
Spolsky: Does Slow Growth Equal Slow Death? - johns
http://www.inc.com/magazine/20091101/does-slow-growth-equal-slow-death.html?partner=fogcreek
======
wallflower
Atlassian Confluence (the corporate wiki product from Fog Creek's probable
competitor) has pitiful search functionality, among other things, for all the
revenue that product probably generates from site licensing.

That being said, Atlassian Confluence's "Wiki" is updated nearly every minute
(according to the homepage dashboard) at my company. It's not just a Wiki;
it's a Wiki that normal business users can use. Fog Creek seems to think they
can take on their competitor by mainly focusing on features while IMHO
Atlassian's strength is producing an adequate product that works and more
importantly makes the person at a company who leads and drives its adoption a
likely corporate hero. Corporate sales is tough but lucrative.

> "What set Oracle apart from Ingres," Moore writes, "was that [CEO] Larry
> Ellison drove for 100 percent growth while Ingres 'accepted' 50 percent
> growth."

To achieve 100% growth: Oracle salespeople were fired if they did not achieve
a doubling of their sales quota on a yearly basis.

~~~
chrisbroadfoot
More specifically, the competing product he's referring to is probably
Atlassian's JIRA (bug tracking software).

I for one thought that Joel sounded a bit sour and jealous. Is it that Fog
Creek is losing its "market leadership position"? (was Fog Creek ever a market
leader?)

~~~
pchristensen
I wouldn't say jealous, more like disoriented to realize that his business
hypothesis might be invalid. He designed his company to be a high quality
competitor among many, but now he's got to face a category killer which
requires very different tactics. A core part of his business has to change to
something he doesn't necessarily want.

------
ctrager
Disclaimer: I'm the author of an open source bug tracker, BugTracker.NET, a
sorta hobby project that got better over time and sorta, kinda, "competes"
with FogBugz. Also, I receive money from Atlassian to display their ads on my
website, but other than that, I know nothing about their business. So, I'm not
any sort of insider. But I do pay attention to the space, and here's my two
cents.

Some of the income for these companies comes from the hosted versions of their
apps. I think free and somewhat viral services like GitHub put a lot of
pressure on Atlassian and FogCreek. 1) Downward pressure on what they can
charge. Consider Atlassian's recent price drop. and 2) Classic Joel "Fire and
Motion" pressure to match the competition's features. Kiln is FogCreek
returning defensive fire.

Not to mention less viral players but really nice playes in the hosted space
like Unfuddle, Assembla. Christ, even Google.

So, along with hosted apps, some of the income comes from installed software.
There, both companies compete against open source, like Trac, Redmine, and
even my own BugTracker.NET. Traditionally some stodgier companies have tended
to be fearful about running open source alternatives, but there might be a
generational change going on. There could be a tipping point where open source
developer tools start being perceived even by the stodgier companies as being
the more comfortable, safe, mainstream choice. Safer than commercial. That
might already be happening with version control.

~~~
ghshephard
Note: Atlassian just increased their prices. Our legal department was going to
use their professional 3.x license to manage issues for 300 employees (You'd
be amazed at how far people push Jira - a nominal software defect tracker is
used by my company as a ticketing system, time tracker, project management
system - we've got north of 20,000 issues entered and tracked through it) -
The previous price was $2400 on a quote expiring on Oct 24th. The New quote
(for 4.0 "Enterprise" - no more professional) is $8,000. Both Cheap, but the
new prices certainly aren't a decrease.

I doubt that many enterprise size companies (100+ employee companies) host
their issues at either FogBuz or Atlassian. Security. I'm betting the vast
(90%+?) of their revenue comes from license sales.

BTW - Don't forget Bugzilla as a bug tracker - we were quite happy with it
until we switched to Jira (ironic if you know where the name comes from).

And you are right - Generational Change is happening. Right now. All of the
people who where in their 20s and 30s In the late 90s, are now Managers, and
Directors - and have some clue about open source, so it's coming into
companies from the top, and bottom now.

~~~
ctrager
You are contradicting my unsupported opinions using actual facts? That's not
fair.

Regarding "You'd be amazed": No,I wouldn't. Whatever the humble origins of a
bug tracker, user pressure does push them to accrete more features and
complexity, so even my own little BugTracker.NET also has evolevd to be also a
ticketing system, time tracker, and a tiny bit as a project management system.

(Please let's not talk about permissions and customizable, enforcable,
workflow...)

