Amazon Web Services Debate Expands

Posted on October 1, 2006 by Simeon Simeonov

Antonio Rodriguez, founder of Tabblo and brother of the founder of Archivas (Andres Rodriguez), has a lengthy post worth reading on why AWS isn’t manna from heaven. He makes two key points:

  1. Given Amazon’s core business, it’s worth questioning the SLAs of AWS.
  2. The answer to the problem of entrepreneurs dealing with “muck” is open source and not managed services.

I completely agree with the first point and I’m sure Amazon has a reasonable SLA pitch or they wouldn’t be used by that many startups. Then again, the devil is in the details.

The second point I disagree with. It’s not that open-source doesn’t help with muck or that managed services do an amazing job. You just cannot compare the two–they are orthogonal.

If one of my companies needs some infrastructure functionality, say, a reliable message delivery service, it certainly won’t build one. It’ll go with an available provider. The choice between open-source or not will be made based on a number of factors, including the software delivery model, the target customers, potential M&A targets, etc. It is not obvious that open-source would be the only way to go.

Let’s say the company is thinking about going with Mule. Using Mule from a development standpoint is not a problem. Getting Mule to scale to huge message volumes and putting Mule in an appropriate high availability and disaster recovery (HA/DR) environment with all related bits and pieces of infrastructure may be a problem. There are issues of up-front cost, complexity and know-how. That’s where it may be worthwhile to consider a managed service that can help with bringing Mule up to this scale (high-end outsourcers will do this) or a managed service that does reliable messaging such as Amazon’s SQS. The ultimate choice would depend on many factors but whether the messaging service itself was open source or not would not be the biggest one by far.

Huge over-generalization alert. It is worth mentioning that open-source projects, as a pattern, tend to leave two types of functionality on the back burner–management and performance in large scale environments–because (a) management is uncool, (b) most designs initially don’t focus on very large scale environments and (c) it is hard to assemble the HW/SW necessary to run tests in these types of environments. That’s a problem but also an opportunity.

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Windows Live Writer Screencast

Posted on October 1, 2006 by Simeon Simeonov

Jon Udell interviews JJ Allaire and Jack Ozzie about Windows Live Writer. It’s all captured in a nice screencast. If you see it, you’ll know why I enjoy blogging with WLW. The beta update fixed most of the issues that I had mentioned to JJ. The coolest thing, however, are the details provided around the plug-in architecture. I’m sure we’ll see a lot of action on this front.

I wish WordPress integration was a little better. I guess that’s something Matt and JJ should talk about…

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Bad Patents and Patent Trolls

Posted on September 28, 2006 by Simeon Simeonov

I was on a panel on that topic at the MIT Emerging Technologies Conference today. The panel was nicely balanced with multiple perspectives from large and small companies, the EFF, investors, lawyers and the press. The audience asked great questions. I have gotten several emails about two references to other people’s work I made.

The first person I mentioned was Ronald Coase, winner of the Nobel Prize in Economics in 1991. Anyone who cares to understand issues around patent rights should read his 1960 paper “The Problem of Social Cost”. It’s every bit as relevant today as it was then. Coase’s work grew from research on how spectrum rights should be assigned and is also the theoretical foundation of pollution rights/credits and other schemes for handling environmental externalities.

The second reference was to Jay Walker, founder of Walker Digital and Priceline. Yesterday, Jay said that “a patent is a bargain between [some] individuals and society where the individuals get some rights in exchange for teaching society something”. This is a great, simple way to look at patents. Using that frame, my definition of a bad patent is one where the rights granted are disproportionate to the teaching delivered. An example would be a patent of something obvious, e.g., the famous method for swinging on a swing, or a patent that was granted with too broad claims.

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Amazon Web Services & Standards?

Posted on September 28, 2006 by Simeon Simeonov

I’ve been thinking more about AWS since Jeff Bezos’s talk yesterday. Whenever infrastructure outsourcing comes up, the question of standards is not far away.

Amazon can wait for its services to become de facto standards or they can lead with a standardization effort of S3, EC2 and SQS APIs. OASIS will be a good organization to go through. There are pros and cons, of course, but Amazon shouldn’t fear standards–the real IP is in the backend infrastructure and knowing how to scale cost-effectively, which is not easy to do. Buying power is an important part of the equation.

Who can compete with AWS? Certainly GOOG + MS can and will eventually do it across all services. IBM can do it also but will likely be a late entrant since they won’t see service up-sell opportunities. Sun also has a managed services business and the SW infrastructure to get in the game. Y! has great storage infrastructure (they are NetApps’s largest customer) but offering that as SaaS doesn’t jive with their vision. Photobucket can go after the S3 customers but has no technology to compete with SQS and EC2. In short, right now Amazon is in a pretty good spot.

I’d be much more inclined to have startups consider using AWS if the APIs were somewhat standard–it would mean lower costs of switching should there be a reason to more away from AWS.

