Last week we were recognized as the 20th Fastest Growing Small Business (sub $2 mil in revenue) by the Mercury 100 for Boulder & Broomfield Counties here in Colorado. On the surface this might seem like a great accomplishment, however it’s a false measure of success, and I’ll tell you why.

• The Mercury 100 just looks at Boulder / Broomfield County. Not Denver or the rest of the state. Colorado is loaded with great startup companies. Sure, Boulder & Broomfield are a hotbed of entrepreneurial activity, yet sizing yourself up against a small group isn’t a true validation of efforts.
• You have to apply to be in the Mercury 100. Who knows for certain how many small business out there have not submitted their information. Clearly if you’ve found wild success in a business model why, other then selling the business or gaining investor dollars, would you feel the need to tell others?
• The growth is skewed as a startup. It’s not difficult to show 500% growth when your first year consisted of the 3 months in ‘06 followed by a ramp up in ‘07 and sustained business in ‘08.
• Revenue growth doesn’t equal profitability. While our revenue has grown over the last few years our most profitable year was ‘06. Arguably we’ve become less efficient as a business, and that is certainly not a measure of success.

So why are we rewarding pure revenue growth?

Don’t get me wrong, I like the recognition we receive for things like this. I just want to stress to other business owners that measuring success by pure revenue growth clearly isn’t the best option.

Unlike the technology analysts, I’m not paid to see the future. In fact, I’m not big on predicting what’s going to happen, but in this case, I have a strong feeling. Here’s how I see it in Jan 2009:

• The US economy has tanked
• The WW economies are tanking
• The software sector (technology) is changing
• The enterprise software vendors are way down
• IT depts are shrinking – people & costs

Lately, I’ve spent a lot of time researching Cloud applications, cloud stacks, and 3rd party cloud add-ons. Salesforce.com is a well know story, but the seismic shift is how that platform has been “genericized” and built out to become Force.com. Also, look at Amazon’s EC2 and Google Apps/Code/Engine. This is truly revolutionizing application development and thus will revolutionize IT across every industry vertical. This is not about SMB, this is about companies small to very large. Companies with 10 to 10,000’s of employees. You don’t have to be a ‘digital native’ to get this.

I will also add this isn’t about social networking. As these business applications develop, yes, they will have integration points into LinkedIn, etc. But it will be about providing value to the business, not about over-communicating with your virtual friends.

A whole new breed of software is being developed for the cloud applications and platforms. New types of monitoring solutions, new types of middleware, new tools, etc. In many cases, systems and security mgmt is being re-invented, as cloud-native. It’s exciting to see.

Where is this going? I predict that the enterprise software vendors will get slaughtered this year. Many will survive, but they will look very different when the economy does start to pick up. Given that companies and IT depts are shrinking now, I predict that when the economic clouds pass, the software clouds will roll in. When companies do start spending again, they will choose cloud applications for their new application needs. They won’t have the people or the budget to go back to an “old style” enterprise application, plus, they’ll find what they need on the market, on demand, and at a low $xx/user/month cost.

I’m not saying the world will abandon enterprise software and make a wholesale shift to cloud applications. Over the last decade, companies have collectively spent billions of dollars on SAP, Oracle, etc., so integration into these “legacy” apps will be important for more than a decade. What I’m saying is that the recession/depression will lead to a massive jump in cloud application adoption. I could be wrong, but I see the writing on the cloud….

About the author: Greg Davoll is an independent consultant specializing in software marketing and product strategy. Greg has over nineteen years of enterprise software experience across an array of branded technology companies including IBM, NetIQ, Sybase, BMC Software and Embarcadero Technologies. Learn more at http://www.linkedin.com/in/gregdavoll or contact Greg at greg.davoll@gmail.com.

Over the past few years the landscape of home entertainment has been changing. As broadband internet access has found its way into households across the country the utilization of on-demand content is becoming commonplace.

Netflix, who we’ve criticized before and been pleasantly surprised by their response, has been really on top of capturing this next generation of home entertainment. In fact, it seems like they’ve secretly been waiting for this moment since the incarnation of their brand “Internet Flicks”.

