The NetSuds (TM) Report

The January 1, 2001 Issue:

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Definition:  "com and .com" = Telecom, Datacom, IT or Internet

In this Issue:

        1.0  Heard on the Net
        2.0  Jobs in the "com and .com" Market
        3.0  NetSuds on Tour - Stellent
        4.0  Tidbits
        5.0  Calendar of Events
        6.0  Minnesota Venture Capital Conference &
                     Bleeding Edge Technology Showcase
        7.0  Education:  We've Fallen *Way* Behind
        8.0  Bandwidth Management Hoax
        9.0  Talk, Talk, Talk: So who needs streaming video on a phone?
        10.0 Guest Writers for this Report

1.0 Heard on the Net

        1.1 People on the Move:

        Please email:  people@netsuds.com to report a change in your job status if you are
        moving from or to a company in the "com or .com" space.

        NetSudser Jeff Shawd is now EVP at Marketing Drive Worldwide. They
        are an 85-person promotion and direct marketing company.  You can
        reach him at either 952-249-8603 or jshawd@marketingdrive.com.

        NetSudser Eric Wieffering of the Star Tribune no longer covers technology for the
        Star Tribune.  Contact Eric at either ewieffering@startribune.com or 612.673.4237.

        NetSudser Charlie Westling has left Agiliti.

        NetSudser Dan Ryan is now SVP of Corporate and Business Development
        at Stellent.  Contact Dan at either dan.ryan@stellent.com or 952.903.2056.

        NetSudser Rick Parker is now VP of Marketing at Stellent.  Contact
        Rick at either rick.parker@stellent.com or 952.656.2782.

        1.2 Companies on the Move:

        Please email:  start-ups@netsuds.com to report (1) the formation
        of a new start-up, (2) momentum change at an existing start-up,
        (3) addition of key hires, or (4) a funding event at a start-up.

        Please give details on the above including any information you do
        not want made public.  We are very discrete.

        NetSudser Eric P. Strauss recently launched EntrepreneursForHire.com
        as the place for Twin Cities' growing businesses to find all the
        resources needed to launch or expand their operation.  Contact
        Eric at either eric@entrepreneursforhire.com or 612.374.0004.

        2.0 Jobs in the "com and .com" Market

        Please email:  jobs@netsuds.com to report job openings in the
        "com and .com" Market.  In the body of the message, give the
        name of the company and a URL link to the job postings.

        No job openings to report this month.

        3.0  NetSuds on Tour - Stellent

        NetSuds loves on-site tours!  Email me if you want to show off your
        company.  I can be reached at matt@netsuds.com.

        3.1  Stellent

        Somewhere between St. Paul Venture Capital and the Vikings HQ,
        I took a wrong turn on my way to visit Stellent.  I ended up on Page Mill Road
        in Palo Alto.  Stellent impressed me in more ways than one.

        I met with several individuals including Dan Ryan, SVP of Corporate and Business
        Development, Frank Radichel, VP of R&D, Rick Parker, VP of Marketing, Kari
        Seas, Director of PR and Amanda Kohls from Haberman & Associates.

        Rick is relatively new to the organization.  Frank and Dan are veterans. 
        Opposites in personality, they both seem naturals for leading their
        respective organizations.

        Stellent is one of the world's leaders in content management software.
        Formerly known as IntraNet Solutions, this publicly-traded company has
        weathered the financial storms of the last 22 months extremely well.  Growth
        has slowed from the breakneck pace since the inception of the company but
        Stellent boasts of nearly zero employee turnover.

        Stellent customers routinely spend six figures for software which enables efficient
        communication and document manipulation over the WAN and LAN between
        business partners and between a company and its employees; B2B and B2E.

        What does it take to be a leader in this market segment and why
        do companies spend an average of $200K for this software?

        First, the software has to be relatively easy to install and use.  In order for
        employees and business partners to WANT to use the software, it should be
        intuitive, useful and facilitate - not hamper - day-to-day business activity.
       
        Second, the software has to provide value over and above what it costs.  Intranets
        and Extranets can be built, and continue to be built with less expensive software.
        Third, it has to interoperate with other legacy software products and file formats.
        Approximately 200 different file formats are supported by the Stellent software;
        not a small task.

        Stellent seems to know its competition and its market.  It is not supplying
        content management software to the small enterprise. This is not typically
        software you find behind public-facing Web sites such as BestBuy, OfficeMax
        or Fry's.  [Nor would you buy it at those stores!]  The market is still relatively new
        and growing. Because of this, Stellent and a handful of other companies can
        exist and continue to do well.  As the market matures Stellent will have to be #1
        or #2 in order to thrive.  They seem to be at least #2 in their market and making
        all the right moves.

