What Do You Care What Other People Think?

Architecture Strategies for Catching the Long Tail

Fred Chong has completed his work on the overview of the architectural guidance for building Software-as-a-Service (SaaS) applications on Microsoft infrastructure.  If you haven't seen it yet, check it out.

Fred spent several weeks in the field with SaaS providers who have built their applications on Microsoft in order to understand the key issues core principles in building a scalable, multi-tenant on-demand environment.  Many of the companies they worked with are startups managed by the Microsoft Emerging Business Team (EBT), and I had the privilege to connect with some of them.

The EBT is actively reaching out to and working with SaaS providers building on the Microsoft platform in order to improve their market exposure and business relationships.  If you are interested in connecting with the EBT, check out their SaaS page and drop a line to SaaSMS@microsoft.com

Open Source Strategy at Microsoft

I've been quiet on this blog for the last few months because I've taken on a new role at Microsoft: Open Source Technical Strategy.  At this point, some of you are thinking:

a) I'm joking
b) I'm crazy
c) I've joined a dark conspiracy

But in fact the truth is:

d) none of the above

As Director of Platform Technology Strategy (official title), I run the Open Source Software Lab at Microsoft, where we have hundreds of physical and virtual servers running 40+ distributions of Linux, 12+ variant of Unix, and several versions of Windows.  The research projects we do run from testing interoperability of network protocols like IPSEC and IPv6 between Linux and and Windows technology, the user experience and technical capabilities of HPC projects like ROCKS and Ganglia, to the broader attributes like size of developer base and changes in the development model for different Open Source projects.

We're also working with JBoss and SugarCRM on optimizing their open source applications for Microsoft infrastructure like Windows Server and SQL Server.  This has been fun, rewarding work that has helped to demonstrate the truth of our statements about working with Open Source.

Finally, I'm active in the Microsoft Shared Source Initiative, where I am responsible for Technical Strategy.  We are seeing some great work from inside the company - teams from all product groups wanting to contribute to Open Source in some way.  This week, Microsoft launched CodePlex in beta.  CodePlex is a developer community infrastructure hosted by Microsoft on behalf of Open Source developers - a place for code from both Microsoft product teams and the community to reside and for the developers themselves to collaborate.  Currently a dozen projects are there, ranging from IronPython to the Commerce Starter Kit.

I have a new blog at http://port25.technet.com, a site we've built to have a constructive dialog on Open Source, Interoperability, and Microsoft. 

Change is coming and I'm thrilled to be a part of it.  I'm particularly grateful to people like Andrew Aitken, Mary Coleman, and Matt Asay for what they taught me about Open Source and the Open Source community.

Future of Commercial Open Source

I got to take part in a workshop in Santa Clara yesterday put on by SDForum - "The Future of Commercial Open Source" - unlike a standard event in the valley, this started with "opening comments" from the panelists and then broke out the 70+ attendees into 6 working groups, each discussing a question about "What will Commercial Open Source be like in 2010?"

Andrew Aitken of The Olliance Group was the instigator, and brought together a really outstanding set of people - Tim O'Reilly, Rod Smith of IBM, Simon Phipps of Sun were panelists, and the constellation of VCs and open source companies was amazing.  As a bonus, Mark Radcliffe of DLA Piper Rudnick summarized the first draft of the GPL 3.0. I've worked with Andrew Aitken in the past for insights into Open Source and given his knowledge and connections, it was no surprise that the event was a success.

It was no surprise that Microsoft was mentioned many times - but the big surprise to me was hearing Tim O'Reilly say, "If you consider companies that contribute to Open Source projects to be Open Source Companies, then you would have to say Microsoft is one, because they contribute a lot of source code."  He went on to say that his definition of Open Source companies is companies that use OSS, like Google, SugarCRM, etc.

Tim's insights:

• Open Source is about sourcing commodities - we should look at the core this phenomenon as the software supply chain enabled by Sourceforge
• Can SourceLabs, SpikeSource, and OpenLogic become part of the Sourceforge ecosystem?  This would mean that they are truly integrated into the software supply chain.  What about Palamida, Black Duck, and CollabNet?
• There is a linkage between OSS and the Long Tail - find niche markets and use OSS to source niche technologies
• Ultimately, success for OSS will come from applying the Dell model - instrument the front end and back end of your business and find the inefficiencies - this is where the opportunities for OSS ecosystem infrastructure lies
• By 2010, the business frontier and the hacker frontier will move.  The hotspots will be very different and we should expect to be surprised.  OSS will be part of every software business, and every company's strategy - much like the Internet has done.

Simon Phipps (who is the chair of OpenSolaris) commented that "customer progress with open source is much slower than the industry's progress, so we must be careful and not rush in where customers fear to tread."

