We’re quickly moving to a new world where the wealth gap is compounding and increasing. We’re moving to a world that is going to look a lot like Hollywood: a few people enjoying insane success … and everyone else spends their days waiting tables.

The delta between A-players and B-players in companies has always been high. A-players get promoted faster and they earn more. My guess is that an A-player earns about 30 percent more than a B-player in that same position for most professions. An A-player administrative assistant usually can earn about 30 percent more than a B-player in the same position. That’s a significant difference and even more when you compound that difference in savings and lifestyle over the course of one’s career.

In some professions like sales and entertainment, an A-player might earn 300 percent more than a B-player and essentially live an entirely different lifestyle. In the future, everyone’s jobs will look more like salespeople.

Let’s focus on the profession I am most familiar with: software engineers.

Today, an A-player software engineer has a lot more job prospects than a B-player. That seems obvious. But there are plenty of B-player and C-player engineers that work at great companies and get paid well. Their services are needed and important. And while they don’t make the contributions that an A-player makes, they still are very valuable to a company and have a lot of importance to the success of an organization.

But things are changing (queue in the Darth Vader music).

There are three forces that will drastically change work, compensation, and our value to each other forever:

1. A productivity boom will automate B- and C-player work.
2. Globalization will commoditize B- and C-player work.
3. A-players can have much more impact.

The productivity boom will automate your job.

Everyone is massively more productive today than they were just a few years ago. A salesperson can use tools like Salesforce.com to track customers, LinkedIn to find prospects, and they can easily call and send documents from the road with their iPhones (unless they are on AT&T). The Internet makes all of us extremely productive and automates parts of our jobs.

In the 1990s, I was a software developer and I remember writing a script to determine if a string was a valid e-mail address. It took about 12 hours for me to write. First, I had to research what could and could not be in an e-mail address (dashes are ok, commas are not, only one “@” symbol, etc.) and there were a bunch of corner cases that I had to guard against and test against. After coding into the night, I finally came up with something I was proud of.

Today those 12 hours of work would take about 1.2 seconds. There are hundreds of libraries that have been written by really smart people and tested by thousands of programs. All one has to do is … Next Page »

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[Updated 11:15 am, see below] Varolii, an 11-year-old software company that handles customer and employee communications for big companies, has served as something of a barometer for the U.S. economy’s troubles over the past few years.

After generating double-digit sales growth in the mid-2000s and preparing for an $86 million IPO, Varolii had to back away from the public markets as the downturn took hold in mid-2008. Layoffs followed in 2009 and 2010, as the Great Recession and its aftermath walloped the ledgers of Varolii’s corporate customers.

Now, as the economy continues its long, slow recovery, Varolii is announcing some positive news: an $8 million round of growth financing from existing investors BlueRun Ventures, Draper Fisher Jurvetson, Institutional Venture Partners and InterWest Partners. It’s the first institutional money since 2002 for Varolii, which is based in Seattle and has a major satellite office in the Boston area.

New CEO David McCann, a former Microsoftie who took the helm at Varolii about four months ago, says it’s a strong vote of confidence that reflects the accelerated switch to cloud-based services expected from big corporations in the next couple of years.

“A lot of little fragile companies disappeared off the map” during the recession, McCann says. “We clearly have the revenue strength and the customer base that absolutely gave us the ability to withstand the downturn in 2009 and 2010.”

[Added info on Pawlak here] Varolii was founded in 2000 under a different name by MIT grads Scott Sikora and Michael Ho, and Ken Pawlak, who now works in Microsoft’s Startup Business Group. It makes software tools for text messaging, voicemail and email that help businesses reach customers and employees. The client roster is about 400 deep, and includes large banks, utilities, airlines, and health insurers.

McCann says he plans to use the cash infusion to speed up efforts in the smartphone arena, including extension of Varolii’s current communications platform to include Android and … Next Page »

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Concur, which helps businesses manage travel and expense accounts, is making a couple of big moves to broaden its international reach today. The company said it has invested $40 million to obtain a minority stake in Cleartrip, a privately held online travel-booking service in India. Redmond, WA-based Concur said it’s forming a marketing partnership with Cleartrip, and opening a Concur office in India.

If the Cleartrip news sounds a little familiar, it should: Concur (NASDAQ: CNQR) started the year off by acquiring TripIt, a San Francisco-based online travel itinerary manager, for as much as $120 million. Concur subsequently made TripIt into its front door for mobile travel booking.

