks like (the example below shows my friend link)

http://www.xobni.com/friend/MTA2MjQx

But if you really want to make it easy for everyone else, you may want to make that link clickable. To do that, you want to enter it as follows:

<a href=”http://www.xobni.com/friend/MTA2MjQx”>http://www.xobni.com/friend/MTA2MjQx</a>

This will make it really easy for other people to use your friend-link to sign up – giving you the credit.

The (Slightly) Tricky Part

Normally, that’s all you do to make a Conga Line work. However, Xobni wants you to get them two referrals before they bump you up. That’s ok – it is just slightly trickier for us.

The second person (when there’s only one comment on this article) should also use the link from this article, and then post their comment just like the first person.

Everyone Else

Ok, it is pretty easy for everyone else. However many comments there are when you decide to sign up, divide that number by two, round down (if needed), and click on the link from the comment that has that number.

Examples:

• If there are currently 2 comments, you will divide by two, and click on the link from comment #1.
• If there are 3 comments, divide by two (3/2=1.5), round down, and click on the link from comment #1.
• If there are 10 comments, you will divide by two, and click on the link in comment #5.
• If there are 11 comments, divide by two, round down, and click on the link in comment #5.

This way, as many people who read Tyner Blain as possible will get bumped up in the Xobni queue.  And based on what we all do, we need this more than other people [grin].  And they need us to stress test it and provide feature requests. If you don’t want to join in, just go to the site directly. If you don’t want to mess with the math – just click here and I’ll get extra credit.

Michael Port’s new book just came out. If you’re trying to redefine or improve how you focus professionally, it would be a good read. If you run your own company, or want to, it is a great read. Michael has good advice, good reasoning for his advice, and he writes well – a very easy to read style. Not dumbed down, not full of jargon. As someone who exactly matches his target audience, I highly recommend Beyond Booked Solid.

Getting Beyond Booked Solid

Out of the blue, one day, I get a pre-release copy of Michael’s book. I sometimes get books in advance of publication, so that I may review them and spread the word. It’s a good word-of-mouth marketing investment for the publisher. In full-disclosure, I feel a mild sense of obligation to review the book. But I feel no obligation to write a good review if it isn’t deserved. And as someone who’s now written about half a million words at Tyner Blain, I personally have no interest in panning a book that I don’t enjoy. If I don’t like it, I don’t write about it.

Usually, the books I get are related to product management or business analysis – or occasionally development and architecture. The publishers send me books that Tyner Blain readers are likely to benefit from – the books fit our niche. I was a little surprised that I got Beyond Booked Solid – it doesn’t fit that mold. I started reading it anyway. I just assumed it was from one of the publishers that sends me books.

A little while later, I got an email from Michael’s assistant, and we started a good conversation.

It turns out, I like the book. As the founder of Tyner Blain, and as someone who sells consulting services, the notion of getting booked solid is definitely something that resonates. And I’ve been really fortunate over the past three years, and I find myself getting more requests for help than I can fulfill.

Michael’s book is about exactly that – what do you do when you’re successful enough that your business model is working perfectly? So well, that you’re booked solid? How do you move beyond that stage?

Anyone who listens to audio books will tell you that sometimes the reader is more important than the work. The best novel, poorly read, is excruciating. But a good reader makes anything enjoyable. George Carlin actually made people laugh by reading the phone book years ago. Seriously. Belly Laughs.

Michael’s writing is so conversational that (1) you feel like you’re listening to an audio book with a good reader, and (2) I feel a connection with the guy. It would feel awkward to call him Mr. Port at this point.

The best part – the content is great too!

Taking your business beyond what already works great couldn’t be a more compelling topic for me. There are things that Tyner Blain will do that go beyond today’s business model. After reading Michael’s book, not only are they likely to happen sooner rather than later, I believe they are now more likely to succeed.

Breaking Out of the Box

Innovative solutions usually require thinking “outside of the box.” Whatever your box may be. Michael provides some occasionally inspiring, often analogous examples. He’s not writing about software consulting, or enterprise product management. But the challenges are the same. The small business owner that reaches “capacity” with his store, and decides to open a franchise. His writing is fluid enough that I can’t remember if he suggests that we (as readers) imagine parallels in our own worlds, or if I just did it.

