John Mashley: History of Software Development and Opportunities

• Each major new computer generation:
  • physically smaller
  • less expensive
  • ...
  • networked
• Each major new software generation:
  • physically bigger (code size)
  • less epxensive cycles -> use more
  • larger numbers of apps and programmers
  • adds radically diferent apps (successful things don't go away)
  • adds new markets, problems, and tools
  • networked -> more distributed dev
• History of software dev
  • batch jobs
  • share mini
  • share lan
  • own pc
  • own clients
  • share WAN
• constants, cycles, changes
  • small is beautiful 1977 -> 2004 deja vu (agile software dev)
    • we haven't improved human management issues much
  • programmer producitvity: 10:1 or more differences between people
    • sometimes finding really good programmers is the best single thing you can do. that's an impetus of distributing development across the world is to take advantage of really fine programmers, and differences are huge.
    • some people are 100:1 better, write 3000 lines of code in a few hours and have it right first time.
  • requirements always hard to get right
    • error cost and impacts escalate
  • problems -> tools -> enable bigger problems ... and cycle
    • some things a handful of people build today we couldn't have done with 100s 30 years ago
  • one person -> several -> many contributing to a software project
    • at Bell Labs, a memo said this project plans on 300 people working on something, and in my experience only 250 people can work together
  • same room -> same building -> ... -> worldwide

Following are several talks with different aspects of problems and solutions for distributed development and investing in software.

Going first: David Hartford is an old software guy, then lawyer, vc, now back home as CEO of a software company.

David Hartford: Detecting Requirements Errors

• Detecting requirements errors

  • $Billions spent on tools to support millions of developers every year
  • $100B flushed every year in US alone. Not fault of programmers or developers. But the requirements they are given aren't right.

• Do your business people and IT people understand each other?

  • Answer to this is usually "no".
  • Dilbert cartoon: Pointy haired boss says "we're outsourcing half of our programming to elbonia to take advantage of the time diference." Elbonians says: "I have no idea what they want. Let's pretend we died."
  • With distance, it gets increasingly difficult to fill in the gaps.
  • The problem: Missing, ambiguous and contradictory requirements.

• Where does the money go?

  • 60-80% of project failures can be attributed to requirements errors. at the very front of the process. not the arch, dev, or testers!
  • The biz people say you didn't understand, the IT guys say you didn't explain.
  • Scope creep and rework usually mean you didn't find the errors it the beginning
  • Good requirements are hard.
    • requirements definition and validation cycle: informal primarily text requirements -> spec -> formal spec documents -> validation -> visual inspection and review of spec for errors -> elicitation
    • This is a laborious process, with error detection that's bad.

• State of the art in requirements is Use Cases.

  • Engineering Change Order use case example.
  • Do you see the errors?
  • Given time, you might find some of the errors. Many of them you don't find until 6 months later.
  • What if you could turn that text into a visualization of what it really communicates? That's what N8 software does, it takes the text, structure of what was said, turns it into a mathematical model and gives a visualization of what was there.
  • Breaks, actors that don't do much, inconsistencies, improper requirements language.
    • If you develop something from this, you won't be successful.
    • But if you can take it iteratively, fix it, through it back to your user, you can do elicitation easier. Work with english, and throw pictures, not words, back at your stakeholders.
    • After 30 mins with stakeholders, you fix the text, get real diagram showing what they want.
    • We use this methodology writing our own software.

• N8 is getting platinum customers so far.

  • We're just starting to look at outsourcing.
  • Is there a way to get your stakeholder to stay involved in the process.
  • Maybe that wouldn't be such crazy talk anymore.
  • "mind the gap" between business and IT.

• Live N8 Scenario example: take use case written in a book.

