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Beautiful Things Come in Small Bundles

Beautiful Things Come in Small Bundles

Morning or is it afternoon? It could even be evening. Whatever it is, welcome. Another month has rolled in and we're now sailing dangerously close to that Christmas mark again. Goodness, where has the year gone? I've no idea. This is my wee corner of the journalistic minefield of the computing industry. Here I don't teach about Java. I don't take you through the joys of class design or the hell of class threading. Instead I ask you to sit back, push away the keyboard, tether the mouse and prepare yourself for some gentle mental stimulation as I give you some food for thought about the overall picture, the greater goal.

This month let's plump for greed, one of the seven deadly sins. When talking about money, it's really the only one that can apply. I want to take a look at the financial issues facing a small company in the Java world.

As most of you know, I run N-ARY Ltd., a British-based Java consulting company I gave birth to more than three years ago with nothing. I donated my old 486 and that was the only thing of note on the balance sheet. Three years later we have a team of 12-plus people and projects all over the world. And what do we owe our investors? Nothing. We don't have investors.

This is the first point I'd like to bounce around. When starting out on this long road to success, there seems to be the British way of doing things and the American way of doing things. It appears that when a group of skilled individuals get together to start something, what happens next depends largely on the side of the Atlantic you wake up on.

In America the first thing on the agenda, or at least one of the top things, is to find an investor. Whether in the guise of a friend, bank or, more than likely, venture capitalist doesn't matter. It seems my American cousins prefer working with a large sum and working down, hoping they start making money before it reaches zero. Us Brits on the other hand start with zero and work up, hoping we don't expand beyond the month's cash flow. From day one the American company is worth, say, $1 million, whereas the British company is worth practically nothing. After three years the tale can be somewhat different.

Granted this is a gross generalization, but it serves to illustrate my point. The question I put to you is, Which way is the right way? Talking to you who are CEOs, if someone approached you with advice on starting their own company, would you recommend the route you took? Perhaps another route? And if a different approach, why not the one you started off on? Answers on a postcard, please!

As one of the CEOs of a Union Jack company as opposed to a Stars and Stripes company, I'd have to say that our way may have worked 20 years ago or for companies that have no ambitions for growing multimillions. But in this day and age hard work alone is not enough. To successfully compete in today's high-paced industry I think we have to look at the American way of doing things. If companies are to succeed, there's not enough time in the day, alas, to grow the company organically. Ironically, the root of the problem may be the multimillion dollar companies, the very thing we CEOs strive to take our companies to. But why?

Many of the large companies have become so large that they can afford to lose money on projects in order to stifle competition. If a small company pops up with an innovative and exciting product and begins marketing it, chances are the marketing strategy employed will be very targeted and low-cost. Now if one of the bigger companies happens to see the idea, one of three things will happen: the first is for them to ignore it. The second is for the large company to buy out the smaller company. This is probably the best-case scenario, and I'll come back to it later. The third - and most damaging - response is for the large company to produce their own version of the product and market off the back of one of their more successful products.

For the smaller company this generally means a death sentence. Remember back in the old days of the World Wide Web, where one of the benefits that was touted around was the ability to give everyone a level playing field? Give the smaller company the ability to compete with the corporates. All you had to do was produce a Web site and you could start the duel. However, anyone who's tried this knows that it's not so much a duel as a complete mismatch. Sure, the Web site may be far superior, but what's the use of a Web site that no one visits? This is where the corporate entity can win...in its ability to attract users.

The corporation has the money to market the Web site elsewhere, the money to advertise the site both online and in more traditional media such as magazines and on billboards. The smaller company does not. Chances are the smaller company may have a far superior product, but what's the use of that if no one knows about it? It's a catch-22.

On my travels I heard of a small company based in Brisbane, Australia. Now these guys are typical of what I've just described. They have an exciting product that's doing famously well in the local market but they're scared to take it to America for fear someone might steal it. Granted, their very presence on the Web opens up their treasure chest for possible perusal by some Californian. The assumption is that they're unknown in the global arena and want to stay that way for the time being at least. So this column is really going to help them, eh? Oops.