Thinking outside the box. That’s what it boils down to. And Michael’s writing style is such that he encourages you to break out of the box. He isn’t a pitch man, there’s no “hard sell.” You just read what he’s writing and think to yourself – “Yeah. That’s what I need to do.”

He provides sound advice – almost a layman’s SWOT analysis approach to managing your business or career. What are the strengths you can leverage, the weaknesses you need to avoid? What do you love to do or hate to do? What are your goals? Good stuff in general. Fantastic advice when you’re already doing everything you thought you wanted, and you have that niggling thought in the back of your head asking – “Yeah, but what’s next?”

Payback and Pay Forward

While not “obviously on-topic” here, everyone who reads here is trying to improve themselves – either getting better at what they do, learning to do something else, or just learning how to accomplish the same things in less time.

And that means Beyond Booked Solid may be right up your alley.

Michael Arrington has 2400+ unread emails in his inbox. And he needs someone to fix it.

If you are the person with the idea to save us all, send me an email and tell me all about it. Actually, strike that. Drop by my house and tell me all about it. I don’t want your message to get lost in my inbox.

Michael Arrington

Michael is looking for the email equivalent of a magic diet pill. He can’t change his behavior, so he needs a dietary supplement. The dieting-market is huge, and products succeed playing on that emotion for dieters. Is email management the same?

You’ve Got (Way Too Much) Mail

Are you completely overwhelmed with email? There are two fundamental ways to approach solving the problem of having too much email. The first is to change the way you work. The Getting Things Done people have all-but-formed a religion around changing how they work. A master-stroke for David Allen. But you – if you’re reading this, you already heard of GTD, and at least one of the (at least 92) companies that has developed products to make it easier for you to change. But apparently that didn’t work for you. Or Michael Arrington.

The best way to diet is to eat sensibly and get exercise. A well-balanced diet with more calories burned than consumed will make you lose weight. Steadily and sensibly. It always works, and it is “the right way to do it.” USA Today reported in 2005 that 62% of American adults are overweight. I am unwilling to believe that that stems from ignorance. People know how they should eat and exercise. They just don’t want to.

People with weight problems are perceived to desire a solution that does not require them to change their behavior. An odd diet, an arcane supplement, a magic pill. Something that lets them lose weight without changing their behavior. Or they try and change their behavior, but it just doesn’t stick.

Maybe that’s what happens to people who have lost control of their email. They try changing behavior, and that doesn’t work. And now they are looking for a magic pill.

No Pain, No Gain

Pain, in the market, translates to profits for the people who alleviate it. I attended Pragmatic Marketing’s product management training a couple years ago, and Barb Nelson presented a compelling argument for addressing pain in the market. She used Dr. Scholl’s shoe inserts as an example. Their products address people’s foot pain. They make for a great example for a traveling instructor because they are light and they pack flat. Maybe that’s why I remember them.

Before I attended that class, being an optimist, I was always looking for opportunities, not problems. I realized after listening to Barb that calling a problem an opportunity is fine when you want to motivate yourself to solve it. But when you want to motivate your customers to pay you to solve it, every opportunity looks better as a problem.

Michael sums it up well:

The volume of communication requests for most people today are far, far beyond what they can handle. Few people today respond to every communication they receive. And an increasing number don’t even claim to be able to read every communication they receive, let alone respond.

>Arrington

That is definitely pain.

As soon as you start imagining the ROI for solving this problem, you start thinking of lost opportunities, misunderstandings, past-due bills… There’s money to be saved by your customers. And therefore, money to be made. Email is so ingrained in the mass-consciousness now that you could sell people a solution based entirely on emotional appeal. The USA today article pointed out that being overweight has been a growing problem for decades. That problem has emotional roots too. The same type of message could work for email.

Get all the email you want. Respond to what you need to. And don’t worry about it. Keep using your current email solution, and watch your inbox dwindle away to nothing, shedding those excess mails overnight!

