Coop's Corner

OpSource is hosting a very timely conference in San Francisco this week on software-as-a-service. What with the meltdown in the economy and continuing concern about the cost and environmental impact of energy use, there's interest in how cloud computing will impact the IT world.

And what better way to cut through the hype over the so-called green aspects of SaaS than to assemble veteran technologists who might share their experiences with the uninitiated? That's the usual format: People ready to impart knowledge to people eager to receive knowledge.

(Credit: CNET News)

Good idea but, well, maybe another day.

As I sat in a cavernous ballroom in San Francisco's Westin St. Francis Hotel scribbling down notes, it dawned on me that I was one of, literally, a handful of people listening to the lecturer. At most, there were 10 or 15 of us--a pity because as he faced a sea of mostly empty seats, Randy Bias, a technology strategist for GoGrid, a supplier of cloud computing infrastructure, offered up a convincing brief on the energy-saving advantages of virtualization and why it makes sense to offload server functions to the cloud.

He was followed on stage by Adrian Bowles, a director at Datamonitor, who was equally eloquent about why there are compelling business reasons to rip up the procedures of hardware provisioning that IT followed until the recession (some call it a depression) hit. "The old days of 'buy it, plug it in, and run it' are probably gone forever," Bowles said, proceeding to lay out a hard-headed case on behalf of going green.

By then, I counted eight people--eight--in the ballroom (not including the speaker). Most of the folks attending this two-day kaffeeklatsch couldn't be bothered with a topic that obviously bored them silly. No matter that green tech at its most basic is technology done with a low environmental impact. For some reason, a discussion of low-energy technologies, virtualization, and improved cooling techniques weren't enough to hook them.

As they used to say back in my Brooklyn neighborhood, whaddya gonna do? But truth be told, I was puzzled by all the no-shows. It wasn't as if the other sessions being held at the same time--"SaaS marketing in a downturn" and "Architecting and delivery for SaaS success"--were so much more thrilling.

Could it be that "green" remains too squishy a concept for most of these red-blooded show-me-the-money types? I buttonholed one attendee in a hallway, who agreed as he was munching down a free ice cream provided by the show's sponsors. But the proverbial man on the street interview doesn't suffice.

I heard it said at one of the sessions how IT compensation plans now hinge on how successful you are doing projects faster and doing them more inexpensively. That's why SaaS advocates believe their timing couldn't be any better. Maybe that's misplaced optimism; we'll see as the year progresses.

But this much is clear: telling the boss that you're saving the environment in the process is not likely to be the clincher. Ever.

I'm spending Saturday in an auditorium somewhere in the bowels of Microsoft's Mountain View, Calif., campus. The occasion: a series of panels co-sponsored by Microsoft, Google, the Computer History Museum, and the American Academy of Arts & Sciences, probing "the impact of information technology on society."

That's quite a mouthful, not to mention quite an ambitious subject to tackle, but a very timely conclave. To their credit, the hosts have assembled a collection of very big brains up for the task.

The day started off with a rocking presentation by Joshua Cohen, a Stanford professor of political science. Alluding to the accelerating collapse of newspapers, he cautioned that the still-to-be-determined impact on the American polity will be anything but good.

From left to right: Edward Lazowska, Joshua Cohen, Henry Brady, and Edward Felten

(Credit: Charles Cooper/CNET)

"Here's where there is a big problem," he said, arguing that a "successful democratic sphere" is impossible without the information that newspapers supply. He added that "the damage is growing, and the consequences, potentially, are severe."

"Call me old-fashioned," Cohen continued, but blogging will not offer "a viable alternative" to investigative journalism. He faulted arguments that an increasingly decentralized blogosphere can fill that vacuum, a contention that he dismissed as "cyberutopianism."

"It is not only misplaced," Cohen said. "It's dangerous."

Talk about waking up with a strong cup of coffee.

Cohen's argument has been made by many others in different forums. But for the sake of perspective, however, keep in mind that it not universally shared. You'll find investigative reporting by agencies or individuals who don't belong to the ranks of professional journalists. But as the discussion broadened out to the political impact technology was having on public discourse, electoral politics, and governance, Cohen maintained that investigative journalism was "an important source" of information for the nation's political discourse.

"I think you have to talk about investigative journalism...It's not about weather or reporting sports. A world in which investigative journalism disappears is not a world in which democracy works very well," he said.

"The situation is getting urgent. Big newspapers are laying of about 20 percent of their investigative journalists," he said. "This is a profession where people learn how to do it. There are standards. It would really be a disaster if this investigative profession went out of business, a disaster for democracy. There's absolutely no reason to think that there's a fundamental hostility between the future of investigative journalism and technology, but nobody's figured it out yet."

He was right about that. Nobody did provide a conclusive answer to the question. Another panelist, Edward Felten, who teaches computer science at Princeton University, said that by 2020, the current disruptions taking down so many newspapers will lead to a reshaped landscape with more emphasis on what's taking place in peoples' backyards.

"There will be many fewer newspapers...partly due to fact that people can read newspapers from far away. We'll see smaller outlets which focus on the local and operate in a low-budget way, more like a community paper than a big city newspaper. And we'll see a lot of non-profit or low-profit punditry."

Will Joe the Plumber's tax message resonate in Silicon Valley?

Joe Wurzelbacher, an Ohio plumber considering whether to buy a business, turned into an unlikely media star this week after he confronted Sen. Barack Obama over the Democratic presidential nominee's tax proposal.

(Credit: CNET News)

Obama maintains that his plan would reduce personal income taxes on 95 percent of the wage earners in the United States. But after an Obama appearance at Holland, Ohio, Wurzelbacher told Obama that his tax plan would take money out of his pocket.

