Recent Google acquisition JotSpot found itself the subject of unwanted attention this week, when an early customer complained of being shut out after the Google deal. A blog post by someone named Kevin (no last name supplied) had all the gory details, but Kevin then subsequently deleted it (note: I'd already read it before it disappeared). Techcrunch then posted the cached text of the post. My concern when I first read it wasn't so much for the damage to JotSpot's reputation (which the company is more than capable of defending), but the implication that hosted applications in general carry more risk than people normally assume. Here's the key extract from Kevin's post:
"Pick your hosted application service provider well. Relying on web hosted application services is much more dangerous than I ever would have assumed. This is especially true for those services that are “closed source” like those of JotSpot."
What's more, in the Techcrunch comments another person who claims to have been a JotSpot customer has his/her say:
"I can’t reveal much about my experience with Jotspot either, but our company has been heavily screwed because of the merger.
After the merger, Jotspot went on some kind of blackout as far as communications, and a portal we developed on jotspot’s servers is half-assedly done, but the developer can’t do anymore work because Jotspot has been quiet on whether they will pay him or whether google will. Unfortunately, we already have 50 customers (NOT USERS, CUSTOMERS) not understanding why basic functionality is not fully developed.
We’re probably going to dish out tons of cash to redevelop the portal on another engine entirely.
Thanks, Jotspot. Thanks a ton."
To his credit, JotSpot CEO Joe Kraus then leaps into the comments to defend his company. He says that Google has a policy of "not announcing anything about future product direction" and so "our ability to give any sense of timeline and capability is extraordinarily limited". Joe promises they're not going to abandon their partners and customers. Now, I have a lot of admiration for Joe Kraus and I think he's one of the smartest people in the valley. Nevertheless, the sense here is that JotSpot's customers have indeed lost out in this deal - and there's not a whole lot JotSpot can do about it because of Google's restrictive policies. So where does that leave the customers?
Peoples faith in web hosted applications has been shaken by this - and in particular in the Web Office realm, where hosted applications have a lot of business value invested in them by their customers. How can customers be guaranteed that a Web Office company acquisition (or worse, a bubble burst) won't negatively impact their own business?
This problem isn't new - back in the dot com days these types of hosted providers were known as ASPs (Application Service Providers). But ASPs very rarely replaced entire office suites (in particular Microsoft Office). In the case of Web Office, over the past year or so some of us have been talking up the potential of a whole business being run on a hosted platform - which is of course a threat to Microsoft Office. However the smaller the hosted provider is, the bigger the risk. Just as Amazon has a decided advantage providing hosted infrastructure (S3 etc), the likes of Microsoft and Google (with their own apps) have a big advantage over the smaller Web Office providers.
This has to be a concern going forward for Web Office startups. How on earth can they convince customers that they're as rock solid a (business) investment as purchasing a license for Microsoft Office, or downloading OpenOffice? Will they need to open source their technology, as Kevin's post alludes to? Or will it just require tightening up the service level agreements for customers?
And from the Web Office startup's point of view, how difficult does this make it for them to compete with Microsoft or Sun Microsystems? Imagine a Microsoft ad campaign that has as its main message: 'why take the risk of running your business on a small startup's servers?' It's not that far fetched an idea for an ad campaign.
I'm interested in your thoughts, because obviously I think Web Office startups have a lot to offer in terms of innovation and Web native functionality. But the business risks are something they need to overcome, to gain the trust and uptake of customers.