People’s desire to gain with no pain leads to your gain from their pain. In Spain. In the rain.

Design The Magic Email Pill

OK. So all we have to do now is design the magic email pill. Let’s see if brainstorming will work on a blog post.

In a comment, either

1. Describe how email pain manifests for you. How does dealing with your email hurt? OR
2. Describe a possible technology solution (feature, capability) that will help one of the pain points. OR
3. Describe how you think about email and using your email system (which do you use). OR
4. Describe how this problem has already been solved.

This is a fun topic to think about.

• We found Steve’s poems first
• Then we read the Cranky ones
• First came Pivotal

• Bonsai tree serene
• You release the stress of work
• Focus and forget

• Define processes
• Validate with stakeholders
• Meet and bring donuts

• Start with personas
• Find out what they need to do
• Capture in the spec

• Unambiguous
• Concise, correct, and complete
• Write for the readers

• Don’t define design
• It must be realistic
• And consistent too

• They must have value
• And be verifiable
• And atomic too

• Strategic actions
• Tactical execution
• Only you can choose

What makes the best gadgets great? An understanding of goals and attention to design details. When we take a step back from writing requirements about software, and think about gadgets and goals – the perspective can help us write better requirements and make better prioritization decisions.

Thought Provoking

Mike Schaffner’s recent article about what we can learn from our favorite technologies got me thinking. We can learn about how to focus on goals to make great products. In summary of Mike’s points, the best technologies do one thing and do it well – sound technology that works, and is easy to use. Those characteristics are necessary*, but not sufficient to having a great product.

* Doing just one thing may not be the right goal, but for any given product, there is one thing or very few things that are more important than all the others. We’ve written about the 80/20 rule of requirements in the past – but it might even be 90/10.

Lets pick an example.

Apple’s 2nd Generation iPod Shuffle

I’ve been using a shuffle since the start of the year. I guess dropping hints at holiday times helps. If we think about creating a portable music device, we could come up with any of a number of criteria for the product:

• Great sound
• Long battery life
• Ease of use
• Price

But that would be backwards. Yes, the long battery life is good – but not differentiating. Nor is the size – other small players are out there. Pricing defines a market more than it defines dominance of a market. And sound quality matters – but how much? Is an audiophile going to use a shuffle as their primary listening device, or does it just need to be good enough (which it definitely is).

We can start by thinking about goals. For a device like the shuffle, it would be personal goals. I wish I could remember who said it, but someone wrote that the iPod is a “process improvement device” for improving the process of walking around (by adding music to it). What a great way to think about it. And yes, the shuffle definitely makes walking the dog more entertaining.

There is one feature of the shuffle that I thought was mildly interesting when I got it, and now I think it is the killer feature. That’s the clip.

One User’s Story

While not a full fledged persona and scenario development exercise, let me share a little about how I use my shuffle.

I am not a fan of working in the yard. The exercise is nice, and the results are worth the effort – but the time usually feels wasted to me. I may be a little ADHD, so even when I think “productively”, I bounce around from idea to idea – and no more than one or two survive to the end of the yard work. The rest of that time is “lost.”

I also listen to several podcasts – tech podcasts, programming podcasts, science friday from NPR (which is awesome), and occasionally books on tape. But I could never make time to listen to them. With the shuffle, I can listen while I work in the yard. I also use noise-reduction headphones, so I can listen even when mowing and weed-whacking.

Why The Clip Works

What makes this possible is the clip. I can clip the shuffle onto the back of my baseball cap and tuck the cord under my shirt. If the audio device were in my pocket, or strapped to my arm (options with other devices), the cord would get in the way. For walking around, there’s no real difference. But for doing active stuff – all the difference in the world. Thanks to Tom for mentioning the baseball cap trick to me – previously, I had clipped it to my collar. That works great on planes when you’re travelling – no cord to mess with while you launch your roll-a-board into the overhead compartment.

What’s The Point?

