Sun: The Bleeding Continues

Sun announced declining sales (from $3.22B to $2.99B) and a whopping $1.7B loss ($2.24/share) for its fiscal first quarter, ended 9/28/08.

Says this recent New York Times story:

With falling revenue, problematic acquisitions, product slip-ups and a stock that has lost three-quarters of its value in the past year, the investment community is getting impatient with Sun’s management, including chief executive Jonathan Schwartz.

Now, I don't claim to be a hardware/systems expert, but I haven't understood Sun's strategy for a long time. I understood Sun at the beginning: high-performance workstations. I understood Sun when they evolved to high-performance servers.

I've never liked their marketing (I loathed the "dot in dot-com" thing). Like most of us, I initially enjoyed all the McNealy barbs thrown at Microsoft. But over time, the cleverness ran dry, leaving only bitterness in its wake.

I understand Sun's current situation isn't easy:

• Racks of ever-faster commodity servers continue to eat away at demand for high-performance systems.

• New software and algorithms that increasingly support parallelism across large numbers of commodity servers (e.g., MapReduce, and lest I fail to mention it, MarkLogic), which further erode high-end server demand

• Being lost on Porter's generic strategies: succeeding neither in differentiation (where I don't see much) nor in cost leadership (where they are beaten by white-box makers, Dell and presumably HP)
  

• And the lifeboat -- if it's open source software -- has a a hole in it. Sauf RedHat, no one has really figured out how to make money in open source software. (The other exception is selling your stock to someone who thinks they can -- e.g., MySQL's $1B exit to Sun itself.) At least MySQL has strong adoption which increases monetizaton potential. Despite being free, I've met only one person in my life who used OpenOffice -- and guess where she worked? Sun.

I took Sun's changing of their ticker symbol to JAVA as more desperate than anything else (see this post, one of my favorite titles, Sun: The 0 in Web 2.0).

Going back to my marketing roots, the analysis is simple: I don't know what Sun stands for any more. I don't know what Sun means.

Heinz means ketchup. KFC means chicken (and the F still means "fried" to me). Speedo means swimsuits. Bobby Flay means great restaurants (and fun cooking TV). Facebook means friends. Cabela's means outdoor gear.

Forget political views, but I will say -- at a branding level -- Obama means change every bit as much as Volvo means safe or Patek Philippe means heirloom.

What does Sun mean? I don't know. And that, in my humble opinion, is where the problems begin.

The Interview That Wasn't: Joshua Duhl on Dynamic Publishing

I've known Joshua Duhl since about 1990, where we competed amicably in the object database market, when I was at Versant and he was at Ontologic. We later crossed trails a few times over the years when he was at IDC. We recently reconnected at a tradeshow or two, now that he's at Quark working as director of enterprise product marketing (or product management, see below).

So when I saw this post on the PlanetQuark blog, The Faces of Quark: Joshua Duhl on Dynamic Publishing, I was eager to hear what Joshua had to say about dynamic enterprise publishing. After I read the post, I decided to blog about it for two reasons: (1) I think Quark is doing some interesting work in enterprise publishing that I wanted to highlight and (2) I think the post is unfortunately a bit of a counter-example on corporate blogging.

Let's talk first about the positive: Quark's interesting work in dynamic enterprise publishing. What I like best about their approach is that Quark, a company more historically associated with a proprietary file format than open standards, is embracing XML in their dynamic publishing solution.

Here's an excerpt from the post:

Dynamic Publishing can mean a range of things, depending on its use. Quark focuses on four key ideas:

• Content first: Focus on authoring the content first, independent of the context, formatting or media in which it will ultimately appear
• Single source of content: one large database of smart text components, graphic elements, and other files related to projects
  
• Multiple output channels
  
• Automation: generates documents with minimal human interaction, customized for different audiences, markets or media..
  

So my first message is that Quark is doing some interesting work in dynamic enterprise publishing and they seem to have a strong XML vision (thanks, in part, I suspect to appointment Ray Schiavone, ex-CEO of ArborText, as CEO of Quark in 2006).

Now, let's do a brief critique of this post as an example of corporate blogging:

• The title suggests it's an interview with Joshua Duhl. We all know what interviews look like. This ain't one. That's a bait and switch.
  

• The warm-up is excessive. It's about 12 paragraphs before we get to material that resembles commentary from Joshua.

