Why IT Managers Are Devouring Spiceworks

Tuesday Mar 24th 2009 by James Maguire
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IT managers at small and medium-sized firms are enthused about this free network monitoring application.

IT managers generally are not a particularly excitable bunch. But offer them a free download of software they truly need and you’ll see mass energy in motion.

Such is the case with the Spiceworks IT Desktop, a network monitoring application geared for small and medium-sized businesses. At last count, some 600,000 copies of Spiceworks have been downloaded. And the Spiceworks forum is a thriving community of IT staffers, kvetching and sharing and opining.

The Spiceworks IT Desktop is designed for IT managers at smaller firms whose biggest headache (or one of them) is tracking the patchwork of gear on the company network: printers, routers, servers, PCs and assorted peripherals.

The Spiceworks app tells a manager what software is loaded on each machine, when anti-virus updates are needed, and how much disk space each machine has. It’ll tell you when that pesky printer (the one that usually jams) is low on ink. You can ping a worrisome machine to see if it’s really up and running. (Here’s a tech review of Spiceworks.)

Spiceworks, free IT network monitoring software
Spiceworks IT Desktop
And yes, the software is a free download. No, it’s not open source. And no, it’s not a bare-bones version from a vendor that hopes to sell a premium version. In the world of business software, Spiceworks is riding a new trend: it’s ad-supported software.

Because tech vendors are so eager to get in front of IT manager (read: buyers) at SMBs, Spiceworks has sponsorships with the likes of Microsoft, Dell, AMD. Download the software and you’ll see a quilt of tech company banner ads along the monitoring screens.

The software, says co-founder Jay Hallberg, was developed to fill a gaping need in the SMB world. Hallberg and his fellow founders – who launched the firm in Austin, Texas in 2006 – have plenty of experience in network management. Their resumes include stints at Tivoli (IBM’s industrial-strength network app) and at Steve Jobs’ NeXT.

As they laid the groundwork for the company, their previous experience gave them a strong hunch: SMBs tend to shortchange their network monitoring software.

Big firms, of course, can’t live without top-flight network monitoring. They have teams dedicated to nursing their high-end network tracking apps. But IT managers at smaller firms, say 100-300 employees, often use an odd assortment of utilities, perhaps with a mix of open source apps.

As Hallberg researched the market, “We went to about 30 SMBs, and not one of them was using the same tool.”

Spiceworks co-founder Jay Hallberg, free network monitoring application
Spiceworks' Jay Hallberg
It's not that these IT managers don't have a budget for networking monitoring apps. Many SMBs have an annual budget dedicated to buying tech gear. In fact, “These guys might have budgeted $5,000 to buy LANDesk or Alteris, but they were afraid to pull the trigger,” Hallberg says. The IT managers’ reluctance goes like this, he explains: “God, I’m going to have to set aside two months to implement it, then I’m going to have to deal with their sales guys, Oh, what if it doesn’t work, the CFO is going to be on my case. I’m just too busy to implement it.”

Part of the problem is that IT managers at these smaller firms tend to have a semi-infinite workload. With a ratio of employees to IT staff at about 50 to 1, that means a 170-person accounting firm might have 2-3 IT staffers – which means they run constantly.

“They’ve got to do everything and most of the time they’re just running around putting out fires.”

It was in response to these market factors that the Spiceworks founders sat down to develop the program.

“The idea was to create the iTunes of IT,” Hallberg says. “Why can’t we make a network and systems management tool, and ultimately kind of a whole IT desktop, that literally took five minutes to install and get it running?”

What Should it Cost?

As Spiceworks built its software, the company faced a big question: how much to charge for it?

“We knew we didn’t want to do the traditional software licensing model, partly because we have done that for our whole lives,” Hallberg says. “We were used to asking for $1-2 million dollars, shaking them down and creating an antagonistic relationship. We don’t want to do that – it wears you out and you end up hating your customers and vice versa.”

The firm briefly considered open source, but worried that it would take too long to attract a developer community.

Also considered was a monthly subscription model, perhaps for $20 a month. “We did the math and figured we could get a couple thousand customers signed up.” But the problem was apparent. “Hey, if we charge $20 a month, what keeps four guys in Croatia seeing what we’re doing, trying to copy it and charging 10 bucks? Or 5 bucks?”

Next Page: A gathering of IT managers

The epiphany came when they looked at the consumer world: On the Internet, everything wants to be free. Increasingly, that’s even true for apps used by businesses (notably Google Docs and Zoho).

The founders wondered: “Why is there this line between consumer and business?” And: “Is that going to stay forever?”

Concluding that the move toward free was a cresting wave, they resolved to distribute Spiceworks at no cost.

And free meant all the way free. “We’re not going to do a premium version, we’re not going to do some model where you have to buy other features,” Hallberg says. “We symbolically burnt the ships – because we knew if we kept them we’d go back to the lifeboats.”

(For users who simply cannot tolerate the ads, Spiceworks offers an ad-free version for $20 a month. But Hallberg says only a negligible percentage of users request this.)

The Secret Sauce: a Community of IT Managers

The banner ads embedded in its software are only a portion of the Spiceworks strategy. Far more noteworthy – and potentially far more lucrative – is the community that the company has gathered at its Web site.

It’s a community that can largely claim to be “IT managers only.” That’s because to log-on, you must download and install Spiceworks. It’s a great way to keep out the riff-raff and the flamers.

A visit to Spiceworks’ online forums reveals a thriving give and take among IT managers. It’s a constant sharing of the challenges involved with supporting a tech network and an often frighteningly non-tech bunch of fellow employees.

One user posted: “Has the economic downturn caused you to take on more non IT duties?”

One of the replies: “The only thing I've had to do is baby sit the project manager and make sure he's doing his job correctly.”

Vendors, of course, are very eager to influence this crowd of frontline decision makers.

“We go to over a hundred technology companies that are in our network and we provide all sorts of access to them, in ways well beyond the banner,” Hallberg says. “We can then have their marketers involved with the community and pose questions, and people will jump all over it.”

For instance, the forum questions include: “Why should I buy Cisco?” and “What do you think about Vista and small business?" (That last hot button query received some 350 forum posts.)

“Microsoft loves that because they don’t get that kind of feedback on their Web site,” he says. The responses are the equivalent of a focus group of active potential buyers.

The vendors jump right into the mix. “There are companies like Xerox and AMD that have one of their employees in the community, specially marked as an avatar, and they can answer questions,” Hallberg says. The firms can target the areas they want to promote themselves in. AMD, for instance, sponsored the virtualization group.

Hallberg stresses, however, that the point is not to flood IT managers with vendors’ offers.

“Nobody wins if ten companies are bombarding the user,” he says. Instead, “It’s a lot better if [an IT manager is] doing their job; they might not even know that they need a back-up solution. They start leaning about it, and ‘Huh, look, Bob posted in the community that he’s doing that – let me go learn about that.’”

“The vendors love it because they haven’t wasted all that time trying reach somebody who’s not educated yet. And the users love it because they’re learning with their peers and they’re not getting annoyed.”

It’s not just vendors like Microsoft that benefit from Spiceworks community feedback. The Spiceworks software itself benefits from the active user forum. The forum contains a product feature board in which users vote on various Spiceworks features requests. Think of it as a form of software democracy (though Hallberg says there's a development director who makes the ultimate decisions.)

Clearly, the Spicework story seems to be on the rise. Over the course of 2009 the company will host tech events in which IT managers meet to discuss their approaches and get training. In the next several months events are planned in Boston, Las Vegas, Orlando, Austin and London.

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