The main point is to think about the most important thing(s) for your product. And think outside of the box. iPod shuffle as process-improvement. I love it. I think all of the non-clip features are undifferentiated “me too” features in the shuffle. But the clip is valuable and unique.

What is “the clip” for your favorite gadget? What is “the clip” for the product you’re working on right now?

Joel on Software writes a great article about how to set the price for your software to maximize profits.

Joel does a good job of explaining and exploring the economic theories behind pricing and balancing supply and demand. He then dives into market segmentation and how it applies to pricing. Finally, he addresses the marketing elements of pricing and perceived value. He takes us on a fun journey with an enjoyable read, even if he doesn’t get to the conclusion we all need. The thoughts and analysis are still helpful when thinking about pricing your software.

For more actionable advice, and generally everything about pricing, check out the Dollars and Sense blog by Reuben Swartz. A lot of good stuff there! He has a categories on software pricing, pricing strategy, and a lot more.

The material in the presentation is off-topic, but the presentation is so good that you just have to watch it. I found this when researching about openID (mine is http://tynerblain.com/scott.sehlhorst/ – check out myOpenID to set up yours). Consider the open ID thing to be a tangent you might be interested in pursuing today, and will be interested in pursuing soon.

Regardless, you should watch this presentation. The delivery will knock your socks off. The topic is interesting, or perhaps not interesting at all – but delivered so well that you’ll be interested.

This is your third link to it. Last chance.

For folks who don’t read a lot of blogs – there’s a meme going on right now where bloggers list five things that most people don’t know about them. This spreads virally, like the old email chain letters. After you share your five things, you tag five more people.

Five Things

1. Before I fell off a ladder and tweaked my shoulder, I used to be able to climb 5.11c (really hard rock climbing). Photographic proof.. The ladder thing is both true and ironic. I tweaked my shoulder in order to protect…
2. My wife, with whom I am madly in love. She and my step-daughter Sarah became my family in 2004. To offset the estrogen levels, we added Scout, a male labrador, to our family last year.
3. I used to be a mechanical engineer, and even authored a few patents in the field of electro-mechanical controls design.
4. I was a competitive swimmer, and held a couple Georgia state records when I was 12.
5. I used to be best-known for my jalapeno poppers recipe, and I am an official chile-head (#51?). I even carry ground habanero with me when I travel, to spice up pretty much anything.

Five More People

Tag! You’re it.

1. Roger Cauvin
2. Tony Chen
3. The Cranky PM
4. Michael Shrivathsan
5. Adam Bullied

Many of us who are part of the Tyner Blain community are geeks, gadget hounds, and people who read books that make you think. All of us know someone like this. Tyner Blain is a mostly-for-free site – we just ask that you remember our name, join in on the discussion, and share the good stuff with others. Tonight we have a shameless, off-topic, self-promoting article.

Professional Shoppers

The professional shoppers out there know that Friday is known as Black Friday, one of the largest shopping days of the year – at least in the USA. New products hit the shelves in time for the holiday season, and retailers offer loss-leader sales to get shoppers in the door.

Tyner Blain is an Amazon.com affiliate – if you buy stuff we reccommend, we get a small commission. Not enough to pay for hosting the site, but enough to buy a copy of Karl Wiegers’ Software Requirements, 2nd Edition. We’ve put some great suggestions here, and feel free to use them – if you don’t want us to get an affiliate fee, don’t click on the links on this page, browse to Amazon directly and look up the product on your own.
Also, if you want to just use this post as a wish list of your own, send the link to someone else [my wife's suggestion].

Amazon Gift Certificate

The perfect gift

What do you get for the person who already bought what they want? A gift certificate. Amazon sells gift certificate that can be used for anything from powdered lemonaide to DVDs to big screen tvs.

Wireless Joy

I love my Bluetooth gadgets, and can reccommend two in particular:

Kensington USB2.0 to Bluetooth adapter. My laptop doesn’t have bluetooth, but my cell phone does. With the bluetooth adapter, I can use my phone as a modem, when the hotel doesn’t have wireless (or we’re on the road). I can also transfer pictures and mp3s back and forth. The most practical feature – keeping a backup of my contacts on my laptop.