• The by-line is at the bottom of the post, which initially gives the impression of a nameless, faceless corporate blogger. This makes the long introduction all the more strange, especially for first-time readers like me.

• There's too much blatant marketing. Examples: "only Quark’s solution guarantees consistency in branding and messaging across all publications, media and languages." Or, "Quark has a vision that is clearly understood because it aligns with the needs of companies" or "Quark DPS engages at a higher level in the organization."
  

My advice?

First, lose the marketing, at least that written by the blogger. If there's marketing to be included, let it come in how Joshua chooses to answer the questions. Second, make it an interview -- ask questions and transcribe (and edit) the answers.

• Joshua, why did you join Quark?
  
• What is the dynamic publishing solution?
• Why did Quark make it?
• Who is the target customer?
  
• Does this reflect a change in Quark's strategy?
• What's unique about the DPS?
• What are the alternatives to the DPS? Who does it compete with ?
  
• What are its advantages over those competitors?
• Who's using the DPS?
• Where do you expect to see it evolve over time?

In reality, there's plenty of room for marketing in the format I'm suggesting. It's just the kind of marketing that I like: fact-based and argumentative. Quark's got a dynamic publishing solution. By definition, they think it's a good idea. So tell us about it: why you made it, who's it for, and why you think it's better.

That's the post I'd rather read.

Quote of the Week

"The only thing that goes up in bear markets is the correlation between asset classes."
-- Richard Davis, Needham & Co

I'm sure it's a bona fide "ism" in the finance industry, but I'd not heard it before. And boy does it seem true. Consider this headline: "Stocks, Oil, Gold Tank on Growing Recession Fears."

Isn't gold supposed to inversely correlated to stocks? Aren't commodities only partially correlated? And, worst of all, aren't hedge funds supposed to be uncorrelated or inversely correlated?

If you believe the "ism," it's a great argument to suggest that a diversified portfolio is a fair weather friend, an illusion that appears to work in smooth seas but that sinks in rough ones. Is real diversification possible -- i.e., diversification where the correlation doesn't head to 1 in rough times? I'm not so sure.

Mark Logic Progress in Europe: OECD and Semantico

I'm pleased to say that we're having continued success with our European efforts. Yesterday, our UK-based partner Semantico announced a new partnership with the OECD in Paris to create a bibliographic metadata engine based on MarkLogic.

Semantico's press release is here. Excerpt:

Semantico will work with OECD to develop a unique internal repository of publication metadata for OECD’s books, journals, working papers and databases. The repository will export a variety of bibliographical publication metadata in different languages and formats to a range of dissemination channels, including library systems. The data model used will provide a flexible publication description to fit the needs of the many discovery services used by OECD readers and allow increased flexibility in creating information solutions for OECD’s clients. The system will underpin OECD’s next-generation online platform, OECD iLibrary, due for release in 2009. The repository will be built using XML database technology and will offer OECD increased agility to support the needs of today's digital publishing environments.

Semantico will utilise MarkLogic Server to ensure the most cost-effective and agile solution to handle the diversity of OECD's data and requirements, strengthening Semantico's relationship with Mark Logic Corporation as preferred technology partner.

Web 2.Over?

I heard this soundbite today (pronounced "web two dot over") as Silicon Valley's response to the crisis in the financial markets, declining consumer spending, and the imminent recession.

In many ways, I think it's true.

• Many of the previously-unconstrained-by-revenue web 2.0 startups are in for a reality check.

• I attended the now-famous Sequoia "Rest in Peace Good Times" meeting and indeed sat in the front row. While I concur with Sequoia that this is a big structural problem that will take years to unwind, I think it will impact different companies in different ways. (And you have to love the Whiner Jenkins parody in response.)
  

• Heck, even the father of Web 2.0, Tim O'Reilly, urged startups to get serious and stop delivering silly software.
  

• Because web 2.0 startups were less capital-intensive, it seems that there are way more of them. And, oh, are some of the names painful. I won't miss Weebly, Zlio, and Yoono.
  

• Heck, there was even the famous web 2.0 bubble video by The Richter Scales, a sure sign that things were coming to a head.