Here's my favorite way I've seen BugTracker.NET stretched:
<http://frap.cdf.ca.gov/projects/hazard/btnet/bugs.aspx>, by the "California
Department of Forestry and Fire Protection".

You're probably right about the 90% for now, but I think the Generational
Change thing also affects attitudes towards hosted versus installed.

And, you have more and more big companies whose OWN business depends on THEIR
customers trusting THEM to host their customers data, so I think that is a
force for attitudes about hosted solutions changing too.

I work for a company that makes software for futures traders. Our customers
include the trading depts of the biggest banks you can name. Presumably
security conscious and with the expertise to manage the software/hardware
themselves if they chose to. We offer both installable and hosted solutions.
Plenty of these big banks have opted for the hosted solution.

~~~
sireat
Zawinski's Law of Software Envelopment:

    
    
        Every program attempts to expand until it can read mail. Those programs which cannot so expand are replaced by ones which can.
    

[http://en.wikipedia.or/wiki/Zawinski%27s_law_of_software_env...](http://en.wikipedia.or/wiki/Zawinski%27s_law_of_software_envelopment#Quotes)

------
edw519
If increasing your growth rate is your objective, this looks like a very nice
first step, Joel. You disguise a PR piece as an objective "how to" in a
national business publication, coming across as an authority, the underdog,
and an all around nice guy who really cares about his customers.

You're an engineer who claims to be "weak" in the sales department, but all
evidence to the contrary: nice "sales hack". Any reasonable person who takes
your advice would be a fool if he bought from your competitor. Not bad for a
couple hours work. Kudos.

~~~
spolsky
Jeez, everything is a conspiracy on Hacker News. How about I wrote it because
I'm a columnist at Inc and I have to turn in one article a month? And how
about, they hired me because they like columnists who are actively running
businesses to write about the issues they face? (c.f. Norm Brodsky, the other
columnist, who has some kind of a box storage business).

None of the plumbers and dog shampoo-vendors who read Inc. do software project
management. The number of leads I get from Inc readers is laughable.

Also, you're confusing sales and marketing. They're different things. We're
pretty good at marketing for a company our size. We're absolutely bad at
sales.

~~~
edw519
Yikes, lighten up, Joel. I really meant what I said. I have no idea how many
leads you get from inc, but I bet you get a few more with that piece.

What I didn't say in my original post was that this was an excellent example
of generating interest in your business while contributing to the community at
large, and that quite a few of us here can learn from it. But now, I'm afraid
to give you another compliment because you may misinterpret it. (Oops, too
late.)

There have been many times when my post was misunderstood because I accidently
omitted the <sarcasm> tags. But this is the first time the inverse ever
happened. Live and learn.

</nosarcasm>

~~~
jister
Actually, I also find your first post sarcastic.

~~~
gruseom
I don't think you're technically allowed to find it sarcastic after the
speaker explains that he meant what he said. Unless, of course, he's lying.
But he isn't. Anyone who reads edw519 regularly (i.e. anyone who reads HN
regularly) knows that's just how he is :)

p.s. edw, given your closing nosarcasm tag without an opening one, must we now
assume that everything you've ever said was non-sarcastic?

~~~
jshen
I think it's perfectly reasonable to believe that the words a person used did
not clearly reflect the thoughts in their head. In fact, I'd say it's fairly
common. Given that, one could be "technically allowed" to find it x even
though the writer insists it's y. It surely didn't sound like a compliment to
me when I read it.

~~~
gruseom
_it's perfectly reasonable to believe that the words a person used did not
clearly reflect the thoughts in their head_

Sure, but that's by definition not sarcasm.

------
elviejo
I'm I the only one that thinks this article is the stick part of the Hockey
stick?

In other posts (<http://www.joelonsoftware.com/articles/fog0000000017.html>)
Joel has said that: "Good Software Takes Ten Years. Get Used To it." And then
makes reference to the hockey stick graph of sales figures for a couple of
products

So ten years have passed for FogCreek and seems that now they are focusing on
the stick.

I would say this is the next logical step in that strategy.

~~~
pchristensen
Joel knew you need developers to make the flat part, but it sounds like he's
realizing you need salespeople to claim the steep part.

