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Interview with Scott Abel, Spiceworks

A few weeks ago, Austin-based Spiceworks (www.spiceworks.com) announced a new, $25M funding round from Adams Street Partners and Tenaya Capital, as well as its existing investors. To get some insight into what the firm is hoping to do with its new warchest, we spoke with Scott Abel, CEO of the company.

Thanks for the time. That's an impressive amount of new funding -- what are you going to be doing with those funds?

Scott Abel: We're really excited to have two new partners. They're known as late stage investors, who tend to come in later in the game when you're accelerating growth. For us, this round was all about letting us really have the comfort to move faster. We're looking to dial in the e-commerce model we're building into the app. We've actually had a strong balance sheet and did not need to raise money, but, after a certain point of time having so many suitors calling, the prices got really high. We decided to go for the funding, because it would give us the comfort and flexibility to move faster than we are now. We're really excited about trying to figure out the best ways to embed commerce into the workflow of our application.

Spiceworks has been talking a lot about how your software has become a "social network" for IT users. Can you describe how that evolved?

Scott Abel: It's not how we started, and I'd love to take credit for looking smart, but I can't. The whole thing actually started as an accident back in 2006. We were just two or three weeks from launching our 0.8 version of the software. One of the engineers came to me, and was asking me how we might better get product features and feedback on what we should build next. He had a pet peeve, which is he wanted to figure out how we would never have to hire a product marketing manager again. The thought was to maybe put that in the app itself as a feature--allowing our users to click a button for a feature request, and allow users to vote those features up or down like Digg. I thought it was cool, but told him--we're shipping in two weeks, we're not moving the date, and this is not happening. Wisely, he ignored me, and worked extra nights and weekends and get it in there. Our users started clicking that button, instantly, frequently, and intensively, and often. Those feature requests led to support, support let to general IT Q&A, which led to proactive planning, which led to discussion about how to architect a network, then product ratings and reviews. Now, fast forward to today, there is almost no IT topic which is not covered within Spiceworks. Usually, you get a response time of two to three minutes on questions.

It sounds like it's becoming a major focus of the software?

Scott Abel: A year ago, I was talking to some people at the Spiceworks user's conference. What they said was bittersweet for me. I asked them why they use Spiceworks, and it's the first time I had someone say that it was not for the software, which was "okay" but because it's having all of those resources right there. For the geek in me who started the company and software, it stuck a knife in my heart, I can't argue with the outcome. Our whole experience is getting so broad, and we're now speaking to people in different ways, but I'm glad they are getting so much value out of that social networking.

IT managers are notorious for being slow to adopt new technology -- did you ever imagine you'd get the adoption you have now on the software?

Scott Abel: This might be one thing we get credit for, and was not a coincidential accident or where you sometimes get lucky. When I started the company, I was concerned, because back in 2006 it was early for software-as-a-service models. Everyone we talked to said we should make it software-as-a-service, put everything up in the sky, because we want to be like Salesforce.com. That sounded like great advice, but when we visited about 30 companies, spending about a half a day with each one--at companies ranging from 10 person companies to 500 people companies--we really got negative feedback about putting their inventory of applications in the sky. Although you never know if that's the case, and people are just telling you something that won't end up being true, that really scared me. The other thing is we were thinking about viral distribution models. We felt the number one mistake people tired to make, was to get things viral until there is a "there" there. We figured out that the number one most important thing was to build a phenomenal, great product. Even if it only did one simple thing really well, we wanted it to be a kick-ass kind of thing. So what we did is create a hybrid model, where Spiceworks was in the cloud, but all the critical information, things like those Ip addresses, configuration management database, and so on were behind the firewall, completely protected, inside their network. We don't see it, and no one else can see it, which is a big deal. Because of that, people were willing to try something they had not tried before.

What's the biggest lesson you've learned so far from your experience starting up and growing Spiceworks?

Scott Abel: That's great question. The one thing I have learned, over and over, is you can never guess how users are going to respond. I'll give you a couple of examples. We had built advertising into the product from day one. We had these simple, Google AdSense text ads, and some advertisers we were selling directly. They started asking us for display ads, then Flash ads, then video ads. Every time they asked us for a new format, I just knew we had to have just jumped the shark, and couldn't possibly put those in front of users. But, we did so open and honestly, telling our users people had been asking for it, and we'd like to try it, and how do you feel about it. Every time, they said--let us see how it looks. At each one of those meetings, I said--we can't do this, it will fail, and we'll have to take them down--and every time I was wrong. Users say--we understand this is a new thing, we're learning this together, put it up, just be honest about it, and if you go too far and stub your toe, we'll find the edge together. Literally, every time I thought our community would not accept that, we still thought we should try--and every time, I saw that I was wrong.

Finally, what's the next thing for you?

Scott Abel: The number one job of the company, is figure out the most scalable, commerce application for us. Is it like the daily deal emails? Is is people purchasing additional licenses for Rackspace in the workflow of their apps? Is it autoprovisioning employees with computers and software they need? We literally have dozens of things we're experimenting with and building into the app. The goal is to find the one that provides the best value to our users, and accrues the most money for us, so we can put a bunch of fuel on the fire and see it grow.

Thanks!