Concur already has offices around the globe, including Hong Kong, Sweden, France, England, Germany, and the Czech Republic. In a statement, CEO Steve Singh said the Indian expansion and Cleartrip partnership will help Concur reach “a travel sector that is expected to grow to over $20 billion by 2012.” Concur had previously worked with businesses in India, but clearly saw more room to grow.

The Cleartrip partnership sounds like it will function much how TripIt is set up for Concur in the U.S.—funneling travel booking for business customers through that interface, and tying it into the Concur tracking system on the back end. It’ll be really interesting to see how far Concur takes this expansion of using consumer-friendly tools to manage business travel— two key moves in two quarters obviously amounts to a big bet on that side of the business.

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Seattle-based business software company Varolii has a new president and chief executive: Former Microsoft general manager David McCann. He replaces Nicholas Tiliacos, who was with the company for 10 years. Varolii makes tools for text messaging, voicemail and email that help businesses reach customers and employees. It was founded under a different name by two MIT grads and has an office in the Boston area. Like many companies, Varolii’s fortunes have reflected the troubles in the broader U.S. economy in recent years. In 2008, Xconomy’s Bob Buderi wrote about Varolii shelving plans for an IPO that had been expected to raise up to $86 million. The company also laid off unspecified numbers of workers in early 2009 and late 2010. Varolii says it now has about 250 employees nationwide, and some 450 clients, including big players in banking, wireless, and healthcare.

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Consider these five trends, and then ask yourself what kind of Internet business you would create to exploit them.

1. Persistent economic uncertainty, leaving employers unwilling to hire lots of new permanent employees—but needing to get work done nonetheless.

2. The emergence of outsourcing as a mainstream, accepted, even expected corporate practice.

3. A growing number of people with home broadband connections for doing computer-mediated work and easy access to remote collaboration tools like Skype, Box.net, Basecamp, and Github.

4. More workers choosing (not necessarily being forced) to work from home as career contractors.

5. The interconnection of banking and financial systems around the world, making it more practical to transfer payments internationally.

Well, obviously, if you were thinking like an Internet entrepreneur, you’d want to go out create some kind of online service that helps businesses find, manage, and pay remote contractors, whether domestic or foreign, and then take a cut of the action.

But as it turns out, you’d quite possibly be too late: a company called oDesk created just such a service in 2005, and it’s now built up such an impressive lead over rivals such as Guru and Elance that it may be unstoppable. The six-year-old Redwood City, CA, startup has been growing its business at 100 percent per year for the last three years, and is now the world’s largest online employment platform, with more than 1 million contractors and employers signed up in more than 150 countries.

ODesk’s services, which include a hiring marketplace, tools for monitoring contractors’ hourly work, and a backend for handling payments across national borders, have been “a hit from the beginning,” says Gary Swart, the company’s CEO. But the venture-funded startup has also been the beneficiary of some huge and unexpected shifts, especially the global economic meltdown of 2008-2009. “The winds got stronger, fueled by the economy, the Internet, and globalization,” Swart says.

Barring the collapse of the Internet, a drastic drop in unemployment, or a sudden end to globalization, oDesk seems positioned to keep growing for years to come—and perhaps to eventually earn a nice return for investors Sigma Partners, Globespan Capital Partners, Benchmark Capital, and DAG Ventures, who have put $29 million into the company. With 38 full time employees of its own, the startup may or may not be breaking even yet, but … Next Page »

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Cal-Comp Electronics, a public company in Thailand, is acquiring Spectragraphics, a holding company that operates two San Diego-based electronics manufacturing services companies—Total Electronics and SMS Technologies. Financial terms of the deal were not disclosed. Cal-Comp, which is controlled by the New Kinpo Group of Taiwan, ships more than $5 billion worth of products annually, and the deal suggests an interest among  Asian electronics manufacturers in establishing operations in the U.S. Spectragraphics, which is closely held, has about 400 employees at its two San Diego companies, which specialize in small and medium production of circuit boards and other electronic components, according to a statement e-mailed by Spectragraphics.

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There has been a smattering of innovation news from around the state this week:

—University of Michigan researchers are developing a laser-based system to protect military helicopters from heat-seeking missiles by jamming their sensors, according to a report in Gizmag. Mohammed Islam, a U-M professor of electrical engineering and computer science, is leading the research and soon might be testing a prototype at his spinoff company, Ann Arbor-based Omni Sciences.

—Wayne State University Physician Group, a nonprofit that operates 100-plus medical practices and serves 670,000 patients in Detroit, said today it is using Orion Health’s technology to collect and manage patient data, independent of its own existing electronic health record system. The system will help the Wayne State organization create an exchange of clinical and demographic data between hospitals, medical centers, and its own offices.