Jabra BT250V Bluetooth headset. Another especially handy toy – staying on the phone while I walk around with the phone in my pocket. I don’t know how many times I’ve ripped the phone out of my ear (or worse, out of my pocket) when the cord got caught on something. No more, with the bluetooth headset. I also get the twisted joy of walking around the airport looking like a babbling lunatic, as I talk into the empty space.

Tuning Out the World

Most of us have iPods or Zunes or other personal video/audio players. Most of us also have cheap headphones.

The Shure E2c Sound Isolating Earphones are at the very top of my christmas list. I’ve been using Bose noise cancellation headphones for years – and based on the small form factor, and several reviews I’ve read, this will be my major upgrade for the year. Life savers on the plane, especially when I get stuck back by the engines, noise-reducing headphones allow me to listen with greater fidelity, without raising the volume to dangerous levels. Shure has higher performance versions than this model (and cheaper ones), but this is the sweet spot on the cost-benefit curve.

The Zune is hot this year. Another great idea is the 2nd generation iPod shuffle (so tiny!).

Ever Get Thirsty?

My friend Tom has the Metrokane Houdini-style opener. Coolest thing ever. If you’ve seen one and don’t have one yet, get it now. If you haven’t, ask a friend about it, then get one.

Innocuous, yet indescribably cool in action, this bottle opener (beer and soft drinks) is equally cool to the Houdini opener, if your tastes, like mine, lead more to beer than wine.

Top-Shelf Books

For work-related books, take a browse of our bookshelf. If you want other really really good books, check out these three that are great both for learning new stuff, and thinking about stuff in new ways.

• The Tipping Point: How Little Things Can Make A Big Difference, Malcolm Gladwell
• The Day the Universe Changed: How Galileo’s Telescope Changed The Truth and Other Events in History That Dramatically Altered Our Understanding of the World, James Burke
• Team of Rivals: The Political Genius of Abraham Lincoln, Doris Kearns Goodwin

Amazon Gift Certificate

After all of that – you still may not know what to get – don’t forget The perfect gift.

Thanks

Thanks very much for either using one of these links, or at least tolerating their appearance here. Have a great Thanksgiving, or if you’re not in the USA, enjoy a day of two without us Americans pestering you.

Once upon a morning meeting, while we wasted minutes fleeting,
Over many an issue of status one through four,
While I listened, eyes glazed over, suddenly there came a question,
As if a project sponsor asked which feature we need more.
”Tis prioritization,’ I muttered, ‘asking ’bout the issue’s score -
Only this, and nothing more.

Ah, quite clearly I recall, it was in the VP’s meeting hall,
Where business and developers cajoled and implored.
I looked at our rework allowance – vainly had I sought to balance
New functionality and fixing bugs – bugs that just might stop the show -
For the worst bugs might just crash the server don’t you know -
More importance drives the score.

Each single issue raised the specter of abandoned users
Losing capabilities – precious for their goals and more;
And as my whiteboard marker fluttered on the board
I created buckets of priority on the board -
Each separate bucket of priority on the board; -
We sorted issues by their score.

Post-its placed in each big column; organizing our big war room,
‘Search is broken from command line’ one of the coders roared;
Bucket one or maybe two he claimed, priority it must be highest,
Without it I can’t test my code. Never use it, user muttered,
I only search by person’s address, and search works fine for postal codes,
Better move to bucket four.

Spelling errors, cryptic messages, the wrong colors on the screen,
Urgent, critical, must-have-features, struggle to avoid the sink-hole for
Never will the dev team finish all that we will relegate
To the least important bucket, the one we know as bucket four.
The oft forgotten, if there’s still time, budget busting bucket four.
Keep mine out of bucket four.

Can’t remember if they told me, how important that one can be,
If the moon is one-fourth waning, and it happens on a Monday morn.
‘Impact,’ I said, ‘can be quite large – if that happens as you said;
but divide by fifty to adjust for circumstances you deposed -
it almost never happens in the circumstances you deposed; -
Allocate to bucket four.