        Stellent has been rather quiet in comparison to other Minnesota software companies
        such as Lawson Software, Net Perceptions and others.  They could end up being
        the 800-lb gorilla in their segment; a nice feather in the hat of Minnesota
        technology companies. And they will have done it with a family-friendly culture
        where it seems everyone wants to work hard and be #1.

4.0  Tidbits

        4.1  LCD Projector and Other Assets

        Downsizing?  Need to sell some corporate assets?  I know some folks
        interested in an LCD projector and some miscellaneous office equipment
        (not furniture).  Email me at matt@netsuds.com.

        4.2  INTERNET WORLD: AOL'S PITTMAN SAYS NET INDUSTRY REMAINS
               UNDAUNTED

        From www.infoworld.com Posted December 11, 2001 10:07 Pacific Time

        NEW YORK -- The Internet revolution is alive and kicking and "has never
        missed a beat," proclaimed AOL Time Warner co-COO Bob Pittman in a
        relentlessly upbeat keynote speech delivered here Tuesday at the start
        of Internet World Fall.

        With two-thirds of U.S. homes connected to the Internet, the medium has
        reached a critical mass, and companies can begin cashing in on the
        subscriber bases they've acquired, Pittman said. That's AOL Time Warner's
        growth strategy: Pittman deployed every hue in PowerPoint's palette to
        illustrate how the company plans to sell additional services and products
        to customers currently paying $20 to $45 a month for Internet connections
        from America Online and AOL Time Warner's Road Runner cable modem
        service.  Add in an array of new services -- for example, $20 for a
        monthly music subscription, $15 for games, $10 for interactive
        television, $35 for long-distance IP telephony service -- and you can
        significantly increase the per-user revenue derived from your
        subscribers, Pittman said.

        For the full story:
        http://www.infoworld.com/articles/hn/xml/01/12/11/011211hnpittman.xml?1218tuunknown

5.0  Schedule of Events

        5.1 - Minnesota

                1/18   MedicalSuds Entrepreneurs Breakfast - Minnetonka
                          http://www.medicalsuds.com/eb/2002/January/

                3/5     NetSuds Evening Gathering - Minneapolis 
                          http://www.netsuds.com/netsuds/

                5/8-9  Minnesota Venture Capital Conference - Minneapolis
                          http://www.mnvcc.com/

        5.2 - Outside Minnesota

                1/9     iSuds Evening Gathering - McLean, VA
                          http://www.isuds.com/dc/isuds/

                1/24   NetSuds Evening Gathering - Raleigh, NC
                          http://www.netsuds.com/rdu/eg/

        5.3 - pulver.com Events - http://www.pulver.com/conference/index.html

                February 5-7 - 5th Annual IP Communications Industry Executive Summit,
                        Ritz-Carlton Kapalua, Maui, Hawaii ( http://pulver.com/execsummit )
                April 8-11 - Spring 2002 VON, Seattle, WA
                       
        5.4 - Non-NetSuds Events
               
                John M. Morrison Center for Entrepreneurship, house on the Minneapolis
                campus of the University of St. Thomas, offers a number of special
                outreach/lifelong learning programs with Just-In-Time information. 
                Visit http://www.stthomas.edu/entrep/programs for a calendar of events.

6.0  Minnesota Venture Capital Conference

        NetSuds has announced the first-ever Minnesota Venture Capital Conference^SM
        (MNVCC) and Bleeding Edge Technology Showcase^SM (BETS) to be held
        May 8-9, 2002.  The event website is www.mnvcc.com.  The MNVCC and BETS
        are 2 conferences in one!

        If you are an entrepreneur at a 2-person start-up or a 200-person start-up looking
        for venture capital, you can apply to present at the Conference.  The deadline for
        applications is March 5, 2002.  Apply at http://www.mnvcc.com/entrepreneurs/.

        If you are a Minnesota company or if your division is based in Minnesota, you can
        apply to present at the BETS.  University researchers are welcome to apply as
        well.  If selected, your registration is free.  We are looking for the best of the best in
        technology.  Apply at http://www.mnvcc.com/bets/.

        Venture capitalists, angel investors and investment bankers are accorded
        complimentary registrations to the Conference but must apply online at
        http://www.mnvcc.com/investors/.

        Members of the media are accorded complimentary registrations to the
        Conference but must apply online at http://www.mnvcc.com/media/.

