Andreessen: Innovation Is Humming


Ten years ago, programmer Marc Andreessen became a tech icon when the Web browser company he co-founded, Netscape, went public. The IPO made the 15-month old Netscape a $1.07 billion company and ushered in the advent of the dot-com boom and the Internet age in one fell swoop. Netscape was all but run out of the business by Microsoft (MSFT) and its Internet Explorer, and Andreessen, now 34 years old, has shunned the media spotlight, no longer donning the covers of Time and other magazines or headlining the conference speaking circuit. Netscape was eventually bought by AOL and later closed down when newer versions failed to gain traction.

But don't let the retreat from the public eye fool you. Andreessen is busy as ever and is still smack in the middle of where the Web is going next. The Midwest native spends most of his time as chairman of Opsware (OPSW), which went public as Loudcloud in 2001.

In contrast to Netscape, Opsware had to cut its offering price in half to even make it out the gate. And it has changed significantly since its IPO, now focusing on software that helps companies better and more efficiently manage an ever-growing number of servers with multiple operating systems.

A NEW JAVA? Running that business may not sound as sexy as pioneering Internet browsing, but it's at the backbone of several cutting-edge trends in tech, including running free Linux software on commodity servers; utility computing, where companies can pay for hardware and software as they go, like electricity or water; and autonomic computing, the idea that networks can run and monitor themselves.

That's not all Andreessen is up to. On Sept. 29 he took a board seat with Zend, a Silicon Valley open-source startup that wrote and supports PHP, an open-source developer language that some people think could replace earlier language Java one day.

And while Andreessen is mum on the subject, he's behind a new venture called Ning. It's a Web site that lets people use very simple developer tools to build so-called social Web applications, such as developing a Match.com, but for activities other than dating, or a Craigslist for specific cities not on that site now. The Web site whimsically calls itself a free "playground" for such applications, and it plans to make money eventually through charging for premium services and advertising.

All this is to say nothing of other personal investments Andreessen is making in other hot startups throughout the Silicon Valley. He may not be out talking about it, but one gets the sense that Andreessen still has several new, new things up his sleeve. BusinessWeek Online Silicon Valley reporter Sarah Lacy caught up with Andreessen to talk about Opsware, Zend, and his view that anyone who says high-tech innovation is dead just isn't paying attention. Edited excerpts of the conversation follow:

You've got Opsware, Zend, and several other projects in the works. Where do you spend most of your time these days?

It's a lot of Opsware. A lot of trying to keep abreast of what's happening. The rate of change is so high right now. I'm doing some angel investing, serving on a couple of outside boards. I've stayed fairly busy, definitely.

I've been a big believer that the rate of change has stayed high over last five years. People who say innovation is dead haven't been paying attention to what's been happening.

Where do you see the most exciting pockets of innovation?

All over the map: On the one hand, in terms of stuff you can see, [it's] in the Web. And with the build-out of broadband and mobile, there's the build-out of new, huge Web startups. [There are] huge rates of change, and businesses are continuing to build out Web applications. You go into any company, and the number of new Web sites is just staggering.

Similar stuff is happening in the home with new technology, from music to video. There's actually a big story on the economics to build out information systems. It's falling in price so fast, the cost is becoming almost trivial. Then that's leading to explosion of new applications. Servers are completely commoditized. It's shocking the velocity with which networking and storage infrastructure software has commoditized.

We've entered a phase where a lot [that was] invented in the 1990s is being deployed at a massive scale. That stuff is all accelerated and we're at the beginning of a 10-year wave of deployment. People get confused because that doesn't show up in the P&L statements [of big companies]. It's not necessarily good for big vendors. Their revenues might fall in the process.

How does the open-source movement tie into that?

If you have a $500 PC and an Internet connection, you have a far more powerful development environment than you could have had for a million dollars 10 years ago. It's that old thing of, would you rather have been a king in the 17th century or poor today, when you've got penicillin? Would you rather be a 15-year-old kid in Vietnam or [have a] PhD from MIT in 1979? You'd rather be the kid, because you've got an unlimited amount of free software.

What about all the consolidation in software? Will it cramp innovation?

By and large, there's a lot less consolidation [than people think]. [Oracle (ORCL) Chief Executive Larry Ellison] goes out and talks about consolidation happening and buys two [big] companies. He's going to have to buy a lot more than that. His business has matured to the point where there's not much growth left.

That said, there are a large number of new software companies, and we're certainly one. More categories are emerging all the time. It used to be understood what a software company was. It was a [program] on a CD ROM.

Today Google is a huge software company. They [just] don't sell it and don't deploy it on your own systems. Salesforce.com is a very significant artifact of that change of business model. Those are very much software companies.

A bunch of people on Wall Street get this wrong. They're so manically focused on Siebel (SEBL) and Oracle, they miss out on all this stuff happening. The packaged software industry has only been around since the mid-1970s. [Previously], people built all their own software. Maybe the next 30 years [will be dominated by] the [application service provider] or service style. That's fine, if that's the way [customers want] to consume it.