  • First thing our software does it figure out actor, object, function, modifier. who is doing what to whom, in what sequence and under what conditions.
  • Also get a use case diagram (good for estimation).
  • Activity diagram: users, swimlanes across the top. System is on the right hand side. See flow of activity from applicant, and see flow of info across the swimlanes.
  • When you shrink it down, you can't see words anymore. But you can see issues. We're looking for happy days scenario: start at one end, get all the way through.
  • First thing we find out is something is passed to the system, and someone else does something totally disconnected. We teach our users they want to find out who is actually doing things.
  • Using "presentation view", we see customer signs loan agreement. In the rest of this, the person that starts out is called "applicant". Ask experts in the room, is applicant the same as customer, or are they different people? They say ah, we're using different terms.
  • So we search and replace the term, and then remodel. Now we see one less swim lane, as everyone is stacked up under applicant. But we have a break. If the loan officer approves the loan agreement .. once the applicant finally signs the loan agreement. But missing info: how did the applicant get the loan agreement. So we insert sentence: "the system then sends the loan agreement to the applicant". And remodel to find out if that really works. Now we have a happy days scenario. (Sam: that's cool!)
  • Once you get some requirements done, this is what the loan process looks like (shows complete loan business proc created using N8 Scenario, very cool)

• Think about being in a room with stickies all over the place. 3 hours to 3 weeks later you say "oops" have to ask them about this. Now you can do this in a jam session. Or save to pdf and send it around. And instead of just connecting the dots, you can accelerate the elicitation of the real requirements.

• Case study: a real story, a BPR activity. We had 1 computer system, 4 people. It had a happy days scenario. But we then took the diagram and text and sent it to other stakeholders and ask is that what's really happening? 1 week later we had 6 computer systems and 9 people inside and outside the company! Think about what this means about the scope of the system!!

• Demo of N8 on VC process

  David types in the following, a bit at a time. N8 Scenario shows the model after each sentence.

  • Version 1 (the real happy day scenario)
    • The entrepreneur gives a presentation to the VC.
    • The VC likes the presentation and gives a check to the entrepreneur.
    • The entrepeneur then gives its stock to the VC.
    • The VC then sells the stock in an IPO.
    • The VC gets lots of money from the public market.
  • This elicits feedback, more steps.
  • David show smuch longer more complex process, developed using N8 Scenario. (we took this from a website of a particular VC firm)

• Conclusion:

  • We're getting requirements in the way they want to express them, implicit, informal representations, and converting it into explicit, formal representations.
  • We think this will be great for the guys not just next door, but across the world.

• q: Does it take care of the grammar?

  • It doesn't check your grammar as you have a grammar checker behind it. But it will show you how it is being communicated to others. It will reflect your own ambiguity back to you so you can fix it.

Steve Mezak, New software tools for outsourcing your software development

Had gluttony for punishment of doing 7 startups. Author of upcoming book: risk-free outsourcing: how to use global talent to create great software

My company helps companies with outsourcing.

• the promise of outsourcing
  • what if you could:
    • have a team of the best eng in the world?
    • direct their work to get reliable on-time results?
    • hire them at a third the cost you are paying now?
  • That's the holy grail. From my experience, it is not a choice, but you had to make it work. Tonight I'll talk about tools that are out there to help with the process.
• Outsourcing challenges

The boss and/or board says: thou shalt outsource! now how to do it?

7 deadly dangers of outsourcing software development (paper available from steve)

1. ignoring outsourcing
2. hiring the wrong team
3. being promiscuous with your IP
4. not knowing what your software should do
5. meager engingeering management
6. mediocre methodology

