Tag Archives: Stanford University

About 2242 days ago Servers and Routers

Hardware Goes Green

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The amount of energy used by data center servers, cooling equipment, and related infrastructure doubled in the United States and worldwide between 2000 and 2005, according to a new Stanford University study. The study credited a jump in the number of servers, driven by the insatiable demand for Web content — such as music downloads, Internet telephony and video-on-demand. Over the same time period, power costs grew by 132 percent, according to the report by engineering professor Jonathon G. Koomey. With electricity now representing up to 70 percent of the cost of operating a data center, small and mid-size businesses need to consider not just how fast — but how efficiently — their servers run. Hardware vendors who traditionally competed by claiming faster processors are now responding with new equipment that addresses the rising cost of operating data center equipment and growing concerns about climate change. In recent months, Dell, IBM, Hewlett-Packard and Sun Microsystems began marketing premium-priced servers that are more energy efficient but can save the added upfront cost in less than a year.  Overspending on electricity Cybertrails, a Phoenix-based technology consulting and data hosting company, was overspending on electricity by thousands of dollars per month because of inefficient power equipment in the company’s data center. The uninterruptible power supplies (UPS) that keep Cybertrails’ servers running and protected against grid failure had excess capacity and were operating at just 60 percent energy-efficiency, according to Chris Boucher, the company’s chief technology officer. As part of a continuing effort to reduce electricity costs, Boucher installed smaller, modular UPS hardware that helped to reduce the energy cost by more than 20 percent per kilowatt hour. Cybertrails switched from traditional floor-based cooling to more efficient in-row chillers that counter the heat by being placed close to the source. Another power-saving strategy that Boucher recommends is to reduce the number of computers needed by placing more load on existing equipment through server virtualization software. Big players help reduce energy consumption Many of the largest information technology companies are jointly studying how to reduce data center energy consumption in a project known as The Green Grid. The first duties for participants including IBM, AMD, Intel, Microsoft, Hewlett-Packard and Sun Microsystems is to agree on benchmarks that can be used to directly compare hardware energy requirements, according to Roger Kipley, a senior technologist at Hewlett-Packard and Green Grid director. Kipley says enabling businesses to compare the “performance per watt” of hardware before a purchase, will drive manufacturers’ behavior in addressing energy efficiency. Server vendors who are judged on their overall capabilities will then work with suppliers to improve the efficiency of individual components, such as processors, routers, and disc drives, according to Kipley. New software tools will be developed that enable information technology departments to tune the servers’ power consumption to match processing loads, Kipley says. Tom Braddish, an IBM fellow and Green Grid board member, says data center hardware will be optimized to provide processing power on an as-needed or just-in-time basis. Since hardware will have enhanced capability to switch to a lower power state when not needed, businesses will need to consider how quickly equipment returns to operation, or the “mean time to re-power,” Braddish says.  At the urging of the U.S. Congress, the Environmental Protection Agency is studying how to reduce data center energy use and will produce a report in June of this year that outlines suggested actions and incentives for businesses.

About 2972 days ago E-Commerce

26 Most Fascinating Entrepreneurs: Fritz Maytag

Fritz Maytag Anchor Brewing for setting limits He invented what later became known as microbrewing. Without his Anchor Steam Beer and its brother brews, we beer lovers might have been consigned to choosing between Budweiser, Miller, and Coors. Instead we have a cornucopia of the finest brews available anywhere in the world, except maybe Belgium. And Fritz Maytag led the way. A young Stanford grad living in San Francisco in the mid-1960s, Maytag often enjoyed a glass of the 109-year-old local brew, Anchor Steam. One day he heard that the brewery was closing. He paid a visit, fell in love, and, in September 1965, bought a 51% stake in the business. Three years later, he bought the rest of the company. The whole shebang, he says, cost about as much as a used car. At the time, Maytag — an heir to the washing machine fortune — knew nothing about beer-making or business. “You know books like So You Want to Have a Puppy?” he says. “I bought So You Want to Learn Accounting.” Even to a novice, however, it was obvious that the company was sinking fast. Maytag soon learned why: Restaurant and bar owners complained that the beer frequently spoiled before they could sell it. So Maytag tinkered with the brewing process and the recipe, coming up with a new, improved Anchor Steam Beer that debuted in its bottled form in 1971. It was an instant success. Within four years, the brewery had maxed out its production capacity. Soon thereafter, Maytag was forced to ration the number of cases distributors could buy. He remembers the next few years as a nightmare. Customers were beating down his door, and there was simply no way he could satisfy the demand. He desperately looked for a new site, but he limited himself to locations in San Francisco out of respect for the historical connection between the city and the beer. Finally he found an old coffee roastery, where the brewery moved in 1979. Maytag vowed he would never go through rationing again. But the popularity of Anchor Brewing’s beers continued to grow. By the early 1990s, Maytag was facing the real possibility of another capacity shortage. He considered going public to raise capital, but rejected the idea because he didn’t want the kind of growth he would have to pursue if he took on investors. Size, he believed, was the enemy of quality. “This was not going to become a giant company — not on my watch,” he says. In the end, oddly enough, Maytag was saved by his competitors. Microbrewing was gaining popularity, and hundreds of small breweries were springing up around the country. Rather than resist them, Maytag helped fledgling rivals develop their brewing skills. They wound up growing fast enough that Anchor Brewing was able to avoid a second capacity crisis altogether. “It was a great relief,” says Maytag, now 67. “It’s not any fun when you can’t produce enough to satisfy people. What if you had a pizza store with 100 customers outside waiting in line, getting angry, fighting, threatening? In business school they say, ‘Raise your prices.’ Not in the real world. You get a backlash if you raise prices too much. You lose your validity. Luckily, we didn’t have to go through that again.” Rare is the entrepreneur who feels lucky that his competitors’ sales have diminished the demand for his product. But perhaps rarer still is the entrepreneur who can resist the pressures and temptations of growth and focus instead on creating what he really wants: a gem of a business. Bo Burlingham Martha Stewart, Martha Stewart Omnimedia because she took one for the team Richard Branson, Virgin Group because he’s game for anything. In fact, everything. Michael Dell, Dell Computer for being brilliantly straightforward Jim Sinegal, Costco because who knew a big-box chain could have a generous soul? Diane von Furstenberg, Diane von Furstenberg Studio for staging an elegant comeback Julie Azuma, Different Roads to Learning for offering hope and help to the parents of autistic children Fritz Maytag, Anchor Brewing for setting limits Ray Kurzweil, Kurzweil Technologies and other companies because he is Edison’s rightful heir Craig Newmark, Craigslist for putting the free in free markets Jack Mitchell, Mitchells/Richards because his family business makes an art of customer service Frank Robinson, Robinson Helicopter for whipping an entire industry into shape Mark Melton, Melton Franchise Systems for giving immigrants their shot at the American Dream Michelle Cardinal & Tim O’Leary, Cmedia and Respond2 for rewriting the rules for husband-and-wife teams Mike Lazaridis, Research in Motion because someone had to stand up for all those frustrated engineers Trip Hawkins, Electronics Arts and Digital Chocolate for still scrapping Warren Brown, Cake Love and Love Cafe because only in America will someone quit a secure job as a lawyer to start a bakery Muriel Siebert, Muriel Siebert & Co. for being a notable first with a worthy second act Chuck Porter, Crispin, Porter + Bogusky for verging on reckless Katrina Markoff, Vosges Haut for setting a completely unreasonable goal for her business Barry Steinberg & Craig Sumerel, Direct Tire and Auto Service for showing the power of the peer group Victoria Parham, Virtual Support Services for serving as a mentor to military spouses Tom LaTour, Kimpton Hotels and Restaurants for staying at fleabag hotels so that we don’t have to Mitchell Gold & Bob Williams, Mitchell Gold for creating a true comfort zone Izzy & Coco Tihanyi, Surf Diva for kicking sand in the face of conventional wisdom Tony Lee, Ring Masters for saving 16 jobs, including his own Rueben Martinez, Libreria Martinez Books and Art Galleries for simultaneously building a business and nurturing Latino culture

