There is a NYTimes story today on the rise of “cloud computers” and net-tops like the Asus EEE. I have called them Fireboxes in the past myself, but cloud computer would work! Here are some reasons I think why this trend is inevitable.

1. Convenience: On any kind of decent broadband connection, launching a cloud application is faster than launching the desktop equivalent.The fact that you could do that from just about any machine is icing on the cake. On a regular basis, I now work from 4 different machines: 2 desktops and 2 laptops (see reason 3 why).

2. Lazy Computing: flossing teeth, backing up files - I don’t want to diss those oh-so-disciplined folks who do these regularly, but alas, I am not one of them. My single biggest reason for switching to cloud applications is that I never have to do a backup ever again - that’s what data center administrators are for. I was reminded of it twice recently, because two laptops decided to crash on me suddenly. That brings up the third point.

3. Resurrection of old computers: I actually like to use old computers. Partly it is to force myself to experience our own software in fairly challenging circumstances. The reason reason is that there are plenty of unwanted old computers around, so using old machines you are always in a state of super-abundance. In fact, one of my laptops is a “loaner” from a friend who was going to send it for recycling - Firefox works great on that one!

One consequence of using older computers is I encounter frequent crashes. But it is not just old computers that crash. Last week, a brand new loaner given to me by our sysadmins in our Chennai office had a disk crash too. Since I don’t store anything on the local machine, it was a 2 minute operation to swap it with another laptop and I was on the cloud again.

Try moving yourself to the cloud entirely. I bet you won’t ever go back!

(Update: Just after I posted this, I find that Mike Arrington wants a dead simple web tablet. I would love to buy one too!)

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I was recently interviewed on Fox Business News. The anchor Liz Claman told me one of the things that interested them about Zoho/AdventNet is our recruitment model. It is a subject I am passionate about -in fact, I spend about as much time on it as our products or technology. After all, AdventNet has about 700 people, and we are hiring at a steadily increasing pace, so recruitment, motivation and retention are important topics for us.

I was talking to a partner at a successful venture capital firm a few weeks ago (no we are not raising money!), and the subject turned to recruitment. I told him we don’t really value fancy degrees and famous schools. He was surprised - perhaps because of my own educational background. I asked him “Consider all the partners in your own firm and similar firms like yours, how many of them come from fairly unremarkable academic backgrounds?” I stressed that my argument was not that every partner comes from unremarkable background, but enough of them do, making academic background a poor way to screen for partners in venture capital. In fact, the reality of venture capital, as with any demanding field of human activity, is that most of what you learn you learn by doing. As the management philosopher Peter Drucker has observed, “Our most important education system is in the employees’ own organization.” Paul Graham has made similar observations about the academic backgrounds of founders of Y Combinator start-ups - in fact, Paul makes a stronger point that people coming from humbler schools seem to try harder to succeed.

The trouble has been that while most people understand, even readily accept that observation, they have trouble formalizing it, and more importantly, acting on it. In our own case, this observation dawned us slowly over the years - one of the benefits of being in business for a long time is you have the time to learn obvious things slowly.

Our company in India always faced trouble recruiting, because most college graduates, particularly from well-known colleges, would prefer big-brand-name firms. Simply out of sheer necessity, we started to disregard the kind of college a person graduated from, and the grades they obtained. In India, that task was made even easier, because much of the Indian industry is boringly conventional, and job advertisements that specify things like “Must have a minimum of 80% average in college” are fairly common (so if you got only 79%, don’t bother to apply). As a result, we get a lot of the arbitrarily-cut-off category applicants. What we found over time was that there is a lot of really good talent in that pool, which the industry had overlooked. Based on a few years of observation, we noticed that there was little or no correlation between academic performance, as measured by grades & the type of college a person attended, and their real on-the-job performance. That was a genuine surprise, particularly for me, as I grew up thinking grades really mattered.

Over time, that led us to be bolder in our search for talent. We started to ask “What if the college degree itself is not really that useful? What if we took kids after high school, train them ourselves?” I talked to a lot of people internally, and one of our product managers introduced me to his uncle, a college professor, who he thought might be interested in hearing me out. As I shared our observations on recruiting, he shared his own experience in over twenty years teaching Mathematics and later Computer Science. It turned out we shared a common passion. He joined us within a month to start our “AdventNet University” as we very imaginatively called it. This was in 2005. He went to schools around Chennai to recruit students. So as not to distract anyone from their existing plans, we waited till the school year ended, went to several schools to ask for bright students who were definitely not going to college for whatever reason (usually economic). We then called on those students and their parents, and explained our plan. We started with an initial batch of six students in 2005, who were in the age range 17 or 18.

