Of all the people in the technology industry, it's those whose business is investing in the future -- venture capitalists -- that have the biggest stake in what's coming next.
So what's around the next corner in business tech? What's promising -- and what's overhyped?
In this occasional series, we sit down with the folks on the front lines to see what they're seeing.
Today, we talk to Norwest Venture Partners partner Matt Howard.
ZDNet: What's going on right now -- in enterprise startups, and in business technology as a whole?
MH: The enterprise, that's my love. It's something I've been doing my whole career. (laughs) There are some big paradigm shifts happening in front of us. It's fascinating; you can see it happening around you, with Microsoft and Apple.
For the last 25 years, information technology was pretty much sold to the CIO and the IT organization. At Microsoft, for example, you don't see them coming out with a lot of features very often because the IT manager and CIO are responsible for compliance and productivity -- the last thing they want is new features, because they're rolling out to 10,000 desktops and so forth.
On the other side, you see Apple and Google trying to delight the consumer. It's like simple carbohydrates. They're constantly dribbling out new features every six months. Now the consumer wants these new features in the enterprise. The IT manager historically has not been equipped to handle these types of end points while maintaining security and compliance. I find this extremely fascinating.
Another interesting point? When I talk to a lot of people who use Amazon for their cloud-based services, [I learn that] the Web 2.0 companies build their whole company on it, but there are an interesting number of people in large enterprises in development, building their prototype systems outside their IT envelope. The large Fortune 100 companies, the doers in development, are prototyping these efforts up at Amazon -- and it's to circumvent bureaucracy. The inmates are trying to get control.
It's like self-serve gasoline. I don't want to talk to the teller and get in line; I just want to go quickly.
The bureaucracy, in many cases, is a necessary element: Sarbanes-Oxley and such things. But it's kind of like warfare sometimes. There is a lot of attention on fast-tracking. This is really dictating a lot of investment. How do you make a win-win for the IT organization and the inmates?
ZDNet: So how do you?
MH: I vote with my wallet and my reputation and my firm's reputation. I get very involved recruiting people to these companies.
We give the IT professional the tools necessary for BYOD. For example, we have MobileIron in our portfolio.
I've got another company called Blue Jeans Network. What Blue Jeans does is, they have the ability to put mobile infrastructure in the cloud. People seem to want to own as few assets as possible, that's why we're seeing such interest in software-as-a-service -- SaaS.
People just want their freeze-dried coffee, so to speak. They want to go, and if it doesn't go, they want it to go away.
In the enterprise sector, there's a lot of reputation risk; that's when the bureaucracy can kick in. There's a long evaluation cycle. To write a multimillion-dollar check, that should take a long time. But a SaaS model, if it doesn't work, it goes away.
We've invested in three video conferencing companies over our 50-year-lifetime. Today, if you want to do a video call with 10 participants, you have to go through a device called an MCU, or multi-channel unit. It's a very expensive device that bridges all your calls. With Blue Jeans, number one, it's in the cloud -- you're not buying an expensive piece of sheetmetal. The other part is, you can take a Skype, Tandberg, [Cisco] TelePresence, Google Talk -- you can mix and match. It's like BYOV, or "bring your own video." It's very personal.
There is a logical bridge in these companies that's allowing the IT manager and the CIO to do what they absolutely have to do. There's no compromise -- the CIO must be compliant. He has to be. At the same time, the business owner has their objectives. MobileIron, BlueJeans -- they're acting as the bridge.
For the first time, I can have the full enterprise experience anywhere now. You're talking to me from Paris. I'm here. There was a commercial [in 1982], "I want my MTV." That's what's being enabled right now. And people are working a lot longer. They're connected. You really can't escape.
ZDNet: How has the economy impacted all this? It's been a tough slog over the last four years.
MH: Unfortunately, this recession has been very challenging for so many people. In my 30 years in information technology, I think technology has a greater appreciation through this recession. Productivity, unfortunately, a lot of people have been displaced, productivity through technology has found a new level of value in enterprises. And in globalization, things are moving very quickly. So the driver is that productivity is being driven by technology.
If you look at what is driving software-as-a-service and hosted [applications] and everything in the cloud, it feels like people want instant-on, instant-off. Short-term ROI.
