Sramana Mitra: Let me just comment on it before you go on. I think the framework that you’re setting is interesting because we have seen this in action especially over the last decade where there were a lot of functions that were getting outsourced to the various outsourcing providers and that are still being outsourced, but to SaaS vendors. That’s the evolution that I think synthesizes what you’ve said so far. It’s also interesting that it ties in to your own story. You took a function that is a do-it-yourself function where people were trying to cobble together internally and built a solution to it.
Sebastian Stadil: You’re absolutely right. Entrepreneurs today, to be able to spot opportunities, need to look at the different activities that an enterprise does and try to figure out whether that activity has two properties. One is, is it not revenue producing? Two is, can its function be performed through software? If you look at it in hindsight, that’s exactly what Amazon did. The provisioning of virtual machines is something that doesn’t get customer preference at Walmart. When you go and shop at Walmart, you don’t care how they get their virtual machines. That’s an activity that satisfies the first condition. The second condition is, can it be done as a software? That’s what they did with UC-II. It’s a product that allows you to get virtual machines on demand. If I were to start all over, I would try to spot those activities that satisfy those two conditions.
Sramana Mitra: We have a methodology that we use quite aggressively and continuously in our program, which we call bootstrapping using services. We very often see services entrepreneurs – people who are doing contract software services on a particular skill set area or a particular process –getting close to business problems and customers. As a result, they learn about those domains and they step back and productize those and build more scalable businesses out of it. I think this whole discussion we’ve had so far is yet another validation of that strategy.
We strongly encourage entrepreneurs to practice this for many reasons excluding the fact that it has certain advantages of early cash flow that allows you to bootstrap building a product. A lot of people working in services organizations are in very good vantage points to know what those problems are. Don’t you agree?
Sebastian Stadil: That’s true but there’s one caveat, which is services organizations have an incentive to continue selling services.
Sramana Mitra: They may, but the entrepreneurs may not. We’re not talking about services companies wanting to do this. What I’m saying is that people who are on projects inside of services organizations are close to domain specific problems are in very good positions to identify what these are.
Sebastian Stadil: That’s spot on. If an entrepreneur works in a services organization and they see a lot of labor being done by something that a product can do, then that’s a fantastic opportunity for a company.