That proved to be an outstanding success. Within 2 years, those students would become full time employees, their work performance indistinguishable from their college-educated peers. We have since expanded the program, with the latest batch of students consisting of about 20, recruited not just from Chennai but smaller towns and villages in the region.

One question that comes up often: if you don’t look at formal credentials, what do you actually look at? This is a surprisingly difficult question. In fact, doing full justice to it would take me a series of posts, and take me into some deeply philosophical territory, which I will attempt some other time. At one level, the answer is very simple (”go by gut feel, i.e use your human gift of judgment” - yeah, I know, what a cop-out), but at another, it is exceedingly hard. The difficulty comes from the simple observation: any formal rule-based system involving human beings is very easy to game and will be gamed. More on that later.

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My favorite grocery store is Trader Joe’s. As I was waiting in line at the cash register today, I saw this message, handwritten on a black board:

High quality products
Ridiculously low prices
But talk is cheap
We invite you to shop and compare

Normally this kind of thing would sound, well, a bit cheesy. But at Trader Joe’s it somehow fits perfectly, because they actually live up to it, day in and day out. I am always surprised by the quality of the goods on offer there, and the prices at which they are offered. And they consistently come up with surprises, making it even fun to shop there - I say this as a person who absolutely hates shopping.

They are such a unique grocery store that they even have a fan site, TraderJoesFan.com - when was the last time you heard of a grocery store with a fan website?

At Zoho, our guiding philosophy has been “Quality products, Low Prices”. Trader Joe’s has been a continuing inspiration, every time I shop.

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As we announced yesterday, Equation Editor (with LaTeX support) is the latest feature in Zoho Writer. This one has deep personal relevance to me. My first “programming language”, in the sense that I wrote a lot of code, was actually LaTeX. It is a programming langauge for accurate typesetting of documents, that in many ways anticipated developments like HTML/CSS.

As a graduate student at Princeton, I spent countless hours writing and rewriting papers for publication using LaTeX, first with inputs from my advisor, and later from anonymous reviewers at publications like The IEEE Transactions on Information Theory. Of course, my entire PhD thesis was written in LaTeX as well. The most important aspect of LaTeX I loved was its easy facility with equations. You would type in something like (Ampere’s Law - thank you Wikipedia!)

\Delta  \times  \mathbf {B} =  \mu_0  \mathbf {J} + \mu_0  \epsilon_0  \frac{\partial  \mathbf {E}}{\partial t}

and the LaTeX compiler would generate

Or the integral form of Ampere’s Law:

 \oint_{\partial S}   \mathbf {B} . d \mathbf {l}  =  \mu_0 I_S + \mu_0 \epsilon_0   \frac{d {\Phi}_{E,S}}{dt}

It was pure magic to see the compiler generate such beautiful forms. I spent four years of life with equations like that - pretty much every section, every page in my thesis had them. As a graduate student, I used to wonder if such equations could be generated via a friendly user interface - keep in mind that MS-DOS still ruled the world at that time and graduate students like me had Sun workstations. I myself had little interest in software at that time (I was going to prove theorems, so I looked down on programming as a lowly activity!) so never pursued that thought further. If someone had predicted at that time that I would end up founding a software company one of whose key products is a word processor, and LaTeX would play a role in it, I would have just laughed the idea off as absurd or in technical terms, “of vanishingly small probability”, a phrase that sticks in mind after seeing those epsilons and deltas (or \epsilon’s  \ and  \ \delta’s in LaTeX terminology!). I used to practically dream in epsilons and deltas during that period - so many of the mathematical proofs depended on them being close to but not quite zero. 

I am very happy to see the Equation Editor in Zoho Writer give shape to that user interface idea. There is a lot more potential in typesetting using LaTeX like ideas, and you will see us pursue them in due course.

Thinking back, what is surprising to me now is how little of my PhD I remember. I retrieved my PhD thesis from its long-forgotten closet, dusted it off, and it is all Greek to me. I can scarcely even believe it is my own work I am staring at. I used to be really, really passionate about proving theorems, so it seems even stranger that I would just completely abandon it. The only thing I would have gotten right with all my PhD training was to recognize that vanishingly small probability events can still happen.

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Lately, I have been thinking about advertising - no, not as a business model for Zoho, advertising and work-oriented software don’t mix, in my opinion - but from the point of view as an advertiser ourselves, again not primarily related to Zoho. AdventNet, the parent company of Zoho, uses a variety of marketing channels, ranging from trade shows to search advertising, to popularize our software products. What we have noticed is that the ROI of internet advertising, outside of search, has been dismal and getting worse. I was reminded of this when I read the post by Jason Calacanis on falling advertising rates in social networking sites.