However, in many ways, I think the Web 2.0ver assertion is not true at all. In fact, it almost misses the point. While a swarm of eyeball-catching, oddly-named, twenty-something-led startups may get obliterated, that wasn't the point of web 2.0 (outside venture circles, at least). To me, web 2.0 was, is, and will remain, an important collection of concepts that will endure:

• A read/write web, where we can participate, update, annotate, comment, link, tag, etc
  
• A social web, where there is awareness of relationships that can be leveraged appropriately
• User-generated content, which is here to stay and, in fact, always has been (think: radio call-in shows, Kids Say the Darndest Things, or America's Funniest Home Videos)
  
• The use of the web for communication and entertainment. People are natural communicators. We will always adapt our tools to that fundamental need.
  
• A personalized web, that understands what we like and how we like to get it

These concepts -- and others -- came with web 2.0, and perhaps despite the illness of the hosts who brought them, they are most certainly not web 2.0ver.

Slides from My Presentation at the Plug and Play Tech Center Collaboration Event

Yesterday I spoke on a panel of international software companies at the Plug and Play Tech Center's Acceleration and Collaboration Track event in Sunnyvale, California.

I was invited not to discuss Mark Logic's success (we are a US-based company), but to discuss my experience prior to Mark Logic as a key member of the executive team that grew Paris-based Business Objects from around $30M to more than $850M during my nine years there.

Other panelists included:

• Marten Mickos, CEO of MySQL (now SVP of the database group at Sun Microsystems), a company originally founded in Sweden and Finland
  
• Eyal Hertzog, co-founder of video site Metacafe, a company founded in Israel
  
• Kurt Hemecker, SVP of business development at Echovox, a company founded in Switzerland
  

Here are the slides from my presentation on the panel.

Business Objects Case Study at Plug and Play Tech Center

View SlideShare presentation or Upload your own. (tags: software strategy)

Mark Logic Webinar on XML and Geospatial Intelligence (GEOINT)

Mark Logic will be sponsoring a webinar run by the Open Geospatial Consortium entitled Exploiting Geospatial Information in the Intelligence Community: The XML Factor. The webinar will discuss performing GEOINT using GML as an example.

Speakers include:

• Dr. Carl Reed III, CTO of the OGC
• Joe Francica, editor in chief of directions media
• Chris Biow, chief technologist of Mark Logic's Federal division
  

There's a lot of brainpower in this line-up, so I'd say that anyone interest in geoint should consider attending.

The webinar is slated for this Thursday (10/23/08) from 1:30 to 2:30 PM EDT. You can read more about it in this press release from the OGC. Or, you can register for the webinar here.

The Semantic Web Pitch by Nova Spivack

Nova Spivack, founder and (I think) CEO of Radar Networks / Twine (see prior post here), entrepreneur, blogger, and grandson of management legend Peter Drucker, is often described as head salesperson for the semantic web / web 3.0.

Here is the video of Nova giving a presentation on the semantic web at the recent Next Web conference in Amsterdam. It's ~45 minutes, but well worth watching.

My favorite quotes:

• "Let's turn the web from something that is more like a file system into something that's more like a database." (Hallelujah!)

• "The web is the database. We're turning the web into a database. We're making the world wide database."
  

• "Keyword search has reached its limit. It's not going to get better. It's going to get worse."

Nova Spivack at The Next Web Conference 2008 from Boris Veldhuijzen van Zanten on Vimeo.



Thanks to Daniel Tunkelang for blogging about this.

Elsevier Article 2.0 Contest in Full Swing

Just a reminder that the Elsevier Article 2.0 contest is off and running, having started on 9/1/08 with an entry deadline of 12/31/08, and awards to be presented on 1/30/09.

Each contestant will be provided online access to approximately 7,500 full-text XML articles from Elsevier journals, including the associated images, and the Elsevier Article 2.0 API to develop a unique yet useful web-based journal article rendering application. What if you were the publisher? Show us your preference!

The distinguished panel of judges includes Alan Darnell, Jill O'Neill, Andrew Perry, Rafael Sidi, David Worlock, and yours truly.

The prizes are real: $4,000 for first place, $2,000 for second place, and $1,000 for third place. You can find sample applications here, contest details here, and contest rules here.

Two Interesting Mark Kvamme Presentations

Sequoia partner and Mark Logic board member, Mark Kvamme, recently gave what looks like an interesting presentation at the University of Montana. Below are his slides.

Mark Kvamme's Presentation to the University of Montana, October 2008

View SlideShare presentation or Upload your own.

While looking at this, I stumbled into this interesting presentation as well, entitled 2/17/09: The Beginning of the End of Appointment Media, a keynote done by Mark for the iMedia Brand Summit.

