Early Release Abstract – Examining the Qualitative Attributes Used for Selecting Investment Worthy Ventures in the B2B IT Subsector

Examining the Recent History of Qualifying Investment Worthy Target Ventures in the B2B IT subsectors.

Alan D. Wilensky, Analyst and Industry Relations Advocate
bizQuirk, LLC.

Abstract

Is the The B2B IT sector a difficult arena to source and place capital or, conversely, to harvest capital out of such deals? According to a diverse pool of analysts, including several specializing in the enterprise software and services sector, the past 15 years of high-profile B2B tech company consolidations driven by certain PE funds, has resulted in a reduction in overall availability of mid stage direct placement capital deals for well-established, maturing ventures poised for growth. This reduction in capital resources, and how it came about, is a troubling tale. The epilogue is even sadder as if that were even possible, describing the pollution that occurred in the aftermath of the B2B consolidations. The selection criteria and commonsense values became out of phase, upside down, leading to long-term damages. These are the wages of fear and doubt that reliably occur when sound targeting attributes are ignored. Applying the corrective selection targeting criteria  – no MBA required – when the next phase of capitalization restarts – and we shall see that these mature, well led, clearly innovative B2B ventures come to the surface, with long-established continuities of private ownership; these ventures have been overlooked en mass for the past 15 years in the B2B IT subsectors.

While it seems a bit  farfetched to state that, “better companies were deliberately ignored in favor of the now well-known, (even infamous) weeble-companies tagged by PE’s for toxic consolidation). They were all past their prime,  overstaffed, overstuffed, having long abandoned their founders drive and vision, and eschewing the technical staff’s architectural and system acumen.  The sordid mess. in a nutshell, stank of corruption, but there is still hope….

We all know that no one can stop a true inventor –  the Edison’s, the Teslas, the Jobsian leaders….these brilliant, hard-headed, are true to themselves (and to the very wordInnovators  –  they never go away, they continue to innovate and improve, and gain more ground.  Continue reading

Standing Alone and standing fast, as the allies fled.

Standing Alone and standing fast, as the allies fled.

The boldest, bravest action I have ever witnessed in  business (where self-sacrifice is rare), is the antitrust lawsuit initiated by Todd Gould, Founder of Loren Data Corp, against the PE-funded B2B leviathan,  GXS Inc.

The EDI Communications market predated, then adopted Internet Protocol as the bearer of EDI data. All original Value Added Networks began life as circuit switched and leased line (PSTN) modem pools that were the original progenitors of A2A  routing.  In the 1970’s, as EDI became established in manufacturing supply chains, interconnection  physical via bisynch – but all of it taken together was a replacement for telex and twx (the original global message system for manufacturing) – these were tariffed teletype services, i.e., regulated by the FCC, as common carriage, and each message had bailment attached ….(each message was considered valuable and the carriers took responsibility for timely delivery of each message.) Telegraphy services could not refuse to relay traffic to competitive carriers  – thus one component of Common Carriage is Interconnection).

Computers and Data networking was a new concept to the regulators;  non-voice, packet store and forward using computers as switching and application host, was not only novel, but it gave rise to  new innovations and potential abuse.   FCC undertook “The Computer Inquiries”, a grand colloquy of testimony from experts and industry leaders, with the goal of determining if new regulations would be required to steer the FCC’s system of bureau-based enforcement, and the administrative law panels that heard testimony and adjudicated petitions for Common Carrier, Wireline Competition, Broadband, and several other communications markets.  The Telecommunications Reform Act of  1996, which deregulated a most of the content and pure data infrastructure  of  the IP universe, created and compounded confusion arising amongst EDI networks, or VANs, that were application layer 7 data messaging services. The FCC erred terribly in failing to tariff EDI Communications, and left a fallow field to wither under the 96 Act. Any company participating in the EDI driven supply chains, from the largest retailers to the tiniest suppliers, now has an AT&T style, most toxic monopoly to contend with – and this all courtesy of the FCC, and more recently, the USDOJ….now  in my estimation the most ineffective competition regulators in the entire Milky Way…along with Great Britain’s Office of Fair Trading. Exactly what does a true monopoly look like to these “govt chair sitters”.

