FWD.us is an organization started by key leaders in the tech community to promote policies to keep the United States and its citizens competitive in a global economy—including comprehensive immigration reform and education reform.

I admire that Zuckerberg and his merry band of do-gooders for embarking on this quest. I also respect the idea of education reform and applaud the leadership position this group is taking here. And I also applaud the efforts the group will devote to science and innovation.

However, what I hate is the focus put on a specific immigration issue; but I am getting ahead of myself. This is from an op-ed currently on the FWD.us website:

The economy of the last century was primarily based on natural resources, industrial machines and manual labor. It was an economy where many of these resources were zero sum and controlled by companies. If someone else had an oil field, then you did not. There are only so many oil fields, and there is only so much wealth that can be created from them for society. Today’s economy is very different. It is primarily based on knowledge and ideas — resources that are renewable and available to everyone.

Yup, ideas and knowledge are renewable and available. But do they lay the bricks for the data centers that house Facebook’s servers? Do “ideas” — as Zuckerberg & Co describe — actually build the dams that in turn produce the electricity that helps you poke Mark? The food on your plate, it too is just bits and bytes?

Yup, those things don’t need people. They crop up magically. No natural resources, no machines, no manual labor, just …. ideas and knowledge!

What that snippet from FWD.us tells me that when it comes to our Silicon Valley leadership, there is a disconnect in understanding the real world that exists beyond the browser or the mobile phone. We don’t do empathy and human interactions very well in the Valley, especially companies whose raison d’être is social and people. You know, like Facebook.

The problem with this effort is that many of those leaders live in a bubble that is of their own making and have little interaction with the real world. The fact is that any immigration reform needs to dovetail with the domestic reality of the 21st century America. In order to change the world and wanting new policies, there needs to be a deeper understanding of the world around us.

The Flyover Nation

Between Sand Hill Road and Wall Street lies a big country that is going to bear the brunt of the coming connected age. Sorry Mark, but in the age of data, Facebook is Standard Oil and you are Rockefeller. And unfortunately, you have the data and we don’t. If we did, there would be naked transparency on data and privacy from Facebook. But I am digressing again.

Any immigration debate has to start with the education and re-education of the American workforce. With the coming connected age and continued proliferation of technology into our physical world, we are beginning to see disruption and massive displacement on a large scale. We don’t have the mechanisms in place to train people for this quantified society, where data looks to become the ultimate arbiter. How can we have any talk of immigration and a knowledge economy that doesn’t acknowledge that there is a silent desperation outside of Silicon Valley and New York and Washington, D.C.?

People talk about robot-helpers and an army of drones, but I don’t hear how the factory workers and farmers will actually learn how to use them, as well as tame the data these gizmos will throw up and then will put it to work. What is going to happen to millions of people who will be replaced by those drones and robots? After all, they are as much a part of the capitalist food chain that makes the world go around. Damn … if we are going to continue to be an innovation economy, then it has to be about more than a couple of million people.

The Invisibles

Now let’s talk about immigration issues, because when I see FWD.us and the focus of its charter, I see the same old self-serving argument the technology industry serves up when it comes to immigration reform. In my years of writing about technology, I have seen pretty much the same argument made every single time — just change the billionaire or the company clamoring for this change.

Every discussion is about getting startup visas, or visas for engineers and knowledge workers and experts and how we need to get these people to stay in the U.S. after they are done with college. Let’s not trivialize the challenges facing our society and the reality of immigration and job creation in today’s world.

As an immigrant, I see any such discussion as limited. We can’t have a discussion about immigration reform unless we talk about other immigrants — the invisibles who do a lot of the work in the offices of Facebook and Yahoo, but never get invited to the IPO party or are handed an iPhone. How can we have a lobby group which has no representation from those people? Instead we have this:

Across America, creative, hardworking people in coffee shops, dorm rooms and garages are creating the next era of growth. Let’s embrace our future as a knowledge economy and help them — and all of us — reach our full potential.

If Mark and others really cared deeply about immigration reform on a holistic level then the conversation would involve a whole lot of other people — members of non-engineering and non-technology corps. So, no, I don’t buy that just because an immigrant works on an algorithm make her more important.

I know, because I am one. Perhaps FWD.us and Zuckerberg should start actually learning about the whole and real problem: a society disrupted in connected age.

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But it’ll need that dough: ZenPayroll is taking on a big challenge — providing payroll software-as-a-service to small and medium companies and thus taking on payroll behemoth ADP (although obliquely since ADP focuses on large companies.)