        Sponsorships are available and are sold on a first-come, first-served
        basis.  Contact me for sponsorship package information at matt@netsuds.com.

        Registration is open now!  The first 100 registrants are $295/person.
        Subsequent registration prices start at $495/person.  Register at
        http://www.mnvcc.com/register/.  If you qualify for a complimentary
        registration at a later date, your fee will be refunded.

        MinnesotaBusiness Magazine - www.minnesotabusiness.com is the official Media
        Sponsor of the Minnesota Venture Capital Conference.

        Conference Speakers/Investors Confirmed to Date:
        Prof. Andrew Odlyzko, UofM, Director of the Digital Technology Center
        Dave Stassen, General Partner, St. Paul Venture Capital
        Brian Sullivan, Candidate for Governor
        Brad Lehrman, President, Portage Capital
        Art Monaghan, Principal, Norwest Equity Partners
        Bea Rothweiler, EVP, Portage Capital
        Christopher Volker, Principal, The Mercanti Group
        Tom von Kuster, Angel Investor, AMEX Inc.

        7.0  Education:  We've Fallen *Way* Behind

        The pot is on the stove and the water is being brought to a slow boil.
        Unfortunately, we are the meal but we think we are in a hot tub.

        Unless we make a major overhaul of our K-12 educational system, we -
        the United States - will lose our technology leadership in the world
        within 20 years.

        We will lose to countries like India and China.  We will lose tens of
        thousands of jobs in engineering, computer science and related
        disciplines.  We will begin to lose chunks of our venture capital
        industry as more and more successful Indian entrepreneurs choose India
        to found and fund new companies, eschewing Silicon Valley and Boston.
        Take a look at www.siliconindia.com.

        This dismal prediction is based on a couple decades of trends which
        point directly to the outcome.  It started with a major influx of
        foreign graduate students in top research universities two decades ago.
        Foreign countries would send the cream of their undergraduate crop to
        places like MIT, Berkeley and Stanford.  They had to compete for
        admission with other students and they competed very well.  They continue
        to do so.  For the past two decades, these students found good jobs at
        high-tech companies in the USA after graduation.  They made much more
        money working in the USA than they would have made back in their home
        countries.  In the last decade, many of these engineers and computer
        scientists have risen to management ranks in their companies. It was not
        a giant leap then for many of them to found their own companies. In fact,
        many have graduated to the 'rank' of venture capitalist.  With their ties
        to both Silicon Valley venture capital and their homeland, we are now
        seeing a trend with venture capital offices opening up in places where
        venture capital never existed ten years ago.

        In the past decade, many foreign countries have been a source of
        inexpensive software programmers.  In the coming decade, they will become
        a source of new companies, competing very directly and very efficiently
        with USA companies.  We will lose our technology edge and eventually, our
        leadership.  We will have no one to blame but ourselves.

        It started with and continues with a lazy approach to K-12 education.  The
        USA system does not demand excellence or competition in our educational
        system; not to the extent of some other countries.  It is a national
        disgrace.  We have become self-satisfied and inefficient.  We delve in to
        non-educational programs during the school day while our world counterparts
        are engaged in advanced math and science programs.  I'm not talking an
        excessive emphasis on sports and the fine arts.  I'm talking about
        politically correct "courses" and the coddling of disruptive students.  I'm
        talking about a major relaxation of standards.

        Many foreign students are in a very competitive educational environment
        where failure can impact their lives forever.  They know this and they
        are extremely motivated to learn.  They study harder.  They take more
        challenging courses.  They understand their future depends on their ability
        to compete on a global scale.  They know technology is vitally important
        in a world increasingly dominated by technology; engineering, medicine,
        biology, chemistry, computer science.  For a local example of what the
        demographics of a typical graduate program in Engineering and Computer
        Science are, look at http://www-users.cs.umn.edu/grad.html.

        So, what is the solution?  First, competition will breed excellence.  Call
        it a voucher, tax credit or something else.  Stop the political rhetoric
        and address the problem.  Second, demand more from our schools and our
        children.  Third, give more control at the local level so parents can have
        a greater influence.  Fourth, start thinking and competing globally.  Don't
        compare the Burnsville school district with the Moorhead school district.
        Compare Burnsville to Bangalore.

8.0  Bandwidth Management Hoax

        By NetSudser Bruce Bahlmann, bahlmann@pobox.com

        Visiting this year's Western Cable Show there were many booths/vendors housed
        under the subject of "Bandwidth Management".  I suppose bandwidth management
        has become this year's solution to the problems experienced by many broadband
        operators.  However, I still don't get it.

