Bill Gurley is a general partner of VC firm Benchmark Capital and a frequent contributor to C|Net’s Tech News. Today he’s posted a Perspective column suggesting that many companies which currently sell their software in a cardboard box consider providing it on a commodity rack-mounted server instead. (This is for server-based software sold to corporations only.) Gurley, who I met when he was an associate with Hummer-Winblad and I a plebe at NetDynamics, points out half a dozen issues where a simple closed box alleviates customer or vendor pain points.
I have to say, though, that I think he’s wrong for the vast majority of applications. Some applications are little standalone islands and for them this delivery model might be fine. Gurley points to firewall vendors NetScreen and Check Point Software as an example; NetScreen follows the closed box configuration and is ramping up sales, while Check Point delivers only software and has been badly hurt in the last couple of years. However, most of the important corporate server applications are decidedly not islands nor can they be used as is out of the box. Even something as simple as a webserver requires significant customization to meet needs and you can forget about complex beast like an ERP or accounting suite.
I have a good friend who spent the better part of a year recently as product manager for a startup company which attempted to use this model to deliver software which was mildly more complex than a webserver. It actually was a webserver (Apache) with very sophisticated load balancing built in. This company had very smart, experienced, previously successful people at the top and directing product development and by many measures should have a had a clear path to success in even in the nastiness that was the 2001 tech selling market. But having to factor in the hardware just confused many issues internally and allowed customers to not clearly understand the value proposition of the product. And the company failed. Badly.
Gurley’s column, as written, doesn’t even mention this limitation of the suggested delivery model. He sure writes purty though.
BillSaysThis 