------
ghshephard
Joel is definitely talking about Atlassian in this article. In particular, one
of their products, jira, goes head-head with FogBugz. Joel has actually
referred to them in previous articles, in terms of customers threatening to go
to the "Australians" if he didn't implement such-such a feature.
(<http://www.joelonsoftware.com/items/2009/07/20.html>)

Atlassian is really the Major Grower in this space - good sized developer
community, and "App Store" equivalent (Plugin Exchange ) - They have about
50,000 plugins a month downloaded from a library of 400 - 130 of which are for
Jira.

The latest rev of their product, Jira 4.0, has one major feature - a SQL like
query engine, they call it "JQL" - Jira Query Language - which allows you to
do everything you might expect/imagine. Their searching was _already_ better
than FogBugz, but JQL makes you not even not want to compare the two.

Interesting Notes:

Google for "Bug Tracking Software" doesn't bring up FogCreek, but does bring
up Atlassian.

Atlassian is like the "Anti-Fog Creek" in terms of it's thoughts around
office. I've been to their San Francisco Offices (which are supposedly like
their Sydney) - One Big Wide Open Space. No Cubicles. No Offices. Nothing -
just pure Agile openness.

Go to Atlassian.com - you are 4 Clicks away from having the software on your
computer, and it takes about as many seconds. And it figures out whether you
want OS X stuff, linux files, etc...

Go to FogCreek.com - 30 seconds later I _still_ couldn't figure out where to
click to try their stuff - and when I do, I finally land on a page where I
need to start providing Email Addresses, Phone Numbers, accepting terms of
services. It's almost like they are _daring_ you to try the competition.

What's cool, is that _both_ Fog Creek and Atlassian are the ultimate results
of Startups going head-head. Someone will have to write a book about these two
companies.

<http://www.atlassian.com/about/history.jsp> Atlassian: "In 2002, fresh out of
university, Scott Farquhar and Mike Cannon-Brookes, With total start up costs
of $10,000 charged to a Visa card, they built JIRA, a professional bug and
issue tracker, and Atlassian was born. By 2004 the company had grown to six
developers."

<http://fogcreek.com/About.html> Michael Pryor founded Fog Creek Software with
Joel in September 2000.

Fog Creek's Major Problem, and the reason why I suspect Atlassian is going to
wipe them out if they don't get their Act Together, is that Fog Creek has, to
my knowledge, three products:

    
    
      o Bug/Project Management/Software Project Tracker (fogbuz)
      o VNC Hosting Service for Tech Support (Copilot)
      o Forums for Software Developers/SysAdmins StackOverflow/ServerFault
      o 25 Employees
    

Atlassian, on the other hand, has:

    
    
      o Issue Tracking Software (jira)
      o Wiki (confluence)
      o Source Code Reviewer (fisheye)
      o Code Review (crucible)
      o Continuous Integration (bamboo)
      o Code Coverage (clover)
      o Identity Management (Crowd)
      o 200 Employees
      o 15,000 Customers
      http://www.atlassian.com/about/customers.jsp
    

I don't want to come off sounding like an Atlassian fan-boy, particularly as I
love reading Joel's articles, and I don't think I've ever read anything, ever,
out of Atlassian that caught my attention - but he has his work cut out for
him. Of course, maybe Joel needs someone like Atlassian to shake him up and
get him going...

~~~
ghshephard
Interesting to look at their pricing for jira vs fogbugz - Clearly each of
their pricing (for anything but the smallest companies) is almost the same -
basically they discount the software and profit off the maintenance
contracts):

Fog Creek: $10,000 + $5000/year Atlassian: $8,000 + $4000/year

<http://fogcreek.com/FogBugz/PriceList.html>
<http://www.atlassian.com/software/jira/licensing.jsp>

But, Atlassian is smart, and gets you when you are small:

    
    
      50 Person Software Shop:
      Atlassian: $2200 + $1100/year
      FogCreek: $8000 + $1825/year
    

And, what if you are a small startup - Where FogCreek/Atlassian were 2 Years
after they were founded,

    
    
      10 Person Software Shop:
      Atlassian: $10
      FogCreek: $1899 + $365/year.
    
    

Given that the products are _roughly_ equivalent, and the customer has decided
for some reason not to just use Bugzilla or Trac , which product do you think
your typical 10 Person Small Software Shop will install.

Or, if you are using Bugzilla, but you are a cranky release engineer, and you
want to replace it with something with a little more horsepower (not to
mention benefiting from the QA/Regression of all those customers of
Atlassian/FogCreek) - which product do you think you might be able to get away
with expensing.

Now, finally - You have grown from 7 engineers to 20 Engineers - there is a
CLOSE TO ZERO chance that you will EVER switch from FogBugz to Jira (Or Vice
Versa) - But, Jira is starting out with a lot more customers, so they
experience a profit wave.

Basically by the time the companies grow to 100 Users (where
FogCreek/Atlassian are making profits off of the Maintenance, as it's been 3+
years since anyone has called for support) - Atlassian has a much bigger slice
of the pie. This does NOT bode well for fogcreek in the coming years, as all
of that Atlassian market share finally starts to pay dividends, further
accelerating their growth, allowing them to invest more in their product, and
further gaining market share...

And that, is one major reason why Atlassian is growing faster, and eating
Joel's lunch.

Ironic, given the essays that Joel has written on pricing. I realize that he
probably doesn't want to price his product at $10 and make it sound "cheap" -
Atlassian was brilliant, and they did the following:

"Get started for $10 All proceeds go to charity" - "www.roomtoread.org" - it's
like they READ Joel's article and said to themselves "Well, we can't cheapen
our product to gain market share, but we _can_ raise money for charity"

