Software Tech Investment Risks and You
Software Tech Investment Risks and You
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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 an information technology context if we look at the value of the ICT layer and notions of outsourcing: long-term maintenance and
bugs are a problem. And, what does long term mean 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 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, this also raises 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 (costs) 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 the two others are innovative—even game-changing—technology leaders for disruptive labor automation for software organizations. By the way, both received about 100m venture capital last years.
Now imagine we would like to invest in these companies. During the due diligence process, many things are important; as a technology specialist, I would focus on my part to establish something like a sanity check. That said, the working assumption is that the quality of the technology matters if we talk about a tech company.
What could limit the value of a software company on the technical side? In my opinion, open bugs in its main software product is one starting point.
So, let's have a look at bug statistics of Docker and Jenkins and put them in relation with other facts like the 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?
- The Docker community is about 3 times larger than the same around Jenkins, although Jenkins is much older.
- Docker seems to have less bugs.
- Jenkins has weak bug ownership management (almost one-half of the serious issues are not assigned.)
- Note: Information about size of the code base is not available in this statistic
The questions arising from this data are:
- In the case that the commercial versions are different from the open-source versions—and are superior over them—does this mean there is 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 in the open-source version? And, how does that internal statistic look then?
- Or, in the case that both versions are the same, why should I use the commercial version? Would the paid team fix already known bugs which I, let's say, personally do not like on demand (and I'd probably contribute my time as a tester)?
- What exactly happens 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 of discussion and due diligence. Does anybody care—and where can I find the facts I have probably missed? Of course, maybe I have totally misunderstood what is going on... in this case, I'm searching to learn what's right. Please help me!
Now if you are a thoughtful reader, and managed till here, you might ask yourself, "What about Google? Wasn't 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 lots of respect for what Google does, its Google Apps service desk does not seem to work well... at least in this one way. 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 a user to disable a slide from a presentation. Funny enough, this feature is even there for imported PowerPoint slides, but not by default. This feature request was made more than 3 years ago and has been confirmed by many hundreds of users without any reaction from Google. Unfortunately, this is 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.
This article originally appeared on sigspl.org.
Published at DZone with permission of Peter Muryshkin , DZone MVB. See the original article here.
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