Mark Kvamme's iMedia Brand Summit Keynote, "February 17, 2009, The Beginning of the End of Appointment Media"

View SlideShare presentation or Upload your own.

Gartner Revised Take on 2009 IT Budgets: Too Rosy?

Check out this article on SeekingAlpha, entitled Gartner's Worst Case for 2009 IT Budgets Isn't So Bad. It covers a speech made by Gartner SVP Peter Sondergaard at Gartner's annual Symposium / ITExpo show, this week in Orlando.

Excerpt:

The meat of the talk, however, was the downturn. The upshot:

• Gartner had expected budgets to grow 3.3 percent in 2009.
• Now the most likely case is IT budget growth of 2.3 percent to 0 percent;
• The worst case is that IT budgets will be down 2.5 percent.

Now, given the craziness in the markets (see Paul Kedrosky's latest Weekend Reading) and given recent vendor announcements (e.g., SAP's Q308 commentary) and rumors (e.g., that SAP may cut up to 25% of its salesforce during 4Q08), this strikes me as rather optimistic. After all, isn't the financial industry alone something like 20% of aggregate IT spending? While I'm sure some vendors will find opportunity in the wreckage (and we might be one of them, think FpML derivatives repositories), surely total financial sector IT spending will go down in 2009.

The Gartner argument seems to be that IT is so embedded in your business that you can't just slash it -- in essence, that IT is increasingly becoming fixed, non-discretionary spending. If it proves true, that would certainly be nice for Silicon Valley.

As for what CIOs should do going forward:

Sondergaard said technology execs need to do two things. (1) focus on disruptive technologies that can cut costs and (2) think like your CFO. Here are Gartner’s top 10 disruptive technologies:

1. Multicore and hybrid systems
2. Virtualization and fabric computing
3. Social networking
4. Cloud computing
5. Web mashups
6. User interface
7. Ubiquitous computing
8. Semantics
9. Augmented reality
10. Contextual computing

I think it's a good list of disruptive technologies, and here are a few additions / comments.

• Virtualization and hybrid systems are great topics because, to me, they're ultimately about efficiency, cost, (and in turn) green-ness.
• I think enterprise social networking, and more broadly, enterprise 2.0 (and governement 2.0 a la Intellipedia and A-Space) are all good initiatives. In the end, these also drive productivity and cost, provided they work.
• If cloud computing means use SaaS where indicated, I'm on board. If it means enterprise cloud computing (in the sense that central IT builds internal cloud services on which divisions rely ), then I'm also on board. If it means something else, then count me in with unlikely bedfellows Larry Ellison and Richard Stallman.
• At MarkLogic, we're all about semantics and contextual computing, so I*love* that they are on the list. Represent the semantics in XML and building the conextually aware applications in XQuery, we say.
  

Yahoo Now Below $13

For a stroll down memory lane, here is (again) the investor presentation that Yahoo made in March of this year, arguing that Microsoft's offer of $30/share was insufficient. Today, Yahoo closed below $13.

I have blogged about the failed Microsoft Yahoo deal before: here, where I highlighted some of their more ambitious assumptions and here, when Henry Blodget posted as Yahoo fell through $19. Today's post was prompted by another of Blodget's. I know that no one can predict the future and that Yahoo couldn't have predicted the crisis that has helped drive their stock towards the single digits.

But, managers are paid to make decisions under uncertainty, and they should do so logically and dispassionately. When a public company is offered a 50% premium over its (1/31/08) stock price, it should, in my opinion, do a classical decision tree analysis.

• Make 3 or more scenarios
  
• Produce a resultant stock price for each using standard ratios
  
• Assign a probability to each scenario

And then analyze from there. Sure, there are scenarios where everything goes right and you end up with a stock price above $30. But there are lots of other scenarios, too. My guess is that other variables were factored into the analysis (e.g., attitudes about Microsoft) and thus the alternative scenarios were either never made or were never assigned realistic probabilities.

I suspect there was some recency bias as well. Just a few months earlier, in October 2007, Yahoo's stock was trading in the 30s. So I'm pretty sure that some people thought: "30 isn't a premium at all, since the stock was recently $30."

This is an all too common form of denial: while the stock may recently have been $30, at the time of the offer it was $19. There are reasons for that, and 30 divided by 19 minus 1 really is ~50%, regardless of one's emotional desire to call it 0%.