• #3: protecting your IP
  • fortressware (stealth software co): system allows you to prtect source code IP and data from internal compromise. increases control and visbility of remote team activities. (doesn't leave that machine)
  • palamida: detects, manages, and reports on the third party, commercial and open source components that may exist in your software's code base
  • black duck: software compliance management solutions. govern how software assets are created, managed and licensed. they maintain a database always updated so you can constantly evaluate your source code.
• #4 create clear requirements
  • N8 Scenario: would be an excellent product for this.
  • TRUEreq: web-based issues and requirements mgmt tool for PLM
  • iRise: lets you sketch the screens of your software, link them together so you can simulate the actiivty of what the software is supposed to do.
    • get biz people online and get their inputs.
    • studio product.
    • simulation platform.
  • macromedia: use dreamweaver to create and link HTML mock-ups of your screens
    • demo functionality and illustrate "use cases" and "user stories"
    • can get templates to make it look decent, add buttons and text
    • fantastic for doing demos to your VC before you have software running
    • when you've gone through those iterations, then you can use screen shots to illustrate your requirements for software or other artifacts you want to create.
  • Breeze: does video and voice over web so you can do collab in real-time across internet.
  • Another approach, many startups and CEOs can't write anything down. For one CEO, I asked the Use Cases, he said it's too big for that. he found a development team in US, did vulcan mind meld to transmit his requirements. they came up with a prototype, but that's inefficient and unworkable process if you're going to use outsourcing.
• #5: Effective engineering management
  • Artifact ($500/month): pay as you go, on demand service. requirements mgmt, doc mgmt, issue tracking. low cost way to do this mgmt.
  • role-based dashboards and project mgmt tools. normally teams cobble together open-source tools, cvs, wikis. Some people said "gotomeeting", basecamp, cvsdude, skype, and yahoo doodle give us a rough and ready collab platform for under $100 a month.
  • collabnet: put those tools in a hosted environment you can use
  • datainfocom: more BPO moving offshore.
    • mathematical models that monitor and predict when things are going to go wrong.
    • identifies root causes of the problems using proprietary algs
    • recommends optimum corrective actions
    • working with Dell and GE.
• #6: use agile-aware methods
  • agile development methodology
    • takes your dev, splits into short iterations.
    • take list of features, how many can we get done in the next 3 weeks, then work only on those high priority features and functions in the next 3 weeks.
    • involve the biz people in the development process directly.
    • a little debate as one of the principles is eng and biz people working closely together. how can you do that with offshore outsourcing? we need to find a way as there is too much of a cost advantage of offshore. webex type tools and breeze will help with that.
  • optimalJ: accelerates j2ee dev
    • generates apps from visual models
    • implements model-driven architecture (MDA)
  • rally dev: on-demand, software lifecycle management. accelerates agile software development.
  • versionOne
• conclusion
  • accelerance: outsourcing advice and services
  • full spectrum of outsourcing strategies
  • 17 proven teams in 14 countries around the globe.
  • Practical (and free) info about outsourcing from accelerance
  • writing a book
  • Steve's blog discusses the above tools in more detail.

Sam Jadallah: Investing in Software

The internet has changed everything

I was an eng and dev, ended up at msft in 1987. It was exciting to see birth of that industry, watch how things have changed. There were inflection points along the way: the pc, client server, and now the internet.

The internet has brought profound changes, both to software industry.

