Vermeer

Topics: Software engineering, Lotus Software, Software development Pages: 10 (4866 words) Published: April 20, 2015
Harvard Business School

9-397-078
Rev. July 2, 1997

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Vermeer Technologies (A): A Company is Born

Charles Ferguson was exhilarated as he hung up the telephone after talking with Andy Marcuvitz, co-leader of the venture capital (VC) consortium that was considering financing Vermeer Technologies, Ferguson’s startup for developing software for the Internet. It was the first week of January 1995. Marcuvitz had called Ferguson to tell him that the group was prepared to make an initial infusion of $4 million.

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The moment was an unparalleled one for Ferguson. After years of dispensing advice as a consultant, he had finally realized his ambition of owning his own company–and at a juncture in information technology that he believed was revolutionary. It had been only eighteen months since Ferguson had first had the idea for Vermeer.

And yet, Ferguson was having second thoughts about proceeding further with the VCs. Marcuvitz had made the funding decision contingent on some rather onerous conditions. Delighted though he was with the VCs’ decision to back him, Ferguson was nevertheless wondering whether he should pull back from the deal.

Founding the Company

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The thinking that led to Vermeer began late in 1993, shortly after Ferguson had completed a consulting project for Apple on electronic publishing and on-line services. As he thought about his findings over the subsequent months, Ferguson concluded that there were fundamental problems with existing offerings. These services were based on a centralized design and used proprietary technology. Consequently, not only were these services extremely expensive to develop (costs ran up to $50 million for complex systems), but they were also incompatible with other services. As a result, businesses using these services found themselves locked into a limited set of subscriber-customers. They found it difficult to link into their own internal data-bases because of technological incompatibilities. Besides, they had to pay high fees for the privilege of using the services. Of course, businesses could develop their own customized on-line services. However, they still faced stiff development and operational costs, the resulting systems were isolated technologically, and they provided access to only a limited set of customers.

Ferguson conceptualized that the solution to these problems with on-line services lay in providing a standardized, shrink-wrapped, inexpensive, and easy-to-use software package that would allow anybody to develop and operate an on-line service–without using a complicated programming language. Moreover, the software would enable businesses and professionals to develop these services based on local and real-time use of hardware resources, data, and applications. Research Associate Takia Mahmood and Professor Ashish Nanda prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1997 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Vermeer Technologies (A): A Company is Born

In Ferguson’ view, such an innovation would spark the widespread development and deployment of on-line services, and dramatically alter the $12 billion industry, currently growing at 10% per year.

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Someone could produce the software in three parts: a server1 for disseminating information, a browser for retrieving and processing it, and a development tool for creating the on-line interface. “If somebody can do that,” Ferguson thought, “why...
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