Once at Business Objects, we offered a company a 30% premium on its stock, which had recently been slashed from $6 to $3 on missed earnings and lowered guidance. They said that they wanted 30% above $6. We reminded them politely that their stock was, in fact, trading at $3. But they wanted 30% above $6, so there was no deal.

Can you spell d-e-n-i-a-l?

Yahoo! Investor presentation

View SlideShare presentation or Upload your own. (tags: yahoo!investormicrosoft yahoo)

The Frugal Future

Thanks to Alex Moissis for passing along a link to the following presentation in a comment on my previous post (Nobody Knows) on the current financial crisis. I thought the presentation was so good, so insightful, and so statistics-packed, that I'd share it here.

And lest I accidentally end up a financial blogger, I'll remind you that I rather presciently wrote this post on the real estate roller coaster in April of this year.

The Frugal Future

View SlideShare presentation or Upload your own. (tags: economy meltdown)

Mark Logic CEO Blog Again Named a Top CEO Blog

I was pleased a punch to discover that corporate blogging guru Debbie Weil has the Mark Logic CEO Blog listed on her blogroll as one of 5 top CEO / executive blogs. As is increasingly the case when the blog gets such recognition, I find myself in truly impressive company, including Richard Edelman of Edelman PR, Alan Meckler of Jupitermedia, and Bill Marriott of Marriott.

Debbie is author of The Corporate Blogging Book and runs a blog on corporate blogging called Blogwrite for CEOs.

All I can say is wow and thanks!

BI Change in Store at SAP?

Klaus Kreplin, who ran the 2500-person development organization responsible for NetWeaver, including SAP Business Warehouse (also known as SAP NetWeaver BI), has left SAP.

Kreplin was in charge of SAP's BI strategy for most of my near-decade at Business Objects and, given his departure, some financial analysts are predicting a change in tack for SAP BI. Specifically, the rumors/predictions are:

• That SAP may develop an acquisition interest in Teradata, Netezza, or Greenplum
• That SAP Business Warehouse might get moved under a Business Objects executive

From a distance, both seem like good ideas to my mind.

Intrade Prediction Markets

I'm seeing increasing blogosphere references to Intrade prediction markets, so I thought I'd cruise over to intrade.com and have look. I first heard of the idea of using prediction markets in business over a decade ago from amateur economist and Business Objects co-worker Timo Elliott.

While I found the idea intriguing, Timo was way ahead of this time. In those days no "serious" business person would use anything "as random as a market" to do something important, like forecast sales. But inexplicably those same serious people were seemingly happy to have a market set a price for a share of their stock.

In any case, the whole concept was legitimized with the publication of The Wisdom of Crowds in 2004 and, seemingly overnight, using markets for predictors of all things became rather mainstream. Towards that end, businesses like Intrade appeared, allowing you to effectively buy and sell futures contracts in events, such as:

• Will the Higgs boson be observed in 2008?
• Will Obama win the presidency?
• Will there be a magnitude 9.0 earthquake this year?
• And most of all, will there be a recession in 2009?
  

Let's see what Intrade has to say. On the boson, you can buy a contract that says it will be observed before the end of 2008 for only $2. (If the event happens by the date, the contract is worth $100; if it doesn't, it expires worthless.) The price has plummeted due to the shutdown of the large Hadron collider.


On the presidential race, it seems as if the economic crisis has been good for Obama.


On the possibility of a magnitude 9.0 earthquake striking before the end of this year, while they're only trading for $4, I'm still selling since there have only been four magnitude 9+ quakes in the last 118 years. You can buy or sell the contracts on Intrade. If you sold these at $4, the most you can make is $4/contract when it (hopefully) expires worthless on 12/31/08. By the way, buying a contract for $4 that pays $100 if an event occurs represents 24:1 odds (remember you get your bet back), which is actually quite consistent with the history (118/4 = 29.5). But remember 5/6th of the year is already past.


Finally, on whether they'll be a recession in 2009, that contract costs nearly $80 and will deliver $100 if it happens, implying odds of 1:4. Note, that's not 4:1, but 1:4 -- i.e., a fairly certain outcome in the minds of the betters.

Selected MarkLogic Server 4.0 Press Coverage

Here is a list (which I'll be continuously updating for the next few days) of selected press coverage of the MarkLogic Server 4.0 launch.