“Non-Settlement” is the key Term-of-Art in Understanding VAN Interconnects

Interconnections between the legacy VANs, whether via hard-lines, modems, or IP virtual circuits in later days primarily refer to data carriage between two competing VANs, VAN interconnect agreements in the Internet era are “non-settlement, message traffic exchange agreements” –  a complex jumble of words for a the practical  accommodations made by the VANs to facilitate bidirectional messaging between any two subscribers on competing Networks.

Illumination:

Interconnections were deemed a market-driven necessity by the earliest VANs, as the first adopters would never have acceded to the requirement of corralling 100% of their suppliers on one VAN (these clients were powerful automotive manufacturing and shipping lines). EDI would thrive  only in a competitive market where subscriber choice came first. The  freedom to choose a VAN without the concern of routing dead-ends, kept the business healthy for years. Until the GXS fiasco, that is.

The freedom to choose or move to a competing VAN was ensured by liberal interconnection. This is the reason why networked markets deemed important by  the FCC always mandate  interconnection via tariff.

EDI messages between two transacting parties (a supplier Invoices a Retailer, in response to a purchase order) are bidirectional and balanced in terms of the messages sent and received, Therefore, VANs do not settle billing for interconnect traffic. it nets out to zero.

VAN subscribers pay for the messages sent and received  by volume measured in KC (kilo characters). VANs have historically granted interconnects under fairly permissive guidelines, especially in the industry’s earliest days until the dawn of the 2000’s, The mostly accepted formula for granting semi durable, interVAN connections is as thus:

“if a competing VAN requests a “trading partnership’ be setup with a subscriber on the home VAN, an interconnection will be established upon confirmation of the mutual trading parties”. Viola.

The most public and infamous refusal to interconnect was PE Funded GXS Inc,. against Loren Data Corp. The background of the dispute is covered by the author in several articles on this site. The important point is that the Founder of Loren Data Corp, Todd Gould, initiated the antitrust case against GXS, using his personal resources.

In our numerous public appeals to an industry which would anticipate future  deleterious actions of such pan-market sabotage, not one other company stepped forth to join the fight, or  came to the aid of Loren Data  Corp’s legal initiative –  though GXS’ damaging InterVAN traffic routing was  actually a preemptive strike against the Service Provider Sector.

GXS, having become all but unstoppable  due to its  purchase of  three major VANs,   had  leveraged a Network Effect routing  coup,  the likes of which the VAN sector had never imagined nor experienced before. The service providers as a collective group with no unity whatsoever, had no idea how to deal with these burnt earth. GXS tactics. So, with almost no  opposition, except what Todd Gould could muster. The result  a sector that has, by inaction, procured a malevolent dictatorship; a private enterprise controlling an increasing number of “magnet destination   network addresses”.

Could a new market entrant as a VAn or Service Provider operate without routes to GXS bound subscribers, all  Fortune 2000 hubs, retailers,manufacturers, etc. ? Would any capital source risk such an investment….without knowing beforehand that any new venture would be “Routing Viable” – no way.

Only massive capital of a PE fund, and the coordinated acquisition of a sufficient number of VAN properties, carefully executed to exploit the weaknesses of the “unfinished” VAN routing ‘non-architecture, could accomplish such a feat. The analysis could not be clearer – Routing Arbitrage and exploitation of the layer 7 EDI addresses was the original organizing principle behind Francisco Partners Funding of GXS, Inc. These are tactics the FCC and DOJ are supposed to be on-guard against…..but our regulators have failed us in a double agency failure –

Our competition watchdog laid down and waved through a HSR for many such acquisitions, but the coup de grace was Inovis. Why was so special about Inovis?  An incisive quote from Todd Gould illuminates the obscure:

“Inovis was the last competent VAN operator to stand briefly against GXS (speaking of the tiny, inner cadre of technical management holding a slim slice of Inovis equity), who first of all could operate and offer a transit route to GXS, at a price envelope we could potentially operate within – although that differential was a disadvantage compared to other EDI networks (who paid zero $ under standard non-settlement terms)”,

“Inovis was technically capable of operating the beast, which was  only required by  Loren Data Corp – the last VAN to be publicly denied a GXS interconnect to TGMS” – (Author’s historical note: Loren Data Corp’s ECGrid VAN had established  interconnection with IBM IE, and Inovis, pre GXS buyout – such that  astute readers truly understand  GXS’ latest  “daisy chaining” defamatory claptrap, is completely bankrupt on its face).