Joshua Reeves, CEO and co-founder of ZenPayroll

ZenPayroll CEO and co-founder Joshua Reeves cites IDC numbers to back up his contention that there’s a ton of opportunity here.  ADP along with Paychex, Ceridian and Intuit handled about $7 billion of a total $13.9 billion in US payroll in 2010. The other $7 billion is split up between lots of small local providers and companies that use error-prone manual processes.  ”Small businesses have been slow to automate payroll — many of them still do it on paper and calculate taxes using spreadsheets,” Reeves told me.

The Internal Revenue Service’s own stats show that a third of US small businesses are fined for payroll tax mistakes annually to the tune of $5.3 billion. Clearly, there is a payroll problem to be solved.

ZenPayroll says its SaaS will ease that headache at a fraction of the price ADP and others charge. It will charge companies $25 per month and an additional couple of dollars per employee.  For a ten-person company, that ends up being $780 per year compared to $3822.80 for ADP Compliance with Pay Convenience or $1,428 for Paychex Small Business Paperless service. Other competitors include outsourced human resources services, but they focus on a full suite of services, not just payroll, Reeves said. And payroll is ZenPayroll’s sole focus.

Payroll is serious business

Ease of use is critical. “You go to the web site and request an invite. We respond in a few hours, you set up the account, enter employee ID numbers and send invites to your employees who add their own information,” Reeves said. The service supports direct deposit or payment by check, according to whatever pay schedule the employer prefers. It supports bonuses, reimbursements, garnishments — all options a business needs.  And it integrates with existing e-sign and e-fax technologies, Reeves said.

The service, the beta of which has already handled several millions of dollars in payroll, runs on private, dedicated servers that are backed up many times a day in multiple locations, Reeves said.

Payroll is a big, big job and no one — not company CEOs, CFOs, employees, state or federal tax authorities — has a sense of humor about mistakes. Reeves said the company has hired payroll tax experts with decades of experience from ADP and Paychex. This is important — because tech smarts is one thing — but doing payroll right also requires deep expertise in tax codes and regulations.

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• A billion files saved every 24 hours.
• It has 100 million users, twice as many as a year ago.
• Nearly 96 percent of its customers use Dropbox for free.
• About $500 million in revenues.
• Almost 250 employees. It started the year with 90 employees.
• A year ago when its revenues were $250 million, it was valued by private investors at over $4 billion. The company has attracted quite a few celebrity investors. Today its value is rumored to much higher.

That growth has come despite increased competition. In an interview with The New York Times, Houston dismissed competition and said:

“Those companies are busy trying to build something we had four years ago. We’re out front. We’re already out there and building smaller features and things. All those other companies have turf to protect, and they’re fighting a battle on a totally different front.”

Where is this company going? If its deals to bundle storage into Samsung and HTC phones are any indication, Dropbox has plans to embed itself into many devices and eventually become the “filesystem for distributed data” for the new connected world. Houston touched on this briefly at our RoadMap conference in 2011. Watch the video.

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It’s a serious question.  A day after Harvard Business School’s Cyberposium 18, I remain struck by the concern attendees seemed to feel about what their advanced degree will mean in a tough economy and in a tech business that elevates technical prowess above everything else. After all, college dropouts Paul Allen, Michael Dell, Bill Gates, Steve Jobs, Steve Wozniak, and Mark Zuckerberg all built hugely successful tech companies — Microsoft, Dell, Apple, Facebook —  without a degree among them.

One Cyberposium panelist basically told MBA candidates interested in big data opportunities that they need not apply unless they also had technical chops.  I’m simplifying here, but that was the gist.

Dropbox founder Drew Houston — who does hold a bachelor’s degree in computer science from MIT  – was gentler but still not all that encouraging. Asked what he wanted in an MBA he said … um pretty much the same thing he seeks in any hire. “What we look for in any candidate is that they’re smart and passionate and not just chasing money. We look for a cultural fit,” Houston said in a Q&A session. ”The guy who runs most of the business side [at Dropbox] has a Harvard MBA but what we look for isn’t that different from what we look for in other areas,” Houston said.

The underlying theme was that business skills and teamwork are valuable and much desired. Attitude and a sense of entitlement are not.

Hunter Walk, director of product management at Google (and a Stanford MBA) must be hearing the same concerns. Yesterday, he shared a great post on the topic: “It’s fine to get an MBA, but don’t be an MBA.”