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eBayMatchUps: Meg Whitman vs. Fruit Helmet Cat

Posted on September 28, 2006 by Simeon Simeonov

Smart people inside eBay have been looking at ways to drive more traffic to the site and figure out what’s on the minds of people in their community. One of the cool ideas must have been to do eBayMatchUps.

Apparently, the site cost next to nothing to build, another example of how easy it is to hang your shingle on the Web 2.0. The concept is not innovative but very effective when globed onto the eBay community. It’s a way to tap into the emotions of sellers and drive some gawker traffic, sometimes with unintended consequences. See for yourself Meg Whitman vs. Fruit Helmet Cat.

It is now important for eBay to not interfere with the doings of users.

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Spam Comes to Ning

Posted on September 27, 2006 by Simeon Simeonov

I got my first spam “friend” request on Ning. It was a standard affiliate scheme. The Ning app is populated with a ton of content. The programmability of a social infrastructure platform is a mixed blessing as it lowers the cost of doing both good and bad.

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Jeff Bezos on Amazon Web Services (Mechanical Turk, S3 and EC2)

Posted on September 27, 2006 by Simeon Simeonov

I’m at the MIT Emerging Technologies Conference today.

Jeff Bezos was the first keynote speaker. His talk focused on Amazon Web Services (AWS), in particular, Mechanical Turk, S3 and EC2. Jeff didn’t talk about the Amazon Simple Queue Service (SQS), which is my favorite of the lot. After his talk he told me he omitted SQS due to time constraints.

Ultimately, the goal of Amazon Web services is laudable–to lower the cost of experimentation and shorten the time from idea to final product. Jeff talked about eliminating the need for “undifferentiated heavy lifting”, a.k.a., “muck”.

  • Mechanical Turk provides infrastructure to aggregate human intelligence by creating a market for humans to answer discrete questions that software has a hard time with, e.g., “is there a human in this picture?”. CastingWords uses Mechanical Turk for podcast transcription. The main issue with the service as it stands is that it doesn’t guarantee the availability /quality of answers. I would expect us to see an interesting set of services emerge leveraging the unique characteristics of cost/accuracy/reliability/throughput of Mechanical Turk. For example, an interesting area to look at would be batch speech-to-text processing. Another area would be machine learning where distributed human effort can play a role in adaptation, e.g., as the fitness function in GA/GP.
  • Amazon Simple Storage Service (S3) provides handle-based storage, similar to content addressed storage (CAS), which was pioneered by EMC Centera. It’s great bit storage in the cloud. Amazon can take it much further, I expect. I have an investment in the digital archiving space, Archivas, which is taking a more comprehensive approach–managing both content and its meta-data and adding a number of extended services such as indexing & search. An Archivas-type solution in the cloud would be able to off-load much more “muck” than S3 as it stands. It’s still cool, of course, and getting increased usage. For example, SmugMug is using S3 for professional storage and sharing.
  • Amazon Elastic Compute Cloud (EC2) allows developers to create a boot image and store it on EC2. When you need it, you can start a machine with this image. You control your machine instances. You can scale up and down in minutes. Amazon charges 10c/CPU/hour ($70/CPU/month) and 20c/Gb transfer. The main advantage is flexibility–you can run one CPU/month or 700 CPUs for an hour. That’s great for compute-intensive tasks and for scalability testing. EC2 has been in beta for just a few weeks but it’s already getting strong buzz. I wish it was around when we were doing scalability testing of our application servers as Allaire/Macromedia.

AWS can definitely remove some muck.

For a long time I’ve talked about the trouble with non-consumer software nowadays being that innovative core IP must be surrounded with 70-90% undifferentiated code that has to do with installation, updates, management, scalability, internationalization, standards support, etc. The net result has been that the bar to entry in the software space has gone way up. The capital requirements to ship quality product have also gone up and because undifferentiated IP doesn’t bring great exit multiples, the end result has been that returns in these sectors have gone down on average. It’s harder now than ever to build a really big enterprise software company. It requires careful planning of where in the value creation curve one should plan to get off and seek an exit.

Consumer-facing Web applications don’t suffer from many of these maladies but even they have to face the growth pains associated with success. Note Friendster’s struggles with scalability and MySpace’s multi-year re-architecture. Outsourcing some of this work to large players such as Amazon makes sense. For really simple applications, one can imagine an AJAX or Flash frontend that relies almost exclusively on S3 and EC2 as the backend.

Jeff Bezos and I had lunch at PC Forum a couple of years ago where we talked about the future of Amazon Web Services. At the time he said that one of the key strategic issues he was focused on was the interplay between Amazon The Platform and Amazon The Brand. With AWS focused primarily on developers and with Amazon affiliates growing stronger than ever, it seems Jeff will be able to have his cake and eat it too.