People used to be OK with a multi-year payback. In boardrooms, what I'm hearing, people want six, 12-month paybacks. They want to feel the benefit nearly instantly. That's the beauty of Salesforce.com. NetSuite. Blue Jeans. MobileIron. And they're willing to sacrifice some features, to compromise. If somebody does a large Siebel implementation, they're going to have a lot more bells and whistles than a Salesforce. But the [down] economy and being nimble is really driving things.
Companies that are focused and answering a short-term and long-term value proposition are doing extremely well. MobileIron gained 2,000 customers in the last 12 months.
ZDNet: You mentioned consumerization in the enterprise. Let's talk about that a bit more.
MH: In the first part of my career, I had a richer environment at work than at home: more bandwidth, more computing, a better e-mail experience, all my tools on a mainframe or UNIX workstation or client server. It was better than home.
Now I have more bandwidth at home and more computing at home on a per-person basis. At home, my environment is more robust in some ways. Whether it's Box.net or Dropbox or any number of quasi-consumer tools, with my credit card, I'm instant-on. If I want a virtual machine at Amazon, I have it in five minutes. Everyone has become a one-man army. People become that "army of one." When you've got some idea, you can go on and create and do.
I know a guy who has a Vonage system with a 408 Silicon Valley area code. He's in India half the year. When you dial him, his phone rings in India. He works U.S. hours. His customers don't know where he [actually] is.
People want that dynamic nature. They have a job; they want to get it done.
My wallet might not be the right wallet for you. Instead of wedging everybody into a couple lanes, you now can pick the lane you want. People are wired differently.
At a multinational company I know, their American chip developers used to do all their research with these big, bulky books -- very expensive manuals. Now they do everything off of Google -- say, researching an IEEE spec. It's all online. The American developers work for a large Asian company, and at one point it refused to give their employees Internet access because it was worried about data leak protection. There was practically a riot. The U.S. employees didn't know that Internet access wasn't allowed. They needed those large, consumer-based tools.
ZDNet: So how do you bridge that gap with the companies in which you invest?
MH: Every VC would say this, but it's like a couple of bookends. On one side, you have Salesforce.com and NetSuite and self-realization; world-class products that have become standards. On the other end, you have Rackspace and Amazon, the two premier cloud providers; that's food and shelter. I think there's a lot of white space between the two. We have other companies we've invested in. There are a lot of things that are going to be put up in the cloud. You'll hear a lot more from us.
The venture capital industry has changed a lot. The plates are shifting very rapidly. Fortunately for us, we're not shying away from capital-intensive investing. When you invest in a Rackspace, or an enterprise-class SaaS company, these are very capital intensive. It's not like doing a social media company. But this infrastructure, it just so happens that it's being built in the cloud.
ZDNet: Given these shifts, has the venture capital approach to the enterprise changed?
MH: We're still trying to address problems people want. We spend a lot of time talking to customers to understand what their pain points are, their pressure points. But from a product development standpoint, it's had a huge impact. It's the paint job; the user interface.
One of the hardest people to find in the enterprise space is the UI designer. The consumer space has sucked the enterprise dry of these people. Now, in product development, one of the first engineers we're hiring is UI. You used to put the paint job on last. Now everybody's building that upfront.
At Exablox, a stealth infrastructure company at which I've made an investment, at every board meeting, our UI lead comes in and shows the new work, the progress she's making. That's how important it is, the show and tell. That's all from the consumerization. People don't want DOS. They don't want a client-server experience. They want a robust, browser-based experience. They don't want to wait six months for a bug to get fixed. They want agile development.
I send this podcast to every CEO or founder [I work with]. Terry Gross from NPR's Fresh Air, she did one of the rare interviews with [Apple design chief] Jony Ives. I forward it to every new company. He's a person that stays away from the media. What he says is, at Apple, the designer is the root and everything forks off of it. Most times in Silicon Valley, it's the software development that's the nucleus. That's what's happening in the enterprise now.
In the last 12 years, since the Great Recession hit, we've been on the Survivor show. To survive and thrive, you'd better be sensitive to your customer. And your customer -- the IT manager and the user -- demand these things. If you don't do it, you'll be punished very quickly. That's why productivity has gone up in the U.S. economy, for fortunate and unfortunate reasons.
In terms of development, even the way people develop software, I've seen a lot of changes.
It's a fascinating time.