Cloud // Software as a Service
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5/31/2012
09:51 AM
Patrick Houston
Patrick Houston
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Watch Out: I've Become The Boss Of Me

Cloud services are helping to create a new wave of super-powered, cell-sized businesses. Thanks to us, you may have to manage quite differently.

The partnership papers should arrive any day to officially mark the birth of my new business. After 20 years of working for someone else, I'm now working for me. I'm my own boss. I'm warning you right now. Watch out for my new boss and me.

Even though my boss and I don't imminently threaten to upend your market (we do dream, though), that doesn't make us any less meaningful. Here's why: We represent a growing cohort of "microenterprises." And we're getting bigger and more powerful--even as we shrink in size. In aggregate, we threaten to steal your best employees, snatch your top customers, and surprise you with new business models.

Think of us as a biological phenomenon, like an unseen colony of bacteria ready to sneak up on you with a bad cold, nausea, or worse.

Though we've been around for a while, we've largely been ignored--most notably by government number crunchers and policymakers who confuse "small" with "insignificant." But in April, Facebook paid nearly $1 billion for Instagram, a two-year-old, 13-employee photo-sharing startup. (A billion dollars! Just 13 employees!)

Then, in mid-May, New York Times columnist Tom Friedman--he of "world-is-flat" fame--waxed rhapsodically about us. It's "easier and cheaper than ever to publish your own book, start your own company, and chase your own dream," he proclaimed. "Never have individuals been more empowered, and we're still just at the start of this trend."

Of course, what Friedman recently discovered is what you, my boss, and I have known for while: Cloud-enabled software services are picking up where the PC and Internet left off to create a next generation of super-powered, cell-sized businesses. For a small monthly subscription fee, my tiny company has access to same systems that, as recently as five years ago, only corporate behemoths could deploy. Even more simply put, the cloud is lowering the barriers of entry--to the thickness and permeability of a membrane.

Yes, there are more and more of us. Just how many? Depends on how you define us. Dawn Rivers, the editor and publisher of the Microenterprise Journal, likes to think of us as companies that don't employ anyone else but the owners. She cites a Census Bureau stat that counts "non-employer" companies at 21 million. The Association For Enterprise Opportunity, the self-proclaimed "voice of microenterprise," defines us as businesses with fewer than five employees, founded with less than $50,000 in seed capital. By those criteria, AEO puts us at 25 million establishments, providing work for some 32 million people.

Claudia Viek, the CEO of the California Association for Microenterprise Opportunity, which owns the aptly named "microbiz.org" domain, says that in the Golden State alone, self-employment has increased by 25% in just the past five years.

But there's something even more astonishing taking place--something hardly anyone else knows about. The federal government's official bean counters have, experts tell me, largely overlooked us, because we're not perceived as the job creators the politicians want to boast about, especially in a down economy.

But in a paper published in March, two economists at the U.S. Bureau of Labor Statistics put their finger on a corollary trend. They found that individual microbusinesses are getting even smaller. The average size of non-seasonal startups fell from 7.6 employees in the 1990s to 4.7 in 2011.

Do the math, and the decline accounts for an astonishing 38% plunge.

The significance, as Rivers so nicely distilled it, comes down to this: "The size at which a business reaches scale has gotten much, much smaller." Whoa. Think about the implications of that observation to the dynamics of the marketplace.

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And, yes, while the economy is hardly cooking, don't write us off as people who can't find work otherwise. According to a survey conducted at the behest of MBO Partners, a company that serves "solopreneurs" with a suite of back office services, 55% of us made a proactive choice to work on our own. I did.

Nor are we card-carrying AARP members, in career twilight time. According to the MBO study, 48% of us are Gen Xers. We are 30- to 49-year-olds, in the throes of adult responsibility.

To put it bluntly, we're not the "second-class citizens" you may have once considered us to be. In fact, we represent a formidable talent pool, and the most enlightened companies are tapping into us. MBO CEO Gene Zaino told me he sees more and more companies creating special offices, tasked with staffing smaller component projects from the ranks of contract workers, as an alternative to hiring a big, blue chip consulting firm for a huge engagement fee.

And here's a stat you probably don't want your own employees to see: The MBO study found that 80% of us are satisfied with being on our own. Along with your rivals vying for your best talent, you've got a lifestyle choice luring them too.

It also means, thanks to us, you may have to manage quite differently. As Amazon.com's Jeff Bezos told Friedman, corporate managers may have to adopt a style more akin to that of gardening, watering, weeding, and fertilizing people and ideas--instead of engineering them into productivity from on high.

But the biggest reason to watch out for is how readily we can be overlooked. Like the germs on your hands, you may not be able to see us. That doesn't mean we're not there. Now instead of competing with foes around the world, Zaino says, large enterprises have to start worrying about new business models that pop up right in their backyards.

My boss and I have been talking it over. We don't think we're as far away as your backdoor. We prefer to think we're right under your nose.

Patrick Houston is the co-founder of MediaArchiTechs. He is a former SVP for a new media startup, a GM at Yahoo, and editor-in-chief at CNET.com. He can be reached at patrick.houston@mediaarchitechs.com.

SMBs have saved big buying software on a subscription model. The new, all-digital Cloud Beyond SaaS issue of InformationWeek SMB shows how to determine if infrastructure services can pay off, too. Also in this issue: One startup's experience with infrastructure-as-a-service shows how the numbers stack up for IaaS vs. internal IT. (Free registration required.)

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