About 3031 days ago Computer Security

Larry’s Kids

Al Mcgorry is a small-business man who thinks big. So in 2002, when this CEO of a 12-person software consultancy in Sacramento heard of a new, inexpensive service called Oracle Small Business Suite, he thought that Oracle’s CEO, Larry Ellison, was finally offering a scaled-down version of the software that its big, multinational customers use — at a cost of a quarter of a million dollars and up — to run their businesses. But unlike traditional Oracle products, this one was simple to use, integrated, delivered over the Web, and at only $49 per month, surprisingly affordable. McGorry was hooked. The fact is, it wasn’t an Oracle product at all. This innovative new business software solution was the work of a small San Mateo company called NetLedger (later NetSuite) that was launched in 1998 by Ellison and a young protege, Evan Goldberg. NetLedger got to use the Oracle name at a time when upstart Internet companies needed all the branding advantages they could get. In return, Ellison got a foothold in the small to midsize business space. It was an inspired partnership. So much so that NetSuite reached No. 12 on the Inc. 500 this year, with four-year growth of 5,763%. Its 2003 revenue was $16.5 million, and 2004′s number will approach $50 million. And if you ask Goldberg and his team, they’re just getting warmed up. “This is a massive, massive market,” he says, citing the nearly seven million small to midsize businesses in the U.S. alone. It’s a fact not lost on Ellison. At the same time he was funding NetLedger, he was also helping bankroll another Web-based software company targeting small and midsize businesses: SalesForce.com. And now, years later, Oracle has launched its own product — which bears more than passing resemblance to NetSuite’s — aimed at the small and midsize market. That gives Ellison a stake in three companies that are, or soon may be, fighting a turf battle for the small to midsize business dollar (he owns more than 50% of NetSuite; Goldberg, other employees, and venture capitalists own the rest). If you’re Larry Ellison, those are pretty good odds. And if you’re Al McGorry, the competition is pretty good for you, too. For McGorry, the NetSuite product, which started as a simple competitor to QuickBooks, delivering accounting software over the Internet via subscription, has made a huge difference in his business. Instead of buying software on disks that you (or well-paid engineers) load onto your computers, the software is accessed over a Web browser, allowing you to log on from anywhere. All of your employees can access real-time data, which is backed up every night on class A servers. There are no upgrades to buy, and there’s far less maintenance. And the software is constantly growing, adding the ability to manage contacts, keep appointments, track sales, manage employees and payroll, manage customer orders and inventory, and build and maintain a website. As the service evolved, the name of the company was switched from NetLedger to NetSuite to reflect its lineup more accurately. “Everything just fits together,” says McGorry, who had been using at least four different software programs — none of which were integrated like the Oracle Small Business Suite — to do the same thing. But then in 2003, McGorry’s annual cost for the suite doubled to $1,200 a year ($99 per month). And in 2004, he had to write a check to NetSuite for $7,200 ($399 per month for one user; $99 per month for each additional user). That figure allowed him to increase the number of users from one to three, but it’s still an eightfold increase in his annual payment, which is always required up front. An avid reader of Internet technology bulletin boards, McGorry says that many in the small-business community were apoplectic each time the price jumped. “People were ripping them apart in these user-community forums,” he says. “My God, there were a lot of defections.” Still, McGorry says NetSuite makes sense for his growing business, Capital Datacorp, which has annual revenue just shy of $5 million — especially since it has engineers who work almost exclusively in the field and other employees (including himself) who occasionally work from home or at a customer site. On a recent trip to the Alps, McGorry, thanks to NetSuite, was able to duck into a tiny Internet cafe and get up-to-the-minute sales figures. To goldberg and zach nelson, NetSuite’s CEO since 2002, customers like McGorry are proof that they’re on to something. Trying to keep up, they hired nearly 100 new employees in 2004 — most of them sales staff — bringing the total to about 300. They’re already expanding into Europe, Asia, and Australia, having established sales offices in Canada and the U.K. in the past year, and they’re working on translated versions for countries from France to China. In advance of an IPO planned for late 2005 or early 2006, they’re on a tear to grab market share, and their confidence is riding high. “This is a CEO’s fantasy product,” says Nelson, a nearly evangelical promoter of NetSuite. As he demos the software, his enthusiasm is infectious. When it comes to competitors, he patently dismisses them, regardless of their size (like Microsoft and its Great Plains product) or market share (Intuit’s QuickBooks, the 800-pound gorilla of small-business software). Nelson is, rather boldly, even dismissive of Oracle’s ability to move into the smaller market space. And yes, that’s his boss’s other company he’s talking about. NetSuite is like the Chihuahua that thinks it’s a German shepherd. But it’s a fast-growing Chihuahua, and NetSuite has one big advantage. While its competitors targeted specific slices of the market (QuickBooks focusing on accounting, SalesForce.com on sales-force automation), NetSuite was first out of the gate with all-in-one business software delivered over the Web. Is there even anyone else in the race? “No, believe it or not,” says Yankee Group analyst Sheryl Kingstone. “Not the way they do it.” Ultimately, the company’s greatest challenge may be its ability to retain its small-business focus. Can a company that’s owned by one of the wealthiest men on the planet, a company that’s growing spectacularly, expanding globally, and competing against the likes of Microsoft and Intuit, stay close enough to the small-business mentality of its customers to truly understand them? Goldberg says that one of the company’s advantages is that it’s run entirely on NetSuite software, which forces it to evaluate its own product daily in a real-life setting. But will NetSuite be a candidate for its own software if it keeps up this pace? “It’s an interesting question that we think about,” says Goldberg. “Will we still be using NetSuite when we have 10,000 employees?” Early in his career, Goldberg’s own focus was on big business. He went to work for Oracle as a database architect in 1987, right after earning his degree in applied mathematics at Harvard. Then, after eight years, Goldberg — with the blessing and backing of Ellison — set off with three other Oracle employees to create his own multimedia software start-up in San Francisco. An early, ill-fated competitor to Macromedia Flash, the company was called mBed. It never connected, but as Goldberg struggled with managing his fledgling operation, he began to sense a greater opportunity. He had gone straight from software genius to CEO and was now dealing with employees, sales, and all sorts of start-up issues. And he needed help. “The main thing I learned,” says Goldberg, “is that, if you were a small or growing business, the tools that were available to you were extremely limited.” Goldberg called Ellison in 1998 to suggest that they create small-business applications. Ellison encouraged Goldberg to focus on accounting but to do it, unlike QuickBooks, over the Web. “Larry really was, even at that point — and this is in 1998 — sure that this was how all software was going to be delivered,” says Goldberg. “And he was trying to transition Oracle to do that for big companies.” Goldberg wanted to pursue sales-force automation, but Ellison pushed for accounting first, arguing that that’s the core of all small businesses. Accounting it was. “The entire vision of the company,” says Goldberg, “came together in about five minutes.” Thus, NetLedger was born in late 1998 in a small office south of San Francisco above a hair salon and an Indian restaurant. Goldberg says that while the first four employees were all ex-Oracle, the next 50 were deliberately not. “We really knew,” he says, “that because we were delivering software for small and midsize businesses, we needed a different culture at the company. We needed different blood.” The company was launched on QuickBooks and stuck with the Intuit product — for the first two months. “I remember that day when we imported the QuickBooks file [to NetLedger's nascent online software program], and our business was sitting there, right on the Web,” he says. “We could see everything that was happening. That was a great moment.” The first product, also called NetLedger, debuted in 1999 at a cost of $4.95 per month. At that price, Goldberg got NetLedger in a lot of hands, which was the goal. One of those early customers was Rene Vandockum, a small-business man running a San Diego company called Racebolts.com, which imports and sells titanium nuts and bolts for motorcycles and racecars. Vandockum dropped QuickBooks because of NetLedger’s integration, tying together the front and back offices. But the software was hardly perfect. “Back then,” he says, “it was down a lot, awfully slow, and every time a new version came out, the whole thing crashed.” But it was cheap, offered good (and free) customer service, and was constantly improving and adding features. It was during this early phase that Goldberg was stunned to learn that his friend and former colleague at Oracle, Marc Ben-ioff, had decided to target the same market. “He came in three months after we started NetLedger and sheepishly said, ‘Yeah, I’m doing a company. I’m going to do sales-force automation for small businesses delivered over the Web.’ ” It was precisely the plan Ellison had talked Goldberg out of pursuing. Benioff’s business — launched in 1999 with a $2 million investment from Ellison — became SalesForce.com, which is now the market leader in the category and has a post-IPO market cap of $1.7 billion. “He went a different route,” says Goldberg of Benioff, “with a different approach that allowed him to get to market quicker — but focused on a more narrow area.” I’ve always allied myself with somebody who lives and breathes sales and marketing so I can live and breathe technology.” -Evan Goldberg The news brought a heightened sense of urgency. By 2000, NetLedger had launched its Web-store application. By 2001, it had delivered its own sales-force-automation application. With that came the realization that it no longer made sense for Goldberg to serve as both CEO and chief technology officer. “My whole career,” he says, “I’ve allied myself with somebody who lives and breathes sales and marketing so I can live and breathe the technology and product design.” He knew he needed a professional CEO. His first choice lasted just a year and is now a VP at Intuit. After Goldberg dispatched a headhunter to try again, the executive recruiter sent an e-mail to virtually every executive at Intuit with a subject head reading: “Larry Ellison.” The message said Ellison was starting a great company that was going to be huge. “I actually know some people over there,” says Goldberg, “and Steve Bennett [the CEO] wrote me and said, ‘Interesting way to recruit.” Despite the aggressive approach, no successful candidates turned up. In early 2002, Goldberg called Nelson. They had known each other at Oracle, and once they started talking, says Goldberg, “it was immediately apparent that this was exactly who I wanted — he was the yin to my yang. And he gets into the company in a way that makes it really, really fun to work here.” Five years older than Goldberg, Nelson, 43, had already been on the scene in Silicon Valley when Goldberg arrived from the East. A graduate of Stanford, Nelson had bounced from Motorola to Sun Microsystems and eventually to Oracle, where he became VP of worldwid. It started with obtaining the naming rights for Oakland Coliseum, where the A’s and Raiders play. Network Associates Coliseum proved to be an unpopular stadium name, but it was a marketing coup. In fact, the A’s are now a NetSuite customer, and Nelson has already negotiated for ad space behind home plate. But he doesn’t want to stop there. “Someday we’ll have our own arena,” he says. “That’s my goal.” At MyCIO, Nelson pulled off another stunt, draping the company’s entire 11-story building — a la Christo — in a billboard. “It was at the peak of the dot-com craziness,” he says. “We broke every ordinance known to man. You could see it from five exits away. It was beautiful.” Just before the company was set to go public, though, the bottom fell out of the market. So, here was Nelson, a former Oracle marketing whiz with CEO experience, looking for a new gig. And he had one other important advantage. Goldberg knew that any CEO he brought in would have to pass a crucial test: the Larry test. “And that’s a relatively high bar,” says Goldberg. “But Zach obviously had had a lot of exposure to Larry [at Oracle].” While Ellison rarely sets foot in the offices at NetSuite, he is a constant presence. The background image on Nelson’s PC is a photograph of Ellison at the helm of his America’s Cup boat. “When Larry calls,” says Nelson, “everything stops.” And he calls regularly, usually toward the end of the month as sales results are coming in. He often advises Nelson on topics such as sales structure and how to get to market. He calls Goldberg about products, especially the “dashboard” — the system’s front page, which brings critical bits of data such as new sales, year-over-year figures, appointments, etc., onto one easy-to-read and customizable page (see photo on page 69). “When we launched the dashboard [in 2002],” says Goldberg, “Larry called me and said, ‘Okay, now you finally have something in your product that I want to use.’ And ever since then, he logs on basically every single day to see how we’re doing. He’s effectively the product manager.” When Nelson joined NetSuite, he asked Ellison how anyone could run a business without such a product. “Larry said that CEOs historically have been able to make decisions based on 1% of the data that they actually need to make the decision,” says Nelson. “Here, we give you almost 100%.” Larry has a wealth of knowledge, and he’s not shy about sharing it. I call him belligerently consistent.” -Zach Nelson Sitting in Nelson’s spacious San Mateo office with a yin-yang glass coffee table in the middle of it, Goldberg says to Nelson: “I remember that the first thing you said to me when you got done talking to [Ellison about joining the company] was, ‘He takes this thing very seriously.” That would surprise no one who knows Ellison — or has watched Oracle’s pursuit of PeopleSoft. “Larry has a wealth of knowledge about what works and what doesn’t, and he’s not shy about sharing it,” says Nelson. “He’s very focused. I call him belligerently consistent.” All of which makes NetSuite’s evolution toward higher prices and bigger clients and Oracle’s turf even more interesting. As NetSuite works hard to broaden its customer base, seeking larger and larger clients, is there a danger of leaving smaller customers behind? Racebolt.com’s Vandockum certainly thinks so. With only one employee and annual sales of around $100,000, he’s stayed with NetSuite through years of missteps and growing pains but says its pricing structure is shutting him out just as the product is hitting its stride. Over five years, he’s seen his annual payments go from about $80 a year to $1,800 a year and claims NetSuite wants nearly $8,000 next year ($4,800 for the main user, plus $1,800 for a second user, and $1,000 for an annual live tech support package that used to be free). Vandockum is considering letting his contract with NetSuite expire in May and returning to QuickBooks Pro. One reason: He says computer-based, as opposed to Web-based, software means faster response times to questions when customers are on hold. QuickBooks Pro will be a one-time $250 purchase, and Caldera Volution, a Linux-based website builder he’ll use for his online store, will charge $70 a month. But he’s dreading the change. “The switchover is a big drag,” he says. “It’s a lot of work.” While Nelson is adamant that NetSuite is not abandoning small businesses, he emphasizes that the company is targeting “growing” businesses. Seventy percent of its customers have fewer than 100 employees, but NetSuite is also signing up 400- to 500-user customers that are divisions of companies such as Weyerhauser and DuPont. And it just landed its first 1,000-user account. Still, Nelson acknowledges that the price bumps have been tough on smaller customers. Of the $399-a-month fee, he says, “Most small businesses, we know, can’t afford that.” That’s why NetSuite introduced NetSuite Small Business in August — priced at $99 per month for the first user and $49 per month for each user after that. The product has been positioned for businesses that have outgrown QuickBooks, and the price does make it far more attractive to smaller users — but some longtime users will undoubtedly be disappointed. NetSuite has helped even the smallest of companies grow more sophisticated, and these clients have been conditioned to expect more. The Small Business version, for example, doesn’t satisfy Vandockum’s desire to customize his website. Capital Datacorp’s McGorry can’t see himself giving up the features he loves for the cheaper, scaled-down version either. Nelson is quick to say that he hopes to retain Vandockum as a customer and may consider offering some limited higher-level functionality, such as website customization, at a reduced price. “The last thing you want to do is see a customer leave,” he says. “I bet we’ll work it out.” But there are skeptics — especially at the competition. Although NetSuite recently built an ad campaign on poaching QuickBooks customers, Bill Lucchini, director of QuickBooks Enterprise at Intuit, says he doesn’t consider NetSuite to be a small-business company anymore. “I think of NetSuite as a midmarket company,” he says. “If you want to put 10 users on its system, you’re talking over $6,000 a year, and that’s just not a small-business solution.” Like NetSuite, QuickBooks is segmented into multiple products, depending on the size and needs of the businesses. They range from the new $99 SimpleStart program to the $3,500-a-year QuickBooks Enterprise software, which targets companies with 20 to 250 employees (with live tech support built into the price). And Intuit now offers its own Web-based small-business solution, called QuickBooks Online, for $19.95 per month. Nelson dismisses Intuit’s new offering as a “neutered version of QuickBooks Enterprise.” He is equally dismissive of SalesForce.com’s move into the midsize market. “There’s only one thing you can’t do with SalesForce.com: sell anything,” he says. “SalesForce.com is about managing leads and prospects. The minute they become customers, all that data leaves SalesForce.com.” For his part, Marc Benioff professes scant respect for the suite model. Which is all the more surprising because it’s a model that Oracle has embraced, and Ellison, of course, helped fund SalesForce.com and still retains a small stake — although he did step down from SalesForce’s board in 2001 because of product conflicts. At NetSuite, Ellison relinquished the title of chairman in March 2003 but remains on the board. But the sibling and oedipal rivalries may just be getting started. Last summer, NetSuite shed the last vestiges of the name Oracle Small Business Suite, which had been slowly reduced to about 5% of the company’s sales. Nelson says this was done to allow NetSuite to establish its own identity. But it also likely had something to do with the fact that in September, after years of testing it overseas, Oracle released its Oracle E-Business Suite Special Edition. Oracle is explicitly targeting small to midsize businesses with a full suite of integrated business software delivered, of course, over the Internet. The difference is that instead of renting the software in perpetuity, as with NetSuite, customers purchase a one-time license (the minimum order is for 10 users at approximately $2,000 each) and then pay local resellers to maintain the software. Nelson denies that there’s any real competition between the two Ellison-controlled companies, saying they only cross paths a couple of times a month. But with its first 1,000-user deal in the bag and another in the pipeline, there are sure to be more and more awkward moments in front-office waiting rooms when Oracle’s salespeople walk in and NetSuite’s walk out. “We’re going to continue to march upstream,” says Nelson, “still servicing small businesses but also reaching much larger companies over time.” But, according to the Yankee Group’s Kingstone, both NetSuite and Oracle have their work cut out for them. NetSuite’s challenge is that new customers have to dump years’ worth of expensive software to use them. And the bigger the company, the more entrenched they are. As for Oracle grabbing a slice of the small-biz pie? “They have never been able to pull that off,” says Kingstone. “In the back-office, yes, in the front-office, no.” Of course, Oracle’s new E-Business Suite is only just getting started here in the States. When big businesses want to innovate, what do they do? They take a bunch of guys, throw them out, and let them create a small business.” -Zach Nelson Ellison declined to be interviewed for this article, citing the desire to avoid any perception of conflict of interest, as his three kids duke it out in corporate boardrooms across America and beyond. It’s hard to know if he’s conflicted or overjoyed. But it’s even harder to imagine that any of his progeny would have set off down this path without at least his tacit approval. The executive overseeing marketing for Oracle’s small to midsize business market, Frank Prestipino, downplays any rivalry, but his words about NetSuite’s product aren’t entirely brotherly. “If financials are all you’ll ever do,” he says, criticizing NetSuite for not being as customizable as Oracle, “and you don’t care what your general ledger is going to look like, and you’ll take whatever comes, then great, that’s the thing for you.” He also suggests that NetSuite’s rental model is ultimately more expensive than buying the software outright, and points out the lack of manufacturing-systems software in the suite. But does he expect to see NetSuite pop up more frequently as a competitor, as NetSuite moves upmarket and Oracle moves down? “Yeah,” he says, “I would say so.” But for all NetSuite’s drive to go after bigger fish, Nelson zealously espouses the small-business model and its contributions to society. “When big businesses want to innovate, what do they do?” he asks. “They take a bunch of guys, throw them out of the building, and let them create a small business.” That, of course, is pretty much what Larry Ellison did with NetSuite and SalesForce.com. But how much longer will each one be happy serving its own niche? “That’s always been true with software,” says Nelson. “Everybody wants to be where they’re not.” Rob Turner, who wrote about celebrity entrepreneurs in Inc.’s December issue, can be reached at dashboard@inc.com.