But this trend extends far beyond social networking. As a WSJ Online and NY Times online regular (30 minutes a day), I can safely say that I don’t recall any of the ad impressions on those sites in months. No doubt they have always been there, but I just can’t recall any. In contrast, I have watched CNN perhaps a total of 1 hour in the last 2 weeks and yet, I can recall at least a couple of ads from CNN. What makes TV advertising so effective is that it is so intrusive. In the other end of the spectrum lies search ads on Google, which has access to the most distilled form of user intent available, making it possible for ads on Google to almost become content.

Where in the spectrum do other forms of internet advertising lie? By their nature, intrusive ads on the internet don’t work - the user simply clicks away. Even when the prospect of some form of compelling content forces the user to stay (pre-roll ad on internet video, for example), pretty quickly users figure out they can switch to another browser tab until the ad runs itself out and the content becomes available.

Personalization and micro-targeting are thought to be the answer to this problem, but I am not persuaded. Let me give an example: let’s say I list reading & economics as my interests in my profile somewhere that is available to advertisers. Let me be even be more specific and list Austrian School economics. So could a publisher micro-target me to try to sell me a book? Here is the problem they would face: there are a number of specialized blogs that offer outstanding content on these subjects, and I am very likely to hear about books from these sites organically. People who post on these sites (both authors and commenters) are likely to be far more relevant than any computer algorithm could ever be in targeting my interests. So a prospective book publisher in these topics is better off providing real content to these sites to seed user interest than to run banner ads all over the place. In fact, in at least one case, the publisher of such books runs a fairly active content site, and I end up buying the books because I like the content offered in the site.

So here is what is going on in a nutshell: targeted advertising is competing for attention with targeted content, and content would win that contest every time, as long as intrusion is not possible. The only way for targeted advertising to win is to actually become content itself. That explains why Google search ads are so effective: they are a form of content.

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Recently, we announced pricing for Zoho Creator, which we patterned after Zoho CRM, blithely assuming that since Zoho CRM pricing was exceptionally well-received - indeed, I confidently predict that within 5 years, no one will be able to charge $50-100 per user per month for CRM! - we will do fine with Zoho Creator as well. Indeed, we started receiving customer orders literally within hours of the pricing announcement.

While we provided a Free Edition in Zoho Creator, what we didn’t realize, of course, was the diversity of our user base in Zoho Creator, the most passionate & vocal among them called the pricing Zoho’s first strategic blunder. We had non-profits, independent developers, casual users and so on for whom the Free Edition wasn’t sufficient, and the pricing we announced was just not right. In hindsight, we should have known this: even within AdventNet, Zoho Creator is used in ways that we didn’t anticipate when we developed it. The foremost example is apps being used to organize internal events like cricket matches or movie outings, for collecting information on various participant preferences and so on. These kinds of applications are simply not worth paying for.

We apologize for missing key parts of the Zoho Creator constituency with our first stab at pricing. Now we have revised it significantly, and put a second draft, explicitly recognizing the diversity of needs. I have posted it in the same forum thread and summarize below.

I want to emphasize our commitment to a) keeping a generous free edition so the cost of entry is zero b) affordable pricing, designed to vastly lower the cost of IT to business customers c) Running our own business efficiently enough to turn a profit with (a) & (b). At AdventNet, we have a 12 year history of doing just that, and we have grown organically to this level.

Zoho Creator Free Edition & Independent Users Edition: it is based on personal user accounts, and it will have a limit of 5 free applications and a total of 200 MB of data and a bandwidth limit we are working out, with no shared user limit. We expect to revise the data/bandwidth limits upwards based on usage experience and as prices for these fall. The applications can be private or public. Developers can use this edition to test out their ideas free.

In practice, this will work much like how Zoho Writer or Zoho Sheet personal editions work today, with no sharing limit for number of users. They difference is that there is no administrative relationship among users, while an organization account provides for such administrative relationships, and therefore policy enforcement.

Beyond the free limit, pricing will be based on per application basis, because number of users is not tracked.

Zoho Creator Business Edition: it is based on organizational accounts, as provided in Zoho Business, a limit of 5 free applications & 200 MB of data, with monthly bandwidth constraints to be specified. It will have a free user quota as well, based on Zoho Business Free Edition limits (likely to be 10 persons in an organization). The key difference is that unlike Free Edition, it will come with administrative policy options, and potentially some extra features to be decided in future.

