The Other Road Ahead

Money

In the early 1990s I read an article in which someone said that software was a subscription business. At first this seemed a very cynical statement. But later I realized that it reflects reality: software development is an ongoing process. I think it's cleaner if you openly charge subscription fees, instead of forcing people to keep buying and installing new versions so that they'll keep paying you. And fortunately, subscriptions are the natural way to bill for Web-based applications.

When they can, companies like to do something called price discrimination, which means charging each customer as much as they can afford. [8] Software is particularly suitable for price discrimination, because the marginal cost is close to zero. This is why some software costs more to run on Suns than on Intel boxes: a company that uses Suns is not interested in saving money and can safely be charged more. Piracy is effectively the lowest tier of price discrimination. I think that software companies understand this and deliberately turn a blind eye to some kinds of piracy. [9] With server-based software they are going to have to come up with some other solution.

Web-based software sells well, especially in comparison to desktop software, because it's easy to buy. You might think that people decide to buy something, and then buy it, as two separate steps. That's what I thought before Viaweb, to the extent I thought about the question at all. In fact the second step can propagate back into the first: if something is hard to buy, people will change their mind about whether they wanted it. And vice versa: you'll sell more of something when it's easy to buy. I buy more books because Amazon exists. Web-based software is just about the easiest thing in the world to buy, especially if you have just done an online demo. Users should not have to do much more than enter a credit card number. (Make them do more at your peril.)

Sometimes Web-based software is offered through ISPs acting as resellers. This is a bad idea. You have to be administering the servers, because you need to be constantly improving both hardware and software. If you give up direct control of the servers, you give up most of the advantages of developing Web-based applications.

Several of our competitors shot themselves in the foot this way-- usually, I think, because they were overrun by suits who were excited about this huge potential channel, and didn't realize that it would ruin the product they hoped to sell through it. Selling Web-based software through ISPs is like selling sushi through vending machines.

Customers

Who will the customers be? At Viaweb they were initially individuals and smaller companies, and I think this will be the rule with Web-based applications. These are the users who are ready to try new things, partly because they're more flexible, and partly because they want the lower costs of new technology.

Web-based applications will often be the best thing for big companies too (though they'll be slow to realize it). The best intranet is the Internet. If a company uses true Web-based applications, the software will work better, the servers will be better administered, and employees will have access to the system from anywhere.

The argument against this approach usually hinges on security: if access is easier for employees, it will be for bad guys too. Some larger merchants were reluctant to use Viaweb because they thought customers' credit card information would be safer on their own servers. It was not easy to make this point diplomatically, but in fact the data was almost certainly safer in our hands than theirs. Who can hire better people to manage security, a technology startup whose whole business is running servers, or a clothing retailer? Not only did we have better people worrying about security, we worried more about it. If someone broke into the clothing retailer's servers, it would affect at most one merchant, could probably be hushed up, and in the worst case might get one person fired. If someone broke into ours, it could affect thousands of merchants, would probably end up as news on CNet, and could put us out of business.

If you want to keep your money safe, do you keep it under your mattress at home, or put it in a bank? This argument applies to every aspect of server administration: not just security, but uptime, bandwidth, load management, backups, etc. Our existence depended on doing these things right. Server problems were the big no-no for us, like a dangerous toy would be for a toy maker, or a salmonella outbreak for a food processor.

A big company that uses Web-based applications is to that extent outsourcing IT. Drastic as it sounds, I think this is generally a good idea. Companies are likely to get better service this way than they would from in-house system administrators. System administrators can become cranky and unresponsive because they're not directly exposed to competitive pressure: a salesman has to deal with customers, and a developer has to deal with competitors' software, but a system administrator, like an old bachelor, has few external forces to keep him in line. [10] At Viaweb we had external forces in plenty to keep us in line. The people calling us were customers, not just co-workers. If a server got wedged, we jumped; just thinking about it gives me a jolt of adrenaline, years later.

So Web-based applications will ordinarily be the right answer for big companies too. They will be the last to realize it, however, just as they were with desktop computers. And partly for the same reason: it will be worth a lot of money to convince big companies that they need something more expensive.

There is always a tendency for rich customers to buy expensive solutions, even when cheap solutions are better, because the people offering expensive solutions can spend more to sell them. At Viaweb we were always up against this. We lost several high-end merchants to Web consulting firms who convinced them they'd be better off if they paid half a million dollars for a custom-made online store on their own server. They were, as a rule, not better off, as more than one discovered when Christmas shopping season came around and loads rose on their server. Viaweb was a lot more sophisticated than what most of these merchants got, but we couldn't afford to tell them. At $300 a month, we couldn't afford to send a team of well-dressed and authoritative-sounding people to make presentations to customers.

