Inverting The Enterprise 2.0 Risk/Revenue Paradigm

I’ve been involved for over a decade in various shapes and guises selling software as a service to enterprise. But had yet to find an innovation in pricing models that truly reflected the value/volume conundrum that so often stifled adoption of solutions that only truly demonstrated their value at mass enterprise usage. 

And then along came this post from Julien Le Nestour – pure brilliance. As he points out:

Every product bearing what is usually dubbed a “social component” has significant network effect and peer production dynamics. The more employees actively use the application, the more they — and so their organization — extract value out of its use. Marginal benefit per user, and hence total value, thus increases with the number of active users. Yet, most pricing structure are degressive, Volume-Discount schemes: price per user decreases with the number of users. Price and value varies in opposite ways.

Take more upfront risk for deeper customer deployment

Using Yammer as a case study he argues:

The more users will use Yammer, the more value the client organization will get out of it. In most organizations however, the value of a Twitter-like for corporate use will not be obvious, and will slowly build up with time, as it spreads internally.

Yet, pricing is desperately of a Volume-Discount type, making an after-pilot deployment with a small group of early-adopters look very expensive per user (large companies will compare it to the price per user for fully deployed applications like email or IM). Smart vendors will reverse the price structure, offer organizations the opportunity to try out the new technology, experience its value over time after a pilot, and scale up accordingly. They have to forgo immediate but short-term benefits, in order to get a chance to demonstrate their value added and reap the benefits as the client scales up its use.

I suspect there is a good deal of tweaking that will need to be done to make this model work in practice so as not to totally shift the burden of risk to the technology supplier, but inverting the model is a good start. 

Microsoft Is (A)Live With Photo Sharing, Social Roll Out While Apple Searches

Microsoft has rearchitected its portal to be more of a social network on which users can pull in data from various sources and interact with their friends. TechCrunch has more coverage:

Users are automatically connected with any friends they have on Windows Live Messenger, which is by far the most popular instant messaging service worldwide (Comscore: Microsoft Messenger has 268 million worldwide users, compared to 116 million for Yahoo and 6 million for Google Talk).

Users are asked to build out their profile, and can also bring in content they create on blogs (or any RSS feeds, Flickr, LinkedIn, Pandora, Photobucket, iLike, Twitter, WordPress and Yelp. When you do something new on those sites, the information flows into for your friends to see (in a very similar way as FriendFeed, Plaxo and others do today). Eventually, says Microsoft, more than 50 partners will be supported. When users add photos, write reviews, and update their profiles directly on, that content will be put into the activity stream as well.

The hope, of course, is to get people to hang out a lot more at At least those people who use Messenger, since they already have their contacts established. Like Yahoo, Microsoft is going with its strengths, which in their case is instant messaging.

Microsoft’s software plus services strategy has clearly infiltrated as well as their approach with Office. users can now access a variety of online services like mail, calendar, photos, online storage, etc., as well as downloaded services that include a mail client, instant messaging, Movie Maker, Photo Gallery, the Toolbar and other services. And now it’s also one big social network.

Included in this new roll out is a photo sharing site call Live Photos. ReadWriteWeb has a solid review.

They point out that the slideshow background changes color depending on the dominant color in the photo being displayed at any given time – this is an interesting feature and points to photo sharing services growing their intelligence of what is taking place inphoto as it were.


You can share your albums with very granular permissions, and also share individual photos. Every photo can be tagged and your visitors can also leave comments.

On the other side of the spectrum, Apple is reported to be working on a search engine. This one’s more of a rumor than substantiated Valley lore at the moment. Again from TechCrunch’s Michael Arrington.

Elgg 1.0: Roll Your Own Social Network Releases

UK-based Curverider has released version 1.0 of their flagship open source social networking engine, Elgg.

There are two versions to the release – a full version that includes a number of pre-installed socnet features (bookmarks, blogs, messageboard, status etc) and a core version that allows anyone to build their own social network on top of it (think ‘layers in an onion’).

Version 1.0 comes after three years evolution of the codebase since Elgg was initially released in 2004 as vers. 0.1.

The guys at Curverider have emphasised design as a key factor in the build and they have also focused on user control as a key element. Co-founder and CTO, Ben Werdmuller, explains their thinking as follows:

Over the next few years, the explosion in niche social networks, and otherwise socially-enabled websites, will lead to new technologies that will allow you to federate your connections all over the Internet. This presents new opportunities for exciting new applications, but also opens new opportunities for your data to be abused. Therefore, you need to control exactly what is released, and to whom. That’s the core principle in Elgg.