About 3642 days ago E-Commerce

What’s Next: Do One Thing Right

What’s Next Actor Jack Palance, in his Oscar-winning portrayal of Curly the trail boss in City Slickers, said the secret to happiness was “one thing,” with the challenge being to find out what that thing is for you. Well, the same appears to be true for finding business success on today’s Internet, where the best companies choose a specialty and stick to it. Amazon.com sticks to selling, eBay sticks to auctions, and Google limits itself to searching, which might be the most important Internet business of all. This is a good time to reconsider the whole idea of Internet business. Investors’ rolling eyes and dreary business-school case studies notwithstanding, the Internet remains the most successful failure in the history of enterprise. For while the bubble may have burst and a trillion dollars or more of shareholder equity may have evaporated, the truth is that more people than ever are using the Net. Growth in both the number of users and the Internet bandwidth they require has never faltered. Half the Internet companies have disappeared, but more of us are online than ever, and that means business opportunity. The trick is to do it differently this time around, and Google is a prime example of how to do it right. We’ve been here before. A decade ago I met six boys who were running a company in the archetypal Silicon Valley garage. Their start-up was capitalized at $15,000 borrowed from parents. The day I came on the scene the company still had more than $12,000 of that in the bank. Their invention was one of the first search engines, a tool for finding information in huge volumes of text data. Over the course of a few months I helped the tiny company find its first customer, its first outside investor, and its first venture capitalist. Somehow I forgot to grab any stock for myself, which made me look stupid six years later when, at the height of Internet mania, the company — by then called Excite — was sold for $6.7 billion. Excite today is at best another portal, but there is much to be learned from its humbling and from comparing it to Google, which is very much Excite for a new millennium. One reason Excite and so many other Internet businesses from the 1990s stumbled was that they saw their original business idea not as an end but as a means. Excite had the best searching technology of its day, but the company saw searching as a steppingstone on the way to becoming the Internet equivalent of a television network. Searching would attract users, but what would keep them was to turn the search engine into a portal on the Web. At least that was the idea. So Excite, Yahoo, and others added staff and increased expenditures, driven by the idea that searching alone wouldn’t be enough to sustain a significant Internet enterprise. They were wrong. All Google does is searching. As I am writing these words, Google’s index comprises 3,083,324,652 webpages, or about one page for every two people on earth — everyone from rain forest tribesmen to members of the Russian mafia. This is a number too large to comprehend, but it helps us put the challenge of searching the Internet in some context. Looking for a particular webpage is like looking for two specific people on earth without knowing either their names or where they live. Every Internet product or service is utterly dependent on searching. Nearly all search engines use programs called “spiders,” which roam the Internet finding new webpages and “dragging” them back for analysis. How that analysis takes place can vary a lot from engine to engine. All search engines look at the words on the page and some stop there, ranking the results solely by the frequency of keywords on the site. By this way of thinking, a website that says “Inc. magazine” 20 times is more likely to be useful than one that says those same words only once. But all is not as it seems, since clever website operators can fool these simple search engines by inserting keywords — “Inc. magazine” 20, 50, or 100 times over — written in a tiny font and hidden behind the pictures on a webpage. We can’t read these tags because they are hidden, but the spider programs can read them and be fooled. Google’s approach to searching is different. The spider program is still there and it still reads both the real and hidden text on a page. But when it comes to ordering the 4.23 million pages that contain both the words “Inc.” and “magazine,” and presenting them to users in order of relevance, Google is smarter. Google orders the results not purely by how often keywords appear, but also by how many other webpages are linked to the webpages containing the keywords. In essence the system gauges a given webpage by how relevant the designers of millions of other pages have found it to be. This technique, which was invented by Google co-founders Larry Page and Sergey Brin when they were graduate students at Stanford University in the mid-1990s, is unique to Google and patented. Finding useful search results is one thing, and making that a good business is another. Google also had to make its results load faster to further attract users, it had to keep transaction costs down in search of profitability, and it had to find a way to gain revenue from searching. Keeping costs down was simple: Where Excite ran on banks of Unix servers from Sun Microsystems linked to massive disk arrays from EMC, Google runs on personal computers using the Linux operating system, which is free. Admittedly, we are talking about the world’s largest Linux cluster, with more than 10,000 computers, but they are generic “white box” computers just like what you might have at home. To make the pages load faster, Google did not sell banner ads on its site, so only the search result itself had to be transmitted across the data line. Banner ads had been the sole source of revenue for the first-generation search engines, but by the time Google came along in 1998, banner ads were going down in both price and popularity. There had to be a better way to make money. Rolling eyes notwithstanding, the Internet remains the most successful failure in the history of enterprise.

About 4829 days ago Telecom and Wireless

Meet Glenn Weadock

Glenn Weadock is president of Independent Software, Inc. (ISI), a Denver-area computer consulting firm he cofounded in 1982. As an office automation specialist, he works with personal computers, networks, and minicomputers and has designed, installed and supported hundreds of systems across the United States. Weadock has written 13 commercial books to date. His titles include Creating Cool PowerPoint 97 Presentations with Emily Weadock (IDG, 1997), Bulletproofing Windows 98 with Gerald R. Routledge (McGraw-Hill, 1998), Small Business Networking For Dummies (IDG, 1998), and Windows 2000 Registry For Dummies (IDG 1999). Through ISI, Weadock also designs and presents technical seminars on Windows and help desk topics. He has conducted more than 160 intensive, two-day public and on-site seminars since 1988. As course director, Glenn wrote seminars, created instructor slide shows, wrote marketing materials, and served as main instructor on such topics as: supporting and troubleshooting Windows 95; troubleshooting and fine-tuning the networked PC; and customer service excellence for the help desk professional. In January 1998, Weadock testified as the Department of Justice’s technical expert in a contempt hearing regarding Windows 95 and Internet Explorer. In November 1998, he testified as one of three technical expert witnesses, along with computer science professors from Princeton and MIT, in the landmark U.S. vs. Microsoft antitrust trial, on issues of corporate computing practices and Web browser integration. Weadock graduated with distinction from Stanford University in 1980 with a B.S. in General Engineering.