• summary
  • enterprise software is broken
    • many challenges have come together to create mature, slow growth industry dominated by a few companies.
    • msft announced in earnings report today that in entire IT industry, Microsoft garnered 24% of all the profits! so not all that healthy an industry...
  • new business models drove changes
    • open source
      • impacts investing strategy. not necessarily an investible theme
    • SAAS, advertising are key forces
      • changing the way enterprises consume software
      • also, 3rd party payer model gives users powerful service for free
  • distribution channels are completely different
    • in the past it was standardized. resellers, 2-3 tiered channels. SI's did a lot of the integration work.
    • now, the channels have flattened.
    • E.g. for findbugs software, sourceforge is now the major distribution channel. Two guys working on a project now have the same distribution as a large business.
  • web services matters.
    • vision of object oriented, capabilities between people who don't know each other, is now here
    • rapid intergration
    • lightweight toolkits
    • transformation of SAP and Amazon to Platform services by tapping into existing legacy infrastructure that you have
    • someone wrote an app (delicio.us library) to catalog all the books in his house. bar code scan the book, do a lookup to amazon api, then just stick into his catalog. powerful stuff happens in a way nobody would have predicted.
  • customer controls the sales cycle
    • completely flipped the buying cycle. you can't push stuff to customers anymore, they simply buy at their own pace, way and method. if they don't want to buy, they won't.
    • they were burnt through the bubble, Y2K panic cycles, and internet cycle. Now they're in charge and we have to recognize this.
• Maturing software industry
  • Software is now the maintenance industry.
    • Largest percentage of their profits come from maint, not new licenses.
  • deal size shrinks
    • when Microsoft bought siebel, I signed off a $24M order (services, software, everything). No longer will that happen at Microsoft. (That was my last mistake.)
  • 80% of sales force focused on 20% of revenues
    • So cost and effectiveness per sales rep has declined to point it is not profitable
  • customers have become integration oriented, not replacement oriented
    • A CIO says I have no new initiatives. I bought stuff over 5 years, now have it working together. I'm building things on top, using WS. But not buying anything in the core as it has to all inteegrate, if not I am not buying it.
• Only the REALLY BIG matter
  • Software industry should probably have 20-25% of the number of companies it has today. too many companies of all sizes.
  • Because of shift to maintenance and they don't get growth, it's become hard to get profitable.
  • In order to get a 33% margin, you have to be >$5B software company!
    • The companies between 1-5B still struggle to be interesting businesses: 18% margins. Below that not even profitable.
    • My friend at Morgan Stanley said his biz is going gangbusters as every company is trying to buy others and sell themselves to get sustainable on their own.
• Scale AND Margins: tough to do
  • Difficult to be of scale and maintain growth. This biz was exciting for many years as it was incredibly fast growing. people paid for growth. Microsoft produced enormous profits. Now its stock hasn't moved in 5 years as not enough perceived growth.
  • Many scale players are challenged for growth
  • software conslidation targets have generally been subscale or challenged by growth
  • Ron Weissman: Notice that software tools vendors are in the bottom left. Borland, rational. Subscale margins and low growth.
  • Companies haven't gone public lately. There has been M&A, but massive transformation in the industry.
• Old to new order of business
  • Old:
    1. Get a few large marquee customers
    2. meat-eater sales reps
    3. ave sales price > $1m
    4. replace existing software
       • what you have today is really bad, let me show you what you can do now!
       • customer sees order of magnitude improvements, rip out the old stuff
  • New:
    1. bottoms up and SMB focus
       • e.g.: N8 selling to a group, not a top-down sale where they standardize. that's the way we sold in the early days of the software business. Microsoft originally always went aroud the CIO, who never had priority to improve productivity of the users. Did end run around CIOs.
    2. telesales and marketing driven
       • just can't afford the same sort of sales and marketing as in the past.
    3. ASP < $250K (for initial orders)
       • you keep getting that with intention of getting distribution
    4. Integrate quickly or not at all
       • more interesting is the latter. come in as a point and don't try to integrate...
• Software tools investing
  • Lots of areas VCs invest. this has traditionally been a tough area for VCs to invest.
  • development managers think they can build software on their own.
    • At Microsoft, Bill Gates would always say I can build that over a weekend, why are you spending $1M to buy that software?
  • Interesting areas:
    • developer productivity
      • innerworkings (mdv portfolio co): hosted, integrated training
    • quality and security
      • finding bugs, improve quality right from the start.
    • app management
      • n8 fits into that
    • process improvement
    • "tools": a tough term for VCs.
      • When I look at tools, they're tightly integrate with a platform. Platforms are hard for software startups to sell. Platform vendors like to give away tools. So Microsoft, Sun like to give away tools to protect the platform where make all their money. Microsoft willing to make tools a $0B business if it made the OS business twice as large
• Software development trends
  • modular architectures
    • java, .net, python (emerging as interesting platform), PHP
  • distributed development is working
    • in the past VCs didn't want to see this. I have a company with 2 people, on in SV, one in Dublin. Skype sits open all day long, just like two people sitting in room together all day long talking whenever they want. The tools, workflow, process, experience level is now working.
  • open source leverage
    • need black duck etc to avoid contamination, but it's great to bootstrap we used to find a bunch of our investment money goes out the backdoor to pay for licenses. now we see a lot of these cos write none or small checks, leveraging in a very smart way. preserving capital.
  • services: live and constant builds
    • expertise says you have a live process. we have one company doing hourly builds on a live production system. sounds kind of nuts (I think it was nuts) but they got it to work. sign of what we're going to see.
• Example of interesting new apps we see in Venture world
  • RedFin: startup in Seattle
    • pulled together interesting dynamic HTML, rich client. Can grab satellite view, find houses. Integrate to MLS, Google Maps, advertising network through diferent APIs. Tie together in a quick and rich way. This was their demo. But also the application, which wasn't that far off. In 2 months they will have the system to a scalable way. They can build rich and deep apps very quickly because of web services infrastructure.
• Software models
  • From software as a product, to:
    • software product downloads
    • software appliance
      • eliminate the cost of config, hassle of installation support
    • software as a service (SaaS): hosted way, buyer can consume it quickly
• Implications
  • software economics have changed
    • for better and worse.
    • important to grasp those changes in startups.
  • product must be great
    • in an era where sales people can't sell, your product must sell itself
    • 15 minute test: easy to evaluate and use appliance-like
    • live for feedback/upsell/upgrade
  • sales and marketing costs must be managed
    • can't afford to spend the way you have in the past
    • open source models are promising but unproven
  • customers control the sales cycle
    • learn to make the best of it
    • fire expensive sales reps
    • if you are an expensive sales rep, you should be changing jobs...
  • we are at the dawn of a new era of software industry
    • embrace it, it will be exciting
    • It will leverage all the investments of the last few years.
    • radically different, and far more exciting.
    • that's why I decided to stay in this business.

