Backup & Beyond (mostly beyond)

I write my first blog post at a time when I feel the economy is reaching its state of equilibrium which is to say that I consider the credit induced boom across the globe in the last few years as abnormal and unsustainable and it is indeed good we will be returning to what I consider normal and sustainable economic growth.

First some background. I am no economist and I admit my brain power is limited in a way that I cannot give you a logical analysis of what all was wrong with how the world economy was being managed. Nor I am endowed with a reading habit to read and quote from history. But I am also one to boast that I have tons of what is more important that pure intelligence – that is common sense combined with an optimal dose of self doubt. Common sense dictated that there is something wrong with what was going on around us. If we had followed the hype and planned for a 10 or 50 times growth VCs expect I am sure we would have come a cropper. It is all quite easy to follow the crowd, revel in the hype and convince yourself you are some genius who has directly descended from heaven. Fortunately, we had the guts and the confidence to question the popular wisdom and stay the course based on our instinct.

As a business, what did we do right during those times of euphoria? We just followed our instinct and decided not to participate. That is when startups and VCs were talking about raising money with a fictitious 5-year business plans based on the steroid induced economic growth, we told VCs who contacted us that we would not do business plans based on the then market euphoria. When common sense dictated that those were abnormal times we were uncomfortable in cooking up a plan without conviction. So we passed up any opportunity to raise venture capital. Instead we raised some angel investment from successful entrepreneurs who were comfortable with our approach. That is an unwritten and adaptable business plan based on what we believe are fundamentally sustainable.

We put our focus on building a product and slowly and steadily grew our partner and customer base and all this profitably.  In the process we built an internal culture of frugality combined with hard work and commitment. I strongly believe this culture of frugality, commitment and hard work based on our strong convictions is going to keep us in good stead in these tough economic times. As we expect the market to deteriorate considerably in the near future, we are in a good position to grow and become a dominating company in our category when the economy improves in the next few years. The reason is that our plans are always based on what we consider normal, logic driven economic growth and not the steroid induced growth we seem to have gotten used to in the last decade or so. We have always saved for the rainy day and we can sustain our operations without any revenues for at least two years. As we go into this severe downturn we can afford to and are going to increase our investment on R&D and improve our product and solutions. We will keep our marketing expenses under check to make sure we do not get ahead of ourselves trying to fight a possible market collapse.

From a business stand point I strongly believe majority of our partners who are IT solution providers (MSPs, VARs etc.) share our conviction. Almost all our partners focus on the small business segment. Besides my own conversations with a few of our partners, I follow many of the interactions they have with our partner relations and technical support team. Based on these interactions I know how difficult it is to service the small business segment where the IT budgets are small but the expectations are high. So I am reasonably certain our partners have been put though a grind in servicing the small business segment and in the process they have developed a culture of frugality and hard work. And this culture is what is going to differentiate the men from the boys when the dust settles and when the economy reaches its natural state of equilibrium. Hence I strongly believe that majority of our partners would emerge stronger after the downturn and we will be around to support their online backup business with a superior solution than what our competitors have to offer.

To better times and the return of sanity.

The above post was written by Sekar Vembu of Vembu Technologies. Vembu Technologies is a backup software vendor whose product, StoreGrid, powers the online backup services of a large number of service providers across the globe. Besides remote backup, StoreGrid is also used for on premise backups of workstations and servers at various companies & universities.