Beyond the free user limit, pricing will be based on number of users basis, with bands of users. We will start at $5/user/month, and drop it to $3/user/month when we reach 100 users, with volume discounts. We will also announce a bundled package pricing along with Zoho Business when Zoho Business reaches general availability.

Once again, I would like to thank everyone who provided feedback. We don’t always get it right at first, but with your help, we will!

UPDATE : Here’s the new pricing model for Zoho Creator - http://sheet.zoho.com/publishrange.do?id=1427f0d4768347bb628851c41b67ad0c

UPDATE :
New Pricing Page for Zoho Creator & a Pricing FAQ.

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By now it is conventional wisdom to say that there was an IBM Era of computing, then a Microsoft Era, and now we are in the Google Era. In this post, I will explain why Microsoft was not the “next IBM” and why Google is not the “next Microsoft” - there are significant qualitative differences among them, quite apart from their status as the dominant, era-defining players. Understanding that qualitative difference is crucial for third party vendors  like Zoho to thrive.  I was reminded of this because of the IBM/Google partnership unveiled today (via Dan Farber & see also Nick Carr). As an aside, I have coined a kind of Moore’s Law on these computing eras:

The dominant technology company in a generation reaches its pinnacle at about half the size of the dominant company in the previous generation, and it retains its dominance for half as long.

The original IBM mainframe era (in contrast to today’s IBM) was one of highly closed systems. IBM was not just the dominant player of the era, IBM was pretty much the entire ecosystem. There just wasn’t a lot of room for third parties to play in. Third parties were marginalized companies surviving on IBM’s sufferance or professional services companies (like EDS) or were providers of cheap replacement parts, which felt vaguely dirty, borderline legal (consider today’s third party print cartridge situation as an analogy). 

In contrast to IBM, Microsoft was far more open, which indeed was the original reason for their success. Microsoft unleashed what I would call the semi-open era of computing. The acronym ISV (independent software vendor) came into its own during the Microsoft era. Indeed, Microsoft encouraged ISVs, provided fairly good support - up to a point. The defining test for Microsoft was Netscape, the most prominent ISV that got on the wrong side of Microsoft. Microsoft failed the test by winning; their victory over Netscape forever established their reputation in the industry, a reputation that finds its echo in Yahoo’s cultural resistance to being assimilated. Indeed Nick Carr alludes to that defining Netscape moment in his title “Is Office the New Netscape?”

Now the present Google era. Google has the genetic and cultural advantage of being born in an open source world, with a business model that is aligned with rather than antagonistic to open source. It reflects in how they conduct their ecosystem initiatives. Google Gears comes with one of the most liberal open source licenses (BSD license),   and we at Zoho particularly appreciate the support provided Google’s open source teams. In our extensive interaction with them, we could tell how they truly get the value of openness. That openness is going to be the underpinning of the Google era of computing - I hope they never forget that!

OK, that brings me to our own position as an independent vendor. At Zoho, we fully embrace the fact that we play in a Google world. We also fully recognize that opportunities for independent ecosystem players expanded massively during the Microsoft semi-open era compared to what existed in the IBM era, and they will expand even more significantly in the Google open era. Our goal at Zoho is to be an innovative, vibrant, profitable player in this new era. As much as Microsoft utterly dominated computing, vendors such as Adobe and Intuit built thriving businesses (still thriving!). Even more opportunities of that kind exist for independent ecosystem players in the Google era.

That qualitative difference between IBM, Microsoft & Google (seen during their respective pinnacles) is why we see a huge opportunity at Zoho. Our competition with Google is only a part, an important part to be sure, of what defines us. Cooperation with Google, embracing their open standards, is going to be just as important for our success.

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Randall Kennedy of ZDNet makes a bold prediction that streaming office will kill cloud based alternatives like Google Apps and Zoho. CenterNetworks has a somewhat different take. Let me first explain what is meant by streaming office: the server splits the code of an existing desktop application like MS Office into chunks, streams the code to the client as needed,  which the client executes in a virtual machine layer. I would call it an “appletized application” (though there is no Java involved in this).

So is that model going to finish off web application suites like Zoho? Call me hopelessly biased or hopelessly delusional but I vehemently disagree (surprise!).  Let me list some reasons.

1. One-time loading isn’t 

Proponents of such systems always say “it is only a one time download”. Yes, it is a one time download, but for each PC you use, and often each browser you use as well.  Combine that with browser version upgrades, VM upgrades & application upgrades, and you are going to be loading the application code much more often than is comfortable. Such upgrades have a way of happening just when you want to get in/out quick to get something done. Experience with Java applets and Java webstart has shown that this is true.