We were told not to blog about the content of the roundtable "thinking sessions" themselves, and I won't, but I will say that I had the pleasure of working with some real luminaries in the space - John Roberts (CEO of SugarCRM, the most interesting OSS business model today in my view) and Mary Coleman of Walden International.  I learned a lot from the discussion and met some very sharp people.  It was very lively given our table consisted of two commercial OSS companies (SugarCRM and Alfresco), two commercial giants (Microsoft and SAP) and four VCs...

Finally Doc Searls had an amusing and insightful summary of the state of OSS and software in general, drawing heavily on the construction industry as a metaphor for the mature state of the software industry.

SaaS is the "S" in SPLA

I've found that relatively few people know about the Service Provider License Agreement, which was built for hosters and companies which need monthly, usage-based licensing.  From the program description:

The Services Provider Licensing Program enables services providers to license Microsoft® products on a monthly basis. The program is designed to emulate how service providers do business - providing services on a monthly fee to their end-customers. A sample list of products available to service providers in this program is provided below.

So it's a pay-per-use model that works in arrears - hosters provide a report of the license units used that month and pay after they're done.  SPLA incorporates Software Assurance so there is only one license and one price to pay for usage.  There is a version specifically for ISVs which you should look at if you're currently a SaaS ISV using the Microsoft perpetual license model.

Two good examples of why this is useful:

1. Cashflow management: under the perpetual license you would need to buy the software up front and amortize the cost over a multi-year period.  SaaS is a cashflow-focused business model with little room for capital expenditures that need to be rationalized later (as seen by the standard practice of leasing hardware rather than buying)
2. Seasonal volumes: if usage goes up one month, and down the next, there's no need to buy additional perpetual licenses, guess what the necessary capacity will be, and suffer for guessing too high (if you're in Operations at a SaaS company, you know how challenging this can be - as they say, "it's hard enough to predict the past, let alone the future").  Instead, SPLA users report & pay month to month, so payments go down when usage goes down.

The team that came up with SPLA, led by Pascal Martin, has partnered with Rackspace and other hosters so that SaaS ISVs can transfer their existing operations to an MSP.  They are working hard on the next version of the ISV-focused hosting solution - more news on this in the near future.

A Billion Emails via SaaS on .NET

I've had the chance to some time with ExactTarget in the last week.  They're a SaaS email marketing company based on .NET with a very slick AJAX interface.  Since they're an email-centric company, they use Outlook as their design center - task pane selection and folder trees on the left, interaction page on the right, etc.  This parallels feedback I've heard from customers about email interfaces in the recent past.

The impressive statistic I got from our conversation was that they will send a BILLION emails this quarter - perhaps it's my ignorance of the email marketing space but I thought that was impressive.

While talking with their CTO and VP of Engineering, I learned a few things. 

First, they're doing all of this on end-to-end .NET (Windows Server, SQL Server, etc.) and have achieved massive scale.  Second, they're based on AJAX.NET, an elegant Open Source AJAX framework for ASP.NET (for example, to make a method asynchronous on the client, you just add an attribute: [AjaxMethod]).  Furthermore, they've hand-built a number of generally useful client-side features using AJAX - a WYSIWYG editor like Writely, and due to their server-side architecture, they've been able to integrate useful data cleansing tools via SOAP interfaces.  With the number of comments I get about REST >> SOAP these days, I had to ask about their use of SOAP.  They said they got it for free by using ASP.NET (.asmx pages), and that the automatic harnessing of SOAP rather than raw XML was useful.

The new stuff they're coming out with - and which they demoed at Salesforce's conference recently - is significant - partly because of their use of AJAX for some sophisticated drag & drop workflow features, and partly because of the breadth of scope they can handle with their workflow engine.  I can't give it all away here, but be sure to check them out when they launch the new stuff in December.

The ExactTarget team was happy overall with our technology, but were not happy with our licensing.  Running on Windows and SQL Server perpetual licenses, they are charged in a way that's out of sync with their business, and while standard "failover" servers are not charged for by Microsoft, "unutilized production" servers are.  Fortunately, we do have a better offering for them - I believe that the Service Provider License Agreement (SPLA) will be the solution to most of their issues.

If you're a SaaS ISV and you're using Windows, you should almost certainly be using the SPLA instead of perpetual licenses - it's pay-per-use and is a much closer fit to the SaaS operations & cashflow model.

Dave Winer has the Scoop: Ozzie, Gates, and SaaS

Robert Scoble has posted links to Dave Winer's site, where the Ray Ozzie memo I mentioned earlier has been posted, in full and complete form, along with Bill Gates' "turn the ship" email.  Worth reading.

[Updated: Now I think you can see that this is not just about Web 2.0, it's about Microsoft 4.0 which will be a service-based computing platform for the industry - not just an inward-looking "sell our software differently" approach.]

[Update 2: A well-written article in the WSJ discusses the meaning of all this.]

Meet up at the VS/SQL/BT Launch?

I'm going to be at the VS/SQL/BizTalk launch event in San Francisco today at the Moscone center.  If you want to meet up and chat in person about partnering with Microsoft as a startup, getting help with VC, or what we should be doing to enable the SaaS ecosystem, drop me an email.