A large part of what big companies pay extra for is the cost of selling expensive things to them. (If the Defense Department pays a thousand dollars for toilet seats, it's partly because it costs a lot to sell toilet seats for a thousand dollars.) And this is one reason intranet (LAN) software will continue to thrive, even though it is probably a bad idea. It's simply more expensive. There is nothing you can do about this conundrum, so the best plan is to go for the smaller customers first. The rest will come in time.

Son of Server

Running software on the server is nothing new. In fact it's the old model: mainframe applications are all server-based. If server-based software is such a good idea, why did it lose last time? Why did desktop computers eclipse mainframes?

At first desktop computers didn't look like much of a threat. The first users were all hackers-- or hobbyists, as they were called then. They liked microcomputers because they were cheap. For the first time, you could have your own computer. The phrase "personal computer" is part of the language now, but when it was first used it had a deliberately audacious sound, like the phrase "personal satellite" would today.

Why did desktop computers take over? I think it was because they had better software. And I think the reason microcomputer software was better was that it could be written by small companies.

I don't think many people realize how fragile and tentative startups are in the earliest stage. Many startups begin almost by accident-- as a couple guys, either with day jobs or in school, writing a prototype of something that might, if it looks promising, turn into a company. At this larval stage, any significant obstacle will stop the startup dead in its tracks. Writing mainframe software required too much commitment up front. Development machines were expensive, and because the customers would be big companies, you'd need an impressive-looking sales force to sell it to them. Starting a startup to write mainframe software would be a much more serious undertaking than just hacking something together on your Apple II in the evenings. And so you didn't get a lot of startups writing mainframe applications.

The arrival of desktop computers inspired a lot of new software, because writing applications for them seemed an attainable goal to larval startups. Development was cheap, and the customers would be individual people that you could reach through computer stores or even by mail-order.

The application that pushed desktop computers out into the mainstream was VisiCalc, the first spreadsheet. It was written by two guys working in an attic, and yet did things no mainframe software could do. [11] VisiCalc was such an advance, in its time, that people bought Apple IIs just to run it. And this was the beginning of a trend: desktop computers won because startups wrote software for them.

It looks as if server-based software will be good this time around, because startups will write it. Computers are so cheap now that you can get started, as we did, using a desktop computer as a server. Inexpensive processors have eaten the workstation market (you rarely even hear the word now) and are most of the way through the server market; Yahoo's servers, which deal with loads as high as any on the Internet, all have the same inexpensive Intel processors that you have in your desktop machine. And once you've written the software, all you need to sell it is a Web site. Nearly all our users came direct to our site through word of mouth and references in the press. [12]

Viaweb was a typical larval startup. We were terrified of starting a company, and for the first few months comforted ourselves by treating the whole thing as an experiment that we might call off at any moment. Fortunately, there were few obstacles except technical ones. While we were writing the software, our Web server was the same desktop machine we used for development, connected to the outside world by a dialup line. Our only expenses in that phase were food and rent.

There is all the more reason for startups to write Web-based software now, because writing desktop software has become a lot less fun. If you want to write desktop software now you do it on Microsoft's terms, calling their APIs and working around their buggy OS. And if you manage to write something that takes off, you may find that you were merely doing market research for Microsoft.

If a company wants to make a platform that startups will build on, they have to make it something that hackers themselves will want to use. That means it has to be inexpensive and well-designed. The Mac was popular with hackers when it first came out, and a lot of them wrote software for it. [13] You see this less with Windows, because hackers don't use it. The kind of people who are good at writing software tend to be running Linux or FreeBSD now.

I don't think we would have started a startup to write desktop software, because desktop software has to run on Windows, and before we could write software for Windows we'd have to use it. The Web let us do an end-run around Windows, and deliver software running on Unix direct to users through the browser. That is a liberating prospect, a lot like the arrival of PCs twenty-five years ago.

Microsoft

Back when desktop computers arrived, IBM was the giant that everyone was afraid of. It's hard to imagine now, but I remember the feeling very well. Now the frightening giant is Microsoft, and I don't think they are as blind to the threat facing them as IBM was. After all, Microsoft deliberately built their business in IBM's blind spot.

I mentioned earlier that my mother doesn't really need a desktop computer. Most users probably don't. That's a problem for Microsoft, and they know it. If applications run on remote servers, no one needs Windows. What will Microsoft do? Will they be able to use their control of the desktop to prevent, or constrain, this new generation of software?

My guess is that Microsoft will develop some kind of server/desktop hybrid, where the operating system works together with servers they control. At a minimum, files will be centrally available for users who want that. I don't expect Microsoft to go all the way to the extreme of doing the computations on the server, with only a browser for a client, if they can avoid it. If you only need a browser for a client, you don't need Microsoft on the client, and if Microsoft doesn't control the client, they can't push users towards their server-based applications.

