18 May 2006

The Right Stuff

After much praises and hails, of course we need to balance the reality with some serious questions. First I want to quote this statement from one open source entrepreneur's blog: "Software is the most capital efficient business. There is very little requirement for capital expenses and zero for inventory." This is somewhat 20% true and depending on who's on the helm will be 0% true at all. In fact this declaration is so 2001. Because the first serious question is what kind of software is capital efficient? Zero inventory is a myth, a software that is not in a box, is an open source software with very little commercial value and we should not confuse commercial value with usefulness. "Very little" in terms of capital expenses is relative, first top-caliber talents aren't always available for free, and the sure way to attract them is to buy them by any means from signing bonuses, stock options, free iPods and other ridiculous offers.

Software as a Service (SaaS) is not new, it is not going to be the next wave of the software business. No matter how you argue about it, SaaS = ASP. And where is it right now? It's nowhere.

This is not about defeatism especially for the Philippines' software development business conditions. This is realism. We should identify The Right Stuff, the products that we intend to build should solve a globally-recognized problem not just a local one. The VC model for funding software startups is still the most reliable model of fuelling a lot of activities from the product development standpoint. There are just few rules-of-thumb that must be followed. First, the product and/or the business model has to be really compelling, if not, then there's already a major barrier. Second, get a team of ruthless negotiators, every business needs it. It doesn't exempt open source software companies, the difference between luck and survival lies with it. Building great products will not translate to overnight success, great products needs to be understood and these negotiators will help you do just that, especially when raising funds.

Most importantly, a high-tech venture without a Pirate is called Xerox and IBM. I am not referring to plagiarism in any form. It's more about extending innovation, because most of the time, great products are already out there and a Pirate must have the ability to look into the horizon and figure out how to put together these great products to become One Great Product. Jerry Kaplan's experience and The Apple Way still rules today, so do we have The Right Stuff?

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