One of his points:

Getting an MBA means you shoot out of school wanting to prove yourself and see what you can contribute to others. Being an MBA means thinking the world owes you something and that your value 10x’ed just from spending two years on a campus.

Given the economic climate, it’s natural for students to worry about the worth of their degrees. And this topic crops up periodically in the sort of “builder versus spreadsheet guy” debates that get heated. Last year, auto executive Bob Lutz’ book “Car Guys vs. Bean Counters: The Battle for the Soul of American Business”  stoked the debate anew. Lutz’ argument, according to the Time Magazine review was: ”To get the U.S. economy growing again,  we need to fire the MBAs and let engineers run the show.”  Harsh, But I would bet lots of people who watched the decline of US industry in the 70s and 80s under the tutelage of MBA CEOs would agree with that sentiment.

Still, promising business students should take heart. Every tech company needs people with business and financial management expertise.  As one commenter to an earlier Cyberposium story put it:

Harvard Business School was where the concept of the spreadsheet developed. Don’t be dismayed … fellow MBAs. Your day will come… Take the Disruptive Innovation courses, and pick up some Advertising while you’re at it.

And, let’s face it,  there are many times when the best technology in the world won’t win unless it’s accompanied by real business savvy.

I would love the discussion to continue, so please post your thoughts in comments below.

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Last year we talked about how connectedness changes everything. We thought it would be a good idea for us to rewind and share some of the conversations from the 2011 event as we work on the 2012 edition.

Jack Dorsey, Square & Twitter

Tony Fadell, Nest

Drew Houston, Dropbox

Brian Chesky, AirBnB

Matt Mullenweg, Automattic/Wordpress

The complete archives from GigaOM RoadMap 2011.

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Drew Houston CEO of Dropbox

New names — at least to me — include Sarbajit Banerjee, a SUNY Buffalo materials chemist who is designing windows that shield buildings from heat — except when you don’t want them to.

And there’s also Shannon Miller, co-founder and CEO of EtaGen, a startup that wants to bring new life to an old idea — a “free piston” internal combustion engine. The claimed benefit of the engine — which will generate electricity — is that it will use 25 percent less fuel than its predecessors.

Also check out 25-year-old Juan Sebastián Osorio, a former biomedical engineering student from Medellin, Colombia. He’s working on a device that monitors a premature infant’s heart rate, electrical signals from the diaphragm muscle, and blood oxygen measurements to detect problems fast.

Then there’s John Hering, who built BlueSniper technology that hijacked a Nokia smartphone from a mile away. Since then he co-founded Lookout Mobile Security five years ago to devise an app to protect Android smartphones from malicious threats and built the Mobile Threat Network to track these scourges.

But this is just scratching the surface. Check out the full list for up-and-comers in all sorts of high-tech innovation. Tech Review will host its annual Emtech Conference in October.

Feature photo courtesy of Flickr user erinc salor

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Box CEO Aaron Levie

A few months ago, Bill Gurley wrote a post about Benchmark’s investment in Dropbox, and why Dropbox’s cloud-based file synchronization is a major disruptor. Many disagreed, quoting Steve Jobs’ assertion that file sync is a feature, not a product. As a feature, the assumption was that it would be folded into the architecture of the bigger players, once they came to market with a comparable offering.

Enter the giants.

The bigger players have arrived. Microsoft recently gave SkyDrive a major overhaul, and Google brought out its long-awaited Drive. Apple had already launched the iCloud product. It’s no accident that three of the world’s most powerful technology companies have entered this market in tandem. It speaks to the importance of cloud storage, and means that the theoretical discussion about what might happen will quickly give way to the reality of what does happen.

ScaleVP is an early investor in Box, the leader in cloud-based enterprise file sharing. No surprise then that I agree with Bill Gurley, but I would frame the discussion more broadly. File synchronization and file sharing are both “just” features, but they are features of an emerging architecture for PCs, tablets, and smartphones, one where files are stored in the cloud, accessible across all devices and cached locally as needed.

This is a shift from the device computing architecture that has persisted since the Apple I, through the entire PC era and into the early years of smartphones. That this shift has now been endorsed and embraced by the three companies who collectively set the direction of the technology industry is huge validation. It means that this change is going to happen.

For startups like Box and Dropbox, this is a big deal. The typical risk early on in the life of a startup is, “will this change even happen?” That risk is behind us. Now, the issue is whether they ultimately become features, products or companies?

