With Web 2.0 technology (which refers to applications distributed over the internet as a service) and open-source platforms, many small companies have thrived with minimal initial capital. In contrast, just a few years ago in the United States, businesses needed to attract investments of up to millions of dollars to succeed.
Typically, to enter and survive in the market, software companies must seek out a few wealthy clients willing to make significant investments. However, entrepreneur Jason Fried had no intention of following that traditional model when he founded 37Signals.
Fried did not attempt to establish the company’s position by designing a complex and expensive product. Instead, he and his team focused on emerging Web 2.0 technology and delivering project management applications as web services. “Enterprise software is dying because it is cumbersome, inefficient, and too costly,” Fried stated.
The business software industry is a billion-dollar sector but has shown signs of stagnation over the past two years. It is too harsh and challenging, often regarded as the “arena” for giant corporations, while newly established businesses are turning towards other attractive territories. The development direction of 37Signals is to build simple applications and charge a monthly service fee for small businesses or individuals with limited finances. After two years, the company has signed contracts with hundreds of thousands of clients and has never reported a loss. “Through the Internet, you can reach millions of users,” Fried succinctly explained his key to success.
Similarly, the founders of Upstarle, the company behind the online word processor Writely, originally intended to develop document management software for internal Intranet use. However, they eventually formed the idea of taking this application online for everyone. As the Internet “is becoming an application platform,” Writely can connect with other web services such as blogs and photo-sharing sites.
Notably, with the rise of Ajax (a method for creating interactive user interfaces and websites that can automatically refresh data from web servers), developers can design web service versions that function like applications stored on computer hardware.
Open-source and free software is also experiencing significant growth, while powerful hardware servers have become relatively affordable (five years ago, newly established companies had to spend tens or even hundreds of thousands of dollars to acquire similar products). Additionally, operational and management costs have decreased substantially. For instance, 37Signals spends no money on advertising and uses a “viral spread” technique, leveraging personal websites. The company currently has only seven employees, with not even one salesperson.
Salesforce.com, NetSuite, and SAP are ready to abandon large projects to focus on web services. Even Microsoft, the king of “closed-source” software, has had to compromise and join in.
“I believe we can become one of the most meaningful companies in the world 20 years from now. We don’t care about the Fortune 500 list; we care about the Fortune 5 million – the list of small businesses that are doing wonderful things,” Fried confidently remarked.
