Four Minute Mile

Facebook and the Viral Nature of Social Networks and Communities

Sex sells...

Scratch that... Social Networks and Web Communities Sell.

Facebook's landmark deal with Microsoft (MSFT) placed a staggering value on the web's leading social network.  1.6% ownership acquired for $240 million -- that pegs Facebook's value at ~$15 billion.  That places Facebook's value as the 5th largest Internet company according to TechCrunch (see image at left).  If you haven't read up on this news, check out the write-ups on TechCrunch and The New York Times.

What's driving this madness? 

It's relatively simple... whether it's information or infectious disease, it spreads best in areas where people gather together.  And, where information flows freely and quickly, there's an opportunity to exploit it for commercial means.  The San Jose Mercury claims that Facebook currently boasts 50 million users and pundits suggest that 300 million could be within reach in a short period of time.

The obvious play is to monetize the traffic with context-sensitive promotions (a la Google Adwords (GOOG)).   But, Facebook doesn't stop there... founder Mark Zuckerberg wants Facebook to become the "Social Operating System for the Internet".  That's a tall order, but he's not the first Harvard drop out with such an expansive vision.  Ironically, Bill Gates built Microsoft on a similar vision of platform dominance.

With all of that said, some are skeptical that Facebook's brand of social networking will ever make money.  eWeek reports that Zuckerberg took a beating at The Web 2.0 Summit.  Zuckerberg cited product development and hiring as his biggest challenges... building the revenue model did not appear top of mind.  And, one only need look back a few days for headlines on eBay's write down of their over-valued Skype asset.

Community and Social Networks as Business Platforms

Regardless of how the Facebook tale unfolds, community and social networks can be viral and valuable business platforms.  The power of networking people and communities together to share ideas, best practices and know-how has been around for a long time.  Universities, religious organizations, think tanks, trade show operators and others have been at it for a long time.

KACE has been actively promoting the benefits of community-driven features within its Server and Desktop Management Software products for some time.  In July 2007, KACE acquired AppDeploy.com.  AppDeploy is the Internet's largest free online community of application and computer administrators.  This merger sparked the continuous development of AppDeploy's online community while integrating its extensive deployment knowledge-base directly into the KBOX family of appliances in the form of an exclusive feature called AppDeploy Live.

With over 18,000 registered members and more than 180,000 unique monthly visitors, AppDeploy.com has become a proven and respected source for users to share their own in-the-trenches advice about complex software deployment issues -- saving users precious time and money.  KBOX customers benefit in unique ways as well.  As the leading systems management appliance, KBOX administrators are now able to directly access context-based help and insight from AppDeploy directly from within the KBOX console.  Rather than searching the web high and low for valuable technical notes and information, they have ready access within the tool that they're using to do their job.

"AppDeploy.com has been an essential part of almost every package that we've managed over the past two years," said Christopher Blake, workstation administrator at Benchmark Group. "I'm not sure which is more invaluable: 'KACE's KBOX appliance or AppDeploy! AppDeploy and the community of contributing IT professionals make my job much more manageable."

"Stumbling across AppDeploy.com was one of the most productive discoveries we've made," said Leon Hewitt, systems engineer for Curtin University of Technology in Western Australia. "Because the Website is so incredibly easy to navigate, I'm able to quickly search and find installation solutions for most applications from command line switches to MSI modifications to registry fixes, AppDeploy has it all. AppDeploy is by far the most relevant and time saving resource for any technician involved in application deployment."

Facebook may have cornered the market for the "Social Operating System".   However, KACE has successfully demonstrated that similar principles of community can revolutionize the customer experience within the Server and Desktop Management Software market.  Building a strong community is a great way to fulfill our vision to "help administrators from all backgrounds get their arms around what can be a technically difficult subject", said Bob Kelly, founder of AppDeploy.com and senior product manager at KACE.

Old Guard or Innovator? It's Easy to See.

It turns out that it's a lot easier to recognize things that are moving than things that are standing still.  There's an interesting blog entry on the topic in Cognitive Daily.  In fact, according to the referenced blog by Dave Munger:

"We can recognize the faces of our friends very quickly from just a snapshot. Within 150 milliseconds of being flashed a photo, brain signals respond differently to photos containing animals than photos with no animals. We can categorize scenes as "beach," "forest," or "city" when they are flashed for even shorter periods.

But we also get a great deal of information from the motion of people and animals. We can identify our friends and family members just from a point-light display of them walking. We can also detect the emotions of point-light faces, and even the species of point-light animals."

Malcolm Gladwell's New York Times Number One Bestseller Blink (see Wikipedia or the Official Site) talks about a similar concept called rapid cognition which is the ability to make determinations near instantly often with a high degree of accuracy based on very little information.   For example, an expert on a particular artist may judge an artwork as masterpiece or fake with just a quick glance.

So, what's this got to do with the market for Server and Desktop Management Software? 

Well, I'll argue that one can quickly recognize rising star companies by looking at just a few data points -- particularly when you can also measure the movement or success trajectory of the company as well.  Companies like Salesforce.com (NYSE:CRM), Google (NasdaqGS:GOOG), VMWare / EMC (NYSE:EMC) and Facebook -- after all -- were all relatively easy to spot as up-and-comers before they hit the mainstream of American consciousness.

