In times of economic distress, technology organizations in businesses tend to hunker down. The recession of the last three years, coming on the heels of the dot-com boom, caused an extremely sharp correction inside most businesses, just as it did in the market. Just as financiers eschewed speculative investments on new technology, IT departments went back to the basics. The story of the past three years has been one of conservative consolidation, not irrational exuberance.
But innovation didnt stop while investors and IT looked inward. Inventors and entrepreneurs kept developing cool new technologies. And smart venture firms have recently begun seeking out and funding those new technology companies.
Along with high-tech companies, financial Darwinism has weeded out the weaker venture firms. The ones that are left, though, are stronger than ever. And theyve uncovered some pretty cool technologies, ones that have great potential to help your business.
So over the next few months, Ill be offering an irregular series that looks at the most interesting new companies coming from the countrys top investment funds.
Today we start with one of my favorite firms, Hummer-Winblad. Founded by former programmer Ann Winblad and basketball star and high-tech genius John Hummer, the firms partners also include Kerry supporter and technology whiz-kid Mark Gorenberg and former Powersoft and Sybase CEO Mitchell Kertzmann. I sat down recently with Winblad and Kertzmann to talk technology and analyze the more interesting companies in their portfolio.
Its a good time to be investing, according to Winblad. “We are blown away by the number of great companies out there,” she insists, even though only a very small number of ideas are getting funded. But thats good too, because “these companies are getting a lot of attention.”
“When the world stood still, the inventors and passionate people did not.” Venture capitalists didnt either. “Just because people are writing bad things about us, as if we were a class of lepers, should we all just find the leper island and die?”
According to Winblad during the bubble, “engineers got overwhelmed by the MBA crowd. There were a lot of smart people that understood business strategy and were excellent communicators, and came to talk to us about market opportunities. But they didnt have the invention to match the opportunity.” Today, it starts with the invention, not the strategy.
Winblad points to two other trends that make this an ideal time to look at and invest in new technology companies. First, the idea that software is becoming a service is done. That battles been fought, and services won.
But the emergence of open source has also been a big plus. “Its just not true that open source will kill innovation,” said Winblad. Instead, because software tools are freely available, including relational databases, development frameworks and bug tracking systems, its much easier for a small company to get a prototype up and running quickly.
“It puts them on parity with the big dogs [like IBM and Microsoft],” Winblad said. Its scalable too. “You can start with a small investment and easily add more hardware to build it up.”
According to Kertzmann, its time for companies to look beyond their core technology suppliers. “Were calling it the new era of optimism,” he says, comparing it to the technology explosion of the early nineties. Back then companies like Wind River, Arbor and Kertzmanns own Powersoft “invented brand new spaces, based on technology as much as products in the market.”
Management teams, as well, are richer now than during the boom. “Three to four of the people in a team could be CEOs, but they want to work together,” Kertzmann said.
Winblad takes it even further: “We are also seeing a shift of leaders in the technology industry. One of the reasons its not all about Larry Ellison and Steve Jobs, there are newcomers that are taking the mantle of the industry.”
According to both partners, its time for CIOs to invest. Only through new technology will they keep improving productivity.
So whats Hummer-Winblad investing in? Here are four of their investments that I believe have a real chance to succeed.
Started up by a former head of HR at Sybase, Bridgestream attempts to solve the provisioning and access problems faced by large enterprises. When something changes in a corporation—reorganization, layoff or project change—all sorts of changes need to happen to corporate systems. VPN and building access needs to be shut off. Folder access needs to be changed. Phone numbers rerouted. Passwords and access rights changed.
In many organizations, all those changes take place close to the user. The facility person changes access codes. The network guys change VPN or corporate network rights. Network and application passwords are typically changed by the owners of those systems.
Synchronizing all those changes, especially in the case of a layoff, can be a nightmare. IT typically doesnt know about corporate restructurings until the night before. Inevitably, something gets overlooked. There are numerous stories of contractors retaining access to systems long after the job has ended, or embittered former employees stealing data after being laid off. With Bridgestreams real-time authorization management system, all that can be automated.
And, in addition to automating changes to ERP, network sign-on, collaboration tools and other systems, the system saves a record of those changes. That means lawyers and others can go back in time to see who had access to what, when. “Thats a critical part of Sarbanes-Oxley 404 compliance,” said Kertzmann, who sits on Bridgestreams board. “It helps them document and manage all those things that are required by law.”
Setups no picnic. Bridgestream integrates with Oblix, Netegrity and Microsofts Directory Services, but it takes a lot of elbow grease to put it all together. And only large companies with a pre-existing identity management program will find real value in Bridgestream.
But for at least one large financial services customer, its proving invaluable. The pilot implementation, which has now gone into production, manages 150,000 employees worldwide. Its available now, and for more information, head to Bridgestreams Web site at www.bridgestream.com.
