Cloud Consulting + Distributed Professional Services

May 27th, 2008 § 1 Comment

The Times recently ran an article by Michael Fitzgerald on the red hot cloud computing trend. Fitzgerald defined cloud computing to be “obtaining computing resources . . . from someplace outside your own four walls, and paying only for what you use.” The concept of cloud computing makes perfect sense: instead of paying for massive amounts of computing capacity to be ready for spikes in usage, site owners pay only for what they need, when they need it.

Fitzgerald’s definition illustrates the parallels between cloud computing and what we’re up to at KnowledgeBid as well as, in a larger sense, a growing trend in the professional services space. Like cloud computing services, KnowledgeBid provides services on an as needed basis, the difference being that instead of tapping into a cloud of computational power, KnowledgeBid facilitates access to a cloud of expertise and information.

A new lean breed of professional service companies is maturing with similar operating models, silently taking market share from the incumbent players. These firms have minimal office leases on their balance sheets and aren’t burdened with massive annual partnership payouts. They offer customized, lower priced services and often have broader offerings than their traditional competitors. The management of these firms plays a new and rapidly evolving role, combining matchmaker, headhunter, temp agency, accounting firm, compliance officer, and human resources department.

One of the hottest of these new breed is Axiom Legal Solutions, Inc. Founded in 2000 by Mark Harris and Alec Guettel and backed by Greenhill & Co., Benchmark Capital, and Panorama Capital, Axiom is disrupting the legal world by working closely with the in-house counsel at major corporations to fuel them with niche, qualified attorneys on a contract basis. Axiom “combines the flexibility of outside counsel with the best attributes of a sophisticated corporate law department”, collecting fees on attorney hours but without the weight of partner payouts and massive office leases. Axiom “is not a law firm” and “does not provide legal representation or advice” but does interview attorneys, hire them full-time, then place them directly with clients for specific engagements. Their clients include American Express, Bank of America, Cisco, Dow Jones, Goldman Sachs, Johnson & Johnson, New York Times, Nokia, Sun Microsystems, and Viacom, among others.

The most advanced segment of these new service providers is arguably the web development and design sector. Dominated by oDesk and eLance, these companies give customers access to a global network of developers, designers, and database architects. They don’t hire service providers directly but serve as a platform for clients to screen, interview, monitor and compensate service providers. These companies have seen explosive growth thanks to the web 2.0 boom. The chart above shows the number of hours worked through oDesk by month since 2003.

Running a similar model in the engineering space, Exponent, Inc. hires professionals on full time and staffs them with clients according to their specific needs much like Axiom. Exponent has been around in one form or another since 1967, and has morphed several times. It’s currently a publicly traded company and employs over 500 engineering and scientific professionals, covering 20 practice areas including biomechanics, buildings & structures, civil engineering, construction consulting, ecological & biological sciences, electrical & semiconductors, environmental & earth sciences, health sciences, chemical registration, food safety, epidemiology, biostatistics, computational biology, toxicology, mechanistic biology, exposure assessment, public health, industrial hygiene, industrial structures, mechanical engineering, materials science, statistical & data sciences, thermal sciences, and vehicle analysis. Exponent does have significant lease liabilities (~$5M in ‘07) but most/all is non-premium warehouse and laboratory space. The company saw solid growth vs the S&P last year.

At the end of the day these companies all provide value by making connections and managing relationships. As the world becomes more and more connected, I think this trend will continue. The professional services cloud will become more accessible, and the companies that facilitate access to it will gain market share at the cost of traditional professional service providers.

620,000,000 profiles

May 6th, 2008 § 2 Comments

I’ve recently been doing some analysis focusing on the growth rates of major social networks and resume databases (I’m saving major blogging platforms for another day, although I’m guessing there are ~400M blogs out there). For the purposes of this analysis I calculated the user profile CAGR for each major social network and resume database, assuming 1M profiles in the launch year and ending with the best estimate of user profiles today (May 2008).

The results show that there are nearly 620,000,000 robust user profiles among these services today, a figure that has grown at a 64% CAGR since ’95. Orkut has grown at the highest CAGR (231%) while MySpace claims the largest raw number of profiles (173M). The chart below nicely illustrates the social networking explosion staring in ’03, underlined by the steady growth of resume databases starting in the mid 90s. The exponentially higher growth rates of social networks can be attributed to the viral features that have come to define them. Traditional resume databases are useful but are generally non-viral so they continue to grow steadily. This analysis does not take into account spam and fake profiles and the chart massively simplifies the growth trends by retrospectively applying each company’s CAGR.