The FCC chose not to look even briefly at the distortion of the EDI messaging sector, although, there were ample arguments to apply the reasoning arising from the “Computer Inquiry Remands I, II, III”,-  the EDI market is  a “services market in which bailment attached, meeting all requirements for common carriage regulation”. Hit the buzzer on the FCC for the largest failure of intentional, regulatory blindness since….you name it.

The EDI VAN and Service Provider Sector now inherits the fruits of  collective inaction –  the grand prize for undistinguished market non-activism in the face of a toxic consolidation Presently, the sector finds itself bereft  of an effective means  to oppose GXS, a giant now franchised by a TransAtlantic, intragovernmental “star Chamber’ of competition regulators. These regulators played into the hands of a PE Fund that, to all appearances, wrote their script …and handed each agency their very own gilt embossed set of rubber agency stamps, in felt-lined cases with certificate of authenticity….

Each boxed set of rubber stamps given to the UK OFT and USDOJ has a hand-written note enclosed, that says “the check is under the felt liner, guy$”.

While we are at it, the e-commerce service provider sector leadership? What have they been doing for the last two years? Well, that will be my next post, but suffice to say that it’s has been a very, very Black several years for EDI businesses wishing to access that fragile, under provisioned and under architected routing mesh.  More to come.

VAN Industry End User and Major Account Narrative Opinion Study

As I mentioned in the opening teaser for the upcoming VAN Sector Review, I decided to take additional input from the following end-user constituencies:

1) Major Accounts of any VAN or EDI network in the global mesh – if you want to have your opinion tallied, contact me @ about.me/awilensky

2) Employees of MegaVAN One – or any VAN or service provider for that matter – do you want to crow or complain, are you busting at the seams to blow the whistle on some dastardly actions? I will keep you safe and anonymous – a subpoena wouldn’t get squat from me – I’m an itinerant analyst on the back of maxi scooter, working via my Macbook Air – I’m the righteous wind, your evil employer is a stolid inane drone.

Conversely,   if you feel that there are praiseworthy things to say about the  VAN or major EDI network you work for, I will give any positive viewpoints equal weight – subject to the same reality checking I do on every opinion survey.

Your opinions count. The results of this user survey will not only be used during the composition of the review, but will also be used by the sponsoring investor pool to steer funding of new products in the B2B sector. It’s anonymous, you only have to disclose to me the bare essentials, and I have stayed alive and employed in the B2B products sector by keeping my promises.

Your candid opinions of the status quo is where the next innovation comes from.

Ok, you brave, brave whistleblowers, EDI Evangelists, and Contrafactual crusaders, the NSA don’t give a crap about EDI and VANs, so open up the taps and gush forth your truth to Skype: awilensky email: abmadw@gmail.com

Act Now in Defense of the EDI Communications Market

Take Action Now to Preserve Fair Competition in the B2B IT Communications Sector.

Influential GXS Customers:

1) Demand in unambiguous terms, that your suppliers retain their unencumbered right to select the EDI VAN, B2B SAAS provider, or supply chain service provider of their choice. Insist that your EDI network messaging provider respect your supplier’s choice of EDI network. Period. Tell GXS that you stand behind your supplier’s selection of EDI network  provider. Leveraging any supplier’s access to a GXS resident Hub via interconnect pathways, called ‘route arbitrage abuse’, is sufficient cause for terminating a contract. Any entity that acts to impede the contractual relationships between buyers and their supply chain members needs to be put on high notice that these actions are unacceptable.

A prestigious corporation using GXS-TGMS for supplier communications should not tolerate these factitious, manipulating actions by GXS. IT Directors and CIOs would never accept any such  action by a telecoms provider, ISP, data center, or 3PL;  and it is similarly unacceptable for an EDI Messaging provider to dictate terms to your supplier community – especially if the terms are sure to increase costs to your suppliers.  Retailers,  Manufacturers, and Consumer Brands – if you are a wise GXS’ TGMS VAN customer, please take action and contact me, or the DOJ,  FTC, or FCC, they must hear directly from as many GXS clients as possible. Let us work together to eliminate all such market limiting actions that are perpetrated against your supplier community.