About 4829 days ago E-Commerce

When Something Clicks

Editor’s introduction: Sometimes it seems as if the Web has turned the world upside down. In the hype-ridden landscape called “dot-com,” it’s easy to assume that only the young, the new, the original idea conceived by two kids in their basement will survive. Out with the old. How untrue that is. The two companies profiled here, Plural in ” The Metamorphosis” and Camera World in “When Something Clicks,” are hardly start-ups. Their leaders have been running steady, profitable companies for years. They’re taking those years of experience managing entrepreneurial brick-and-mortar companies and using every ounce of their knowledge to transform their businesses into winners in the online world. CEO Roy Wetterstrom, never a guy to fear change, is rebirthing his 11-year-old company to take great advantage of the new economy. And Camera World has built on its 22 years of experience fulfilling customers’ expectations to transform itself into an E-commerce business. BRAVE NEW COMPANIES Over 22 years Camera World Co. honed its expertise in fulfillment, customer service, and supplier relationships. Today, as Cameraworld.com, it can teach Internet start-ups a thing or two about what matters most It’s a sodden, gray pre-Christmas workday in Portland, Oreg., but the jeans-sporting photographers who handle incoming calls at Camera World Co. (a.k.a. Cameraworld.com) are oblivious to the weather. Sitting in their white cubicles, they dispel the clouds with their cheerful “Thanks for calling Cameraworld- dot-com!” They repeat order information and occasionally murmur soothing guidance to Ansel Adams wanna-bes on the other end of the line, who need to know things like the difference between the Hasselblad 203FE Medium Format Chrome single-lens reflex camera and the 202FA model. In the 20,000-square-foot warehouse behind the front office, 15 workers scurry down long concrete aisles, clutching sales orders fresh off the network printer. To the casual observer, these warehouse folk seem to have X-ray eyes. Quickly scanning the metal racks loaded with thousands of indistinguishable-looking boxes of equipment, they have an uncanny ability to tell a box holding a $10,000 lens from a virtually identical package bearing a $1,000 one. When they locate the box they’re after, they place it in a plastic tub; a bar-code check at the packing station ensures that the order is complete. There, a young man nodding to rock music on a boom box pours Styrofoam peanuts into labeled cardboard shipping boxes and then seals the goods with a deft pull and twist of tape. Camera World’s order-fulfillment and delivery systems have stood the company in good stead. During the 1999 holiday season many of the company’s stalwart 300,000 customers came back and spent an average of $600 a pop. And thanks largely to the explosion of interest in digital cameras, sales soared last year, growing from $80 million in 1998 to more than $115 million. Last December the company’s Web site handled an average of 25,000 unique users a day, and Web sales rose by 245% over the previous year’s figure for the month. (At the same time mail-order business shot up 67%, and sales at the company’s downtown Portland store were up 22%.) Some 90% of Web and mail-order shipments left the warehouse within 24 hours. Return rates for Web sales hovered around 4%, paralleling the rate of returns from the store and the mail-order business. “We maintained heavy inventories to ship on time, and it all worked pretty well,” says Camera World’s new CEO, Terry Strom. “But one thing’s for sure: the Internet is raising the standard of performance for any retailer.” No kidding. This past Christmas season, during which shoppers spent an estimated $6 billion online, saw many a Web site disappointing customers. According to a November 1999 report by the New York City Internet research firm Jupiter Communications, 46% of business-to-consumer Web sites took five or more days to respond to a query, never responded, or failed to post an E-mail address on the site for customers’ inquiries. “If we didn’t make our goals,” says Walt Mulvey, “we couldn’t make payroll.” “An awful lot of Web sites don’t realize that customer service should be a priority,” says Jupiter analyst Cormac Foster. “They focus on customer acquisition but don’t spend time on the unsexy stuff, like customer-support infrastructure. Infrastructure doesn’t get you headlines, but if you don’t have a staff of people to take care of business behind the firewall, you won’t get much.” Case in point: Toys “R” Us, whose online subsidiary ToysRUs.com (announced with great fanfare in June 1998) found itself suffocating under the rush of online holiday traffic and was unable to fulfill orders on time. The company’s back-end infrastructure was built to send truckloads of products to hundreds of stores — not to ship single orders to millions of consumers. Don’t call Camera World a “click-and-mortar” or an old-fashioned retailer with a Johnny-come-lately Web site. Call it, rather, a dot-com with lots of back-end “not-com” experience. Camera World has long known that the boring stuff — attention to the fine details of customer service, simple and solid fulfillment processes, and trusted supplier relationships — is what really matters. Unless you master those three areas well before you put up a Web site, no amount of bells and whistles or transactional and design prowess online will make the Web component of your business successful. To understand how Cameraworld.com operates, view the company through a wide-angle lens. Founded in 1977 by a Korean-born businessman, Jack Shin, Camera World began as a 4,000-square-foot mom-and-pop shop for shutterbugs in a musty downtown area of Oregon’s sprawling, river-straddling city. Shin had come to Portland by way of New Jersey, where for about two years he’d owned a camera store that catered to well-heeled amateur photographers with National Geographic daydreams. From the moment he began his business until the day he said good-bye to Camera World in 1997, Shin refused to sell the cheap “gray market” goods that many dealers were hawking at the time — a practice that stood him in excellent stead with his suppliers. ( Gray market refers to goods that are not meant to be sold in the United States and generally are not covered by warranties.) Building on the relationships he’d established in New Jersey, Shin developed close contacts with executives from Fuji, Canon, Nikon, and the other rulers of the photo world. Ultimately, he constructed an intimate universe comprising 15 primary suppliers. “The gray market is a big problem for the industry,” says Eliott Peck, director and general manager of the camera division of Canon USA. “Canon has had an excellent relationship with Camera World because the company adds value to our products. It’s always provided the best customer support, sold only fresh merchandise, stocked all our products, and had very loyal repeat customers.” On a scale of 1 to 10 among camera dealers, Peck adds, “I’ve always given them a 10.” In return, the manufacturers saw to it that Shin was first in line to receive new or on-order stock. The Internet is raising the standard for retailers. Shortly after opening the retail store, Shin added a mail-order component to the business. “Mail order was easy — we didn’t have to speak much English,” explains Young Ui Shin, who acted as her husband’s business partner and interpreter. The Shins and Young Ui’s brother ran the mail-order business in a space five floors above Camera World’s street-level retail store, which also doubled as a warehouse. Their goal was for customers to receive their merchandise within five days of placing their order, compared with the standard mail-order lag of three to six weeks. Within 10 years the company was earning close to 70% of its revenues from the distant customers it reached through back-of-the-book advertisements in magazines like Popular Photography. On the back end, Shin put together a supersimple order-fulfillment and shipping infrastructure that the company still uses today. Prior to computerization, sales staffers would write a phone order on paper, then send along a copy to the warehouse for picking, packing, and shipping. Working with those paper “pick tickets,” warehouse workers would pull the cameras and lenses (and occasionally camcorders and televisions, which Camera World also sold) from the shelves and place them in plastic tubs. Before the items were packed, other workers checked to make sure that the products matched the order, recorded the product serial numbers, and filled out a receipt. Then shippers packed the items and loaded the boxes onto a waiting UPS truck, which carted off the packages every afternoon. If an item was out of stock, the warehouse workers would pass the information along to the sales reps, who would find out from Shin when the shelves would be replenished, so they could tell the customer when to expect the order. Returns were handled similarly: When a customer called, a sales staffer issued a return number and ordered a UPS pickup at the customer site. When the product came in, the return number was recorded; if the package had been opened, the product was sold at discount, since it could not be returned to the manufacturer or sold as new. The paper-based system stayed in place until 1992, when Shin discovered that a networked computer system could increase efficiency. He purchased a set of Compaq 386 computers, one of which was installed in the warehouse area, and a Platinum database-management system for which he had a consultant design a unique order-fulfillment, inventory, and shipping program. Using the new system, salespeople keyed in orders on PCs at their desks. Hourly, a warehouse worker would download and print out a batch of orders for picking and packing. The computerized system allowed Camera World’s sales reps to maintain an easy-to-access record of customer purchases; it also allowed Shin to keep better track of inventory and to speed up deliveries. The Shins’ five-day shipping goal had become a consistent reality. Shortly thereafter, Shin added a bar-coding system. By passing a wand over the various products prior to packing them up, workers were able to match orders in the database to actual shipments, and the inventory manager was able to see which models had gone out the door. From the get-go, Shin went the extra mile for his customers, retail and mail-order alike. He staffed the phones with a sales force of professional photographers (or photographers with day jobs), who could guide callers through the technical complexities of camera selection. If customers weren’t happy with their purchases, they could return them for a full refund, no questions asked. In one instance, a company selling five-year extended warranties on Camera World’s equipment went belly-up. Though Shin was under no obligation to do so, he set up a fund to cover the cost of repairs for the customers who were left hanging. “We make customers very happy, and they remember we give service, service, service. Repeat customers big part of our business,” Shin recalls in emphatic, if stilted, English. “We never cheat. If customers happy with service, they trust us.” “We had to completely change the mentality of the organization,” says Mulvey. In the early 1990s, despite Camera World’s computerization, a confluence of external and internal problems began to slow the company’s growth. The market for the high-quality 35mm single-lens reflex (SLR) cameras in which the company specialized had flattened by the late 1980s and stayed that way, thanks to a saturated market and a recession. Until digital cameras appeared on the scene, in 1998, the market for SLRs never moved substantially beyond the 700,000-units-per-annum mark. By 1999, according the Boston-based market-research firm Lyra Research Inc., the number of 35mm SLRs sold in the United States had actually declined to 600,000. Shin’s management style also kept Camera World from rising off that plateau. His operations gave new meaning to the phrase lean and mean. He selected office supplies, shipping companies, telephone services, and other necessities on the basis of low price, and replaced equipment only when it fell apart. The company had long outgrown its warehouse, but Shin balked at moving from the low-rent building. “Mr. Shin ruled with an iron fist,” says the company’s longtime buyer, Shawn Weishaar. From a glassed-in loft perched above the retail store, Shin would keep a sharp, Big Brother­like eye on his workers’ activities. Employees did stay — they were well paid by Portland standards — but because promotions were few and far between, their motivation waned as the years passed. “Mr. Shin had great insight, but he didn’t allow mistakes,” says Weishaar. “He wanted