Investment Research + Massive Industry Shift

April 18th, 2008 § 3 Comments

I had the opportunity to present KnowledgeBid at the Investorside Alternative Research conference in New York last week (conference agenda), attended by an interesting mix of independent alternative investment research providers and buy-side folks. The investment research industry has undergone massive change in the last 10 years, much of which is a result of the information technology explosion, Regulation FD, and unbundled commissions. The dominant groups at the conference last week primarily fell into three categories: 1) expert networks, 2) data mining, and 3) research management. Very few, if any, new players are producing traditional research reports with buy/sell recommendations or general industry analysis. Even fewer are associated with particular trading desks, something that never would have been seen 10 years ago. The recent explosion of the alternative research space has in large part been at the expense of traditional sell side research.

Alternative Investment Research Market Size

The sell side and other large financial service players are now actively partnering with, investing, and acquiring alternative research operations. There has been an explosion of activity in the space in the last six months, part of a larger trend that has been emerging since Reg FD was passed eight years ago. I’ve aggregated major announcements and milestones below (let me know if I missed anything interesting).

Ribbit

December 20th, 2007 § Leave a Comment

There is some buzz this week about a company called Ribbit.  TechCrunch swallowed whole their marketing line of “Silicon Valley’s First Phone Company” while GigaOm spat it out, as he should have.  Their site is slick and the service looks interesting, but they are certainly not Silicon Valley’s first phone company.  Ribbit would probably counter that they are the first phone platform, but they’re not that either.  Most folks think Asterisk is pretty darn good in that arena.

We built our own VoIP platform for KnowledgeBid simply because we knew exactly what we wanted (trackable calls, authentication, land line phones, no per minute fees).  If Ribbit had been around 9 months ago, I’m sure we would have looked at the service, but I think that’s about as far as it would have gone.  Ribbit charges for outgoing land line minutes plus a monthly service fee, whereas the KnowledgeBid platform scales and now that we’ve built it, it’s virtually free for us to use.  I’m guessing many other VoIP application developers would find themselves in the same camp.  Flexibility and options are cool, but if you know what you need, you might as well build it yourself if you’re in it for the long haul.

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Andreessen: “If you can program it, then it’s a platform. If you can’t, then it’s not.”

September 20th, 2007 § 1 Comment

It’s not often that I disagree with Marc Andreessen, but his recent post on web platforms draws some pretty arbitrary lines. According to his definition of web platform, Craigslist, eBay, eLance and other web-based marketplaces are not web platforms, nor are any of the gazillion blogging platforms, not to mention payment platforms, video & photo sharing platforms, etc.

It’s no secret that Facebook’s recent explosive growth has in large part a result of their F8 platform, which allows outside developers to build applications using the Facebook API. Andreessen (a founder of Netscape, Loudcloud/Opsware, and most recently Ning, which allows users to make their own social networks) tries to clarify some of the resulting confusion surrounding the “platform” buzzword and describes three types of platforms that exist on the web but first states that, “If you can program it, then it’s a platform. If you can’t, then it’s not.“ However, much like F8, EC2, and S3 allow programmers to plug in and build on a service as they wish, sites like Craigslist and eBay allow non-programmer users to do the same. Further, placing an item on eBay is, techically, “progamming” eBay, as is placing a photo on flickr, putting this blog post on wordpress, or paying someone through PayPal…and the line between programmer and user is becoming thinner by the day (e.g. Yahoo! Pipes).

Not surprisingly, Andreessen’s Ning service, according to his definition, not only qualifies as a web platform, but is also a “Level 3″ platform, the only others being Salesforce.com, Second Life, and “sort of” Amazon (Facebook is only a “Level 2″). I think Ning is a great service, and Andreessen is clearly an amazing entrepreneur and writer, but these classifications seem arbitrary. “Platform” is being thrown around a lot these days, but this is likely in large part due to the explosion of flexible, adaptable web applications that let users and programmers alike manipulate services to fit their needs.

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