2) The Most influential Actors in the EDI communications sector are the Retail, Manufacturing, and Logistics Hubs; your trading partners ability to comply with  complex EDI requirements are impacted by having as diverse a range of EDI Services and providers, solutions , software, as possible. The EDI market is impacted by the adherence to transparent and ‘value free’ message routing across all major VANs and service providers. As I am concentrating on VANs first, please understand that eventually, all systems, even AS2, will have access to transparent message routing. However, this will never happen if GXS has their way…..for the way of GXS is to herd, yes herd, all  end-users onto TGMS, and to eliminate VAN interconnects totally, the Sherman act be damned.  I want to personally thank the DOJ for conducting such a smart and savvy HSR review of the GXS Inovis merger – NOT! The DOJ essentially franchised the monopolization of the EDI VAN sector by giving the green light to an avowed toxic monopolist who had shown in their past actions to abuse the power of EDI network traffic exchange agreements…shame on you DOJ. And, shame on the FCC for although being fully briefed on the impact of GXSs actions, has not taken one step or action to protect just the interconnections of this vital communications sector. Feh. 

Hey DOJ, Joe Wayland, Antitrust Crusader and new Division chief  – WTF! WTF! WTF!

Hey! FCC. Your agency is the Nation’s Communication’s watchdog! WTF!WTF! !!!

Professionals in the B2B IT market simply understand that ensuring the availability of cost-effective and diverse EDI services for all suppliers, large and small alike, starts with solid, standardized, ubiquitous communications services – the more diverse and innovative the better. The unprecedented abuse of established and settled interVAN routing policies, leveraging the consolidation of the VANs GXS acquired  (IBM IE, Inovis, and GEIS), is tantamount to admitting that the behemoth is simply unable to synthesize a credible way of competing with a brilliant Mr. Gould, whose ability to innovate as fast as he can type into Visual Studio – is uncanny.  GXS could only wish…..

The B2B communications sector has very few such prolific innovators – Todd created the one and only VAN built from the ground up for big traffic movers, like SPS Commerce, other Supplier enabling service providers, and the new breed of Virtual VANs.

Finding common cause between the Hubs, their suppliers, and Loren Data Corp is my singular quest ; GXS client’s should understand that they can make a difference, the big hubs can get involved and stay with GXS for all I care , as long as you all get involved. It will be worth it, and we will have a better market with stable prices for B2B Comms services, and better accessibility for your suppliers, at prices they can afford. 

The converse also applies: If GXS kills off Loren Data Corp, and then moves on to suck the blood from all other VAN interconnects….oh you don’t think they are stopping with Loren Data, do you? Please, open your eyes.

And I am not even saying that GXS should not be  in the market – after all the company has consumed 500 million in equity and has access to over 400M in credit facilities. GXS as a company of human capital alone has a scale that is simply unapproachable by most other companies.  Loren Data could take on the comms of a few GXS customers that only require messaging services, but for massive armies of engineers and B2B system techs? GXS, IBM Sterling, and one other…..maybe.

In regards to the issues of ‘what is right, what is reasonable, and what will work for the large hubs and their suppliers….. at least one does care:

https://beaconedi.com/edi-blog/shame-on-gxs—gxs-to-terminate-loren-data-interconnects

http://www.LD.com from the President’s Blog:

http://www.ld.com/gxs-makes-its-next-move-2/

and the deluge of comments continue on Yahoo Groups EDI-L, the oldest listerve on the EDI universe. Here is also a growing collection of comments across many blogs and groups:

http://www.ld.com/more-about-gxs/

Continue reading

Saving the Newspaper business

Toilet paper
Image via Wikipedia

With apologies to Scott Karp.

I hereby announce the first major aggregator of legacy newsprint style reporting for the 21st century, “ReadWipeWeb.com” the first newspaper printed on 100% recycled toilet tissue packaged on a 1000ft. long, 24″ wide roll. Read, then wipe. The content will also be available on the web – get it?

Each 10 year subscription will also include, as our gift to you for subscribing, a 27″ Apple iMac of 2009 vintage, to be used as an a Kindle style reader. That’s right, a specialty modified Macintosh all in one computer on a wheeled hand truck with self-contained fuel-cell power (butane gas-powered fuel cells really exist). An honest to goodness TSA waiver is included. An attractive hinged cover is included, making your new e-book reader look very similar to an oversized Surface tablet. I know that Sony now makes  a 19 inch Android tablet , so this is my contribution to the product matrix.

 

So, !000FT of toilet paper roll printed with Web Finance and Deals news from the Valley, and a 2009 Vintage iMac 27 i7 converted to a e-book reader, powered by a Butane Fuel Cell. you want a 4G Portable WiFi Hotspot? Go buy one, ya big dummies!