Feature, product and company

Drew Houston CEO of Dropbox

I believe that the answer for the startups in this space is all three: they will become a feature, product and company. To get any traction in software today you have to start with a feature — an atomic unit of delight. You have to solve one problem superbly. From that point of view, being labeled a feature is actually a compliment, as it means you have made something drop dead simple to adopt.

Dropbox made it really easy for an individual user to sync files across multiple devices. Box made it incredibly simple for businesses to share files and collaborate in a structured manner. You can call these mere features, but they were features that people really wanted, and they were valuable enough to motivate tens of millions of users to change behavior and move their files to the cloud.

A startup with that traction has earned the right to parlay. Now, it can build a product around that feature. Dropbox and Box are doing that right now. The products they are building are next-generation file systems for the cloud, Dropbox coming from consumer roots, and Box from an enterprise perspective with a focus on collaboration. A file system is not a feature, it is a big deal product, and successful file systems have built successful multi-billion dollar companies in the past, such as Microsoft, Novell and Network Appliance.

The file system descriptor is not perfect, because traditional file systems have tended to be invisible to users, bundled in a device OS or a network OS. These new products thrive on visibility because ease-of-use and real application level functionality have been the drivers of mass adoption, but the technology that powers consumer sync or enterprise collaboration is ultimately based on managing the storage of, and access to, files in the cloud. So calling it a next generation cloud-based file system is a good enough description for now.

Competing with giants

Google, Microsoft and Apple won’t just roll over and die. They will compete hard, using tight technical integration with their existing products and financial bundling to drive adoption. If this is just another feature war, this strategy will work.

If it is an architecture shift, and the opportunity is indeed for an independent cloud-based file system, the old guard’s strategy, with the inevitable “installed base” driven trade-offs, will fail. The trade-offs will cripple the functionality of the offerings in a market where the best product will be the one that is file type agnostic and takes advantage of what a cloud based architecture can offer.

Two giant markets: Consumer and enterprise

Put your stuff in the cloud instead.

I have been talking about this as one market, but it is really two. And it will have two winners. A consumer file system based around sync is very different from an enterprise file system based around sharing. Some of the comments around “sync is a feature” are driven by people’s familiarity with the needs of end users, and lack of familiarity about what enterprise IT needs.

Consumers require platform integration to Facebook, Twitter and other consumer apps and even products (TV, Xbox) while enterprises require platform level integrations to directory systems, security systems and legacy applications. Both are hard problems and both require a platform play with huge scale. But they are very different.

In the next ten years, consumers and businesses will move much of their file storage to the cloud and in the process create multi-billion-dollar software markets for cloud-based file systems. Everyone has files. As a result, the cloud-based file system opportunity is a big prize, possibly the biggest prize in cloud computing.

For the business market alone, at an estimated $50 per user per year, with 200 million knowledge workers worldwide. This is a $10 billion annual market. My gut is that it will be won by those companies that solve the problem holistically, rather than simply bundle it in as a feature. The features are already becoming products, and these products will give rise to some pretty important companies in one of the most meaningful markets of this technology era.

Rory O’Driscoll (@rodriscoll) is a managing director with Scale Venture Partners, where he invests in mobile, Internet, and enterprise software companies. He is a board member and investor in Box. You can find more from Rory via his blog.

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Dropbox is launching a new easy link sharing service, that allows you to share documents, photos and videos over the web, without having a dropbox account. With Google rumored to be launching its online storage service soon, Dropbox is taking battle to the enemy camp. The company can use this relatively simple way of web-based sharing as a way to grow its user base.

Dropbox links allow people to easily view documents, photos, and videos in a beautiful full-browser display without any setup. Business presentations, home movies, and even entire folders can be opened and viewed instantly without having to sign in, download anything, or open files separately.

From the Dropbox desktop, web, and mobile applications, the “Get link” button generates a unique link to a file or folder. The link can then be quickly sent to another person. For Dropbox users, opening a link will provide the option to instantly save the file to their Dropbox.

According to the Dropbox post, users will also have the ability to download the file — something that other cloud-storage services such as Filesonic disabled in the wake of the arrests and asset seizures in the Megaupload case.

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It’s easy to see why. Dropbox, which now claims 50 million users, is the sweetheart of the cloud storage,  file sharing, and synchronization world. People laud it for its ease of use, it’s cross-platform capability. That success has prompted a ton of discussion about whether the San Francisco-based company, led by CEO Drew Houston, is a disruptor or a flash in the pan given that the major platform vendors — Microsoft, Google, Apple — are doing their own cloud-based file-share-and-sync thing. VMware’s  Project Octopus and Citrix’ acquisition of ShareFile are also seen as Dropbox-for-the-enterprise  moves.