I think Microsoft will have a hard time keeping the genie in the bottle. There will be too many different types of clients for them to control them all. And if Microsoft's applications only work with some clients, competitors will be able to trump them by offering applications that work from any client. [14]

In a world of Web-based applications, there is no automatic place for Microsoft. They may succeed in making themselves a place, but I don't think they'll dominate this new world as they did the world of desktop applications.

It's not so much that a competitor will trip them up as that they will trip over themselves. With the rise of Web-based software, they will be facing not just technical problems but their own wishful thinking. What they need to do is cannibalize their existing business, and I can't see them facing that. The same single-mindedness that has brought them this far will now be working against them. IBM was in exactly the same situation, and they could not master it. IBM made a late and half-hearted entry into the microcomputer business because they were ambivalent about threatening their cash cow, mainframe computing. Microsoft will likewise be hampered by wanting to save the desktop. A cash cow can be a damned heavy monkey on your back.

I'm not saying that no one will dominate server-based applications. Someone probably will eventually. But I think that there will be a good long period of cheerful chaos, just as there was in the early days of microcomputers. That was a good time for startups. Lots of small companies flourished, and did it by making cool things.

Startups but More So

The classic startup is fast and informal, with few people and little money. Those few people work very hard, and technology magnifies the effect of the decisions they make. If they win, they win big.

In a startup writing Web-based applications, everything you associate with startups is taken to an extreme. You can write and launch a product with even fewer people and even less money. You have to be even faster, and you can get away with being more informal. You can literally launch your product as three guys sitting in the living room of an apartment, and a server collocated at an ISP. We did.

Over time the teams have gotten smaller, faster, and more informal. In 1960, software development meant a roomful of men with horn rimmed glasses and narrow black neckties, industriously writing ten lines of code a day on IBM coding forms. In 1980, it was a team of eight to ten people wearing jeans to the office and typing into vt100s. Now it's a couple of guys sitting in a living room with laptops. (And jeans turn out not to be the last word in informality.)

Startups are stressful, and this, unfortunately, is also taken to an extreme with Web-based applications. Many software companies, especially at the beginning, have periods where the developers slept under their desks and so on. The alarming thing about Web-based software is that there is nothing to prevent this becoming the default. The stories about sleeping under desks usually end: then at last we shipped it and we all went home and slept for a week. Web-based software never ships. You can work 16-hour days for as long as you want to. And because you can, and your competitors can, you tend to be forced to. You can, so you must. It's Parkinson's Law running in reverse.

The worst thing is not the hours but the responsibility. Programmers and system administrators traditionally each have their own separate worries. Programmers have to worry about bugs, and system administrators have to worry about infrastructure. Programmers may spend a long day up to their elbows in source code, but at some point they get to go home and forget about it. System administrators never quite leave the job behind, but when they do get paged at 4:00 AM, they don't usually have to do anything very complicated. With Web-based applications, these two kinds of stress get combined. The programmers become system administrators, but without the sharply defined limits that ordinarily make the job bearable.

At Viaweb we spent the first six months just writing software. We worked the usual long hours of an early startup. In a desktop software company, this would have been the part where we were working hard, but it felt like a vacation compared to the next phase, when we took users onto our server. The second biggest benefit of selling Viaweb to Yahoo (after the money) was to be able to dump ultimate responsibility for the whole thing onto the shoulders of a big company.

Desktop software forces users to become system administrators. Web-based software forces programmers to. There is less stress in total, but more for the programmers. That's not necessarily bad news. If you're a startup competing with a big company, it's good news. [15] Web-based applications offer a straightforward way to outwork your competitors. No startup asks for more.

Just Good Enough

One thing that might deter you from writing Web-based applications is the lameness of Web pages as a UI. That is a problem, I admit. There were a few things we would have really liked to add to HTML and HTTP. What matters, though, is that Web pages are just good enough.

There is a parallel here with the first microcomputers. The processors in those machines weren't actually intended to be the CPUs of computers. They were designed to be used in things like traffic lights. But guys like Ed Roberts, who designed the Altair, realized that they were just good enough. You could combine one of these chips with some memory (256 bytes in the first Altair), and front panel switches, and you'd have a working computer. Being able to have your own computer was so exciting that there were plenty of people who wanted to buy them, however limited.

Web pages weren't designed to be a UI for applications, but they're just good enough. And for a significant number of users, software that you can use from any browser will be enough of a win in itself to outweigh any awkwardness in the UI. Maybe you can't write the best-looking spreadsheet using HTML, but you can write a spreadsheet that several people can use simultaneously from different locations without special client software, or that can incorporate live data feeds, or that can page you when certain conditions are triggered. More importantly, you can write new kinds of applications that don't even have names yet. VisiCalc was not merely a microcomputer version of a mainframe application, after all-- it was a new type of application.