When I first heard of Netflix I was in early high school, my friend’s parents had just signed up for this new service that delivered movies via mail. I was confused, how in the world did the name Netflix really correspond to mail delivery movies? Further, was it really worth waiting two days to get a movie when you could go to a local store and get it in 30 minutes? Well, as they say, the proof was in the pudding. As the internet boomed in the early 2000’s Netflix became a real time rival to those other rental services such as broke-ass-buster Blockbuster and Hollywood Video.

However, it wasn’t until this past year that I really started to respect Netflix as a company with vision. In fact, I find it almost creepy how well they’ve positioned themselves in today’s current home entertainment market.

I imagine the idea of on-demand content has to be terrifying to most rental services. With pay-per-view, Hulu, torrenting, and iTunes the idea of brick and mortar rental is on the way out. And while DVD mail delivery isn’t quite as dead as store rental it definitely has a limited lifespan.

Here’s where Netflix is different from a lot of companies. They recognized their business model was dying and instead of whining about it they acted. They didn’t whine about liscensing costs, they didn’t worry about not having a media center product. Instead they took their vision and started working. Giving their customers an opportunity to watch movies instantly on their PC’s for free. Hear that? I said FREE. By not expecting immediate returns on their investment they captured a substantial portion of the online steaming market share and the buzz around it.

It comes down to this. How many people would have been willing to pay an extra $10 a month to try online movie streaming? Maybe a few. How many were willing to try it for free? Everybody.

Netflix, whose name now seems surprisingly perfect for their service, is suddenly a leader in the online delivery world. Since they started delivering online content they’ve cut deals with a number of home media center device manufactures. Including Roku, a few Blu-ray players, and Microsoft’s Xbox. Further, they’ve bundled their online delivery with their plans at no additional cost (I imagine they make up some money by not having to use as much postage) and they’ve started adding HD quality (720p) content.

In essence, Netflix lined up their challenges, picked up a bat, and started knocking them out of the park one by one.

Now granted the battle for next generation content delivery isn’t over, but it seems clear that Netflix isn’t holding the losing hand. They’ve played their cards perfectly up to here and I can happily say that I’m a user of their service and it rocks.

We did it back in 2002, but here is how we’d do it again in 2008 on a shoe-string, bootstrap or sandal-thong budget.

Let’s assume you are starting a company because you’ve either been laid-off, had it with the boss or decided to pursue your dreams. My guess if you are like most Americans then you likely won’t be able to give more then $1,000 to the cause. Let’s be real, you are likely not going to receive a bank loan anytime soon.

1st.
Pick a company name and register your business with your State’s Secretary of State. I’d recommend using LegalZoom to setup an LLC, especially if you have business partners. The LLC let’s you get up and running quickly with minimal costs. As your business matures, then decide if another corporate suffix is better for you. You’ll be able to afford fancy lawyers at that point.

Cost $149

2nd.
Find a domain name. Good luck with this one! It’s the main reason why you see so many companies with funky, misspelled names these days. If you aren’t the most creative person use a services like NameBoy to toss around word variations. Once you find one which works, register it on GoDaddy.

Sure I’ve ranted about GoDaddy in the past but their service is still pretty darn good.

Cost $20

3rd.
Buy a Synology NAS with two 1TB internal drives. If there is only one thing I would suggest you spend money on, it’s this. The Synology NAS will give you RAIDed network file storage which can be shared with other co-workers as your company grows. It’s especially nice because the Synology NAS allows for FTP services for those co-workers which are connecting to you remotely. I’m figuring you haven’t closed on that fancy first office just yet.

Bonus: Synology can run FTP, SSH, DDNS and Apache so you can use it to run your web site while you start figuring out your business plan.

Cost $550

4th.
Using GoDaddy as your DNS server, point your email hosting to Google Apps and run your domain name using GMail. You’ll get a free email service which kick the crap out of spammers.

Google Apps also contains Google Docs and Spreadsheets but there is just something nice about having files on your a Synology NAS as opposed to in Google. Once Google develops a way for me to download a backup of the data then I might reconsider this.

Cost $0

5th.
Download and install OpenOffice. I don’t care if you are running Mac, PC or Linux. The OpenOffice team deserves a lot of respect for building a kick-ass free alternative to Microsoft Office and this desktop download won’t disappoint. It will allow you to create spreadsheets, word docs, presentations, drawings and simple databases. You might even consider keeping it as you grow.