But there are dozens of smaller, more nimble cloud storage providers that want to replicate the success Dropbox has had with consumers in the business world. Box is the most prominent of these contenders but the number also includes Egnyte, Accellion, ownCloud, GroupLogic, SurDoc and others. And, Dropbox, itself is not standing still. It just bought Cove to help build up its infrastructure and services to webscale, as GigaOM’s Derrick Harris reported.

All of these vendors promise to let  users synchronize and share their files across all relevant desktops and devices, in a way that won’t give their company’s IT departments fits.

This trend was definitely not lost on The 451 Group analyst Kathleen Reidy who  suggests a whole new category  – mobile file sharing and sync platforms     – to reduce the confusion. In a recent blog post, Reidy wrote that this whole “Dropbox for the enterprise” theme started to crop up  last year …

… when Box started getting serious about the enterprise market and I began to get a lot of briefing requests from the likes of Accellion, Egnyte and others about their enterprise file sharing and sync offerings.  Things really started heating up later in 2011, as we saw VMWare announce its Dropbox-for-the-enterprise in August, Citrix acquire ShareFile in October; open source play ownCloud set sail in December and we recently initiated coverage on another startup, Germany-based TeamDrive.

Her argument is that the mobility bit is really what’s important — and disruptive — here. People want their stuff to be available wherever, whenever and on whatever device they have on hand. And she weighs in on classifying this as a platform as opposed to a feature since these new products will enable lots of customization and add-ons and an ecosystem of third parties that will provide all that.

One caveat: 50 million Dropbox users sounds great. Box claims 9 million users. But neither company is particularly forthcoming about how many of those users are actually paying as opposed to using the companies’ free or “freemium” services. That’s a big question for these Dropbox for the Enterprise wannabes to consider. Presumably, the beauty of an enterprise model is that companies will pay for business-grade services. But it’s difficult to get “freemium” users to move to a paid model — the conversion rate is typically thought to be 1 percent to 3 percent at the high end.

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Drew Houston

With more than 45 million users already connected to his company’s cloud storage service, Dropbox CEO Drew Houston knows he has an infrastructure challenge ahead of him. The challenge is that as Dropbox adds users and devices, it approaches the echelon of web companies that includes heavyweights such as Facebook and Twitter. And as they’ve shown us time and time again over the past few years, there comes a time when you have to go big on infrastructure or go home.

That, Houston told me, is a big reason Dropbox bought collaboration startup Cove, the founders of which played major roles in building out some of Facebook’s big features while they were there, from 2005 through 2010.

Right now, Houston said Dropbox relies on Amazon Web Services for storing users’ files, but it also manages its own 1,200-plus server infrastructure that handles pretty much everything else. Dropbox also built its own file system that Houston says has to be one of the biggest around in terms of sheer scale. It has done this with just “a few dozen” engineers split across about seven or eight subteams, and only about six people dedicated to the backend infrastructure.

“Find smaller numbers of really amazing people, and you can accomplish a lot more than you might think,” Houston said about his lean engineering team.

But the company aspires to be on par with Facebook and other web leaders in terms of building out advanced web infrastructure, and that’s where the Cove team comes in. Not only does it give Dropbox some of the additional staff it will need to focus on infrastructure, it also gives Dropbox some great staff. After all, as Houston said, “There’s only so many people in the world who think big and want to have a big impact and also have built a product that has touched hundreds of millions of people.”

Cove Co-Founder Aditya Agarwal told me Cove is in the process of building its own backend infrastructure that aligns quite nicely with some of what Dropbox wants to do. Going forward, the plan is to integrate a large portion of the Cove and Dropbox systems, but there are some clear areas of integration early on, including around Cove’s search index.

One thing that probably won’t happen, Houston said, is a move away from Amazon S3 for storing file data. Other large web companies, such as Zynga, like to save money by moving cloud computing workloads back in-house once they reach a certain size and predictability, but Houston said AWS provides too much functionality and flexibility to consider abandoning it right now.

Ultimately, Houston said, Dropbox is more than just an app on an iPhone; it’s trying to build a fabric that ties together every service, device and app. Forty-five million users means even more connected devices — possibly hundreds of millions — and those numbers are only growing. “[C]onnecting all of that,” Houston said, “is a massive engineering challenge.”

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