~~~
Carlfish
While your analysis of why we're doing the $10 deal is spot on, we only
introduced it a couple of months ago so any benefit we might see is still in
the future. Previously the cheapest edition of JIRA was (if I recall
correctly) $1200.

~~~
ghshephard
Actually, Atlassian has a Reputation, well deserved, of being very socially
conscious. When I went to the Atlassian San Francisco Social a couple weeks
ago, Scott Farquhar seemed most excited and interested in talking about the
Room To Read program. The "Stimulus Program" (The $5 Personal License from
back in April) raised north of $100K and provided a year of education / costs
for 68 Cambodian girls, helped build some libraries, and published a story
book.

It's nice to see that doing good things in the world can also be profitable.
(Al Gore just got my company on the front page of the NYT today doing the same
thing - so I dig it. :-) )

------
geebee
I'm a little sad to read this article. Are you always in a position where slow
growth eventually means slow death? Or is it possible to find a niche where
you can emphasize craftsmanship, quality, and a decent pace?

The reason I ask is that a lot of software developers actually like the idea
of working for a small, highly profitable firm that stays, well, small and
highly profitable.

If it is possible, what are some of the strategies you can employ to identify
and/or hold on to this niche?

BTW, when I say "small", I don't mean small in the sense of total profits or
number of users. I mean "small" as in craigslist small - a company that can
keep the headcount low, avoid employing lots of non-technical workers (like
sales people), and hang onto what makes a "small" company such a great place
to work.

~~~
hello_moto
Not many owners have the mind of Craig. Most owners of small businesses I
worked for didn't settle for a nice beach house, they want a yacht too! and
they want it fast! like ... tomorrow.

I blame humans for being greedy.

~~~
geebee
Eh, I wouldn't really "blame" someone for wanting those things (some would say
greed is good, others (like me) would say that the honest pursuit of wealth
isn't "greedy", but a lot of that just comes down to how we define the word).

My question is for those people who actually _prefer_ to stay small - how you
can find a strategy and niche to make this possible.

I suspect that a big part of it is how and where you sell. Vendors of for-pay
developer tools need to convince a corporate procurement department to hand
over the cash, whereas craigslist merely needs to convince people to post want
ads, either for free or for very small payments. As a result, I suspect that
the "sales people" approach wouldn't do much for them.

Joel went with the micropayment thing for a while, but maybe his space isn't a
really great one for a small niche-company? Hard to say, since developers are
a pretty unique group of people who might work well as a niche market?

------
lawrence
This is the best argument for considering venture capital that I've read in a
while, and it barely mentions venture capital.

~~~
tptacek
Not so fast. First, Spolsky probably doesn't need VC based on their revenue;
they can staff up a sales team without going out for more money. Second,
Spolsky got to spend ~10 years turning the dials to figure out what works for
his product. He's in a good position. He has the option of increasing growth,
and that option is more attractive _right now_ than maintaining current
growth.

No VC funded company has a 10 year runway to figure out how to get their
product right. Very few VC funded companies get 10 years, period: the
investment needs to liquidate at some point.

Finally, Fog Creek all but stumbled into their current product. They had a
"VC-ready" product when they started (CityDesk). If they had gotten funded,
they'd be dead now.

~~~
SwellJoe
_If they had gotten funded, they'd be dead now._

On what do you base this theory?

I don't know that you're wrong...I just don't see how it naturally follows
from anything we know about Fog Creek.

