Tuesday, November 21, 2006


Advice to Venture Capital Firms

I was thinking that my interaction with various venture capital firms has declined in the past several months and wanted to get back on track to providing them with enterprise perspectives on how they can make their portfolio companies more profitable...

We have all heard statistics from Microsoft such as "for every $2 worth of software purchased legally, $1 worth of software is pirated illegally" which would lead to one of two conclusions. The first camp would think about applying DRM to every piece of software in existence while the other camp would make all software open source. The hybrid answer that I believe is to neither extreme.

Having started my own career on HP3000's and Wangs as a systems adminstrator, later I had the opportunity to get a job programming Windows using the C Windows SDK and it was liberating. Over time, Microsoft at some level indoctrinated me and convinced me that from a usability perspective Linux/Unix simply suck. Of course folks would say that if usability were so important then you should love Mac's but reality is that familiarity is an even more important user requirement than usability.

One of the things that I think keeps me hooked is the fact that I used to bootleg lots of software. The notion of try before buy is the way of the world. Yes, open source provides this as well but it doesn't come with wonderful documentation that allows me to be successful out the gate whereas closed source products tend to be better documented. Over time, I started to take home-oriented thinking and represent it at work, something of which I haven't been able to do with either emerging closed source vendors nor many open source vendors for that matter.

Stopping piracy is a good thing but encouraging it by not protecting your assets is equally good. If you make your closed source software wildly popular in the underground via piracy then folks will demand that publishers such as Wrox, Manning and others write books on such topics solving for the documentation dilemma.

Consider the strategy of SPSS whom is 100% closed source and should stay that way. They give away free copies to MBA graduates as part of their marketing. The notion of catching them young and providing them with a free legitimate version before they grab a pirated one is compelling. If you were to walk the hallways of large enterprises, do you know how many users buy tools at work stimulating sells that otherwise wouldn't have happened?

Maybe piracy is the strategy for displacing competition? For example, imagine if Fortify software started to give away freely copies of its software to the open source community so as to make software more secure, would they displace ounce labs? Remember there is a difference between being free and being open. I wonder how come industry analyst firms when providing sage advice aren't encouraging closed source vendors to do more of this...

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