The point is that in any other industry they have a strong chance of survival. They could grow the company slowly and surely. In our industry, however, the plot isn't as straightforward. All it takes is for Microsoft or Sun or another big company to take the idea and bundle it free with their next release. What chance does the small company have at this point? They now have to justify to their potential clients why they have to pay for the product when it's free elsewhere. A tough sale to make.

Before the Internet, an idea had the time to evolve and grow. Only a handful of people would know about it, and this would be through word of mouth. A good idea comes along now, and before you know it 16 other companies around the world are suddenly engulfed in the same project. A scary prospect at the best of times.

I think the best example of that has to be Web-based e-mail. When Microsoft bought out Hotmail earlier this year, did anyone notice the sudden flood of Web-based e-mail sites coming online? Even Yahoo! offers some sort of Web-based e-mail system and these guys are supposedly a search engine. There are a number of smaller Web-based systems around that are far more feature-rich than the "big boys" but have no chance of survival on a commercial level against the wrath of freebies.

I'm sure you can think of many examples of where this has happened. Another, more famous one is the handheld computer from the GO Corporation. Their CEO, Jerry Kaplan, tells a very entertaining - and in parts scary - story in the book Startup. I'd recommend it for any budding CEO, ignoring the last part; it's a very inspirational book. In this situation, however, Kaplan had venture funds but they proved ineffective against the might of Apple and Microsoft. The moral? Just because your project may be heavily funded doesn't mean it's guaranteed to succeed.

A company structured from a venture fund generally has an exit plan, which is usually to be bought out in three to four years. That's the American dream, to be bought out and walk away with a million or more dollars in the back pocket. But let's take a quick look at the overall picture. Someone once commented to me that they had read in a journal that in around 10 years there'd be only a handful of computer companies. All the smaller companies would have been absorbed into the bigger corporates.

Now on the face of it the comment seems rather silly. Think of the thousands of companies all around the world, all developing various tools and services. So let's see if this could be possible. We already know that the exit plan for many startups is to be bought out by a bigger company. Admirable. If this continues, however, with bigger companies buying up the smaller ones, the above statement suddenly starts to ring some truth bells. Maybe there's something in it after all. But there has to be a cutoff at some point, and maybe this is where the statement falls apart. Looking at the current trend now, it's possible to see a future with tougher competition and fewer companies.

So should we forget about running our own companies? I don't think so. Conversely, I think that in order to crack the monopoly the larger corporates hold, more small organic companies should be started, and alliances should be formed to effectively compete in the marketplace. The beautiful thing about the Internet is that it brings together this rich tapestry of talent and diversity and allows it to be explored and realized. We need more variety, not a handful of companies controlling everything. Do we want the computing industry to go down the same route as the publishing industry? Where two or three individuals control and own the whole industry worldwide? Names like Ted Turner and Robert Mudoch are familiar to everyone. We're heading down there already, but it's not too late.

Java has been responsible for a new influx of startup companies. We are one of these companies. Java has given us the ability to compete with companies irrespective of platform. In many respects we've been given the perfect tool to compete effectively with the big companies. We don't need to make that agonizing decision about which platform to support. We can let the big companies play their own politics; by our not directly supporting them, we're slowly weakening them. I love meeting other CEOs and learning about their growth and their excitement in using Java. It's good to see this wonderful array of companies explode into the marketplace.

It all comes back to greed, the greed of the bigger corporates who want to own everything and control every corner. We're in an exciting time, and if everything does go pearshaped at the end of the day, well, at least we'll have good stories to tell our grandchildren of how we tried to take on the world...and, in a small way, won.

More Stories By Alan Williamson

Alan Williamson is widely recognized as an early expert on Cloud Computing, he is Co-Founder of aw2.0 Ltd, a software company specializing in deploying software solutions within Cloud networks. Alan is a Sun Java Champion and creator of OpenBlueDragon (an open source Java CFML runtime engine). With many books, articles and speaking engagements under his belt, Alan likes to talk passionately about what can be done TODAY and not get caught up in the marketing hype of TOMORROW. Follow his blog, http://alan.blog-city.com/ or e-mail him at cloud(at)alanwilliamson.org.

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