With HTML/JS apps, we actually assume that code will be downloaded practically every time, and architect it to work fast in that case. We measure code in kilobytes.

2. Light footprint of web apps doesn’t preclude rich functionality 

Kennedy makes the point that only streaming office could deliver full office functionality:

Full Office Functionality - MAV encapsulates the entire sequenced application. This isn’t some “web-based” Office knock-off. It’s the real deal: Microsoft Office in all it’s sophisticated, class-leading, standard setting (flaunting?), enterprise desktop-dominating glory.

Mike Gunderloy of WebWorkerDaily observed how rapidly online suites are evolving. I have argued that online application suites are well on their way to matching and exceeding the functionality of desktop applications. Our recent support for VB macros in Zoho Sheet is an example of the rapidly evolving functionality. By the way, we run the macro securely in the server, the best place to execute such code. Due to intelligent partitioning of the application, online suites are going to retain their ease of use and lightness advantages, while advancing in terms of features.

3.  Streaming Office assumes a Fat Client PC

I am typing this post in a fairly low-end machine, which can run Firefox well, but cannot do much else (I call it a Firebox). In fact, I often use fairly old PCs with Firefox to torture-test Zoho and loudly complain to our developers to fix this or that. My personal best on that score is a Windows 98 PC (amazingly it runs Firefox well!) we have lying around here, and yes Zoho suite runs acceptably on that machine. I have cheap friends who still have Windows 2000 PCs at home (which again runs Firefox well!) and use it as their browsing machine. Good luck running streaming office on any of these machines. This is not a trivial issue. The web computing model has given a new lease on life for old machines, and people aren’t going to upgrade their hardware just to run streaming office. The reception for Windows Vista, which essentially requires the purchase of a new PC, shows that this problem is real.

Let me make a bold prediction of my own: streaming office will fail. Note that I am not talking about MS office per se here - I am suggesting that the streaming incarnation of it will fail. Web suites, including Zoho, will succeed in carving out serious market share. Within that space, our own goal is sustainable, profitable market share, that keeps us vibrant and innovative. With our breadth and depth of applications, we are well on our way.

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A long time ago, I had a boss who did his main programming in Excel, except that he never thought of it as programming. He could do absolute magic with Excel, and would challenge engineers to match his productivity with the hottest programming language of that time, C++. Inspired by him, I even thought up my first start-up idea: building Excel based business applications. Just a few weeks ago, one of my investor friends was showing off his collection of Excel macros, with as much pride as he would show off his wine collection. Knowing people like that is why I am personally so thrilled with the VB macro support we unveiled in Zoho Sheet this week.

Excel macro programming (basically VB packaged with Excel) is perhaps the most under-rated languages out there. It embodies advanced functional programming techniques, yet remains extremely accessible. People who never think they have any interest in programming nevertheless churn out amazingly complex “personal apps” on Excel.

Zoho Sheet brings VB macros to the cloud. We have also launched a Wiki for people to share their macros, and learn from other people’s work. This is only the first step for us. We intend to support VB macros across the Zoho suite, particularly in Zoho Writer, and Zoho Creator. Eventually, our goal is to enable VB applications to move to the cloud easily.

Our support for VB macros is an illustration of the growing sophistication of online applications. The rapid evolution will continue, and within one, perhaps two, years online apps will look even richer than desktop apps in terms of functionality, while retaining their inherent collaborative advantage.

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Mike Gunderloy at WebWorkerDaily has a great post on continuous innovation in online office suites. Both Google & Zoho are moving at a rapid clip. The root cause of this faster pace of innovation? Software development productivity.

We have experience in both the traditional and cloud model of software delivery, so can say with confidence that the cloud computing model enables a quantum leap in software development productivity. Such productivity gains for producers translates into faster innovation and better quality. And as I argued in my previous post, the reduced friction of lower switching costs in the cloud computing model will work to reduce prices as well.

Projecting this productivity advantage forward, I am confident in predicting that within a year or two, online suites will overtake desktop software in terms of features and functions. It won’t just be the Zoho or Google suites that would get there, perhaps even new companies that are as yet unknown (I am assuming Microsoft already has its cloud service coming out!). Conventional wisdom holds that online suites will forever be a lightweight alternative, but I believe that will be turned on its head.

Where do these productivity gains come from? I will address that in a separate post - there are numerous disparate sources that aggregate into a vast gain.

This is great news for consumers, even for the ones that don’t switch to the cloud, simply because of the pricing pressure it will bring. Like the open source competition which preceded and even enabled the cloud computing revolution, this competitive dynamic is fundamentally different from the one that Microsoft has faced before.

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