Of course, server-based applications don't have to be Web-based. You could have some other kind of client. But I'm pretty sure that's a bad idea. It would be very convenient if you could assume that everyone would install your client-- so convenient that you could easily convince yourself that they all would-- but if they don't, you're hosed. Because Web-based software assumes nothing about the client, it will work anywhere the Web works. That's a big advantage already, and the advantage will grow as new Web devices proliferate. Users will like you because your software just works, and your life will be easier because you won't have to tweak it for every new client. I would not even use Javascript, if I were you. Viaweb didn't. [16]

I feel like I've watched the evolution of the Web as closely as anyone, and I can't predict what's going to happen with clients. Convergence is probably coming, but where? I can't pick a winner. One thing I can predict is conflict between AOL and Microsoft. Whatever Microsoft's .NET turns out to be, it will probably involve connecting the desktop to servers. Unless AOL fights back, they will either be pushed aside or turned into a pipe between Microsoft client and server software. If Microsoft and AOL get into a client war, the only thing sure to work on both will be browsing the Web, meaning Web-based applications will be the only kind that work everywhere.

How will it all play out? I don't know. And you don't have to know if you bet on Web-based applications. No one can break that without breaking browsing. The Web may not be the only way to deliver software, but it's one that works now and will continue to work for a long time. Web-based applications are cheap to develop, and easy for even the smallest startup to deliver. They're a lot of work, and of a particularly stressful kind, but that only makes the odds better for startups.

Why Not?

E. B. White was amused to learn from a farmer friend that many electrified fences don't have any current running through them. The cows apparently learn to stay away from them, and after that you don't need the current. "Rise up, cows!" he wrote, "Take your liberty while despots snore!"

If you're a hacker who has thought of one day starting a startup, there are probably two things keeping you from doing it. One is that you don't know anything about business. The other is that you're afraid of competition. Neither of these fences have any current in them.

There are only two things you have to know about business: build something users love, and make more than you spend. If you get these two right, you'll be ahead of most startups. You can figure out the rest as you go.

You may not at first make more than you spend, but as long as the gap is closing fast enough you'll be ok. If you start out underfunded, it will at least encourage a habit of frugality. The less you spend, the easier it is to make more than you spend. Fortunately, it can be very cheap to launch a Web-based application. We launched on under $10,000, and it would be even cheaper today. We had to spend thousands on a server, and thousands more to get SSL. (The only company selling SSL software at the time was Netscape.) Now you can rent a much more powerful server, with SSL included, for less than we paid for bandwidth alone. You could launch a Web-based application now for less than the cost of a fancy office chair.

As for building something users love, here are some general tips. Start by making something clean and simple that you would want to use yourself. Get a version 1.0 out fast, then continue to improve the software, listening closely to the users as you do. The customer is always right, but different customers are right about different things; the least sophisticated users show you what you need to simplify and clarify, and the most sophisticated tell you what features you need to add. The best thing software can be is easy, but the way to do this is to get the defaults right, not to limit users' choices. Don't get complacent if your competitors' software is lame; the standard to compare your software to is what it could be, not what your current competitors happen to have. Use your software yourself, all the time. Viaweb was supposed to be an online store builder, but we used it to make our own site too. Don't listen to marketing people or designers or product managers just because of their job titles. If they have good ideas, use them, but it's up to you to decide; software has to be designed by hackers who understand design, not designers who know a little about software. If you can't design software as well as implement it, don't start a startup.

Now let's talk about competition. What you're afraid of is not presumably groups of hackers like you, but actual companies, with offices and business plans and salesmen and so on, right? Well, they are more afraid of you than you are of them, and they're right. It's a lot easier for a couple of hackers to figure out how to rent office space or hire sales people than it is for a company of any size to get software written. I've been on both sides, and I know. When Viaweb was bought by Yahoo, I suddenly found myself working for a big company, and it was like trying to run through waist-deep water.

I don't mean to disparage Yahoo. They had some good hackers, and the top management were real butt-kickers. For a big company, they were exceptional. But they were still only about a tenth as productive as a small startup. No big company can do much better than that. What's scary about Microsoft is that a company so big can develop software at all. They're like a mountain that can walk.

Don't be intimidated. You can do as much that Microsoft can't as they can do that you can't. And no one can stop you. You don't have to ask anyone's permission to develop Web-based applications. You don't have to do licensing deals, or get shelf space in retail stores, or grovel to have your application bundled with the OS. You can deliver software right to the browser, and no one can get between you and potential users without preventing them from browsing the Web.

You may not believe it, but I promise you, Microsoft is scared of you. The complacent middle managers may not be, but Bill is, because he was you once, back in 1975, the last time a new way of delivering software appeared.