• Stephen Arnold blog post
  
• CMS Wire blog post
• Gilbane blog post
• EContent magazine article
• Information today article
• Government Computer News article
• Redmond Developer News article
  
• KMWorld magazine
  
• Directions magazine article
• Folio magazine article
  
• Basis Technology press release
  
• MarkLogic Server 4.0 web introduction
• MarkLogic Server4.0 press release
• MarkLogic open enrichment framework press release
  
• Mark Logic founder video interview

See Mark Logic Founder Christopher Lindblad on MarkLogic Server 4.0

Check out this five-minute video with Mark Logic founder and chief architect Christopher Lindblad, discussing the new features in MarkLogic Server 4.0.

MarkLogic Server 4.0 Launch

Today, we launched a major new release of our core product, MarkLogic Server 4.0. Among other things, this exciting new release includes:

• Geospatial support, including geospatial indexing and high-performance geospatial queries.
• Large-scale alerting, a highly scalable model for delivering alerts (aka, "profiles") when new content appears, enabling applications like real-time deep content inspection.
• Entity enrichment, with both built-in entity enrichment options as well as a new open enrichment framework which enables tight integration with a number of third-party text mining tools.
• Content analytics, with several new features for analyzing content, including co-occurrence and bucketing.
• XQuery 1.0 support

We are holding a webinar this Thursday to present the new features in MarkLogic Server 4.0 to our customers. It's on 10/9/08 at 11:00 AM PDT (California time). Register here to attend.

Here is the MarkLogic Server 4.0 press release. Here is the press release for the new open enrichment framework.

Mark Logic Digital Publishing Summit 11/6/08 in NYC

Mark your calendars! The Mark Logic Digital Publishing Summit is being held on Thursday, November 6, 2008 at the Westin Times Square in New York City.

This should be bigger and better than the event we ran last year at the Four Seasons. It's all day instead of a half day, so there will be much more content.

Confirmed speakers include:

• Ned May – Director and Lead Analyst, Outsell
• Steve Paxhia – Lead Analyst, The Gilbane Group
• Barry Bealer - President & CEO, Really Strategies
• Isaac Sacolick - VP Technology, BusinessWeek.com
• Presumably me, but no one's actually asked yet
  

More details will be forthcoming, but meantime please block the date in your calendar so you can make it and register here.

See you there!

Director Hayden's Speech at the DNI Open Source Intelligence Conference

Central Intelligence Agency Director Michael Hayden recently gave a speech at the DNI Open Source (Intelligence) Conference.

Open source intelligence is a topic I'm interested in and have blogged about before. See Open Secrets (my favorite), Intelligence 2.0, or USA Today Article on OSINT for background.

Rather than take excerpts, I'll just link to full text of the speech here.

Best Notes on the Financial Crisis: Nobody Knows

I've read a lot of notes and articles about the current financial crisis. This one, forwarded to me by First Republic, is among the best I've read. Entitled simply, Nobody Knows, it's written by Howard Marks of Oaktree Capital. A few excerpts:

On forecasting:

This is a great time for my favorite quote from John Kenneth Galbraith: “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

On the causes of the crisis:

• Excess liquidity, which had to find a home.
• Interest rates that had been reduced to stimulate the economy.
• Dissatisfaction with the resulting prospective returns on low-risk investments.
• Inadequate risk aversion, and thus a willingness to step out on the risk curve in search of higher returns.
• A broad-scale willingness to try new things, such as structured products and derivatives, and to employ massive leverage.
• A desire on the part of financial institutions to supplement operating income with profits from proprietary risk taking – that is, to be “more like Goldman.”
• A system of disintermediation, selling onward, and slicing and dicing that caused many participants to overlook risk in the belief that it had been engineered away.
• Excessive reliance on rating agencies which were far from competent to cope with the new instruments, and on black-box financial models that extrapolated recent history.
• Unquestioning acceptance of financial platitudes without wondering whether altered circumstances and elevated asset prices had rendered them irrelevant: (1) houses and condos are good investments and can be counted on to appreciate, (2) mortgages rarely go into default, (3) there can never be a nation-wide decline in home prices, (4) it’s okay to grossly lever a balance sheet if you’ve hedged enough through derivatives, and (5) it’s safe to borrow and invest funds equal to a huge multiple of your equity capital if the probabilistic expected value is positive, because “disasters rarely happen.”
• Individuals such as mortgage brokers and mortgage borrowers who were given incentives to do the wrong thing.
• Newly minted financial “masters of the universe” encouraged to maximize returns for themselves and their employers without concern for whether they were adding value to the financial system or endangering it.
  

