Today’s Q&A is with Jay Hallberg, co-founder and VP of Marketing at Spiceworks. The company’s product has been on the market less than a year, and already has over 160,000 users (and growing every day). They are pioneering the business of ad-supported business applications.

Q: How did you first get the idea for Spiceworks?
The idea for Spiceworks really came in two phases. First, we figured out that we could create much simpler IT management software for IT pros in small- and medium-businesses around the world.  We had a hunch that we could execute on this, based on our experience in the enterprise systems management market, but we really didn’t know until we went out and talked to over 30 IT pros in SMBs… many right here in Austin, Texas. They were really frustrated and in most cases hated (!) the tools they had to choose from today. They were expensive and complex. So, we thought we could hide the complexity from them and create a product they would love!

Second, came the idea for the business model: free software supported by relevant and educational technology ads. We had initially planned to do a monthly-fee "salesforce.com of IT" model maybe for $20 or $50 per month but we had a couple of thoughts: if ads worked in search and Gmail why wouldn’t they work in an app and if we offer the service for $20/month what keeps someone from offering it at $10/month? So, we burned the ships and took the radical approach of figuring out how to give away fantastic IT management software and make money via ads.

Q: Who were the founding team members?
There are four co-founders and we had all worked together at Motive:

• Scott Abel, CEO (previously Co-founder and EVP Products at Motive, COO all.com, NeXT, Apollo)
• Jay Hallberg, VP Marketing (previously VP Product Management & Marketing at Motive, 3M)
• Greg Kattawar, VP Development (previously VP Development at Motive, IBM/Tivoli)
• Francis Sullivan, CTO (previously VP Technology at Motive, IBM/Tivoli)

The technical guys have basically spent 20 years in complex systems management, Scott worked for Steve Jobs at NeXT where he inherited the ‘product gene’, and I spent quite a bit of time in marketing and advertising at 3M before business school.

Q: Give us the elevator pitch on what Spiceworks does for IT professionals?
We give them an incredible tool to inventory, monitor, report on and troubleshoot their networks, plus we give them a great help desk and a community of over 160,000 SMB IT pros with whom they can collaborate and interact with to do their jobs. All for free. That’s pretty compelling.

Q: Who would you consider your competitors?
We focus on serving the needs of IT professionals in small- and medium-businesses with fewer than 250 employees.  These companies can’t afford systems management products from the big players like IBM Tivoli, HP, BMC or CA.  They can’t even afford products from companies like Altiris or LanDesk.  They have a big budget to buy computers and servers and to create new software to run the business but they don’t have a budget to spend on inventory and network management software.  Imagine going to the CEO and saying "I want to spend $10,000 on an inventory and monitoring solution."  He’ll say "whatever, where’s my iPhone!"  So what happens is there are literally hundreds of companies that have served this segment over the past 10-20 years.  People like Numara and Illient — small companies most people haven’t heard of.  It’s really fragmented and we already have the most market share after less than a year.

Q: What kind of capital have you raised so far?
$13M.  Our first round was $5M from Austin Ventures and our second round of $8M was led by Shasta Ventures out of California and joined by Austin Ventures.

Q: We’ve watched your end user counts grow from 120,000 to 160,000 in a really short period of time. How big is the market?
It’s big. There are millions of SMB IT professionals worldwide and they control 50% of the worldwide IT spend. Most software companies focus on selling to large enterprises like Chevron or Citibank because they are easy to find and they have big budgets. The SMB market has just been too tough to crack. We think we’ve figured out how to do it — build a great product that your users will rave about and will tell other IT pros to join the revolution. Once you crank up that word-of-mouth engine it’s hard to stop.

Q: What can we expect to see in the future from Spiceworks?
November 6 will mark just one year since the release of our 1.0 product.  The first year was about two things:  adding features our users wanted and proving that people would accept an ad-supported business application.  We released a new version of Spiceworks every 2-3 months and cranked out 5 releases in the past year.  That’s amazing.  And we grew to over 160,000 users.  Clearly IT pros have accepted an ad-supported business application.

The next year will be even more exciting.  We have our fantastic 2.0 release coming out soon. I think our users will love the new features and improvements. After that we have something interesting planned for nearly every month of 2008… I can’t get into details until January but I think you’ll see that our ‘revolution’ will extend well beyond just "spicing IT up" with an ad-supported and easy-to-use network management application.

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