Sponsor’s teeth are grinding loudly, neck veins bulging to explode,
‘My favorite feature you’re forgetting!’ I must admit it was ignored.
Politics and process battle, to the victor goes the spoils;
But features sort by prioritization, we all agreed to rank by score -
Leveraging his lofty title, the sponsor forced a change in score -
Removing it from bucket four.

The list grew smaller, one by one, of issues still to be decided,
As we slogged through more discussions of the buckets one through four,
‘We’re not yet balanced,’ I implored, ‘our numbers aren’t realistic.’
With six of ten in bucket one, and one of ten in bucket four -
‘They can not all be most important’ some of them are less not more -
Shift some more to bucket four.

Balancing the less important wasn’t easy first time through,
But we all struggled, sorted, balanced – slowly filling bucket four;
Pointing out the most important still would be the first we tackle
Until we’ve used up time remaining – unless we choose to ask for more -
We fill each timebox in each cycle – unless we choose to ask for more,
Our only hope for bucket four.

Cutting quality is not an option for delivery of our software,
Time and people, money and scope, but we can not risk the product’s core.
Something falling, from the whiteboard, falling slowly toward the floor -
His favorite feature, flashy graphics, written on a post-it note,
Bucket three was somewhat crowded, on the whiteboard by the door,
Hoping to avoid the stigma, tender lifelines for the features,
All avoiding bucket four.

No one noticed as I bent down, picking up the post it note,
Breathlessly I looked around, the project sponsor had grown bored,
Conversing softly about wineries, our politician had not noticed
His post-it was not where it started, on the whiteboard by the door -
Adrenaline was taking over, I was shaking as I crossed the floor
Returning it to bucket four.

The meeting ended moments later, and the minutes were sent out that day,
No one noticed my correction, removing it from near the door;
The feature was where it belonged, politics be damned I chuckled
Priority would win this battle, with flashy graphics in bucket four -
Opinions lose to facts in battle. Lowest value? Bucket four.
Issues we now sort by score.

Dysfunctional Definitions

1. Agile- Approach that jumps through hoops to avoid providing a project forecast.
2. Broken Windows- What over-worked developers create when driving through the code-base late at night.
3. Business Analyst- Person who sweeps problems back out from under the rug for their customer.
4. Deliverable- A measurable output of work, completed after the scheduled date.
5. Developer- Person who creates solutions to unidentified problems.
6. Innovation- What happens when managers fail to do their jobs correctly.
7. Intellectual Property- Secret Sauce. Used to achieve the impossible. Alternately, used to prevent other companies from achieving the valuable.
8. Iron Triangle- The rationalizing tool for reducing quality to meet the schedule.
9. Meeting- An opportunity to stop all useful work and take a break. Effectiveness is proportional to the number of attendees.
10. Offshoring- Going to the ends of the earth to help the developers, then finding their replacements there. (IP “borrowed” from Dispair, Inc)
11. Product Manager- Person who identifies problems that apply to all customers except yours.
12. Quality- The feng shui of software.
13. Review- A meeting where all previous work is discarded and new work is defined. Followed invariably by another review.
14. Rework- Replacing broken windows (see Broken Windows)
15. Risk- A means by which reality is infused into projects.
16. Schedule- A perfect prediction of the future and all project events. Schedules never change.
17. Scope Creep- Theoretical event that my friend’s brother’s cousin’s neighbor once heard about happening on a big project.
18. Software Salesman- Person who reserves weekday tee-times for CIOs and purchasing managers.
19. Status Report- A transmogrification of reality to conform to the schedule (see Schedule).
20. Timebox- A five gallon hat, into which ten gallons of work must be stuffed.
21. Waterfall- Approach that maximizes the ability to plan to fail to deliver the right software.

More

Add to the list or provide alternate definitions in the comments below!

David, at 37signals, writes an interesting post about changing the way their company is managing the naming of new versions of their Backpack information manager product.

David starts with the premise that there is too much feature-creep when scheduling deliveries of software updates.

