We live in a connected world, and a connected world leads to more and more transparency. Transparency means also discovering things which were not obvious.
So, a new fresh insight by Yoav Fisher on startup business and venture capitalists is that venture capitalists (VC) are so to say real estate agents: they sell startups not by value, but just by price. A stunning quotation: “If the foundations of the unit are shoddy, like poor installation or termites, this isn’t part of the pricing — it is left for the future buyer to deal with these undisclosed issues and suffer the negative ramifications on the long term value of their home.”
This is indeed quite interesting also in information technology context if we look at the value of the ICT layer and notions of outsourcing: long-term maintenance and
termites bugs are a problem. And, what does mean long term for your company? Therefore SaaS and PaaS are so successful, but also here – how would you know the real value offered by the API service provider – some of them use outsourcing as well, and the responsibility, and also the liability are blurred along a quite lengthy delegation chain.
But, if we come back to transparency, an interesting thing is that many software enterprises build their technology stack today on open source software components – up to 80%, by the way, which raises also the question about USP of virtually any IT consulting company on a $90bn market. What is the business model here – selling workforce time and bill hours (cost), or delivering software (value asset)?
Now let’s have a look at three prominent examples. Let’s say, we pick Google, CloudBees and Docker. The first one is prominent enough without comments, and two others are innovative, even game changing technology leaders for disruptive labor automation for software organizations – both got by the way about up 100m venture capital last years.
Now imagine we would like to invest in these companies. During an according due diligence process, many things are important; as technology specialist I would focus on my part to establish something like a sanity check. This said, the working assumption is that quality of technology matters, if we talk about a tech company.
What could limit value of a software company on the technical side? I think, open bugs in its main software product is one starting point.
So let’s have a look on bugs statistics of Docker and Jenkins and put them in relation with other facts like latest publicly available release, or developer community size. The following table puts it all in one place (as of March 2016).
What do we see?
- Docker community is about 3 times larger than same around Jenkins, although Jenkins is much older
- Docker seems to have less bugs
- Jenkins has weak bug ownership management (almost a hald of serious issues is not assigned)
- Note: Information about size of the code base is not available in this statistic
The questions arising from this data are:
- In case the commercial versions are differ from the open source versions and are supreme over them, does this mean, there is say a Jenkins 2.0 and a Docker 1.5, with a paid team who has managed to fix most, or all of those critical bugs? And how does look the internal statistic then?
- Or, in case that both versions are same, why should I use commercial versions? Would the paid team fix already known bugs which I, let’s say, personally do not like on my demand (and I probably contribute my time as tester)?
- What happens exactly with those millions of venture capital?
- According to Yoav’s considerations in the cited article at the beginning of this article, the VC money does not express the value of these companies, or products; it expresses rather the price tag a VC thinks it could attach later on.
Now, I am really eager to find out how much the investors (well, not only venture capitalists) and also company owners are involved in this sort as discussion and due diligence. Does anybody care – and where to find facts I have probably missed? Of course, maybe I have totally misunderstood what is going on and in this case search to learn it the right way. Please help me!
Now if you are a thoughtful reader, and managed till here, you might ask yourself, “what about Google? Was this guy talking about three examples?”
For you, here comes the bonus. As mentioned above, after all you never know what happens behind the scenes of a shiny SaaS/PaaS company. While having big respect for what Google does, its Google Apps service desk does not seem to work well at least for one example. I ask myself whether there is a single point of truth on such data anywhere and if not, which risks this ignorance, or lack of resources might introduce in other domains. So, there is a quite simple feature request for the presentation app: allow user to disable a slide from presentation. Funny enough, this feature is even there for imported PowerPoint slides, but not by default. This feature request lives for more than 3 years, and has been confirmed by many hundreds of users…. Without any reaction from Google. This is unfortunately an example of epic failure in customer support, despite implemented digital capability. Ownership and strategy will be always key! That’s it, and how much customer dedication is there, becomes transparent and measurable for anybody in the digital age.