questions

1. Talking about integration, do you find greater interest in providing tools like business process engineering (BPEL)? integrating various systems, orcl back end, siebel front end. help user improve process flows. beyond data integration?

sam: all the CIOs are saying that's where their focus is today. they made investments, now focused on building customer facing apps that tie together the various IT investments they made. Its' still very hard, and while N8 and others will do well it is still a hard and long process for them to do this right. The CIO who said he has no new initiatives then told me they were building a new customer application that could only be made because of the previous investments and he can tie them together.

david: I concur. People are trying to figure out what they bought. A lot of functionality still isn't being used. And tying into initiatives with SOX, to see how these can be more properly managed in the compliance process.

John: At AT&T, my wife was in the department called "common language". she found 400 systems in all the different operating companies, needed to build systems that did nothing but integrate and talk with other systems.

2. It seems there's a shift to more business innovation. Open Source is a technical capability but ultimately relates to the business model. So how will business innovation be a major thrust?

sam: I think the tech innovation is actually increasing because of this whole infrastructure. Just gotten easier to do many things. In the past we had disruptions that flushed all the old investments. New apps did half of what the old mainframe apps did. Just trying to catch up. But now we have all these incredible investments to leverage. I believe we still have a lot of technical innovation happening. And it's software.

There is a lot of innovation that's not interesting. how much better does your spreadsheet, word processor, email have to be for you to use it? I'd argue a lot better, as I'm just overwhelmed.

The other part is tech innovation in new platforms like this TREO. This costs more than the last 2 PCs we bought, and is just as powerful as PCs were a couple years ago, and really hard to program. These sell at 4X the rates. 150M PCs, vs. 600M cellphones sold over the last year.

Layered on top of that innovation we have biz models challenging the industry. the biggest thing we need to do is things that matter to the customers. many biz plans are still incremental feature improvements, and that won't make the difference to somebody that will buy them.