Innovation Bay: Mike Cannon-Brookes Shares His Atlassian Adventures

Mike Cannon-Brookes, the CEO and a Co-Founder of Atlassian, spoke at an Innovation Bay breakfast session last week. You can listen to his entire talk here.

Atlassian is 6.5 years old. They have 12,500 enterprise customers in 105 countries and did about $35.5m in sales last year and are aiming to hit $60m this year. In total they have 200 staff spread between Sydney, San Francisco, Kuala Lumpur and Poland. They are opening an office in Amsterdam in August.

A few nuggets:

  • They didn’t know what product they were going to sell when they started the company. They had in mind the type of business they wanted to run, they knew the sector (sell enterprise software) and they knew a little bit about how they wanted to sell, but they didn’t have any idea what software they were going to sell. They started with about 3 or 4 different unique prototypes that they built. One of these took off a little more than the others, so they focused on that and it is now their leading product – Jira, which has 9,500 of their 12,500 customers.
  • They knew they wanted to build an enterprise software company, but as encapsulated in their mission statement: a different kind of enterprise software company. This is not a contrarian stance, rather they like to evaluate everything they do and not simply follow what other businesses do unless it makes sense. “A little commonsense goes a long way as an entrepreneur.”
  • All of their products have been built because they fundamentally needed them and because they felt there was a large enough market that wasn’t being addressed. They have yet to build or buy anything they don’t actually use as a company.
  • Starting a second product was the smartest thing they did as it stopped them being a single product, single feature company. Today they have seven unique brands/products, developed by 12 different software teams – some of the products are sold in different ways. “Being a single trick pony as a business is very, very dangerous”.
  • As an online business they have found that the speed with which they are able to respond to customers makes a marked difference in their propensity to buy software. Their goal is to be able to respond within four hours to every single query they get from anywhere in the world — this ties into their strategy of opening a key European office in August as it give them the ability to respond around the clock.

The Big Picture: A Vision For Social Media

Imagine a world in which:

every single human being is posting their thoughts and experiences in any number of ways to the Internet.

This is the world that New York-based VC, Fred Wilson, sees within his ‘grand vision‘ for social media.

I applaud Fred’s simplicity. All too often the bigger picture can become obscured by over complication. If we take a look through his firm’s portfolio, we quickly see that he is pulling together a mosaic that will progress us towards achieving his vision:

Twitter – microblogging

Disqus – distributed comments

Oddcast – conversational chararacters

Tumblr – microblogging

Zynga – social gaming

There are a bunch of other companies in the Union Square Ventures portfolio, but these are the stand out ventures that speak to Fred’s simple vision.

Turning this vision into reality will take a lot more determined effort by all of us. Besides supporting the right technology pieces, achieving standards (think what Gears is doing for HTML5), and gaining wide user traction there are regulatory and plumbing issues that will need to be solved.

Currently we see a lot of infighting and an almost continuous bitchmeme, at present this seems to be over whether Friendfeed is better than Twitter. And this within the context of a world in which millions are unable to express themselves, a world in which millions are dying because of oppressive regimes.

It is high time the social media industry rallied together. By focusing on this simple end goal, by setting a target we can come together around, we can achieve so much more.

[Picture courtesy of hellomartin]

Micrsoft/Yahoo Deal Theme Song: It Ain’t Over Till Its Over

The blogosphere has been abuzz since Microsoft indicated it was walking away from its offer to acquire Yahoo. But as many of us know a deal like this ain’t over till its over – anything can happen, and indications from Ballmer behavioralists is that anything probably will happen.

Taking a read through Michael Arrington’s comments on his colleague, Erick Schonfeld’s blog post speculating on the departure of Steve Ballmer we find:

Wow, Erick. Your poll options remind me of the “so when did you stop beating your wife” jokes. In yesterday’s Gillmor Gang we talked about what, if anything, Microsoft did wrong in the negotiations. Overall it seems they were handled as well as could be expected right from the beginning.

and later,

I mean, seriously, how about “He’s played this perfectly from start to finish”

and it isn’t over yet.

One thing the team at TechCrunch hopefully can agree on, and which they’ve got right is that Yahoo will be having an interesting Monday.

The best comment so far though has to be this parody: