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>One of the things that really blew my mind this year was a large ($40MM) software development project I became familiar with (a worldwide internal system for a multinational corporation) that concluded -- in 2011 -- and required MSIE 6. MSIE 6! Doesn't even run on MSIE 7, much less any modern browser.

This happens all the time at the hospital I work at. I'm constantly flummoxed by how behind the times software vendors consistently are. We're still stuck on XP for the foreseeable future because some of our vendors are still pushing updates that are totally incompatible with NT6 with no timeline for when it might work.

They've had half a decade to fix their software, and they just aren't doing it. I understand that Enterprise moves slowly, but you eventually reach a point of absurdity, as well.

One problem is that as a vendor, we have to work to the lowest common denominator. It's still generally a requirement that you support IE6, despite the department of health encouraging hospitals to upgrade, because they have legacy apps where the vendor has disappeared or the upgrade is too expensive / painful for the hospital to bear.

We actually ship customers a custom build of Chromium which can only access our application (hospital policy generally dictates they must use IE to access the internet for "security" reasons) - we would love them to just use modern browsers so we can ditch our custom client but it doesn't look like it's going to happen any time soon :-(

I worked at a hospital in 2008, where, mid-summer, the IT department had just approved the use of Windows XP Service Pack 2 (which was released in August 2004).

Note that this doesn't mean they were actually going to start deploying it. It just meant that they were open to the idea of doing so. I'd be surprised if they'd actually upgraded any machines yet.

The law firm my wife works for has just switched to the new version of office, because Word Perfect is no longer supported by their billing software. I don't even think their version was new either.

It's kind of sad that you'll only modernize when you'll no longer get paid. You'd think improving efficiency would be motive for modernization, but I guess not.

Probably why so many hospitals are choosing iPad over PCs.

Our software is so tied to PCs and IE that that's not even an option.

Just curious, what makes you think the "enterprise" market is less lucrative than it used to be?

No growth. Everyone who could possibly use a Windows license has a Windows license and drags their feet about upgrading.

You're either busy growing or you're busy dying. As a potential shareholder, I care more about growth than straight up profitability.

"Entreprise" is not limited to Windows. Far, far, far from that. I don't know your background, but in software development (let us exclude plain Website just publishing information), most of it is written for enterprise customers, not private consumers. Excel had around 10 developers years long. I understand cloud is making the difference more blury, but there are just so different needs across different countries, industries, etc - work is in the enterprise. Consumer tools scale, you don't need much people to maintain and develop these.

You're either busy growing or you're busy dying.

This is extremely simplistic MBA talk.

By this logic, as soon as you saturate the market, you are dying?

Yes. You need to find/create more markets.

Look at Apple. iPod -> iPhone -> iPad.

If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time.

In real terms, this means you need to grow your business by at least 3% in order to give me that return.

I'm not the right person to talk about this, as my knowledge is thin and my metaphors are poor, but even if you're the sole owner you start to lose money if you don't grow at a reliable rate.

You're right in that most businesses need to grow to increase their value (generally because growth is built into their current valuation) but the narrative you're using isn't on target.

It's entirely possible for a business to give investors good returns even if their business or market isn't growing. Profitability and cash returns from a business can grow as revenues decline if the company either increases operating efficiency, or reduces in investment in recognition of the declining opportunity. MBAs would call this a "cash cow" business - one that should be milked.

We dont tend to see this much in tech because growth is such a fundamental part of our valuations that no company is willing to admit it's in such a position. And you'd probably lose all your engineers over time. But when you look at say, Microsoft, and strip away their non-performing businesses, that's what it looks like: a company that has some assets that produce a lot of profits, but aren't really growing any more, yet if managed properly can continue to throw off gobs of cash for years to come.

Please correct me if I'm wrong!

But:

>Profitability and cash returns from a business can grow as revenues decline if the company either increases operating efficiency, or reduces in investment in recognition of the declining opportunity.

Sure. When I say growth, I mean "make more money this year than you did the year before". This doesn't directly translate into "make more widgets", of course – that's just the (in an ideal world) easiest and least complicated way of achieving that.

>yet if managed properly can continue to throw off gobs of cash for years to come.

Until! It dies ;0.

>Sure. When I say growth, I mean "make more money this year than you did the year before".

If I understand tomkarlo's point correctly, he's saying that you don't have to make more money year to year in order to have a viable business. Rather, you simply need to keep expenses low enough to manage a respectable profit for your investors. That profit need not necessarily grow year to year for investors to find it worth holding.

Of course, valuations will be made completely differently for such a company, but that doesn't mean they can't exist.

It's the fallacy of the excluded middle that convinces people that stability has no value.

It's this statement that is incorrect: "In real terms, this means you need to grow your business by at least 3% in order to give me that return."

In almost any definition "growing a business" means increasing unit sales, or increasing revenues, or both.

Neither is necessary to provide acceptable returns to an investor - there are great investments around in businesses that have long since peaked in terms of unit volume and revenue. Much of the private equity world focuses on these kinds of investments.

Cool!

Duly noted. I was using it as a catch all for "make more profit than the year previous".

> If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time.

Yes.

> In real terms, this means you need to grow your business by at least 3% in order to give me that return.

No.

Suppose you want 3%.

You give me $100 and I buy $100 worth of goods which I then sell for $106. I give you $3 (there's your 3%), keep $3. That leave me with $100 to buy goods to do it all again.

Note that this biz doesn't grow at all but it can throw off 3% as long as I can keep buying at $100 and selling at $106.

What about inflation you say? Multiply all the numbers after the initial $100 by your inflation factor the first year and use the updated numbers (and your inflation factor) each subsequent year.

It shows just how isolated the startup community can be from traditional business. Stable businesses can make plenty of money; growth is simply the way you increase your profits even more.

Really, your sentiment is reminiscent of the dot-com refrain of 'get big or go home'. Those were the true champions of growth-as-profit (and it sure turned out well for them)

"""Yes. You need to find/create more markets."""

Actually you don't "need" anything. There are tons of examples of profitable companies that do one thing / product, or several things / products and do it for a century or more, with thousands of employees that do not look to expand on other markets. Even more so for companies with less employees.

"""If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time."""

Yeah, that's why the stock market promotes cancerous growth of companies.

I don't mean to be adversarial, but could you provide examples?

>Yeah, that's why the stock market promotes cancerous growth of companies.

I have troubles with this sometimes. I lie awake at night and think about the little I know about finance and economics and I wonder - is this all a zero sum interaction? Abstractly, the earth is a closed system, right?

Of course, value and money are also abstractions and so aren't directly pegged to any physical constants, so maybe in real terms it doesn't matter either.

Anyhow, my understanding is that the narrative I used above works for stock markets and single shareholder companies.

I have a fixed amount of hours/year to invest in my company/enterprise. Let's suppose it's profitable and yields oh 250k in profit/direct wages to you, the single shareholder.

If your total amount of profit remains constant, you're losing money just via diminished purchasing power. Your employees will demand raises, which means you have to raise prices and/or squeeze more productivity out of your company, yadda yadda yadda. If you don't keep growing… you end up finding yourself in a position where you will begin to contract, and it's easier to go down than to go up.

"I wonder - is this all a zero sum interaction? Abstractly, the earth is a closed system, right?"

No, the amount of value in the world is not fixed [eg, 1].

[1] http://www.paulgraham.com/wealth.html ("The Pie Fallacy")

My suggestion is stop laying and wondering and start reading. Economics and finance is a fascinating topic if you want to truly understand the history and theory of money and finance.

I don't mean boning up on company reports (though the ability to read and understand them is a good life skill) but rather truly trying to understand what money is, what it means, why so many apparent paradoxes exist.

To wit; wealth is not a zero sum game. Hard numbers like valuations come about just from an agreement at a point in time, which are just the opinions of two people at a flash in history. Even the value of a dollar in your wallet is a massively volatile thing in terms of what you can purchase with it.

A good jumping off point is Niall Fergusons 'The History of Money' (book or video). Get through that and then decide which of the sub-themes you want to delve into further.

I've been reading Sacred Economics: http://www.realitysandwich.com/homepage_sacred_economics

It's the clearest explanation of this I've heard in a long time. However it's a bit long and deep, if you want an essay length version of the argument, it is here:

http://www.realitysandwich.com/money_and_crisis_civilization

"""I don't mean to be adversarial, but could you provide examples?"""

Well, clothing and accessory companies, restaurant chains, publishing houses, film studios, etc, even software houses (has EA made anything else than games --anything substantial to their bottom line, that is?).

But don't think brand names. Think of the tons of companies we don't necessarily know by name, but exist and serve their markets: construction companies, package delivery companies, etc.

OK, I interpreted your original comment as saying that big corporations in the aggregate spend less money on software and its associated services than they used to, and I couldn't imagine how that could be true.

Well, it's still pretty lucrative, but for Microsoft, it doesn't go anywhere anymore.

I am persuaded by some of the recent arguments (John Siracusa's maybe?) that both the innovation and the money in general-purpose computing industry have moved over to the consumer side of the equation, and that this change has put MS in a worse position than they've traditionally been in.

Dominating corporate computing (for soooo fucking loooong) made MS billions and billions, but it also held back their two products, Windows and Office.

They couldn't ditch compatibility, they couldn't make disruptive moves, they needed to pre-announce their roadmap... and also, I'd guess that they probably just didn't see the business-to-consumer weight shift coming, just as they didn't see the Internet coming until it ran them over. (Neither did any of their peers, though -- Apple still had their own branded AOL-clone at a late stage, what was it, eWorld? The Internet ran over everybody as the 80s turned into the 90s. And MS is itself one of those hidebound big corporations; it's natural for those organisms to be slow.)

Anyway my point is that megacorps actually want a pretty limited computing product, compared to consumers. Barring esoteric business needs, they don't need, or even want, their employees to be able to, say, shoot HD video, make unlimited anonymous video calls to anybody in the world, track themselves jogging with accelerometers and GPS, play Angry Birds, and so forth. In general, megacorps want cheap, reliable, slow-moving tools that match their slow-moving planning and frankly limited needs. And did I mention cheap. Cheap.

Back when a PC cost as much as a used car, business purchasing drove the industry. But the human spirit and Moore's law went marching on, and in recent years we have a variety of desktop, laptop,and pocket phone/computers that not only outperform those used-car PCs of yesteryear, but may also feature wireless and nationwide magical Internet connections, ones much faster than the 128K ISDN-line that cost me 40,000 yen per month in the 90s.

So now you can buy a pretty kickass computer--one that fits in your pocket, or handbag, or backpack, whatever you prefer--for the price of like, two steak dinners with a date. (Maybe three or four for the macbook air.)

Cost-conscious companies with big headcounts don't need any of that good shit. So they end up with, say, a fleet of Dell Vostro 620S desktop PCs with 4GB RAM, archaic spinning-platter HDDs, and Windows 7 Pro (or XP still, if they are on a volume license (which they totally are)). So we're talking about $700 with a shitty Dell monitor. 3-4 year deployment life. MS'll make whatever percentage of that, plus a bit on the Office they'll probably use, but that's it for that duration.

Meanwhile, a guy and his wife will drop eight times that on smartphones over the same duration. iPhone, Nexus, Galaxy, whatever. (But yeah, mostly iPhone.) Or a tablet of some kind.

Because they want all that good new shit, and it's no longer so expensive that they can't have it.

So consumers, wow what a shitty word, okay I mean 'people doing their own things and living their lives' -- let's call them PEOPLE for short -- can now afford computers. Waitresses, stadium hot-dog boys, tax drivers, high-school students. That was not so much the case when MS started to achieve hegemony.

Back then, not only could PEOPLE much less frequently afford computers, but also computers weren't nearly as capable of doing the cool shit that PEOPLE are actually interested in. PEOPLE want to do cool shit, not just do some boring-ass work. Video mashups, GPS flash mobs, music buying, music bootlegging, angry birds, porn, cold fusion, etc.

Therefore, the companies aimed at PEOPLE are the ones who are, and have been for a while, making the more ground-breaking and innovative products. Lighter, simpler, more sensors, more stable, brand new re-architected OS software. The PEOPLE are the ones recently pushing the limits in computing. Demanding new, ground-breaking products. Rewarding innovation.

Computers were prohibitively expensive. But now they're not.

Computers used to not be able to do cool shit. Now they can.

So even if the ENTERPRISE market is still bigger overall in terms of units, ENTERPRISE wants shittier products, updated less frequently, for less money. That's what MS has provided over the past decade (with the exception of the less money part, har har).

Microsoft's products met those needs, but at the cost of tying MS to that legacy, and thwarting their ability to compete for the faster-evolving PEOPLE market, arguably now more important.

They are now trying to reinvent themselves. With Windows Phone surely, and it seems they are trying to make a break with the past even with Windows 8, though they are understandably halting in their efforts, loathe to disturb the waning cash cow. But serving the PEOPLE and serving the ENTERPRISE increasingly seem to be mutually exclusive. PEOPLE want new, awesome, fast, again! ENTERPRISE has different priorities. So MS has its internal schizophrenia. And no success on that front so far.

I didn't mean that the enterprise market was becoming less lucrative for everybody, although relative to the consumer market, it probably is. I meant that for Microsoft specifically their dominance of the enterprise over the past 15+ years has been milked for everything it is worth and has now become a hindrance to them, keeping them stuck in a narrowing rut.

You say that the enterprise is “lucrative” and then you say that “megacorps want cheap” software.

I don’t dispute either of these statements. I share the observation that price is the number one concern of those who don’t understand technology and that there’s a lot of money to be made in that space. But what to you think enables both of those statements to be true?

Is it that developers are able to con technophobes into contracts and processes that appear cheap but ultimately end up costing them more? Or, perhaps technophobes actively demand things that lead to that situation e.g. waterfall. Or some other possibility?

It turns out that "cheap" software at the scale where you're rolling it out for thousands of employees, plus maintenance contracts, plus consulting fees, plus servers needed to manage all those PCs, plus... still add up to be a remarkably lucrative market.

Hey veidr, Your ideas are intriguing to me and I wish to subscribe to your newsletter (cold fusion... made me snort baba ganoush out my nose) - update your profile with further information, dagnammit!

While I personally think that's insane -- if you are that specific (not to mention antiquated) with your browser requirements, why don't you just code a native app?

They pretty much have. They are probably using VBScript for event handling and depending on various IE6 behaviors that are no longer supported in current versions of IE and never were available on other browsers. They've written a "native" app for the IE 5/6 platform.

>why don't you just code a native app?

It sounds like that's exactly what they did,

They just hosted most of the code on a server. It's kind of like the "native" iOS apps that just use a webview component to display a web app. Sticking with IE6 just means you have all the hassle of a native app (like needing to make sure IE6 gets installed and stays installed on every machine) with none of the benefits.

At the time, IE6 WAS installed on every machine and using it as a platform for internal apps was VASTLY easier than deploying client/server apps that needed a powerbuilder or some such runtime on each desktop.

Almost as easy as CICS. ;-)

Well, almost all of the hassle, anyway. They probably don't need to maintain and distribute an installer for this particular enterprise app.