26 Oct DEMOLetter: Draining the Economic Swamp
My good friend, Scott Beth, vice president of procurement at Intuit, has a wonderful metaphor that describes well the experience of the economic recession. It is as if the swamp was drained, and companies finally saw the old tires, rotting tree stumps, and rusting barrels at the swamp bottom. That is, the fiscal largess of the Internet boom covered a world of organizational excess and mismanagement. With the money drained, the trash was exposed.
Once the mess was exposed, corporations of all sizes went about the task of cleaning out the swamp. They cut excess, dumped nonperforming products and people, and outsourced what they didn’t need to own.
The water is beginning to refill the now-cleaned basin. And to Scott’s point, you can’t just cover up the trash and pretend it isn’t there. In other words, if you haven’t cleaned your swamp, you’d better. Then, as the water level rises, you have a lovely pond rather than a putrid swamp.
It’s a good visual, and one that has me thinking about how to maintain the purity of the pond in a post-recession business cycle.
Indeed, the last 36 months will fundamentally change the way businesses are structured. Once forced to “right size” by falling revenue, these companies aren’t about to go on a hiring spree. Instead, many have discovered they’ve done quite well outsourcing a range of activities, from product development and manufacturing to design and marketing, and even many corporate management functions such as HR and accounting services. This outsourcing drives a new organizational mantra: Keep fixed costs low, manage variable costs carefully.
Not good news if you were one of the tens of thousands of people right-sized out of a job. Or is it?
You see, a new post-hierarchical corporate organization is emerging. The relatively small corporate core owns and manages the brand. Orbiting around this core are hundreds of outsourced providers offering a range of services. The corporation contracts with these providers as the life-cycle of the product, brand, and organization dictate. When the need grows, more contractors come into the project. When the need wanes, the contractors leave the project. (BMW has successfully used this model in the development of its Z4. As a BMW insider told me: “The only thing BMW on the car is the logo.”)
So what does this new networked corporation model mean?
The implications are far reaching, so much so that we posit three points this week, and dig deeper into these issues in the coming weeks.
* Corporate structures get small; the network of providers gets very large.
* The hub/network organizational structure suggests significant changes in enterprise network design and infrastructure, such that providers can move in and out of the network as required.
* In time, the market buying power will shift from enterprise customers to small service providers, who want enterprise-class tools on a small-business budget. This emerging reality poses a major challenge for enterprise software and hardware vendors who have little idea how to sell to these customers, let alone the ability to find them.
When does this shift become an accepted way of life? Who knows, five, ten, twenty years? I’d only be guessing. Still, the transformation has begun. The water levels are rising and no one is rushing to re-create the mess just cleaned up.
HOMESTEAD’S GOT THE PICTURE (SITE)
For the parade of photo sites that have marched across the World Wide Web, sharing — or better yet, publishing — digital photographs is still a difficult task for the average bear. Perhaps that’s because the majority of photo sites are focused on selling reprints; sharing is simply a means to distribute the images to potential buyers.
Homestead, the company that has made Web hosting accessible to small businesses, takes a decidedly different approach with its new PhotoSite service, launched today. PhotoSite lets digital photography enthusiasts easily create attractive photo-centric Web sites. The creation tool is smartly designed and simple to use. You can post collections of photos in a variety of styles, including a photo journal template that lets you turn photos into stories.
Rather than siphoning off revenue from reprint services, Homestead charges a flat monthly fee, ranging from $4.99 to $9.99. That may seem a little steep for the casual digital shutter bug, but it’s easily justifiable for those (new parents come to mind) who chronicle life through photos. (And easier, still, for certain businesses that depend on photographic images to position and sell their products and services.)
As good as the PhotoSite software and service are, the Homestead story is even better. CEO Justin Kitch has steered this company through the ups and downs of the boom and bust cycle, keeping his team well focused on creating real value for its growing customer base. When other Internet-era companies were scraping to hold on to company valuations, Kitch trained his developers on the task of architecting the next generation of its flagship site-building software. The effort yielded a simple-to-use Web publishing tool, and provided the foundation on which PhotoSite was created. In fact, Homestead’s development tramways able to build the rock-solid PhotoSite photo publishing tool in a little more than six months. The hard work is paying off. The company is zeroing in on operating profitability, having successfully converted from a free to paid model for its hosting services.
Homestead has been on DEMO’s “watch” list for three years, and it’s beginning to show that it is well worth the attention.
DEMO 2004: CALL FOR DEMONSTRATORS
DEMO is known coast to coast as the premier event that reveals the products and services poised to have the greatest impact on the technology landscape in the year to come. Each year, the nation’s top technology executives, venture investors, journalists, and analysts converge at DEMO to preview and understand the emerging products and technologies that are impacting their market segments.
The search is on for the 75 products that will be honored as the most significant technology introductions of 2004. These carefully selected products enjoy the benefit of media attention, investor inquiry, and the imprimatur of the elite DEMO status. If you are working on technology worthy of the DEMO platform, go to http://www.idgexecforums.com/demo/index.html and click on “Launch at DEMO.” Applications are being accepted through October.
February 15 – 17, 2004
Westin Kierland Resort
Symantec, maker of anti-virus software, gave itself an early holiday present. The company picked up SafeWeb, which develops software for secure remote access, for $26 million in cash. Capitalizing on the buzzword of the day, this purchase gives Symantec an SSL VPN product to tout . . . VeriSign exited a business it helped pioneer. The company sold off its Network Solutions registrar arm to Pivotal Private Equity for $100million. Pivotal Private Equity will receive the company’s domain packaging services, including e-mail and Web hosting. VeriSign will keep control of the registry business, which allows it to provide the infrastructure for the .com and .net domains . . .Repeating the success it had with iTunes for its own users, Apple says it has reached the 1 million mark with iTunes for Windows three days after its launch. The popular music store concept that Apple unveiled less than a year ago lets users download tracks to PCs.
Chris Shipley is the executive producer of NetworkWorld’s DEMO Conferences, Editor of DEMOletter and a technology industry analyst for nearly 20 years. She can be reached at email@example.com. Shipley, has covered the personal technology business since 1984 and is regarded as one of the top analysts covering the technology industry today. Shipley has worked as a writer and editor for variety of technology consumer magazines, including PC Week, PC Magazine, PC/Computing, and InfoWorld, US Magazine and Working Woman. She has written two books on communications and Internet technology, has won numerous awards for journalistic excellence, and was named the #1 newsletter editor by Marketing Computers for two years in a row. To subscribe to DEMOletter please visit: http://www.idgexecforums.com/demoletter/index.html.
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