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Cloud insanity – the Shills come out of the woodwork

oWhen people read my posts and comments on other great blogs regarding my opinions about rating and certifying cloud hosts, SAAS, PAAS, they sometimes think that I am 100% against cloud based soltuions. This is patently incorrect, as I routinely recommend hosted SAAS for project management, small business, budget constrained start ups, etc. What I do not recommend is that mid market businesses that have CLOB (capital line of business) applications, hosted on their own racks, or managed by a conventional, stable vendor, change to a cloud solution until the PAAS and SAAS providers get industry rating and certifications. The SNA shops knew this, and went through the in house/ hosted rating travail. The result? An industry in which any business owner can get insurance for business continuity disruption that is caused by IT systems failures. If you are a mid sized business with an internal server rack, distributed multisite architecture, or a hosted AS400 or new IBM architecture, you can insure your operations. You can insure any Redhat, Microsoft, BEA, Websphere, whatever installation, managed and rated SAS70, or hosted in your unairconditooned broom closet, but it will cost a little more. A nice underwriter will come to your place or your managed host’s place, and write a policy.

Can’t do this with the current cloud offerings. Doesn’t mean that cloud computing ain’t here to stay, but some folks take issue with me saying anything regarding the unrated and uninsured nature of the especially thinly capitalized PAAS solutions. Oy! But now, a shout out to a hero I have never met, Jane Mcarty,  – yeah! yeah! You go girl!

Jane actually puts her hands on web hosted apps, asks and applies proof of feature performance criteria in much the same way that any good CIO or upper level staffer would do with a licensed server application. Jane uncovers such simple and basic things that one says, “the PAAS vendor didn’t know that?, huh?”. Good on you, Jane.

It was on Jane’s stellar bog that I spotted a comment thread a few days old, where a shill for the cloud industry says, in so many words, that the time to question the cloud hosted apps is over, they are established and able to deliver, and that self styled analysts, like me, have NO BID-NESS asking what if the service goes down, whaaaaaa! Self hosted solutions go down. And then commenter Russell says one of the most amazingly naive things I have ever seen in print, maybe in my entire life”: See the actual thread here.

Commenter Russell on Jane Mcarty’s blog thread”

“Many of the PaaS providers are in business with deep pockets (Force and Quickbase), well funded by professional investors (Bungee Labs), running with established management teams (Quickbase), or conservatively managed with established customer bases (WorkXpress).”

Ok, where do I begin to refuse this insanity? How about the TechCrunch.com deadpool? No? Lets start with a quote from Tref Laplante,, a principal at Workxpress.com, who says:

WorkXpress is committed to its customers and the quality of its product.  To this end it is a privately held, revenue generating company that to date has not received venture capital funding, and therefore is not under pressure to behave in ways that run counter to its mission of customers and product.” (emphasis mine).

You can see my context on this piece of Mr. LaPlante’s unassailable logic here. But, I digress. And I wish nothing but good for workxpress.com.

On the one hand, we have Russell the unknown commenter saying that VC funded PAAS platforms are an assurance and a bulwark against the vicissitudes of having a mission critical platform beyond one’s ultimate control; Partnership disputes, forced sales by the limited partners,   and raids of the venture’s bank account by coked out CEO? Pay no attention to the man behind the curtain. Ok, got it. VC funded PAAS, though unaudited and closed to inspection, and with unknown capital reserves, is safe because is overseen by, (wait for it now) professional investors. Gawd.

On the other hand, we have a principal of a popular, (and in my opinion one of the better) PAAS shops saying that because they are NOT VC funded, they are more trustworthy, due to the fact that they are, so to speak, master baiters of their own hosted hooks and fly rods

In either case we have no idea how much runway the venture has as far as operating capital is concerned. In the case of the giants (Amazon, Intuit, Google, Gogrid, Rackspace ), when they go down, it doesn’t matter because then it is bad and you will merely get an apology and a small refund.

If your business lines are damaged, taking crucial cash flow out of your pocket, and goads the potential for civil liability (in cases of service critical business), then you are truly screwed doubly, as there are no lines of underwriting that will insure a PAAS solution for anything but the actual costs of the outage.

You people are wearing me out.

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What happened to the ThruDispatch Articles??

The business plan and slides for Thrudispatch, the intelligent mobile work order scheduler and virtual AI Dispatcher for Self-employed independent service  businesses, like Towing and mobile locksmiths, etc. can be found on Scribd.com