Your local cable company, telephone company or beer distributor has hundreds of vehicles roaming around the city, fixing problems, installing lines and delivering vital comestibles. But keeping track of all those vehicles is a nightmare. Do you wonder why you have to wait all afternoon for the cable guy—and then he doesnt even show up on time? Its because fleet management is not easy.
But with Sapias on-demand fleet management product—a hosted service—the central office can keep in constant contact with its metro fleet. Heres how it works:
Each vehicle gets outfitted with a GPS-enabled black box or a GPS-enabled phone. That device constantly updates the system with details on exactly where Waldo is, and how hes tracking against schedule.
With business rules and alerts, this enables all sorts of interesting features. Imagine receiving a phone call when the cable guys a half hour away—or being able to track his estimated arrival time via the Web. Need to make an emergency call? The dispatcher can easily find out whos closest—and who might have a bit of free time.
The system lacks the ability to close the loop and set up schedules, though. A linear programming model that will provide best path fitting across an entire fleet is under development and is expected later this year. Still, “this is very sexy technology,” according to Kertzmann. By applying rules for route efficiency, drivers end up making at least one more call a day. “It pays for itself in 90 days,” he claimed.
Continuing the theme of software as a service, this new company applies VOIP (voice over IP) to virtualizing call centers.
As regular readers know, Im a big fan of the transformational effects of SIP-based VOIP technology. Its changing the telecommunications industry dramatically, using inexpensive boxes and edge-based call routers.
But in addition to enabling Vonage and AT&T Advantage style services, its also providing big benefits to call centers.
Historically, inbound and outbound call centers relied on expensive solutions that integrated computers with PBXs and telephony switches. But with VOIP and SIP, all you need to do is add a little bit of smarts to a dumb box, stick it on the Internet, and now you can virtualize the call center for much, much less.
Five9 Communications provides a hosted app that provides very sophisticated call center capabilities to small and midsized businesses. Setup is pretty easy. Simply put a small black gateway SIP box at each desk—and plug into the companys service. Because VOIP and SIP work over the Internet, your work force can be anywhere—at home, in another country or in a central office.
The Five9 Virtual Contact Center provides automatic call distribution among those connected boxes, along with predictive dialing, interactive voice response, call routing based on operator skills, and centralized billing and management.
Five9 levels the playing field, according to Kertzmann. “Small to midsized companies can now afford the functionality and capability that was only available to large companies” in the past, he said.
It sounds like a decent solution for companies trying to compete with the big boys, whether youre an e-commerce play going up against Amazon or a software company providing product support. For more information head to www.five9.com.
Three More to Explore
Three More to Explore
I was intrigued by the technology inherent in three other companies, which are not as far along and a bit more complex. I plan on spending some time soon with each of them to get a better understanding of how they work and what they do. But briefly, heres who they are.
- Scalent: As server farms have been replaced by racks of server blades, application distribution has become a problem. Dedicating an application to a single appliance can result in wasted cycles and poor resource utilization. Scalent aims to fix all this by virtualizing applications across racks of servers.
According to Winblad, this can result in a seven to nine times reduction in the number of servers, or blades, deployed. The companys software virtualizes network appliances, routers, Layer 3 switches, load balancers and content switches simply by adding a standard x86 server and Layer 2 switches. Scalent will deliver its first version, running in IBMs BladeCenter platform, within the next few months.
- Abhia Systems: Today, most companies have an effective storage architecture setup, with a disaster recovery framework from Sungard, EDS and others. But the problem comes when a user or administrator attempts to recover a small piece of data from that secondary or tertiary storage. Its just not easy to find a single e-mail message or database record.
Thats the problem Abhai Systems aims to solve with its Transband Technology for centrally managing secondary storage. The company claims it can provide continuous data protection and instant recovery at the file level without changes to an existing storage infrastructure.
It works by adding a tiny piece of software at every client. The system reads every single bit as its written, and works independent of applications and services. And because the system monitors patterns of bits, not only can it provide instant recovery, but the system can also detect when somethings going horribly wrong.
Theres a lot of math involved, and much of the technology comes out of Stanford. The CEO co-founded Brocade Communications Systems. Im looking forward to exploring the technology more closely, and Ill report back when I do.
- Voltage: I ran into these guys at the Demo 2004 conference, where I discovered my old friend Sathvik Krishnamurthy was running the company. These guys are fascinating—theyve figured out a way to do private key/public key encryption without all the confusing exchanging of certificates.
The company is leveraging a cryptography breakthrough called Identity Based Encryption that uses an e-mail address, IM handle or other unique identifier to secure communications. The technology also came out of Stanford. Again, I expect to spend time with this company soon, and Ill be back with more.