Al Qaeda, FAS 157, and the Army of Helpful Souls

Great post title, huh?

First the hat tip to Scott Rafer for pointing me to this deliciously satirical column about a very serious subject, FAS 157.

I propose another rule standard for valuing a company’s assets that reflects my abilities to sell companies like hot cakes. I call it the SAS 69 rule. That means that an asset should be valued at whatever I think the highest price I could sell it for within the next 69 days. That’s much fairer and a more accurate reflection of the current possibilities when you trust in the genius of The Steve and our army of helpful souls at the Blackstone Group.

To the general public FAS 157 is an obscure obscurity, seldom heard and even less so understood, but it is becoming the posterchild for good intentions with catastrophic unintended consequences.

There is a campaign underway right now to get FAS 157 changed but I”m not so sure I would be quick to sign on to that initiative. While the current financial market turmoil may in fact be the financial equivalent of cutting off your arm to fix a broken wrist, it’s also not clear whether the long term gains in transparency that mark-to-market valuation reporting will provide offers the promise of a more healthy market at some point in the future.

Investment bank Goldman Sachs has been using mark-to-market reporting for years and as a result were better able to weather this latest storm, even if it came at the expense of unrealized paper profits in years past. Public companies have not been as aggressive in reporting asset valuations since the days of Enron and Worldcom, and as a result have been left largely unaffected by the core issues that drove liquidity issues in the financial sector.

Critics of FAS 157 assert that accounting rules have triggered a financial crisis (not to mention Sen. Chuck Shumer) but the fact remains that the losses that have been experienced are not academic but quite real. The question remains whether the accounting rules, FAS 157, accelerated the liquidity crisis.

As I said, I’m not sure where I come down on FAS 157 but if you are interested in this topic I would highly recommend that you watch this Charlie Rose interview of Jamie Dimon.

More on this topic (What's this?)
On FAS 157 and Measurement Fallacy
New Valuation Standards May Affect Transparency and Fees
Market Update
Read more on FAS 157, Shangri-la Asia at Wikinvest

Hunt for Man Eating Cougar in Palo Alto

It’s always fun to read the comments on any article featuring wild animals and Bay Area communities. “Mountain lions” and “Palo Alto” bring out the best in people.

“50-year-old man from Portola Valley: more likely a billionaire venture capitalist than a hippie. If he was truly in the park alone, then he was there illegally, since Foothills Park is open to PA residents (and their guests) only.”

[From Search is on in Palo Alto hills for cougar that pounced on man]

BTW, despite having a juicy headline to work with, I will refrain from tasteless jokes about aging divorcees.

More on this topic (What's this?)
Another Wall Street West?
Thank God! They're from New Jersey
Read more on PA at Wikinvest

Cloud Computing Needs to get on the Bus

Irrespective of any other event or factor, I think cloud infrastructures are the quiet revolution in the tech industry. Well not so quiet but my point is that it’s hard to overstate the dramatic change they have brought about for how entrepreneurs build new products and companies, as well as how established IT providers are taking these infrastructures into account as they look to the future.

Engine Yard, a hosting and support company for the popular Ruby on Rails programming framework, has raised $15 million in a second round of financing. Chief Technology Officer and co-founder Tom Mornini says the San Francisco startup will soon expand its offerings with the release of Vertebra, its platform for managing Rails applications in the Internet cloud.

[From Engine Yard gets $15M for Rails hosting, and a new platform » VentureBeat]

One aspect of this that doesn’t quite sit with me well is that the tech stack will ultimately homogenize and commoditize, meaning there will be well defined “camps” that fall within known parameters and depending on what your technology needs and predilections are you will select a cloud that fits your parameters. Assuming reliability achieves some telecom like constant, then the industry moves to a mainly price driven competitive model.

Right now there are the following “as a service” permutations:

  • Infrastructure: IaaS is the lowest level set of services and the primary abstraction is provisioning and racking, everything else you get to manage, including the virtual machines. This is what Engine Yard does but the most well known example is AWS; other IaaS providers include 3Tera, Elestra, Xcalibre and Nirvanix. VMware and Xen are also IaaS but you have to build your own IaaS using their virtual machine technology, which means it’s more work but still entirely doable.
  • Platform: PaaS is middle of the road, meaning not IaaS but also not SaaS. If you already have a working app that you need to scale quickly, this is likely the best scenario for you. Google Apps Engine, Mosso, Morph and Heroku are known PaaS providers who can take your Python, PHP, Rails, etc. bits and scale ‘em up PDQ. The big tradeoff here is flexibility because you are restricted to what extensions and libraries the PaaS provider is making available, meaning your existing app could require some porting.
  • Software: SaaS is the granddaddy of cloud computing and most restrictive. Salesforce and Google Apps are the best examples of SaaS, each provides 3rd party developers with the infrastructure and the app code hooks to work with but in each case you are building to their app rather than a generic set of services. I’ve always thought of this as more of a route to market problem solver than a technology solution.

So why do these aaS variations need to “get on the bus”? Simply put I think that achieving interoperability is a more strategic longer term goal than simply commoditizing hosting costs. OpSource may not be the best example but it’s one that comes to mind, their app hosting service provides the technical infrastructure as well as add-ons like billing, end user support, and analytics (which is kind of a general term…) that provide business solutions to software providers in addition to technical advantages.

OpSource is taking advantage of Mule ESB and that means that one provider on OpSource should be able to take advantage of other hosted app even if it is from a different provider. What this means, as an example, is that my CRM app could embed functionality from another company that is providing some specialty integrated online marketing module. I’m not limited to what I build and host.

It turns out that ESB functionality is making it’s way into cloud services, AWS SQS being one example that also takes advantage of Mule’s most awesome ESB. Going forward, and as clouds more intensely target enterprise accounts, I am sure we will see more ESB like functions make their way to the cloud. It’s all goodness for entrepreneurs and startups, and ultimately the cloud will change the way that enterprises buy, build and manage technology services.