First, lets begin with some context on the enterprise software business.  During the golden years (nineties) of enterprise software – companies like Siebel, Peoplesoft, ePhipany and many more brought software from the back-office (order processing and billing) into the hands of sales reps, customer service, marketing, and human resources (commonly referred to as the front-office).  The license based enterprise software revenue model works like this.  They sell $1M worth of software licenses and then charge companies annual maintenance fees (approximately 20% of the original license cost) for patches and incremental versions of the software.   So, a $1M license software deal actually translated into $2M over five years ($200K annual maintenance fees times five years plus the original license deal of $1M.)   Once a customer installs the software they are effectively locked in for many years.  These maintenance revenue streams are highly profitable as they not paying sales commissions and support costs are spread across thousands of customers.

With that context, it’s pretty clear what buyout firms are doing.  Acquire an enterprise software company with a significant customer base, cut new product development, move support to a low-cost labor market, and milk the maintenance revenue stream.

Yes, this is part of the natural product lifecycle – these are companies on their death-bed.   But the unfortunate part of this is that users (customer service agents, payroll admin, and hiring managers) are stuck with barely usable (try using Oracle Applications) and now largely unsupported tools.

Given the improvements in user experience (Apple) and collaboration tools (Facebook, LinkedIn, etc.) over the past five years these older software tools are a massive productivity drain for millions of users.  There needs to be a better and faster way to flush out mostly defunct enterprise systems and migrate users quickly to something usable.  There is hope, companies like Yammer cleverly bypasses traditional IT purchasers and first hooks the people that matter most — the users.

• iPhone users consume ~250MB/month
• Android users consume ~150MB/month
• Smartphone (a non-iPhone or Android) users consume ~100MB/month
• Feature phone users consume <10MB/month

My iPhone Data Usage:

Oyster Hotel Reviews contrarian take on travel review site marks the end of review sites built purely on user generated content (UGC). There are literally thousands of sites set-up to enable people like you and me to review restaurants, books, airlines, hotels, apartments, and much more. Except for a few companies that one can count on a single hand the rest never make it as they operate under the motto of “build and pray.”  For the starters, the underlying technology is not complicated to build quickly and most end up differentiating on user experience.  Secondly, as the name denotes the companies themselves don’t generate any unique assets (content, pictures, etc.), rather are left praying that they will be able to somehow socially engineer a set of users to contribute high value content.

Even the successful UGC review sites like Yelp provide inconsistent reviews between cities and restaurants making it difficult to rely upon unless you trust a specific user who shares similar tastes.  Ironically, UGC review sites are highly susceptible to death at the hands of their own users — who either become too verbose and unfocused in their reviews (see the Yelp one-thousand word review), degenerate into yelling matches between users, or find ways to game the review system (see TripAdvisor).

If you are about to spend $1500+ on a hotel you want to know exactly what you are buying.  When spending this kind of money you want to ensure that an authoritative service dug deep into the hotel rooms, pools, conference rooms, food, and more.  Pure UGC reviews sites cannot cover products and services at this level of depth across all products. Yet, these details matter. Details like:

• nice toiletries by L’Occitane carried by the Four Seasons in Miami,
• blood on the sheets at Negril Escape Resort in the Bahamas
• excellent family services provided by Gran Bahia Principe in Jamaica.
• worn out hotel rooms at Sun Village Resort in Puerto Rico

Don’t be mistaken UGC will still have an important role, but I doubt savvy investors will form entire business built exclusively on UGC content. After all, people are social animals and love  to voice their opinions, but they don’t do so in a vacuum. They need to something to respond to, and in Oyster Hotel Reviews they have quality content and pictures to respond to.  Have an awesome picture to share or want to share your own experience at the Fairmont Turnberry in Miami — you can do that on Oyster.com.

[Full Disclosure:  If not abundantly clear from the opening paragraph -- the founders of Oyster.com are my brothers - Elie and Eytan]

Innovation at the expense of laziness and old-minded dogma

• Ford Motors pumps billions into upgrades of its Ford F-150 pickup truck (i.e. gas guzzler)
• Ford Motors loses $15.3 billion in 2006 and 2007 and more to come.
• Ford Motors shuts down its Menlo Park, CA car dealership
• Tesla Motors (an electric car manufacturer) opens up a new car dealership in Menlo Park on the same site as the old Ford dealership.

• Each flight was 100% full
• Seats were old, cloth was ripped in some places, and one of my seats did not recline.
• Entertainment included watching David Letterman reruns from a few months back on monitors which vacillated between black & white and full color throughout.
• Due to mechanical issues the cabin temperature was either frigid or so warm people were tearing off their cloths (sounds more exciting then it actually was).
• For a 6 hr. flight from San Francisco to Miami they charge you for food (odd, since for a 6.5 hr. flight from Boston to London they serve you food)
• The definition of “carry-on” luggage now includes 50 pound rollers — when 100 or so people are each try stuffing this into the overhead compartment it gets rather crowded.