We’ve previously tackled how to manage this prioritization process via scheduling of changes and managing iterations with timeboxes.

David’s approach to this problem is refreshing – he has provided an out of the box way of solving the problem.

With 37signals’ approach, an update to the software has a major element. We can think of this as the scheduling of a market requirement (or collection of use cases) that provides additional value to the users. This specific focus aligns with our approach of using use cases to communicate delivery schedules.

David’s insight is that once you schedule a release, say 2.1, then other features will try and get themselves included in that release. When I read this, I immediately thought of the riders and provisions tacked onto “clean” bills as they pass through congress. Each little bit satisfies a splinter-group or contingency, at the expense of “more important” stuff.

Imagine if people decided they didn’t want to accelerate the time table on their pet project / feature. That’s what David is doing.

The next release of Backback is titled “Widget Overhaul”, not “2.0.” Suddenly, there’s a lot of clarity about what to include in the next release – overhauled widgets, and not much else.

In a web-release world, this is awesome. In a world where legacy versions of an application will coexist with the latest version, this approach falls down a little (but the idea is still good). Imagine a user calling in for support, and telling the IT guys that he’s running the “Improved Security” release. The IT guys suggest he try upgrading (or is it downgrading?) to the “Improved Performance” release.

There’s a benefit to having a clearly sequential element in the naming of releases. But, as David points out, it comes at a cost – of people adding features until a release is too delayed or too expensive.

How do we get the same benefit with distributed releases? Another approach would be to use dates, for example, the 20060815 release, in conjunction with the benefit-naming approach. Or build numbers.

Identifying a headliner release element is a great idea. Thanks David!

… Skyline Unharmed

Short-sighted demands on software teams usually don’t kill people. Software development is often described with a construction analogy. The Big Dig construction project was under exactly that kind of pressure. On July 10th, 12 tons of tunnel ceiling collapsed and killed a motorist. On July 20th, Mitt Romney ordered the tunnel to be closed. Let the finger pointing begin.

Background

The Big Dig is a multi-year construction project to fix very expensive traffic problems in downtown Boston. The Massachusetts Turnpike Authority has a good background article. Traffic congestion was projected to cost $500 million per year to motorists by 2010 without making changes. Project costs – $14.6 billion (more than 30 year payback period) versus an initial estimate of $2.5 billion.

The 6-lane overpass was to be replaced with 8 to 10 lanes of tunnels underneath the city, protecting the skyline of Boston from large concrete structures. Unlike the “protect the view” argument of previous New Orleans adminstrators against a hurricane barrier, there are practical arguments to building tunnels. The MTA was never proposing to “do nothing.”

Project Timeline

• 1983 – Environmental impact report initiated.
• 1991 – Construction begins. Initial cost estimate $2.5 billion.
• 1995 – Ted Williams Tunnel opens (the one with the collapsed roof)
• 2000 – Project completion scheduled for 2004
• 2001 – Cost estimated at $14.1 billion (project 69% complete)
• 2005 – Cost estimated at $14.6 billion, 96% complete (same link)
• 2006 – All tunnels and bridges open to the public (until now)

According to this Associated Press article, the Turnpike Commission found no problems that “rose to the level of a public safety threat.”

Timothy Johnson, author, project manager, and owner of Delta Project Solutions, speculates in his article that the source of poor quality may have been pressure on the engineering/construction teams to work faster.

It doesn’t take a lot of effort to find stories of the governor’s office pressuring the project to move faster. There was political capital on the line. So… the project moved faster. Quality shortcuts were inevitably taken. And now Mitt Romney wants to know where the blame lies. Am I missing something on the cause-and-effect graph?

Corrobarating Evidence

The US Transportation Department released a scathing audit this week, charging Big Dig officials with misleading federal officials on Feb. 1 that the project would cost $10.8 billion, and divulging later the same day that it could cost an additional $1.4 billion.

“It stands as one of the most flagrant breaches of the integrity of the federal-state partnership in the history of the nearly 85-year-old federal-aid highway program,” the audit said.

