Saturday, November 29, 2008

Photos from the Slush event in Helsinki 24.11

I attended the Slush startup seminar in Helsinki last Monday. It was great! I would even say that the amount of new and interesting information was comparable to Gartner events. Here are Peter Robinnet's thoughts about the seminar. I have also written some posts about it on my Estonian blog.

Here are photos from the event and from the weather outside. (There were some interesting old trams at Korjaamo.)

Thursday, November 27, 2008

Can you do small-time SAAS

There was recently a post on Phil Wainewright's SAAS blog about how to manage the finances of a SAAS solution. "The scary" part of the post to me is the amount money needed and the share size of even a medium sized SAAS business. Is it possible to have a decent size SAAS service in Europe where a 1000 server solution is a big and rare phenomenon.

Well, I think that for niche SAAS applications there is a good chance. And even with a 10 server installation you could run a solution for 1000 users and earn a decent profit. But the principal economic math running it is the same as with big solutions. Every new customer brings new demand for capacity and service and therefore means upfront investment. The revenue is collected afterwards so the cashflow should be calculated with good care.

A wisdom of economics: companies don't go bankrupt because they have negative net profit, they go bankrupt because they run out of money. This is true also vice versa - a business can have really good net profit, but can still go bust because it runs out of money.

Tuesday, November 11, 2008

The primary reason for the current economic downturn

As you know the economic crisis we are currently having is one of the worst economic depressions that the world has seen for decades - probably the first one so global ever. Many are wondering what is the reason for such an event. I have one idea.

The primary reason for such a deep and such a global crisis is that there is no one person and no one institution whose job it is to keep the global economy on track. OK, this might seem strange, but the lack of a responsibility leads to many problems in any organization. It is one thing if the people responsible are not doing their job perfectly, but it is much worse if there isn't anybody appointed to be responsible. So in this global economy ee are just working and looking over our part of it. We try to make the best out of the system for us, but there is nobody looking over the big picture. It is like playing football without a referee. For some time everything might seem OK and the game goes on fine, but at some point the players might get into a fight and without a referee a football game might collapse into a fist-fight.
The last really big economic depression - the one on the thirties - was also due to the fact that there were no central banks and no systems taking care of the national economies. Luckily people were smart and created them afterwards and they have pretty much softened the national crisis afterwards. But now the economy has grown global and there is no global central bank who looks over the rules of global finance markets or puts cash from the global markets to reservers during good times and uses the reserves during bad times. Someone who could influence the global economy with taxes and financial reserve rules or interest rates.
Well you might say, that there are some institutions doing some work in this area like the IMF or World Bank or even the EU, but their role is far from what is needed.
So the commerce banks, the national banks, the multinational companies, the governments, the people...we just play in this global game of economics without the referee or even straight forward rules that everybody must obey. Sometimes we even don't recognize this situation and think that there is somebody who will bail us out when trouble comes. This was probably what the bankers of Iceland were thinking.

While Micro- and Macroeconomics are taught in every university program then the global economics is a rather new subject for only some MBA courses. The situation is so new that there is a lack of research, theories and best practices for the much needed Central Bank of the World.

But to comfort. :-) The thing that we have no institution taking care of the global economics is nothing compared to the fact that there is nobody who has the power or the responsibility to take care of Global Warming or Peak Oil. Or do you know somebody whose job description reads:
Save the world from the Arctic Meltdown and the extinction of species and while doing that also find a way to substitute Oil in peoples energy consumption.

The economic downturn is one thing, but this is nothing compared to half of Europe becoming part of the Atlantic ocean.

Thursday, November 6, 2008

Sales plus services - the effective businessmodel

Last month I wrote a post IT is less than half technology. I want to give this idea another perspective.

The thing is that it is really good for business if you can do both the sales and service part of any given need. This will of course get emphasized on economically gloomy 2009.
The best example of what I mean iscar sales. You need both the sales (to get the growth on good times) and the service (to have a steady cashflow on bad times). If you do only sales you get a really volatile business and probably end up spending the money made on good times and going bankrupt on bad times. If you do only the service you get really slow growth.

What this means for IT? The same as for all the other businesses. You better do both - sales and service.

So if you are currently offering only service - implementing ERP-s, developing software, consulting or doing hardware maintenance - you should get yourself a product to sell. For example concentrate your service on one certain product or vendor and start selling also the product(s) themself. Negotiate with the vendor in order to get a good margin from the sales.

If you are only selling products or producing and selling them then.... well you better have some cash reserves for 2009 and 2010..... you should also create a service business round your product. The software industry has of course recognized this model years ago and sells you broken software at first.... and then a service contract to get their broken software fixed.

Having this in mind I would dare to make a prediction that mobile telephone producers who don't have any serious services developed, and this includes all of them except Apple, run into serious problems when the market growth stops. By now they have delayd the decay by puting all kinds of useless features to the devices, but there is an end to this. So services or becoming Chinese is their future.