That was the beginning of Wurzelbacher's 15 minutes of fame. His name came up 26 times during Wednesday night's presidential debate between Obama and Sen. John McCain, who argued that a tax hike would slow any economic recovery and hurt job growth. McCain also said the tax plan would unfairly redistribute money earned by small businesses, essentially penalizing them for being successful.

Given their libertarian, government-get-out-of-my-way predilections, technology entrepreneurs would seem to have much in common with being penalized for their success. But the surface similarities only go so far.

For one, if you're making $250,000 a year in Ohio, you're living large. If you're earning that much in Silicon Valley (or other high-priced tech hotbeds like New York and Los Angeles), you're just middle class. And then you've got to worry about paying down that crazy mortgage. It's not as if start-ups are pleading to pay more in taxes. Instead, they have more pressing items on their agendas.

"At this stage in our business, we need to put our money into growth and innovation. We would benefit from the hiring credit we have heard about in Obama's plans. Access to health insurance is also much more important to us than a small change in that tax rate," said Mary Mangan, president of OpenHelix.

"I started going to a lot of entrepreneur events before I went out on my own. At every one of those events people asked me what I was going to do about health insurance. Not a single one of them ever asked me about taxes. In starting up a business you are just not making that much in the early days."

(Credit: Obama for President Web site)

Most technology start-ups--particularly, those that receive funding--are going to be structured as corporations, which changes the tax structure. Someone in the position of "Joe the Plumber" would likely establish a Limited Liability Company or similar structure which would treat earnings as personal income.

I heard variations on that theme from many start-ups that confessed to being more anxious about how long it's taking to fix the nation's economic woes. What start-ups want to see is an economic policy that helps the economy recover rapidly.

"A quicker economic recovery will more than make up for a several hundred dollar increase in taxes my company will pay under Obama's plan," said Brett Klasko, the founder and CEO of Phinaz Media & Marketing. "As you can imagine, we have to fight a lot harder for each marketing dollar during rough economic times. A recovery will increase our revenue far beyond any potential increase in taxes."

Like most tech start-ups, Phinaz Media & Marketing doesn't provide health insurance to employees. Klasko believes that if Obama or McCain can lower health care premiums and provide a tax cut to small businesses that offer health care to their employees, he may be able to justify the cost of giving employees access to a company health plan.

"This would certainly increase morale and could, in turn, increase productivity," he said.

With the presidential campaign winding down, the speculation is getting ahead of the reality. First, Obama's not guaranteed victory on November 4. And in the event of an Obama presidency, we'd only know whether his tax policy was a success or failure months later.

But if the political scenario does indeed work out in Obama's favor, his team will encounter a different start-up landscape from the one the Democrats remember from the Clinton administration. The lean and nimble Web 2.0 companies that dot the tech constellation can easily move their operations to more tax-friendly venues if they deem the new team in Washington to be antibusiness.

"There other options for companies to set up businesses elsewhere," said Anthony Franco, president of EffectiveUI. "If the plan is to raise taxes on small businesses, there are options to go offshore...As an entrepreneur, it's something you'd take a look at it."

With globalization and broadband proliferation, start-ups are forging international linkages--whether in sales or software development. And as Franco noted, that presents opportunities should push come to shove.

"This is not about patriotism or whether I love this country," Franco said. "It's what makes sense for this business as an entity. It would take a significant amount for us to consider doing anything outside of the U.S. But what is also true is that if it costs you $1 million year in taxes to stay in the U.S. and you can operate (the business outside of the country) for $200,000, there are companies that would consider that."

You know it's grim out there when the television talking heads report that the stock market only finished down 369 on a day when it fell as low as 800 points.

(Credit: CNET News)

With banks disappearing, liquidity drying up, and the political class clueless about events overtaking the economy, this is what a crisis looks like. If you want a good primer on the origins of what's now turning into a global credit crunch, check out the primer, courtesy of 60 Minutes, that I've embedded at the bottom of this post.

The $64,000 question (now $32,000 and falling) is the impact on the technology industry. So it is that just Monday, the following items came in on the transom:

• SAP issued a third-quarter warning.

• Netflix lowered its quarterly outlook.

• Another Wall Street house cut estimates on Yahoo.

• eBay announced plans to lay off 1,000 employees.

Heading into the teeth of earnings season, the news won't be much more encouraging. At best, it promises to be a rough patch. At worst, who knows? The VIX, a volatility index, climbed to levels Monday that now basically price in the coming of Armageddon. OK, we've seen better times. But before jumping off a ledge, some historical context is in order.

The pendulum swings both ways. Fact is that we've been here before, folks. Not in the exact same circumstances, of course, but in an atmosphere where the fashion of the day favored sackcloth and ashes.

Remember the October 1987 crash? In its aftermath, technology companies couldn't get the time of day from investors. Back then, I was a young reporter and was amazed that it didn't seem to matter that companies like Apple or IBM had beaten expectations. Their stocks would still get creamed. The herd simply was too frightened to think past the headlines du jour.

But Silicon Valley kept doing what it always does, inventing better hardware and software. Venture capitalists regained their nerves, entrepreneurs got funded, and innovation flourished.

More people have fresher memories of the Internet bubble burst. That was an especially ugly time as tech got nearly obliterated after 2000. For a while, it seemed the weekly additions to the Dead Pool of former high flyers would never end. But as bad as it got, that was only a brief chapter in the longer-running story of the computer industry. Normalcy returned and market valuations--for real companies, not the fakers--would later recover.

As the author of Ecclesiastes wrote a long time ago, there is nothing new under the sun. Cliche or not, take that advice to heart in the days and weeks ahead. It may come in handy.