3. I agree integration is a big thing, WS and XML driving a lot of this. But other trends, like VoIP. And wireless phone was part of cellular networks. These 3 technologies are growing in parallel and are causing a change in the biz process, which may be different from pure simple integration. Do you agree?

sam: I think we've become global. It is just as easy to work distant as with people in the next office. VoIP, Skype, IM collab. Literally I have told my kids to go to bed using IM in the next room (It's just wrong, I know!). I've done the same on a trip to London. (PIR means "parent in room"). These have changed our workflow. We need to embrace that.

steve: Responding to the previous quetion, offshore outsourcing is another business model innovation. Creating a product for $50K that you can sell is a boon for a company. The new browser apps are also great. Suddenly we're calling it SaaS, we've been doing it for 10 years but it is now becoming widely accepted as the way to go.

sam: outsourcing not just the lowest cost labor, but to find the best talent. keep an employee on a boat in bermuda. If you call Jet Blue to make a travel reservation, you're speaking to a housewife on DSL in Utah or anywhere, routing using VoIP PBX. Tap into a workforce, bring the job to the employee, who can make decision about where they want to live. Reach talent pools anywhere.

john: there easily factors of 10X or more productivity difference in software development. So if you're a below avg programmer you better find some differentiation. If you're a superstar programmer, you can live wherever you want.

ron weissman: I think things are worse than Sam says they are. To David, Steve: what are you doing differently to counteract the reality Sam talks about for 90% of the venture-backed, IT focused companies?

david: we're going after department level, vs crack a 7-figure sale. And the problems we're targeting are recognized at a department level. We can do this with telesales, web sales, and then move to a quasi-traditional model for enterprise. Our product also supports 2-legged vs 4-legged sales call, as it's so simple we don't require a technical sales engineer (SE) along with the sales guy. It's also an incremental sale. We get a sale in Q1, Q2, and Q3. Not waiting for the big one to hit, we can get them to see the value, and go back in where it makes sense to make the onsite call, otherwise we just call them up. As for viral spread, we've gotten 5 of our customers in a viral nature. 2 from consultants using our software doing a project and their customer asked for how they did that. We got 2 customers when people left to new companies and brought us in. More recently, a manager went to a new company and said: "we're going to standardize on this as we saved $100K in the previous customer."

We are trying to take our most vociferous champions and get them to move to a new company to bring us in :)

steve: offshore companies find it hard to market to US companies. and US companies struggle to provide value.

4. I was at Bell Labs long ago. Lately I'm doing bizdevelopment for offshoring. Finding that the level of dissatisfaction of companies with some offshore experience is high, like 35% of companies I'm talking to. Some of our clients used other services and are now talking to us. What's your experience of customer dissatisfaction?

david: In our (limited) experience, everyone we've talked to who did outsourcing, for development or BPO, had some level of dissatisfaction. One customer said I've decreaesed my cost of failure, not increased my odds of success. People tend to throw problems to someone else. You can't throw an undefined process at someone else, especially lacking cultural context you have here, and hope it's going to work well. Hopefully this is a learning process, so the next round we'll know what we're doing. You always have to have the company store before you put the franchise out.

steve: you can take advantage of outsourcing team to avoid the dangers. Like my 7 deadly sins. In doing outsourcing, you can now adopt a process.

sam: biggest problem with outsourcing it is got hyped very quickly. I started outsourcing in Microsoft in 1992, for tech support. An indian employee left, set up operation to do it. Our expectations were very low, and it worked. We started doing more and more. People got into a big process change, didn't know how to measure and commnicate it, overestimated the return they would get. It makes sense, but not in every case, and we haven't gottent to a point to define that and that's part of the dissatisfaction.

John: Something comes out, good idea, gets overhyped. works well for some folks, not others, and you sort it out. there are plenty of bigger companies who established outsource development teams a long time ago, sorted through that, it works pretty well. with smaller cos, interesting thing about Steve's efforts, it is often pretty random. sometimes great, sometimes atrocious.

steve: I outsourced from sunnyvale to palo alto and still struggled.

sam: I outsource all the time. My associate and I prototype stuff, then he goes to rent-a-coder, puts up a job. the most we ever paid was $350 for a job. people work for 2 weeks. One guy fell behidn schedule, he offered $50 more and the guy had it done the next day. Just describe in a paragraph or two and it works. It's so cheap we can submit it to 3 peopel and hope one works. But there is mgmt overhead you have to deal with.