        Broadband operators find themselves in this position where the services they
        are offering over their CATV, DSL, Wireless, or Satellite delivery media are
        beginning to consume increasing amounts of their available bandwidth.  The
        "solution" being proposed to operators is that if they use bandwidth
        management software they can determine where the traffic is coming from, what
        kind of traffic it is, and how best to manage it.  I guess, so that they can
        free up some of this bandwidth being consumed and prolong their investment
        in network hardware.  Only how exactly can you manage traffic, really?

        I've always believed that there is no such thing is bandwidth management, it
        doesn't exist!  Bandwidth is consumed by content and without content you
        would not have any need for bandwidth -- much less the need to manage it.
        Therefore if you were able to manage content (either at the source or the
        destination), there would not be any need to manage bandwidth -- the network
        would just do as it is supposed to do which is take care of itself.  Networks
        do this very well in fact.

        Of course managing content is not going to buy you endless freedom from
        bandwidth woes, this is where careful planning comes into play. Besides the
        need to manage content, broadband operators also need to manage how they size
        their services that run over their networks.  For example, many broadband
        operators literally give bandwidth away with little regard to the consequences
        this will have on their network over the course of time.  When the service
        becomes impaired (slow) operators look to software such as bandwidth
        management (which represents an additional investment) to determine who their
        top talkers (bandwidth users) are or even seek to divide up their networks
        (yet another investment) to sustain some previously established standard for
        service speed and quality.  What was the logic/market data used to determine
        these initial service speed and quality settings anyway?

        I would argue that charting top talkers is a waste of time! Why, because these
        subscribers are not doing anything wrong (the service should restrict most
        wrongful things from being possible), they are merely using the service that
        they have paid for -- they aren't trying to take advantage of the operator.
        I equate this to pre-paying for fuel at the gas station.  When you pre-pay,
        your allotted some amount of fuel equivalent to that which you paid.  Thing is,
        if you need all the amount you paid for you (as a consumer) are not wrong to
        use what you rightfully paid for.  In this example, its as if broadband
        operators are expecting people who subscribed (prepaid) for service to not
        consume their entitled bandwidth (fuel) -- leave it for the next guy.  I wish
        someone would leave me some free fuel at my next stop at the gas pump...

        Some day, a smart person is going to figure out what a data service is really
        worth and those operators who have arbitrarily offered data services to their
        subscribers in the past without this information are going to look back and
        wonder how much money they could have made if only they would have charged
        what the thing was worth or only provide the level of service that the
        subscriber was willing to pay.  As for managing bandwidth, it will remain a
        pipe dream as nobody really controls what happens between two points on a
        network (that is left to the hardware vendors).

        Content will be the only thing that can be managed but its control is only
        possible at the edge of the network (source or destination). The destination
        appears to be the first logical place to start as it is closest to the
        consumer as well as one of the bottlenecks of the system (the last mile --
        the other bottlenecks being the Internet and the content source).  One can
        either throttle this endpoint to prohibit individual users from consuming too
        much bandwidth (goes back to my point about designing services that the
        operator's technology can sustain and will permit linear growth in bandwidth
        demand) or they can better manage the content they already have (there are
        several applications out there today that for example make browsing more
        efficient by working more like a proxy server).  The source of the content
        can also be managed but this often requires engineering as the goal here is
        to optimize distribution of content. Very few content services actually do
        this, thus they create a new problems downstream for others to solve.  One
        example of managing content at the source would be to only send unique content
        or only the changes (deltas).  Teleconferencing software has done a terrific
        job at doing this kind of thing however few other applications have taken this
        approach.

        As a result you have companies trying to make up for lack of sophistication and
        optimization in content delivery and consumption by trying the tweak the
        network it traverses.  Making changes to the network will never fix this
        problem, it only further delays the inevitable or extends the period of time
        where bandwidth is unavailable.  Again, if you don't regulate demand or the
        distribution of content you cannot fix this problem between the endpoints --
        that is the pipe dream.  The network is merely the scapegoat; taking the blame
        for years of content's lack of innovation and optimization in its delivery
        methods.

        Bruce Bahlmann is director of technical market development for Alopa Networks,
        contributing editor to Communications Technology, and owner of the broadband
        technical information site birds-eye.net.  Prior to working for Alopa, Bahlmann
        worked for Continental Cablevision, MediaOne, and AT&T Broadband where he
        spearheaded a number of engineering efforts including autoprovisioning,
        self-provisioning, troublshooting and leads tracking, and building the
        companies initial legacy & DOCSIS provisioning systems.

9.0  Talk, Talk, Talk: So who needs streaming video on a phone?
        The killer app for 3G may turn out to be--surprise--voice calls

        By NetSudser Andrew Odlyzko, Director of the Digital Technology Center,
        University of Minnesota, odlyzko@umn.edu, http://www.dtc.umn.edu/

        Those third-generation services, combining Internet and wireless
        technologies, were to ring in a new era of communications. Instead,
        rising skepticism about their prospects, together with the staggering
        sums paid by carriers in spectrum auctions, helped precipitate the
        telecom crash.

        But the story may have an accidentally happy ending.  The unanticipated
        killer application of 3G is likely to be voice, the killer app of first-
        and second-generation systems.  This will please both investors and
        those eager to see effective competition to the local phone monopolies.

        3G was sold by its promoters as a way to provide mobile Internet access.
        But the market has figured out that not only will streaming video not be
        feasible with 3G, it is doubtful whether it would bring in much revenue
        even if it could be offered.

        People don't want to be entertained by their cell phones.  They want to
        be connected.  Note the success of simple text messaging and the failure
        of content-providing Wireless Access Protocol.  The good news is that
        3G's higher bandwidth can be used to make room for more calls and maybe
        make those connections more reliable.

        But wait--wasn't the industry hoping to expand beyond what was seen as a
        nearly saturated market for voice?  True, when over 70% of the population
        has cell phones (as in Finland today, and probably in the U.S. in a
        couple of years), subscriber growth will slow.  However, penetration
        ratios ignore intensity of usage.  Fact is, we've hardly begun to talk.

        This may seem surprising, given how often we see people using cell
        phones in public.  However, in the U.S. the total volume of wired voice
        calls is still more than six times as high as that of mobile calls.
        This explains why cell phones are still far from providing effective
        competition for wired phones.

        And yet Americans use their cell phones more than most foreigners:
        more than 8 minutes per day, versus less than 5 minutes in Britain,
        for example.  This lead stems from AT&T's introduction in 1998 of block
        pricing (in which, say, subscribers pay a flat fee for 500 minutes of
        use in a given month).  Such offerings doubled the average daily minutes
        of use in the U.S. between 1997 and 2000.  In contrast, Europe's usage
        per subscriber is declining.

        This is where 3G's enhanced bandwidth comes in.  Although operators can
        boost the capacity of current 2G systems even without new spectrum by
        building more cell towers, these are infamously hard to get approved
        and ultimately expensive.  The investments being made in 3G may not be
        necessary, as 2.5G would have been sufficient, but they will provide
        much greater voice capacity.

        After all the billions invested, the industry naturally is leery of price
        erosion.  Instead it should be aiming to stimulate a quantum change in
        customer behavior.  If prices go down by half, but usage quadruples,
        your revenue doubles.  U.S. carriers may fret that their price per
        minute is down by half in the last four years, yet minutes of use are
        up just enough to keep average monthly bills flat.  Contrast Britain,
        where revenue per retail user was down 20% over the past year.

        The essential point is that breakthrough pricing strategies, such as block
        deals, are needed to bring about the kind of changed social convention
        that transforms an industry.  One logical extension would be toll-free
        numbers for wireless customer contacts.

        The biggest gains, though, are to come from encouraging more nonbusiness
        use.  In a fascinating book, "America Calling," Claude Fischer showed
        that the phone industry entered a new high-growth phase in the 1920s
        purposes only and instead started encouraging "frivolous" social uses.
        These served to make telephones an indispensable part of people's lives,
        and raised usage (and total spending) far beyond the levels envisaged
        by the industry's pioneers.       

        10.0  Guest Writers for This Report

        I have opened up the Monthly NetSuds Report to guest writers. If
        you have a passion for a topic, and you can write (at least no worse
        than me), send an email to me at matt@netsuds.com.  You can even send
        copies of your work.  It needs to be on "com and .com" topics and can
        include entrepreneur/investor activities.  Good information from our
        service providers and vendors is also welcome so long as it is not a
        "commercial" for any one company or individual.

        We will consider both sponsored and unsponsored columnists and guest writers.

If you are aware of others who would like to receive the NetSuds Report, ask them to visit http://mailman.netsuds.com/ to subscribe or unsubscribe.

Please send your comments and feedback regarding this issue of the NetSuds Report to matt@netsuds.com.

Matt Noah

1460 Lake Drive West
Chanhassen, MN  55317

612.279.2154
fax:  425.795.2019
matt@netsuds.com

(c) 2000, 2001, 2002 NetSuds.com, Inc.  All Rights Reserved.