And thanks to those of you who have shared your ideas on the SaaS Startup Offering via comments and email - I will be replying over the next few days (once the launch event and IDC's Software Leadership Council are over).

SaaS Startup Offering

I've been working hard to develop a strong Microsoft-based offering for startups building SaaS companies, because the economics are with LAMP right now.  In listening to startup engineering managers and business managers (i.e. VP Engineering and CEOs) I consistently hear the following:

1) Speed of development is important (hence PHP and Ruby on Rails, although I hear some say they're happy with the agility of ASP.NET).

2) Operations cost rules all (scale-out includes many instances of the OS, App Server, DB, etc., not to mention virtualization).

With partnership from Doug Pratt (who runs the Empower program which is designed to meet the needs of startups - and given the 15,000 enrollees who have gotten development licenses to every piece of software we make ("back the truck up") for $375, I think we can say it was a good offer for ISVs) I've been able to learn a lot about our licensing and pricing issues relative to SaaS companies.

Unfortunately it is far short of what SaaS startups need - first of all, they need permission to run the software as a service, which is prohibited under the Empower agreement, and second, they need to be able to scale out without paying more.  The Service Provider License Agreement (SPLA) is a usage-based pricing model for Microsoft infrastructure which is a closer fit to the SaaS model (has per-user and per-CPU modes of billing) developed by the Microsoft Comm Sector Hosting team.  They have also built out a hosting solution and we've seen ISVs like Vertafore use it to lower their costs & scale faster.

Shannon Clark writes about this in response to Robert Scoble's list of Web 2.0 entrepreurs' complaints he heard during his "two days in the Valley."

So what if we launched a SaaS Empower program that included architectural guidance on how to build multitenant applications on .NET, had a slew of free runtime/production licenses for our server software, and connected you to a SaaS Marketplace or Solution Finder on Microsoft.com?  Would that be enough to move you to use the Windows stack?  What if we included Provisioning, Metering, and Billing engines (to be run by you, not us)?

The complaints department is open.

Live Services != OS

I'm seeing some very smart people miss key pieces of the announcement and then go haring off in the wrong direction... my conclusion is that there's just too much new information in the Live announcement and related commentary for people to handle.

Ross Mayfield bags on MS Office vs. Google Office but apparently completely misses Mojo, the collaborative document creation infrastructure (Niall Kennedy nails this), and then concludes:

Jerry Michalski said something brilliantly simple the other week at a collaboration conference. That we are certainly not waiting for Vista, we have lost trust in these guys and it's time to get these things out of the OS.

So - remember, Live != OS, Services != OS - except perhaps metaphorically.  Vista is the OS but this set of announcements is about Live Services, rapid revs, and open APIs.

Similarly, we should probably have a new class of logical error like ad hominem - perhaps ad demonstrandum(?) - to cover the hundreds of blogs that point out that the launch was too early, and the demo broke, therefore Office Live and future Live properties are DOA.  Not even worth linking to - even when I was competing with Microsoft this would not have been worth focusing on... also known as aggressively missing the point.  Microsoft is coming into the services age - and that includes the much hyped "Web 2.0" areas evoked by the Live announcement and the whole software value shift represented by Service-based computing.

Ray (of light) Ozzie

It's going to take a while for all of this to really be digested inside Microsoft, let alone the industry.  But people really need to see the magnitude of this "turn the ship" effort - the internal memos and webcasts as well as the external communications, directed at making wholesale changes to how we do business.

It's a day to celebrate - there is an intelligent, informed, well-organized guiding force that is taking the company forward into the brave new world of Software as a Service.  I'm not talking about Windows + Office Live - see "Microsoft Previews New Windows Live and Office Live Services" - which looks like a good start for us. Don Dodge has some good coverage on this and also liked Richard McManus' writeup.

What the world didn't get to see today was Ray's internal memo on SaaS, which is brilliant.  It specifically calls out requirements for the entire ecosystem for SaaS and not just our direct offerings.  No doubt it will be leaked at some point but I'm not going to be the one to do it.

[Update: Here is Ray Ozzie's memo - thanks to Dave Winer]

For those who are interested, here is Tim O'Reilly's take on the announcements today.  Steve Hamm has put it in the right historical perspective but misses a key point - he says that Microsoft was able to beat Netscape because they were a software company and therefore appropriate competition, where Google is a different animal.  I suggest a different perspective - Microsoft is an indirect channel company (of $40B in revenue we generated last year, over 95% was indirect) and that we understand how to deliver value to ecosystems at scale.

The partner story for Microsoft in SaaS has not been officially told yet, but it is coming and it will have an impact.  To get an early look at what this could include, check out my previous post on providing a marketplace for SaaS companies to connect with small and mid-sized businesses globally. 

Offer your opinions and advice on this and I'll see that it gets into our SaaS discussions internally.  We have a cross-company team working specifically on how to make partners wealthy through our future SaaS offering, and we're looking for input.