While I happened to be flying American Airlines they clearly have lots of company in the category of poor flying experiences these days. This is a rampant problem throughout all of the major U.S carriers (United, American, Delta, Northwest). These carriers have old equipment, neglected employees, and antiquated software systems. When you combine this with the FAA that is still using 1950’s technology to manage air traffic flow it creates “get me out of here” customer experiences. For a country that prides itself on technology innovation and service our flying experience is an embarrassment.

Business professionals — folks who fly a lot have reached a boiling point and are looking for something new and different. Which airline executive has the the guts to begin innovating again. Only a few years ago cell phone customers were an angry bunch — they had dingy plastic cell phones that did no more then call people, shoddy network coverage, long handcuff contracts, and call-centers that replaced humans with robots. Apple came along and re-defined much of that experience —everything from buying the cell phone, to onboarding customers, to the cell phone itself. Who is going to pull an Apple on the airline industry. Lets start with the flight experience — here are some of the things I am looking for:

• New airplanes: clean interior, inviting ambience, cushy seats that recline properly, and a comfortable cabin temperature and pressure.
• In-seat entertainment: I want at least 15 channels of live TV.
• Laptop friendly seats: Electrical outlets in all seats and seats when fully reclined do not crush an open laptop in the seat behind it.
• Food: Option to buy a meal at booking— if the flight is six hours and leaves at 9am I am pretty certain that I will want either breakfast or lunch provide me the option to buy a civilized hot meal.
• No Black-Out Dates: No black out dates for using frequent flier miles.

Granted this only solves part of the problem, but its a start and its focused on the longest segment of most peoples trip — the flight itself. Other parts of this problem — cramped airport terminals,, long security lines, limited public transportation to airports, etc. require federal and local government agencies, so lets leave that till January ‘09 to start addressing those problems.

Cubicles are the ultimate form of a poor compromise. Lets consider the two reasonable extremes of providing a working environment for employees. On the one hand you can go with the bullpen approach or you can go with offices. Somebody must have said, well if we just built walls around these desks then we would have the best of both worlds (lots of bad products get developed with this type of thinking). We would have the privacy of an office as well as the open and egalitarian benefits of the bullpen. Nothing could be further from the reality as cubicles

1. provide a false sense of privacy — you can’t make a private call from your cube.
2. generate just as many distractions as a bullpen environment as you can hear every conversation.
3. rarely provide the upside associated with the bullpen model where ideas can flow quickly and people have the latest information required to make good decisions.

I have no doubt that technology companies and especially those companies whose success relies on developing code cubicles are a significant drain on productivity and general employee satisfaction. Rather, a better model would provide employees (especially software developers, product managers, qa, etc.) with a small office and in the center of the floor provide an ad-hoc meeting places (not conference rooms that you need to reserve) with Wi-Fi (of-course), refreshments, etc. where employees could congregate around if they need to ideate, exchange information, etc.

Lets have a quick look at the current lineup of major industries in the Valley and the top players in those industries:

Media companies

• Google
• Yahoo (ok, 9% growth is not exactly hitting it out of the park, but there is untapped potential here — full disclosure: i work at yahoo)

Computer/devices companies (both of these companies are on a tear)

• HP
• Apple

Micro-processor companies

• Intel
• AMD

Well — when times are good folks start to expand beyond their core and these companies are expanding — especially the folks at Google — into the following industries:

• Wireless & Telecom
  • iPhone
  • Gphone
  • Buying wireless spectrum: Apple & Google are each other
  • Undersea fiber: Google
• Entertainment
  • Apple TV & iTunes –> distribution hub for all entertainment
• Energy (alternative forms)
  • Silicon Valley in general is playing a major role in this space — however with the exception of Intel and AMD the companies above are more dabbling then anything else — but $20M here and $30M there and it becomes a bit more then dabbling.

For the past 4 years the pendulum has been swinging in favor of these Bay Area companies but when you expand beyond the core you inevitably start to piss off the legacy players… Once these legacy players start fighting back and the economic slowdown forces these companies to curtail their investments beyond the core will the pendulum reverse?

1. Clever use of free data (costs a ton to process this much data, but the data itself is free)
2. Deliver the right information (will fare’s increase or decrease) at the right time (at the point of search or transaction)
3. Leverages consumers fear of overpaying. 

However, will your average consumer spend enough time to grok how this works — not sure about that one.  Some good marketing folks will be needed on this one. 

• Unlike Google Trends or Flickr Camera Finder which rely on data that is directly provided by users on their respective sites the data on which Indeed trends is based on is based on their crawled data and therefore very suspect (full disclosure I did work in the Yahoo!’s HotJobs group).  Lets go one level deeper and look at the Indeed corpus and why it is not suitable for analytics and trending:
• Hiring managers and recruiters flood their job descriptions with buzzwords in order to rank higher on Careerbuilder, Monster, HotJobs, etc. hence generating hiring trends based on the occurrence of certain keywords in a job description won’t tell you that much and for certain keywords will likely lead you in the wrong direction.
• Aggregating job listings via a crawl (which is what Indeed does) is not easy and it yields tens of duplicates per job (every recruiter posts their jobs to multiple sites).

By the way Indeed is a pretty good job search engine, this trends feature is a bit out of place.  It would be far more interesting if they provided trends on what their users were searching for.