Valhalla Island

Altgate’s Microsoft Buys 37signals For $300 Million post is a great example of the kind of bullshit writing and lack of integrity that dominates popular blogs these days. Despite the title, Microsoft isn’t buying 37 Signals, it’s an utterly false, sensationalist headline to get people to visit the site. A prediction and misguided reasoning behind why it’ll happen in 2009 follows.

The analysis basically comes down to “I use web based applications for tasks I used to do on the desktop” but let me break down why it’s complete bullshit. Their summary:

Simple, they make killer products, they are a cash machine, it’s an attractive business model and they’re visionaries.

Microsoft don’t need cash. They have millions of customers locked into their systems, 37signal’s business model is completely contrary to Microsoft’s already profitable operation, exactly what makes 37signal’s cash attractive?

Their free trial and $24 per month basic service level make it very enticing to try out. This is exactly what’s killing Microsoft Project specifically and Microsoft’s application business generally. The low price also keeps them from getting the axe when budget cuts come.

They’re less likely to get the axe when budget cuts come? Mircosoft’s products, which you have to pay for up front are impossible to cut from a budget once they’re purchased. Beside that, ability to better weather a storm isn’t reason to buy when you otherwise wouldn’t. When you own a Ritz Carlton you’re not going to pay five times the amount a Motel 8 is worth because it’s less likely to lose business.

Finally, the good folks at 37signals are true visionaries and not just on the technology or business front but in terms of building great organizations too.

It’s a vision not compatible with large corporations. Not only incompatible but entirely opposite. Their philosophy is small and tight, Microsoft’s is big and many. It would be impossible to impart their philosophies on a company as old and steadfast as Microsoft.

And they didn’t just create a great company they also spun off their technology into an open source framework (Ruby on Rails) and refined a new form of development termed “Getting Real.” Think about that for a minute.

Think about it for a minute and you’ll remember everything Microsoft does is closed source and proprietary. Their business is based on not sharing.

The concept of buying a piece of software, installing it on my desktop and then using it sporadically for the next several years without improvement is as over as reading news on a dead tree. The writing is on the wall and it seems that Microsoft just hasn’t gotten the memo.

Exactly, Microsoft hasn’t gotten the memo, they’re still making desktop software, still charging a lot of money for it and still making a lot of money. Why, suddenly, would they buy a company contrary to everything they currently do. Even if they did buy 37signals how would it make a difference to Microsoft?

Remember Visio, the $559.95 software you use to draw complicated flow charts?  I always hated it that it cost so much and I only needed it a couple times per year.  Well, recently I've been playing around with the beta of Flowchart.com.  Check out this screen shot.  It's a killer webapp sure to severely eat away Visio's marketshare.

If a personal anecdote and a screen shot of an unrelated “killer” webapp isn’t reason enough, nothing is.

So why $300 million?

Because that’s what it is going to take. On the financials alone, 37signals should be worth about $80 million (10X revenue). Not chickenfeed, but still not enough to get remaining founder Jason Fried to sell. Jason is “famous” for saying he’d never hire someone who didn’t use a Mac. So basically getting Jason and his team on board is going to take throwing a lot of cash at the problem on the part of Microsoft.

Jason Fried is also famous for being against growth as a measure of success. They’re happy and feel successful making millions a year and not tens of millions. There’s only so many things you can buy, more money to work in a company that makes products he refuses to work with isn’t going to tempt someone like Jason Fried.

But that still won’t be enough. Microsoft will also have to commit to porting Ruby to .NET and supporting RoR and Get Real throughout the firm.

Porting Ruby to .NET makes no sense, especially if they were going to support Rails.

Fried and his team will be given special evangelist roles and retaining them post transaction will be a key success factor.

Yeah, that’s what they want, they want to stop working on things they love, making money for themselves and start work doing nothing as an “evangelist” at a company they hate.

I suspect Bill Gates will have to personally get involved in convincing Fried and company to go along.

This is incredible. Bill Gates, who has stepped down from Microsoft effectively not working there anymore, will get involved with the acquisition of a small company that makes $8 million a year, has a business model and values entirely opposite to their own. Absolutely ridiculous.

Of course this all probably won’t happen, but it was fun to write.

Do they believe their prediction or not? Sensationalist headline followed by nonsense blather followed by their own lack of support for their own position.

I’d never seen altgate before but it seems every post is just as full of shit. Like their list of 15 [how to blog like a pro] tips that includes just one on writing. I guess that’s appropriate.