On what to do:

My answer is simple: we have no choice but to assume that this isn’t the end, but just another cycle to take advantage of. I must admit it: I say that primarily because it is the only viable position. Here are my reasons:

• It’s impossible to assign a high enough probability to the meltdown scenario to justify acting on it.
• Even if you did, there isn’t much you could do about it.*
• The things you might do if convinced of a meltdown would turn out to be disastrous if the meltdown didn’t occur.

On cycles:

Then I went on to create the converse of the above, the three stages of a bear market:

• the first, when just a few prudent investors recognize that, despite the prevailing bullishness, things won’t always be rosy,
• the second, when most investors recognize things are deteriorating, and
• the third, when everyone’s convinced things can only get worse.
  

In the final stage, you can buy assets at prices that reflect little or no optimism. There can be no doubt that we are in the third stage with regard to many financial institutions. Not necessarily at the bottom, but in a serious period of unremitting pessimism.

To SaaS or Not To SaaS: That is the Question

[Revised, rewritten, and replacing a post from yesterday]

One question we encounter with our Information and Media customers is whether they should buy MarkLogic Server and build an application on top of it, or use a SaaS offering (which may or may not be based on MarkLogic) and effectively rent the use of an application to meet their online publishing needs.

The primary arguments in favor of the rent (SaaS) approach are:

• You get up and running faster because you're renting the use of an existing application
• You have lower up-front fees because you need neither to build your application nor buy the hardware/software platform on which to run it
• You can focus on what matters because you are liberated from the nitty-gritty of building and deploying production systems
  

The primary arguments in favor of the build approach are:

• You create a unique offering which you can use to differentiate from your competition
  
• Your costs are potentially lower over the mid-term (SaaS's relatively high annual payments reverse the initial savings over a few years; if you don't believe me, remember that Wall Street values a dollar of SaaS revenue at about 2-3x a dollar of perpetual revenue)
  
• You create a strategic platform on which you build future applications, reducing the marginal cost of experimentation and new product development
  

To me, SaaS is not a religious issue; it's a practical one.

While we typically sell our software on a perpetual license basis, we nevertheless are a big user of SaaS solutions at Mark Logic. We happily use Salesforce and somewhat less happily use Netsuite. I was also a champion of bringing Salesforce into Business Objects, where we became one of their earliest, large enterprise customers. (As I told IT at the time: if you won't treat me as a customer, then I'll go find someone who will.)

Turning back to the question of publishers and SaaS, like most questions in business, the answer should derive from strategy.

• If you are trying to compete solely on the basis of your proprietary content, then you should consider a "rent" strategy.
  
• If you are trying to compete on the basis of mixing content and its delivery mechanism, then should consider a "buy" strategy.
• If you are in between, then you'll need to figure out where you are on the continuum and what you're willing to trade for what.

As I always say, there are two things that money can't buy: love and competitive advantage. Applied here, if you can rent a solution then your competitor down the street can rent it, too, and no amount of application configuration is going to result in competitive advantage (or disadvantage) for either of you.

What does this mean? It means that SaaS is great for what Geoffrey Moore calls "context" and rotten for what he calls "core." Excerpt from the referred page:

Core - See Core/context analysis
Any activity which creates sustainable differentiation in the target market resulting in premium prices or increased volume. Core management seeks to dramatically outperform all competitors within the domain of core.

Context - See Core/context analysis
Any activity which does not differentiate the company from the customers' viewpoint in the target market. Context management seeks to meet (but not exceed) appropriate accepted standards in as productive a manner as possible.

That's why we happily use Salesforce and Netsuite at Mark Logic -- we aren't trying to differentiate on the basis of our accounts receiveable or pipeline management systems. (We are trying to differentiate on technology, market focus, and services excellence.)

So, for publishers

• The more your basis of competition is ownership of a proprietary content set, the more delivery becomes context, and the more you should consider SaaS

• The more your basis of competition is (1) uniting your content with other content, (2) delivering content in unique in-context ways, and (3) rapid innovation in online product development, the more delivery is core, and the more you should build custom applications (i.e., new information products) on a standardized platform.