5. The big players are going after small and midsize customers. does that work with these biz dynamics you outlined?

sam: the big challenge is the cost of integration is really hard. hard for msft to mange 40K developers and ship an integrated product suite. GE is a conglomerate, don't need to coordinate. when you get into software, if you're selling to the same customer base they expect it all to work together. that's a really complex problem at scale of development we've never seen. I don't know how Microsoft builds the next big product that works with the last big product. How does xbox connect with my pc, phone, server. Just incredibly hard to do, different internal formats, optimized around different things.

Oracle buys Peoplesoft, what do they do? Keep the codebase or destroy it? Just before, Peoplesoft bought JD Edwards. Microsoft has 4 such systems, which they are now trying to integrate.

Scale breaks. Economically they have to integrate. but for having a product strategy, we haven't hit the problem and seen the solution yet.

6. Do you really believe the slide that shows only the 5B companies will be profitable, if the value will be cut 10x?

sam: the big companies will survive for a long time. The cashflows on ORCL and Microsoft are huge. THe question is how do they get growth? the only way they know how to do it right now is by acquisition. When you're a 10B, 40B business like Microsoft, they grew larger then all their competitors combined as a business. I don't know how they get growth. Spin out businesses. Conslidate. But their cashflows will allow them to survive for a long time.

6. With commodity hw and systems level platforms, now we can grow downmarket and new geographies. do you agree?

sam: growth from a pc standpoint: 150M pcs sold. China is the #2 or #3 PC consumer in the world. interesting market, but real challenges how to price in these markets to prevent piracy if you're a software company. if we can get the price of a pc down to $100, things change, more people can afford them. these $600 cellphones with $100/month services are going the wrong way. In India, I met with Nokia. they're designing a phone you can buy for $10, be profitable on $8/month rent. That $8 phone is far more powerful than my TREO, with video etc. Why doesn't that phone come into our market and take our busienss down even further? I don't know how to get growth other than lowering prices so more and more people use it.

7. If you're saying we need another quantum price drop, then we need a similar drop with software price...

sam: yes, I think we're in need of another overhaul in software industyr. it's stressing out. that's why you're seeing advertising model emerge. I talked to CEO of GM, trying to get media inside the car. He said: "at $250/month of ads or services, I can actually give you a car". That's believable! These devices, phones, cars, are just vehicles for delivering advertising.

john: Microsoft always thought the hardware should be free. Intel always thought the software should be free...

8. barney pell: Doesn't the belief that software must come down in price reflect a belief that (a) there is no more major value attainable by software, or (b) the providers can't capture a good share of that value?

sam: It is true that if you can truly generate value then you can make money. The challenge, as investors, is to show you have a must-have for that customer to be competitive, therefore they can attract value. customers are willing to pay for stuff that grows and improves their business. many companies are struggling to show this. It is tough to integrate to let them realize that value. Many companies come in with a TCO or ROI pitch, e.g. saving a customer $2M per year. They say all these people are doing this, we chop the process and eliminate guys. You walk into the customer, give them the list of the 40 names of employees they can fire because they bought your software. It's mythical, there aren't the 40 employees you can eliminate.

9. We tried outsourcing, first in ireland, then india. now in malaysia we own our own development team, use our own software and sell that to customers. some of the things like skype and glbal platforms, we see lots of opportunity there. we have strong global demand. so stop looking at US markets, turn on its side, and go for a slither and use global resources and people and selling.

steve: One startup I'm advising has a line in a specification saying "yes, we'll support internationalization". I'm saying do that quickly. Ebay lost out in international markets as they didn't address it quickly enough.