Server and Desktop Systems Management is a relatively mature industry that's outside of the mainstream limelight; however, it's an industry where a new class of competitors is moving quickly to innovate and grab market share from the slower-moving, old guard.  Incumbent players like LANDesk/Avocent (NasdaqGS:AVCT), Altiris/Symantec (NasdaqGS:SYMC), HP (NYSE:HP), IBM (NYSE:IBM), Microsoft (NasdaqGS:MSFT), BMC (NYSE:BMC), CA (NYSE:CA) and others are not innovating rapidly.  Against this relatively motionless backdrop, it's relatively easy to spot the companies that are making a difference and are shaping the future of Server and Desktop Systems Management Software.

Network Computing's 10 IT Management Companies to Watch published in 2006 and updated in 2007 offers an interesting guide post to the rising star companies in this space.  Companies like KACE and Klir Technologies are innovating and winning customers with innovative, new product, ease-of-use developments, rapid deployment, pricing, packaging and service advantages. 

KACE and Newton's Second Law of Motion

Newton's Second Law of Motion states that "The rate of change of momentum of a body is proportional to the resultant force acting on the body and is in the same direction" (see Wikipedia: Newton's laws of motion).  KACE has built a leading position in the market for Systems Management Appliances.  The actions that we're taking to innovate and create value for our customers are delivering an equal positive reaction in the marketplace.  It is this movement in the market that's palpable, contagious and indicative of the greenfield opportunity available in this market.

KACE ACTION

1. Focus on a Simple Value Proposition:
   Since inception, KACE has been focused on saving our customers (the actual users of KBOX) a great deal of time while simultaneously saving their companies money.  How do we do it?  First, we focus on ease-of-use as a competitive weapon.  We use everything at our disposal to make sure that our solution can deploy in a day and customers can get value from our solution immediately.  Second, we deliver a suite of tools that is all-in-one and also offers our customers an immediate ROI (e.g., computer inventory, software inventory, patching, application deployment, security and compliance management, help desk, asset management, provisioning and so on).  And, finally, we provide all of this at an initial price point and TCO that can be 1/3 the cost of our competitors.
2. Appliance-based Software Delivery:
   We deliver our solution as an all-in-one appliance (AbSD).  That single point delivers a powerful punch in the market.  "You mean, all I have to do is plug in this box, make a few configuration entries and I've got an enterprise class systems management platform at my disposal?", our customers ask.  The answer is yes.  Deploy in days not months, with no dependency on Microsoft SQL Server or Oracle or any of the hardware manufacturers outside of the KBOX itself.
3. The Power of a Professional Community:
   KACE merged with Appdeploy.com about six months ago.  Appdeploy boasts hundreds of thousands of unique visitors and it's the leading destination portal for Windows systems administrators.  These users exchange information on application management best practices.  They help each other out with tough technical problems.  This powerful community is now available directly from within the KBOX administrative console via AppDeploy Live.  So, as administrators navigate the KBOX UI to accomplish day-to-day systems management tasks, they're able to browse context-sensitive information syndicated from Appdeploy.com to the KBOX in order improve their knowledge and, ultimately, help them save time a tremendous amount of time.
4. Virtual Support:
   VMWare/EMC, Xensource/Citrix (NasdaqGS:CTXS), Virtual Iron and others are riding an enormous wave of change in the server and desktop operating system market.  I've written on this before in my blog entry "Can Microsoft Survive Vitalization?"  KACE is leading the market with some innovative virtual management capabilities such as vState Management.  And, we've been at it for years.  Some of our largest customers are managing thousands of virtual servers today with KACE Virtual Management Technology (see our whitepaper).  Staying on top of the new technology requirements that face virtual systems management is a specialty of ours and it's a critical value add for our customers.
5. KBOX 1000 Systems Management Appliance Version 4:
   Of course continued core product innovation matters too.  Next week, KACE will release it's KBOX 1000 Systems Management Appliance Version 4.  You'll have to wait until next week to hear the details.  But this release is a major leap forward that marries advanced ease-of-use and sophisticated server and desktop management capabilities.  The product has a wow factor when you see it.

MARKET REACTION

1. Press and Award Recognition:
   KACE has seen impressive uptake in 2007 within the press and analyst communities and the award circuit.  Recent recognition as Most Innovative Product by Windows IT Pro at the Microsoft Management Summit illustrates the type of recognition that our KBOX products are receiving in the marketplace.   
2. Growth Rate and Sales Cycle:
   KACE has enjoyed an average quarterly growth rate of 40% since inception -- that's per quarter.  Moreover, the sales process averages about 1/4 the time that one would expect for a typical enterprise sales cycle.  Customers see the product and it's immediately recognizable as necessary, valuable and different from the rest.  And, with such low TCO, customers can make a quick buying decision.
3. Customer Acquisition and Account Expansion:
   With over 50 new customers added in Q3 plus another ~50 repeat customers, the message is clear.  KBOX is an attractive alternative to the old guard -- and its attractiveness grows with time as customers engage with the product.  Hundreds of customers and 12 straight quarters of aggressive growth are both indicators of a company on the move.  See our Q3 Update release on the KACE website. 
4. International Expansion:
   Word is getting out on a global level.  KACE built its reputation and momentum in the US.  In 2007, our footprint has grown to include customers all across Europe and throughout Asia Pacific and the Middle East including India, Malaysia, Pakistan, Singapore, Brunei and the United Arab Emirates.

There is no doubt that it is a lot easier to recognize things that are moving than things that are standing still.  KACE is moving quickly in the market to prove that Server and Desktop Management software can deliver immediate ROI to businesses without costing a an arm and a leg and without requiring multi-month consulting and implementation cycles. 

The difference is clear and it's in the box.