Gov. Paul Cellucci (R) fired the head of the Big Dig, James Kerasiotes, just minutes after meeting with federal highway officials. But that does not solve the larger issue of how to complete projects of this magnitude on schedule and on budget.

Christian Science Monitor, April 2000

From the same article:

The Big Dig, he points out, is the worst example of cost overrun [Ernest Frankel, a professor emeritus at MIT's school of engineering]’s ever seen. He and his colleagues warned Massachusetts officials that the project could not be done for the state’s initial estimate of $2.5 billion. Which raises a larger point: While government officials often claim – rightly – that added time and costs are necessary on big projects, critics say authorities too often low-ball construction schedules and estimates to gain funding and public support.

Why Quality Suffers

When project constraints put the squeeze on, there are four ways we can respond. The common expression of the Iron Triangle is that a project can be represented as a triangle with three legs – cost, time, scope. If you put pressure on the project without increasing one of the legs of the triangle, then quality suffers. In this project, it looks like the consequences of pressure were mortal.

1. Sacrifice quality to increase functionality
2. Increase cost to increase functionality
3. Increase time to increase functionality
4. Delay some functionality to deliver other functionality

How To Use Timeboxes For Scheduling Software Delivery

Apparently, the folks on the big dig were pressured to choose option #1, which is not a good idea. They also apparently made liberal use of options 2, 3, and 4. Perhaps there were competence problems, or process problems, but regardless, politics trumps people the same way that people trump process.

Conclusion

Don’t sacrifice quality to meet some arbitrary metrics. Without accounting for sunk costs, review the project from its current state to its projected end state. If the additional time and costs will still allow the project to meet the ROI targets, then keep working. If not, cancel the project. If you go with option 1, bad things can happen.

If This Be Treason, Make the Most Of IT! (Patrick Henry)

The customer is always right, except when he is wrong. When we have bad customers, we should fire them. Declare today as Customer Independence Day, where we declare our independence from bad customers.

The Loophole

While the customer is always right, there’s a big loophole – when the customer is wrong, he should stop being our customer.

Hawkins on Firing Customers

Christopher Hawkins provides a list of 11 customer archetypes who should be fired. Having them as customers is just bad business. Christopher provides a lot more detail, and here is his list of abusive client types:

1. The disillusioned
2. The suspicious
3. The chiseler
4. The bully
5. The something-for-nothing
6. The slow-pay
7. The flake
8. The liar
9. The blackmailer
10. The money pit
11. The clinger

Our Take

We agree that people who exhibit these traits tend to make bad customers, friends, bosses, etc. We should always strive to resolve conflicts or change the behavior of our clients when it is unacceptable. Only when all else fails should we abandon a customer because of a personality problem.

There are times when we have great relationships with our customers, and we simply become unaligned. We should fire those customers too. Perhaps the client’s strategy is changing, and it isn’t one we want to support. Perhaps the customer’s needs are such that they ask us to perform work that we choose not to do. Perhaps our direction has changed, or is evolving, away from an existing customer’s business needs.
We will dilute our efforts if we try and be all things to all people.

As a small company starting out, it can be very hard to walk away from a bad “opportunity” with no paying alternative in sight. Someone once said “the hard thing to do is often the right thing to do.” It could be for you. It has been for us in the past.

Be Professional

We’ve decided to fire customer X. We don’t want to dump a shipment of tea in the harbor. Customers have memories, and they also have friends. Even if we never want to work for customer X again, we don’t want a bad reputation.

Some things to do when separating from a customer:

• Be courteous and polite.
• Provide ample lead-time. Two weeks is a minimum, even if the customer wouldn’t have provided it to you. Some situations require more lead time.
• Review your documentation and update it as needed. Presumably, someone else will take the post we decline (or abandon). Make sure they have all the information they need to know everything you did.
• Be proactive about knowledge transfer. Don’t wait for the client to ask for knowledge transfer – actively contribute to the plan, and drive it forward.
• Reccommend alternatives. If you can propose your own replacement (and vouch for her) – even better.

- -
*(based on The Spirit of ‘76 by Archibald Willard 1836-1918)