full control over everything.” In 1996, frustrated by flat sales and worn out by the demands of the business (according to company veterans, Shin never took a day off in all his years at Camera World), Shin decided to sell. He hired a retail-management veteran, Walt Mulvey, to help ready the company for sale. A former banker who’d had experience in helping stagnant companies improve their operations, Mulvey saw a profitable company with a good reputation — but one with cramped quarters and lackluster employees. Mulvey reorganized, setting up an incentive program and a “no-blame” management system that allowed workers to air problems openly. Within a year, sales had climbed 31%, and Mulvey helped Shin put out the word that the company was for sale. Word of the sale reached Alessandro Mina. A gentle native of Sweden who’d lived in Italy, Switzerland, and France, the multilingual entrepreneur came to the United States in 1989, at the age of 27. While working on his M.B.A. at Stanford, he embarked on an investment project with two fellow European students. In 1993 the trio founded Sverica International, an investment fund designed to help transform old-fashioned companies into aggressive-growth companies and often into Web-based businesses, and rounded up contributors. Camera World “fit all our criteria,” Mina recalls. “It was profitable. Sales were stagnant, but there was growth opportunity. The owner was retiring, and there was a successful mail-order business in place. It had a huge database of happy customers who came to Camera World in the same way people go to Amazon.com for books or Dell Computer for computers — they go there pretty much knowing what they want. I held the view that Internet and mail-order sales are basically the same that way, so I thought it had all the ingredients for a great Web business.” Another plus: Camera World had a sound infrastructure; there was no need to develop one from scratch. The company had already figured out how to take in orders, process them, and ship them out. Moreover, Shin had long-established relationships with top-tier suppliers and innovative systems in place to provide customer service. The company even had a Web site, though visitors couldn’t use it to buy products. And unlike any pure-play dot-com, Camera World had the unheard-of pedigree of profitability. “We saw this terrific sleeper and thought we could turn it into a full-fledged Net business,” Mina recalls. Mina and his colleagues bought Camera World Co. and named the online arm Cameraworld.com. Temporarily taking over the reins as CEO, Mina — along with Mulvey, who stayed on as chief operating officer — set about morphing the company from a primarily mail-order business into a primarily online business, knowing that companies like Dell (which had gone from no revenues to $26 billion in 15 short years) had followed the same path. As Mina had predicted, the path was clear of the thorny issues that trip up novices. The niche was already nailed: unlike pure dot-commers, he didn’t have to spend time and money on brand development, market research, and focus groups. Mina and company preserved and expanded the long-standing relationships with suppliers and customers that Shin had built. “We made it a point to visit every supplier personally, take them out to dinner, and assure them that the business would continue,” Mina says. “Walt and Alessandro had a vision,” says Canon’s Peck. “At first we had some doubts about their ability to take over the business and move it to the Net, but they were able to build on the infrastructure to handle it.” The nitty-gritty back end has come to matter enormously to investors. In forging a new business plan for the company, Mina spelled out his goals. For starters, the company’s Web pages would have to be transformed from simple brochureware into a true transaction site. And its back-end systems would have to be married to whatever happened on the Web. The company itself would have to move into a larger, better-organized space, with a warehouse that would allow orders to be shipped within 24 hours, as opposed to the five days required by the mail-order business. “We wanted to one-up everyone else,” Mina says. “To speed everything up, we had to cut out obstacles. We needed to staff up, to fix the bugs in the computer systems, to upgrade the telephone systems for more lines. In the past Mr. Shin had to check everything. Things were duplicated. We decided to streamline processes and empower people.” The toughest challenge was time. Mina wanted Cameraworld.com to become the leading online vendor of cameras — before a competitor could. “We had to completely change the mentality of the organization, from collect-a-paycheck mode to survival mode,” says Mulvey. “We ran the company on two urgent premises: We assumed that there was a competitor out there who would beat us to market with the biggest Web site in the world. And we told ourselves that if we didn’t make our goals, we couldn’t make payroll.” Camera World moved to a less expensive location in Portland four times the size of its former quarters. Though the order-fulfillment process remained the same, Mina and Mulvey reorganized the warehouse to speed up shipping. Frequently ordered products, like film, were kept closest to the packing and shipping stations, while rarely ordered equipment was kept in the back. The company added inventory and packing stations; instead of one packing station, for example, it now had four. And it upped the number of PCs in the warehouse from one to five. The move, Mina estimates, saved the company $7,000 a month in rent and about $4,000 in reduced manpower requirements in the shipping, receiving, and returns departments. (The displaced employees were reassigned elsewhere in the company.) “Because the warehouse was larger and better organized, we made more shipments on time with fewer errors,” he says. To turn the existing, 300-visitor-a-day Web site into an E-commerce factory, Camera World hired the company that had designed its original Web site, Web Northwest. With just six months in which to transform the site, Web Northwest owner Pete Chiboucas teamed up with a Camera World veteran, Internet administrator Gil Rocha, and together the pair hand-coded the pages as Active Server Pages to create a visually appealing, highly interactive site. Visitors could click on an image of a camera, a lens, or another product and order it using a shopping cart. The Webmeisters also cranked up the fire under the site, spending $20,000 to install a network of six high-powered Windows NT-based servers that could handle thousands of concurrent users at a time. Today Camera World’s site, which costs roughly $10,000 a month to maintain, handles at least 15,000 unique visitors and 400 transactions a day. It’s now a full-fledged community for shutterbugs. It keeps visitors interested with increasingly snazzy features — 3-D images of featured products, an online auction area, forums, online chats with celebrated photographers, a selection “wizard” that helps customers choose the right camera by assessing their expertise and frequency of use, and so on. Customers can also get quick answers to their E-mailed questions. Professional photographers respond to them by E-mail or phone — and customers even receive a notice via E-mail showing them where their question is in the queue. (“We try to get back to them within 24 hours,” says Rocha.) And for those who eschew telephone handsets, an Internet-telephony feature lets customers whose computers are equipped with a sound card and a microphone connect over the Internet to talk with the sales and support staff. When a customer orders a camera through the Web site, the transaction is zapped from the servers to the order-fulfillment database via a dedicated high-speed T1 line. A software interface between the Web site and the database reads the order and translates it into the order-entry system. Sales reps, customer-support personnel, and shippers and other warehouse workers can review the order by tapping into Camera World’s database from PCs. Every few hours, warehouse personnel print out a batch of 50 or so orders. Rush orders are printed on red paper; white paper signifies a standard UPS ground order. After a worker locates the correct product and places it in a plastic tub along with the paper order, he carts it to the shipping station, where the bar-code checking occurs. If the bar code doesn’t match the order, a computer screen at the station notes the mismatch. If the match is correct, the inventory database records the product model number; when inventory reaches a low-enough level, Camera World reorders. Once the product is packaged for shipping, it’s loaded onto a waiting UPS van, which departs at the end of the day. Meanwhile, an E-mail message is sent to the customer, noting the time the package is scheduled to ship. Using a confirmation number supplied by the company, the customer can check the Web site to track the order. Picking and shipping, of course, are hardly sexy stuff. But in the crazed world of cyberspace, the nitty-gritty back end has come to matter enormously — especially to prospective investors. “Back in 1996, when I was looking at Camera World, the guiding principle for Internet start-ups — according to venture capitalists — was to start from scratch with the model based on the new paradigm, and everything traditional was bad,” Mina recalls. “Early on, VCs were not interested in us because we had a history. But now infrastructure, customer service, and the ability to ship on time with inventory on hand are all key elements when the VCs come knocking.” So far, Camera World is keeping customers happy. “The consensus is that there are a few retailers out there that have a great reputation and that Camera World is among the few,” says Richard Rabinowitz, vice-president and group publisher of Popular Photography and American Photo. One of the happiest customers is Aneel Bhusri, who — like Victor Kiam of the old Remington razor commercials — liked the company so much that he bought (into) it. Bhusri is a partner with Greylock, based in Palo Alto, Calif., one of the six venture-capital firms that have just poured $60 million into Cameraworld.com. (The other major investor is Technology Crossover Ventures, also of Palo Alto.) Bhusri also happens to be an amateur wildlife photographer and a repeat customer. “I bought my first camera from them four years ago, and their staff were very helpful in explaining the pros and cons of the different models,” he says. “I found it unique that their customer-service people were trained professionals.” Last summer, when Greylock was looking for a photography Web portal to back while casting an eye at a future initial public offering, Bhusri remembered Camera World. “I gave Alessandro a cold call,” he recalls. “I said, ‘I’ve been a customer for a while. Are you interested in outside capital to help the business?” The infusion from Greylock was welcome. The cash, the executives say, will allow the company to move to an even larger physical site this year, add more products to the 7,000 items it currently offers, hire 20 more sales and support people, and keep the computer system shipshape. The marketing mix will remain roughly the same as it has been for years — mailing out catalogs and advertising in photography publications, on the radio, on television, on the Web, and on outdoor billboards — “but it will scale up,” says vice-president of marketing Tom Steele. The venture funding also frees Mina, the serial entrepreneur, to hatch another company. “Alessandro did a fantastic job of running the company, but his goal was never to run Camera World for the rest of his life,” says Bhusri. “So he helped us look for a new CEO.” Bhusri and Mina chose a man who had lots of experience with fast-growth and Internet companies: Terry Strom, who had been the CEO of Egghead Software and the marketing vice-president for Digital River Inc., a Minnesota service provider for E-commerce sites. (Bhusri is now chairman of the board, and Mulvey has moved to the president’s office.) Mina, now living in Boston, is glad to let others grow the company. “Aneel, Terry, and Walt can take the company from an Internet start-up to an established E-commerce player,” he says. “I can go back to what I do best — finding good companies to invest in.” For his part, Bhusri is thrilled to be the rudder of a company that, as he says, “gets it.” “If you look at what makes a Web site successful, most of it is logistics,” he says. “Camera World had this figured out a long time ago. Why don’t others? I honestly don’t know the answer. These guys are rare. I think they can be the Dell of the camera business.” Bronwyn Fryer is a contributing writer for Inc. Technology. Read about another Brave New Company in ” The Metamorphosis“

