Recurring Revenue

Today is going to be a good day. To quote whoever that guy was in Beck’s “Loser”: “I’m a driver, I’m a winner. Things are gonna change, I can feel it.” Thanks for the kind thoughts about the midterm yesterday. I think it went pretty well.

Today is a day for me to catch up. I have a ton of stuff to write for a project I’m doing on web services. It’s a pretty good team of folks: two technical Sloanies (including myself) and two MIT undergrads. One guy interned at Lotus; I was at another big software company this summer. Our mission: Where are the money making opportunities around web services? And are any of them sustainable as business models?

Originally I thought we were going to have some challenges in quantifying some of the more novel parts of the value chain. Then I saw this article about Microsoft’s rates for programmers to incorporate Hailstorm (also known as .NET My Services). What I find interesting is that these rates are much higher than the previous cost of entry for writing for Microsoft’s platforms, which was the license fee for a copy of Visual Basic. Apparently software as a service means billing the developers annually, not just the users.

I think this may fragment the development community. There are a lot of small developers who do this stuff for love, not money, who won’t be able to pay $1000 a year to include the My Services functionality. There are probably a lot of large developers who are prepared to ante up, but it’s not just large developers who make a platform. Where would the Windows platform be without WinZip or WinAmp or any of a dozen other indispensible software products?

Except. .NET is a software web services platform. And maybe the assumption is that providing a billable service requires a certain size of developer — and that the small developers won’t need to play on the platform. Somehow I don’t think that’s right.