~~~
tptacek
Allow for the fact that I am probably totally wrong about this.

But, when I started reading JoS, Fog Creek was all about CityDesk. If they had
gone for funding, they'd have done it to fund CityDesk.

CityDesk didn't work out for them.

That didn't matter, because there was no VC board to shutter the company or
fire the management. And they hadn't run the VC-company playbook of hiring a
20-region direct sales force or running $1.5MM of ads to promote the product.
So they weren't screwed.

That's all I'm saying.

~~~
SwellJoe
Possibly valid. Venture-backed companies do sometimes evolve successfully, but
I can see how your theory could have played out that way, though.

------
RyanMcGreal
> If you're growing at 50 percent a year, and your competitor is growing at
> 100 percent a year, it takes only eight years before your competitor is 10
> times bigger than you.

Assuming you both start out the same size.

------
petenixey
Awesome discussion. It's been what 10 years since people really started
blogging and we started seeing the progress of companies live and as it
happens?

We've seen what happened to Google/YouTube etc. and how they moved into
hypergrowth and uber-size but this is now the beginning of the next phase for
the non-VC (bona-fide?) companies.

Really interesting article Joel, thanks for sharing.

------
BerislavLopac
So the main point of this article is that the biggest risk a company can take
is to not take any risks, right?

------
rfreytag
Perhaps Joel has discovered why VCs are so dismissive of 'lifestyle'
companies.

If 37Signals starts to see market erosion then we'll know the VCs are correct
and its grow fast or wither till irrelevance.

Personally, I hope the VCs are wrong and that in fact what Joel has to do is
undercut his competition in a way they cannot answer without destroying their
business model. This is what Clayton Christenson talks about in "The
Innovator's Dilemma."

------
albertsun
Joel's blog is an excellent marketing tool and I've read and enjoyed a lot of
posts there and have a greet impression of Fog Creek Software. I know all
about the working environment, what their philosophy in hiring is, how they
treat their programmers, etc. And I've learned a ton about software
development processes and working with others.

One thing that I haven't figured out in all this time reading is, what
products does Fog Creek actually make? I still really don't know what the
products are, or what they do.

In his last post he wrote,

 _FogBugz, which is all about giving developers tools that gently guide them
from good to great._

It's a nice description, but it still doesn't really tell me what FogBugz
does. Maybe Joel could blog about how he identified the problem for the
product to solve, what specific features he's really proud of that make
software development easier, etc.

~~~
tedunangst
Go to www.fogcreek.com, it describes all the products.

"FogBugz manages projects, tracks bugs, and even tells you when you’re going
to ship..." It continues from there.

------
MartinCron
Even if you don't agree with what he has to say, his writing, especially for
Inc. Is really good.

I'm having a hard time seeing the comparison of FogBugz vs. Mystery competitor
(consensus says Atlassian?) and Oracle vs. Ingress. Picking a db vendor has a
lot more lock-in and switching costs than using a different bug database.
Also, there are so many more competitors in this space, with plenty of good
free options. Lastly, the barrier to entry is so much lower, I mean, I could
write a usable software project management tool in a weekend, it's trivial. It
would take at least a week to make a fully functional relational database
system.

------
zaidf
I am all for not being secret. But there are exceptions and in this case, if I
am really mapping out a specific strategy to go after a competitor, I wouldn't
blog/write about it. I'd be curious to hear where he draws the line in sharing
strategic plans.

The startup I am doing right now involves public data. I've been able to learn
an incredible deal from my competitor just by googling around and finding the
name of my competitor in the minutes of public meetings.

On a separate note, this makes me feel really good about my decision to take
Sales Management this semester:)

------
stcredzero
I think the reasoning in this article also applies to programming languages.
By that reasoning, it's by far better to have a crappy programming language
that panders to mainstream expectations than to have something innovative that
gives you a more powerful paradigm.

I also think that sometimes the more powerful paradigm still trumps sheer
numbers.

------
wakeless
Does anyone know who the competitor he is talking about is?

~~~
jordanb
Probably these guys: <http://www.atlassian.com/>

~~~
solutionyogi
I doubt if it's atlassian guys. My guess is that it's OnTime by Axosoft. May
be Joel can clarify.

<http://www.axosoft.com/ontime>

~~~
ghshephard
Atlassian goes head-head with FogCreek in terms of features and pricing. <$10K
for 100+ Users. AxoSoft _starts_ at $43K for 100 Users.