About 4829 days ago Data Security

It’s Midnight. Do You Know Where Your Tech Support Is?

Resources Finally, a new breed of tech consultants provide affordable, timely help to growing businesses No computer comes worry free. Despite all the advances in computers, software, and networks, our wired universe, sadly, often becomes tangled. And since the pace of business has revved up to Internet speed, random crashes and network traffic jams are becoming more taxing than ever. Of course, if your budget has room for a full-time tech-support team, kinks like these are mere headaches. Pop an Advil and call the help desk. But what about the smaller and solo businesses that can’t afford to devote precious resources to computer support? What about people like Andy Schilling? Schilling, who is president of Tangent Fund Management LLC, also wears the hat of “technology decision maker” at the private-equity-fund -management firm in San Francisco. Since Schilling joined the 15-employee company 11 years ago, Tangent’s computer arsenal has grown in much the same way that most other small companies’ do — one PC at a time, when a new employee is hired or a creaky computer dies. As Schilling bought new computers, he’d pass the old ones down the food chain. Tangent chose its tech support, too, as most small companies do — -by proximity. When the company decided to network its PCs, Tangent hired a local computer-consulting outfit, which installed, configured, and maintained the new network. When the business decided to add more PCs to the mix, though, it went to a local branch of a computer chain that provided basic maintenance for its machines. That worked fine — until the branch went bankrupt. So Schilling figured he’d devote more of his own time to the company’s tech decisions. But since his expertise is in finance — not in computers — he found himself at a disadvantage. Back in 1990, Schilling had purchased what he thought would be adequate hardware and software to network the office. But as time went by and Tangent added more users, the network constantly crashed. So he brought in new consultants, who advised installing an Ethernet local area network along with more-powerful computers. “We had to rip the whole thing up to put in the Ethernet,” says Schilling. Then he hired another local computer consultant just to wire the LAN, which added to the bill. “It would have been cheaper to install the Ethernet LAN from the beginning,” he says. For computer emergencies, Schilling depended on the same consulting company that had advised him to install the Ethernet network. Although he found its service useful, Schilling says he had to wait for the consultants to respond to his pages and then to travel to his site. Meanwhile, Tangent waited in limbo. “When they got here later in the day, the clock was ticking,” he said. “I kept thinking, ‘How many hundreds of dollars would it take to get our printers to print?’ It gets expensive.” Sometimes very expensive, says Mark Margevicius, a senior research analyst at the GartnerGroup. The average large company spends between $8,000 and $10,000 a year just to install, maintain, and support one corporate PC. Those costs are even higher, he says, for small companies, which often can’t afford an in-house tech staff. As a result, they suffer from significant downtime when faced with a computer glitch. Schilling was hardly alone in his frustration; most small businesses have never had much in-house IT help. According to Eric Klein, a senior analyst at the Yankee Group, 53% of networked very small businesses — those with between 2 and 19 employees — don’t have any full-time tech staff at all. Of networked companies with 20 to 99 employees, only 32% have a full-time IT staff. “The bottom line is that businesses are continuing to adapt to PCs and the Internet. The fact that they don’t have a tech staff points to an obvious hole in their support system,” Klein says. Moreover, because of the high hourly rates of most computer consultants (between $40 and $70 for those who offer both time and materials) and the time spent waiting on the phone for help from software and hardware vendors, many small companies don’t seek outside IT help unless they have a major crisis on their hands. Fortunately for companies like Tangent, a growing band of support warriors have spotted this hole and are rushing to fill it with affordable, timely help. By providing standard sets of PCs, software, and networking products — and, in some cases, by requiring lengthy subscriptions — these new businesses can keep their costs so low that even soloists and two- and three-employee companies can have full-service tech support at their beck and call. Some of these technology soldiers configure, install, and regularly monitor individual companies’ systems in an effort to spot problems before they turn into crises. Just call it Fortune 500 service for mom-and-pop shops. CenterBeam When CenterBeam Inc., a start-up based in Santa Clara, Calif., approached Schilling, last July, the Tangent president was grappling with yet another set of tough technology decisions. He was ready to set up an officewide E-mail system and scrap the multiple E-mail accounts that Tangent’s employees had been using to communicate. And he was thinking about registering a domain name and putting up a company Web site. CenterBeam not only offered him E-mail and Internet access but also promised new PCs with 128MB of memory and 17-inch monitors. The company would also provide printers, a wireless LAN, a local server, a software suite that included Microsoft Office 2000, a professionally managed firewall, nightly data backup, and 24-hour tech support. All this would cost Schilling only about $165 a month per user. Because CenterBeam bills its customers on a subscription basis, those costs would be fixed for three years — the life of the contract — no matter how much tech support Tangent might need each month. Some of these new businesses can keep theirs costs so low that even soloists and two- and three-employee companies can have full-service tech support at their beck and call. Just call it Fortune 500 service for mom-and-pop shops. Schilling scribbled out a back-of-the-envelope cost comparison between CenterBeam’s tech services and the system he had pieced together himself. CenterBeam was only slightly less expensive. However, Schilling found the notion of going with a service like CenterBeam attractive because of its consistency. “Now I know what the budget is,” he explains. “Before, it would go in cycles. I’d have some big problem and would have to get new software or buy new PCs. This is a lot more predictable.” CenterBeam cofounder Sheldon Laube hopes his service’s predictability and reliability will speak to small-business owners. “The whole idea is to not ever worry again about this stuff,” he says. As chief technology officer at Novell Inc. and cofounder and CTO of USWeb Corp. (now USWeb/CKS), a San Francisco-based E-commerce consulting business, Laube spent much of his career worrying about technology. And he’s still a worrywart: he and the CenterBeam staff regularly fuss over the health of their customers’ PCs. Laube’s employees use the Internet to peek into the inner workings of their customers’ computers across the country. They hunt remotely for potential problems — and, using the Internet, they upgrade customers’ software without leaving their desks. But even the folks at CenterBeam can’t solve every problem, like the mystery glitch that murdered a PC in Tangent’s accounting department. “One PC just died,” Schilling remembers. No bother. Schilling opened the storage closet and grabbed his “emergency PC,” an