Posted in amazon web services, Digital Media, SaaS, startups, VC, Venture Capital, Web 2.0 | Tagged , , , , , , , , , | 5 Comments

Alan Greenspan On SOX & Software

Posted on September 26, 2006 by Simeon Simeonov

Last night I went to a Massachusetts Technology Leadership Council (MTLC) event featuring Alan Greenspan as the speaker. The format was 60min Q&A lead by Paul Denninger, Chairman of Jeffries Broadview. Paul did a great job of keeping Greenspan away from economic jargon to my slight disappointment–I am a reformed economist, after all.

It was fairly clear that Greenspan relished the opportunity to speak his mind without regard for politics or the administration. My favorites:

  • “CEOs should certify their financial statements.” The rest of Sarbanes-Oxley should be scrapped. The problem is that “nobody changes a bill when the people whose names are on its title are about to retire”.
  • If his niece or nephew were just leaving college he’d advise them “to own a hedge fund”. If they cannot do this, they “should pass the cup around and start a private equity firm”. Too bad I’m not smart enough to be in a hedge fund. 😉
  • “Corn ethanol is a political product” with no real ability to impact current consumption patterns. All the corn would make 6-8M barrels of gasoline equivalent, which is no big deal, and “then the pigs would starve”. Cellulose ethanol, on the other hand, is quite promising, especially if you assume agricultural productivity would continue of its current trend for the next decade.
  • In a world of ideas, there are lots of problems with IP. “Should Isaac Newton have been allowed a copyright on calculus?” Pity that he didn’t mention that the USPTO needs lots more & better trained people.
  • “Software has high fixed costs and very low variable costs”, which suggests that “a natural monopoly may be the most efficient way to produce”. Good news for big players. Imagine Microsoft goes away. The switching cost to businesses would be huge–with a real impact on the world economy, probably. It is important to note that in the age of broadband not all software follows the high fixed, low variable cost pattern. YouTube and Photobucket are probably good examples. Not complex to build, despite all the scalability requirements. Huge operating costs, be those streaming or adding more storage. 

For even more color on the exchange, read Greenspan unleashed at the Boston Herald.

Greenspan is an unabashed supporter of globalization and a firm believer in the law of comparative advantage. He did invoke both Adam Smith and David Ricardo. What he didn’t talk much about–to my disappointment–were the short-term negative externalities associated with re-allocation of resources and how to deal with them from both a political and an economic standpoint. To put it in blunter terms: what to do with all those unemployed factory workers in the middle of the US. It’s kinda hard to turn them into knowledge workers at this point… Or, if you extend some outsourcing trends in high-tech, what to do with all those average software developers in the US whose real incomes will inevitably decline due to world-wide wage pressures. I would love to have dinner with Greenspan and Stiglitz (a Nobel Prize winner in Economics), whose recent book Making Globalization Work is worth reading.

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The Third Place

Posted on September 25, 2006 by Simeon Simeonov

Jason Fry has an insightful post on the role MMOGs and online communities can play in our lives.

Your first place is your home. Your second place is your work. Then there’s the more-elusive third place — somewhere you feel comfortable, hang out with friends and acquaintances and catch up on the latest news. Whether it’s a good bar, the neighborhood post office or a beloved diner, it’s the kind of place that keeps neighborhoods strong and vibrant. Maybe you’ve got one in your town. Or maybe you don’t, or you don’t go there because you’re too busy ping-ponging between your office and your house. In which case you probably yearn for a third place.

The unspoken assumption is that most of the time spent in the third place is when you’re physically at home. Creating a third place that feels your own would require a new approach to space & relationship management at home. Perhaps this is why I’ve seen so many new products targeting personal media/computer experience such as The Ultimate Game Chair. Some interesting startup opportunities here, no doubt.

Other cultures have approached the problem differently. In many countries, the customized third place is the Net/gamer cafe.

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E-Commerce 2.0

Posted on September 21, 2006 by Simeon Simeonov

The “2.0” in the name is, of course, a play on the 2.0 naming craze of the day but the subject of the article I wrote for Web 2.0 Journal is real (see “E-Commerce 2.0” – The Velvet Revolution).

I started thinking about these issues while still at Macromedia working on the next-generation of user experiences on the Web and at the same time serving on the OASIS Web Services Component Model (WSCM) TC. By that time it was clear that despite the busting of the bubble, e-commerce was going strong and would be an obvious place to apply some Web 2.0 concepts. More recently, the team at Allurent, where I’m an investor, contributed significantly to my thinking as well as conversations with friends like Colin Bryar at Amazon, Robert Chea at PowerReviews and Kirthi Kalyanam at SCU (who, BTW, is organizing a bootcamp at Shop.org in NYC in a few weeks–two panels will cover Web 2.0 as it relates to e-commerce).

The three trends driving e-commerce 2.0 that I describe are:

The obvious fourth trend that I didn’t mention is the drive towards generating unique content (often user-generated) tied to the e-commerce experience. It’s hard to say how this becomes real and scales beyond reviews & recommendations and that’s why I didn’t mention it.

Etailers are under pressure to differentiate in a world of nearly perfect information. Maintaining the e-commerce 1.0 status quo is not an option.

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