Andreesen "Grows Up" 281
inah writes "The original poster boy for the old .com economy and how he's currently doing.
"The poster-child who grew up" from The Economist."
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Andreesen "Grows Up"
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Re:Competing with microsoft (Score:2, Informative)
poster boy not so impressive (Score:5, Informative)
(Background: LoudCloud was attempting to take over my former employer's web operations; not just make a pitch for services, but actively -- and with much hostility on the part of their sales team -- denigrate the infrastructure we had built in our own data center and convince upper management that we were being negligent in our work. We ended up fighting them off by showing that they would have had to lose money on us for several years in order to provide us equivalent services for less cost. They pressed on for months, fueled by our CEO's irrational desire to have Andreessen as a personal friend. The highlight of my career there was the day we canceled our letter of intention with LoudCloud.)
At a meeting in which his local and regional salesmen were in a shouting match with us (my favorite comment from their regional sales director: "You'll never be able to keep up with your little shareware schemes!" -- this was in response to our use of Apache/mod_perl), Mr. Andreessen sat there, first looking at us all as if we were speaking in a language he didn't understand. When talk turned to leasing schedules and other evidence against LoudCloud's value proposition, he became bored and began checking email on his RIM. Eventually he went and made a phone call at the other end of the room, and then sat down away from us so he could fill out his forms for a Federal security clearance (after the meeting I had to show him where our FAX machine was so he could get it in under deadline).
That's how he behaves in meetings with potential clients -- clients that his staff spend insane amounts of money and energy to woo, and bring him in to impress the savages. When we finally ceased talks with LoudCloud, he was very petulant and sent our CEO a near-illiterate email message about how disappointed he was that we had chosen not to contract their services. I understand the CEO still tries to woo him on occasion, despite.
He may very well be the richest (or luckiest) media darling I've ever shaken hands with. I am pretty certain he's also the most shallow.
Services a better business than software? (Score:2, Informative)
A software company has terrific gross margins: as we know, software costs almost nothing to reproduce and distribute once it's developed. Sure, the costs of developing it can be high (in a commerical setting), but each additional product costs virtually nothing to stamp onto a CD (or make available on a server for download). The basic point is that the inherently high margins in software provide a great cushion of potential profit, and one can grow a business to vast proportions with little additional development effort (but with some sales effort). Selling a product to one person or 1x10^6 people takes little additional development effort, in theory.
In a services business, however, each additional customer requires expensive infrastructure and personnel to develop. Whereas software has high fixed costs and low variable costs, services businesses (like IT consulting, lawyers, etc.) tend to have high variable costs (mostly labor) and low fixed costs (rent, etc.). The problem comes when you try to grow these businesses to tremendous scale. It is extraordinarily expensive to hire, train, and retain talented people, especially in IT.
For a place like Accenture (or a tiny 4-person consulting firm), the people are the assets--growing the business means growing the employee base, period. This is a fine model, and tends to have low fixed costs, but the profit margins tend to be lower than in packaged software. That said, people-based services businesses don't depend on expensive equipment with which to perform the service.
In Loudcloud's case, you have the worst of both worlds. On the one hand, you need racks and racks of expensive servers, storage, etc. with which to provide the service. On the other hand, you need extremely expensive people to manage all of these complicated setups. You have the high fixed costs of a product-style business, and the high variable costs of a "bodyshop" type business. In addition, you typically don't have proprietary offerings--one can buy managed hosting from a many companies, large and small. Loudcloud tries to address this in two ways, namely by developing "Opsware" (to lower the number of people required to run the business and to give it a pseudo-proprietary edge) and by (presumably) purchasing new equipment as it adds new customers.
From a profitability perspective, though, Andreesen is wrong--packaged software is, as an industry, one of the highest-margin businesses going (both gross and net), while services (esp computer services) tend to have lower margins and lower profitability.
Besides, there are lots of ways to deal with the "end-of-quarter" haggling. You think Nike and Ford don't haggle on the price of services that are provided to them?
Re:Competing with microsoft (Score:2, Informative)
So in other words, it was perceived that Netscape and Java would soon bring about a new computing platform that would render the operating system obsolete. (IE, all applications would be delivered in Java and over the web, such that it didn't matter which operating system the app would be running on...)
MS developed/bought Internet Explorer to counter this threat.