extra machine that had come with the CenterBeam package. Schilling called CenterBeam’s office and had all the old computer’s files transferred to the new machine. Because CenterBeam had backed up Tangent’s data nightly, transferring the information was a breeze. “The new computer was up and running in 45 minutes,” Schilling says. “Things like this were a real headache before.” Now headache free, Schilling liked the service so much that at press time he gave CenterBeam a ringing endorsement: his company invested an undisclosed sum in the computer start-up’s second round of financing. Everdream CenterBeam isn’t the only full-service, subscription-based tech provider vying for the small-business market. Everdream Corp., based in Mountain View, Calif., is aiming at soloists and small and midsize companies that would normally purchase inexpensive, so-called white-box computers from local resellers. Everdream manufactures and brands its own PCs before shipping them off to customers, who end up paying about $150 a month per computer. Everdream, like CenterBeam, provides software, hardware, and networking components, as well as Internet access, Web hosting, nightly backup, and round-the-clock online and telephone IT support. In addition, Everdream builds into its machines a simple, commonsense security feature: it divides the hard drives into two parts in an attempt to safeguard business applications from viruses brought in over the Web. One part of the hard drive houses business applications, and the other plays home to programs and games that users download. It would seem that tech-savvy companies — especially new dot-coms — would hardly need outside tech support. Not so, says the Everdream team, which is betting that many high-tech start-ups would rather develop their own technology than worry about day-to-day glitches. Such is the case of Tom Jones. As CEO of Stratasource Inc., a start-up based in Menlo Park, Calif., that provides automated systems management, Jones wanted his software engineers to spend all their time creating Stratasource products. Sure, the engineers could troubleshoot their own PCs. But the rest of the staff would still need occasional help. Last October, Jones signed up as a beta tester for one of Everdream’s PCs before committing his support staff to the system. This January he became a paying customer. While testing the gear, he hadn’t needed much support, but when he did need support, he got it right away. “I was working in Microsoft Word and just got hung up,” Jones recalls. When he called Everdream, a technician “entered” his computer remotely — so that both Jones and the technician were looking at Jones’s screen — and quickly showed the CEO how to solve the problem. That said, there are a few drawbacks to CenterBeam and Everdream’s services. Both companies are subscription based and require long-term contracts. Everdream’s customers are obligated for 30 months — a subscription only slightly shorter than CenterBeam’s aforementioned three-year deal. And then there’s the issue of privacy. Both companies tout nightly data-backup services and the ability to enter any subscribed PC through the Internet with permission. Schilling says that although allowing an outsider full access to his files is troubling, the trade-offs are worth it. “We have more up-to-date methods of communication,” he says. “And it’s clear to me that CenterBeam can provide us with much better firewalls than what we were going to be able to afford on our own.” Finally, these kinds of standard services may not fill the needs of small-business owners who require custom configurations or who are devoted to particular brands of computers not offered by the service provider. And they certainly don’t erase the need for customers to ask for written “service-level agreements,” which describe the time frames in which consultants answer service calls, deliver hardware and software, upgrade equipment, and solve problems. More to Come CenterBeam and Everdream both call California home and at press time had only just begun to expand nationally. By the time these pioneers provide services nationwide, they could be facing fierce competition from large computer companies like Micron Technology Inc., which already offers a subscription service for small businesses. Meanwhile, a potential rival, Dell Computer, recently invested in CenterBeam’s second round of financing, and CenterBeam has an agreement with Dell to supply its customers with the computer manufacturer’s PCs. Competition, of course, usually brings lower prices and better-quality service, which is good news for small companies that until now were unable to afford the kinds of services that their larger counterparts benefited from. For people like Andy Schilling, Tangent’s formerly frustrated president, these new services couldn’t have arrived on the scene soon enough. Anne Marie Borrego is a reporter at Inc. The Nitty-Gritty Company: CenterBeam Inc. Location: Santa Clara, Calif. Founders: Sheldon Laube, CEO, former CTO of USWeb/CKS; Glenn Ricart, CTO, former CTO of Novell; Marc Epstein, executive vice-president of product management and development, former CTO of Quarterdeck; Thomas Twietmeyer, CFO, former Autodesk executive Employees: 70 Funding: $55 million in equity financing from Crosspoint Venture Partners, Accel Partners, Microsoft Corp., USWeb/CKS, New Enterprise Associates, Intel Corp., Dell Computer Corp., Impact Venture Partners, and Tangent Fund Management LLC Buzz: $165 a month per user gets you Dell PCs, printers, high-speed Internet access, E-mail, a wireless LAN, Microsoft Office 2000, regular software upgrades, firewall protection, and 24-hour tech support. Dell recently announced an investment in the company, complementing a deal to supply CenterBeam customers with its own PCs. Fine print: You have to make a three-year commitment to the service. If you’re a hot dot-com, three years probably feels like a lifetime. Also, the CenterBeam monthly cost per user of $165 only applies to companies that need 10 or more machines. Prices are higher for companies with fewer users. Finally, you have to feel comfortable letting other eyes peer into your hard drives. Company: Everdream Corp. Location: Mountain View, Calif. Founders: Russell Rive, CTO, and Lyndon Rive, vice-president of partnership development. The brothers Rive hail from the Republic of South Africa, where Lyndon established a successful catalog business when he was 17. Before founding Everdream with Lyndon, Russell picked up computer and sales experience at Zip2 Corp., an online city guide that Compaq Computer Corp. snapped up last year for about $341 million. Employees: 70 Funding: $18 million from Canaan Partners, Draper Fisher Jurvetson, Ricoh Silicon Valley, and others. Investors include Jack Kuehler, former president and vice-chairman of IBM; and Stanford University. Buzz: Like CenterBeam, Everdream operates on a subscription basis. Customers pay about $150 a month for their Everdream-branded computer, 24-hour IT support, a choice of dial-up or DSL Internet and E-mail service, business applications like Microsoft Office, nightly backup, online training courses, and virus protection. Everdream splits the hard drive into two parts — one “locked down” part that handles the business-critical applications and another that’s open to Internet downloads. Fine print: As with CenterBeam, Everdream’s technicians will have access, albeit limited, to your hard drives. You have to sign up for a 30-month contract — that is, if you can get one. The company hasn’t rolled out nationally just yet but plans to offer service outside California by the second quarter of 2000.