How does Opsware fit into all of this?

Opsware is a bet on the continuing proliferation of unit volume and complexity of customer systems. Big companies have large numbers of servers and software. The spread of open-source software [plays into this]. Customers are all dealing with the same thing: 10 to 100 times more computers today than 10 years ago. They're ramping up very fast, and it's a challenge not to get eaten alive. Our software frees up their people.

Does Opsware benefit from the Linux movement?

Linux tends to drive up Unix volumes. [Researcher] IDC predicts that 5 million servers will be sold in 2005. It turns out the real number will be like 6.4 million. It's a big leap, year to year. There are basically 2 big factors. One is the increasing proliferation of Linux and Microsoft. The software is cheaper, and it runs on lower-end hardware, so you need more boxes: 1,000 or 2,000 instead of 100. That makes us more necessary.

The other big trend is virtualization. VMware enables you to run 10 individual operating systems on a single piece of hardware. We're big fans of that.

So is the outlook brightening for Opsware?

We think so. There's a big pickup in terms of the pipeline of customer interest. We've been in this nuclear winter for software companies. It takes longer to go through a sales cycle and establish a new category. But another thing [that has worked] on our behalf is we've had very little independent competition. If we'd have done this in 1998, [we would have] 20 competitors. Instead, we've got one.

We've [been selling this type of software] for about three years, and we're doing $60 million in revenue this year. From $0 to $60 million in three years is faster than Veritas (VRTS), Siebel, or PeopleSoft. We think we're doing fine from that standpoint. It should start getting easier still.

Let's talk about Zend. Why did you decide to join the board?

I really like the company. A lot has to do with the people. It's a great case study about a new software company that started and ran in Israel, moved its headquarters to the U.S., but [still does] R&D in Israel. That it moved to Silicon Valley speaks to continuing importance of this region.

[Zend also plays into that] long-term trend [about commoditization of technology]. With hardware that cheap and that powerful, there's a new set of programming techniques that allow you to develop applications faster. PHP needs fast and powerful servers with multiple gigabytes of memory, but you can develop applications much more quickly and cut programmer time by a factor of 10.

[Application developers are switching] from Java to PHP, like the shift from C and C++ to Java in the 1990s. We're seeing it now with a big migration from Java to PHP in Web development. A significant percentage of Yahoo (YHOO) runs on PHP. A lot of amateur and semi-professionals are PHP [developers]. And we're seeing more and more inside companies, they're using it for intranet applications. They can just develop new applications, faster.

Could this be the death of Java?

PHP is just used for different things. It's just more powerful. Just like Java in the late 1990s didn't cause the death of C and C++, [those programs just became used more for] systems programming, not applications. What's happening now is Java is becoming the new systems programming language or [is being used for] very exotic high-end applications.

What other areas of open source excite you? Where are you seeing the most potential?

There's stuff all over the map. You can plot the number of projects people are working on, then the number of people downloading all of them, and these are these exponential curves. It's becoming more and more worldwide, more international in scope. And it's in all kinds of categories. This stuff is moving incredibly fast. It's just great for everyone, except the affected software companies.

What about the impact of the next generation of programmers coming into the workforce. They're all skilled in writing in open-source code, right?

That's also worth talking about. In the next five years, there will be all [these] new developers trained on all of the open-source stuff [coming into companies]. Everyone coming in the door knows Linux inside and out. They've known Java and now PHP. They don't know a lot of the older stuff. Not that they get to make all the decisions, but they'll have a big influence on what [big companies' IT departments] do. And in the next 5 to 10 to 15 years, they'll have more control, and these trends will all continue.

At Oracle's annual customer conference in September, Ellison said Linux owed a big debt, and Hewlett-Packard (HPQ), which have been pushing for corporate acceptance of Linux -- and without that support newer open-source companies wouldn't have the same success. What do you think? Is open source acceptance still in the hands of the old guard?

Conveniently, several of them, including Oracle, are pushing PHP. SAP (SAP) is pushing MySQL. So a lot of that seems to be happening. [But Ellison] is really underestimating the amount of grassroots adoption that is happening bottom-up [within companies]. What the CIO wants to do is important, but he wakes up and [decides to get Linux and realizes] he has already got 2,000 copies of MySQL running around he didn't even know about. There's more dynamic stuff bubbling up than people want to admit.

Can you talk about what you're doing with Ning?

No, we're literally doing nothing on that right now, press-wise.

You mentioned Zend's decision to relocate its headquarters to Silicon Valley. What do you think of Silicon Valley's stature in the tech world? Why is it still important to be here?

Overall, it's the combination. There's a critical mass of investors -- way more than anywhere else, which does matter. [There are] sales people, executives, accountants, lawyers, bankers, and you're in the flow of what's actually going on. [Being in tech and not being in Silicon Valley] is like trying to be in the movie business not in LA or trying to be in national politics and not be in D.C. You just don't know what's going on half the time. You get outside the valley and you're not aware of next six startups that just got funded. That actually matters.

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