Cost $0

6th.
Setup chat, AIM, Skype and any other of the plethora of instant messaging tools. This will help you resist the need to purchase land-lines from the blood-sucking telcos.

Cost $0

7th.
Setup YouMail. This service will give your cell phone some class. I’m guessing it’s going to play double duty between your home life and your new business identity. YouMail takes your cell phone voicemails and emails them to you as MP3s. It also let’s you personalize the voicemail greetings so you can filter the call for a more professional greeting depending on which client or prospect is calling in. Goodbye generic voicemail messages!

Cost $0

8th.
Purchase a real accounting package like Quickbooks. Yes, I know there are tools like BlinkSale and others which you can generate invoices with, but Quickbooks is time-tested and at the end of the year your accountant will thank you.

Cost $180

9th.
Lastly, use BaseCamp to setup a collaborative environment between your internal team and your customers. BaseCamp is free to manage your first project on, after that you’ll have to pay a minimal fee to add more projects and features.

Cost $0 (at first)

There, that’s it! This is how we’d do it again in 2008. The combination of these tools and services will give your new start-up the legs it needs to move forward as well as a polished image which will hide the fact that you are poaching wireless internet and working in a nearby coffee shop.

Good luck and don’t let this shitty economy get you down!

Back in August I had the pleasure off hearing Jason Fried of 37Signals discuss 37Signal’s philosophies and methods. The presentation essentially followed the same script & theme which you can see here.

For those unfamiliar with 37Signals’ software and design principals here are a few examples to give you a flavor of their thinking:

• Less is more.
• Meetings are useless.
• Working remotely and collaborating is better then being in an office and interrupting each other.
• Chunk large projects into smaller bits which can be completed quickly.
• Focus on speed rather then perfection.
• Don’t do specification, wireframing or usability studies. They are a waste of time.
• Personas are bullshit.
• Invest in what doesn’t change like speed and customer service.
• Roadmaps and planning are useless.
• Morale feeds off progress.

Now, I’m a big fan of 37Signals and what they have done; however it’s a mistake for interactive agencies, web designers and developers to wholeheartedly adopt 37Signals’ ways of working without establishing a strong reputation first. It is key to point out that 37Signals is a product development company, not an agency focused on developing marketing sites or building custom client applications. 37Signals builds for 37Signals!

I asked Jason, “Why don’t you do consulting work or client work any longer?” His response was “it isn’t profitable compared to product development.” I’m sure he is 100% correct. The 12 person team at 37Signals is raking in millions of dollars in revenue each year. By contrast client work is time consuming, labor intensive and involves lots of education between both sides of the project. We are a company of 9 people and we haven’t even crossed the million dollar revenue mark yet.

Jason’s presentation did address several audience questions about client work. Which can be summed up as follows:

• Select your client’s carefully. Not every client is a good match.
• Train your clients on how you work, rather then how they expect you to work.
• RFPs and scope-of-work project estimations should be avoided at all cost because the written description can be interpreted differently depending on the reader.

37Signals originally started as a web design company and then they morphed into a product development company because the product work was far more profitable. Therefore I have to be critical of how their recommendations apply to us interactive agencies. Their advice doesn’t come from success in the client services area!

The ONLY way a client is going to be willing to accept those 3 points is if they know your agency’s record, and they RESPECT your abilities above all other agencies. Let’s use an example. If Widget Corp is looking for an agency to redesign their aging ecommerce site, and two other equal agencies are willing to bend to the desires of Widget Corp’s RFP, then good luck getting that project.

There is something to be said about standing your ground and holding true to your principles however at the end of the day if you don’t have revenue, then you don’t have a business. I’m not interested in being a martyr for the cause.

I’ve always admired the work of IDEO. They are a company which solves problems for their clients in a very fluid and evolving manner. They have put themselves in a position of respect, they do amazing work and I’m pretty sure they are VERY profitable. Any web company doing client related work would be well served to study the success of IDEO while blending in the philosophies of 37Signal’s product development methodologies.

At Imulus we plan on doing things differently. We’ll be proof that a interactive agency can develop great products while doing extraordinary client work. We don’t believe the two are mutually exclusive. Our position is the our brand of doing great client work and great product development will put us in a position of respect. This position will allow us to negotiate using the 3 points above.

This is our position and what makes Imulus unique in the realm of interactive agencies.