—GOP gubernatorial candidate Rick Snyder has come under fire from his Democratic opponents for allegedly outsourcing jobs while he was on the board of Gateway, the computer maker, in the 1990s. AnnArbor.com has the gory details here. Last month, Xconomy’s Howard Lovy wrote an in-depth piece on Snyder’s background and experience in the tech industry.

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There was no obvious reason for us to focus on the $575 million buyout of INC Research, a contract research organization based in Research Triangle Park, NC, that was announced last week.

But the acquisition by Avista Capital Partners, a New York private equity firm, and the Ontario (Canada) Teachers’ Pension Plan’s private capital group, represents a substantial return for San Diego’s Enterprise Partners Venture Capital. Enterprise’s managing director, Drew Senyei, tells me the San Diego VC firm was among the first-round investors in INC Research, which was founded in San Diego in 1996 by Kenneth Selzer, a neurologist and pain specialist.

Selzer, who was a biomedical researcher at UC San Diego at the time, says he raised initial funding of $2 million to $3 million from Enterprise, Crosspoint Venture Partners (which has offices in Irvine, CA, and Woodside, CA), and InterWest Partners of Menlo Park, CA. Selzer says INC expanded its business rapidly, and he estimates the company raised a total of only $20 million in venture funding. Crosspoint and Adams Street Partners (which has offices in Chicago, Menlo Park, CA, London and Singapore) were identified as INC’s lead investors at the time of the sale.

Selzer says he founded INC Research to help pharmaceutical companies expedite their clinical studies of potential drug candidates by tapping the expertise of private physician groups that specialize in neurology, psychiatry, pain, and neurosurgery. Because these medical groups tended to be large and had lots of patients, Selzer says they proved to be an ideal way to help drug companies conduct clinical trials of compounds being developed for pain, depression, and other neurological conditions.

“I was the CEO through 2001,” Selzer says. “Then we moved the company to RTC (Research Triangle Park) and recruited a professional CEO, Jim Ogle.” The company went from a business plan to $400 million in projected (2011) revenue and $60 million in profit, says Selzer, who is now a venture partner with San Diego’s Finistere Partners. Today, INC Research manages mostly late-stage clinical trial programs for drug development companies, and about 60 percent of the work is done outside the United States. It employs 2,000 people in 40 countries.

Enterprise Partners’ Senyei declined to discuss the firm’s return on its investment. But he concedes it was a happy outcome, saying, “If it wasn’t, I don’t know what is.”

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San Francisco-based Cloudcrowd, a “Labor as a Service” startup that helps businesses outsource tasks such as data processing to a virtual workforce, has raised $5.14 million in Series A venture financing, according to an August 13 regulatory filing. Draper Fisher Jurvetson led the round, according to several online reports.

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Marlborough, MA-based Blue Cod Technologies, a provider of outsourcing services and hosted policy administration software for the insurance industry, has raised $8 million in follow-on financing, according to a press release. General Electric Pension Trust led the financing, which included an investment from previous backer Edison Venture Fund, of Lawrenceville, NJ. The funding will help Blue Cod expand its development, sales, and operations, according to the press release.

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[Corrected: 1:15 pm, see below] Earth Class Mail was built on the notion that businesses which receive a lot of important documents through old fashioned snail mail may benefit from the services it has to offer. The Seattle-based company, founded in 2004 by former head and board chairman, Ron Wiener, develops software that digitizes incoming mail, allowing companies to manage their post electronically and avoid being inundated with envelopes and packages. For those of you out there who think this sounds a whole lot like e-mail, it’s a little more complicated than that. Postal items handled through Earth Class are imported into a digital database where customers can access it and choose to have items scanned and saved for company records. Once in the database, the documents can be forwarded to another address, securely shredded and recycled, stored in a digital lockbox, or opened and visually streamed on the spot. [An earlier version of this story said that Wiener is now chairman of the board. In fact this seat is currently held by Carr.]

New chief executive officer Sarah Carr, who joined Earth Class as COO in 2008 and took over the top job last September after Wiener had stepped down, says the software is essentially a “business process outsourcing” service. She describes it as both a convenient filing system and time-saving tool for companies looking to save time. And it hasn’t been without support. Earth Class Mail has been backed by well-known local investors, including Ignition Partners, Keiretsu Forum, and Alliance of Angels (which is no longer an investor in the company). There was only one problem, according to Carr: Earth Class Mail’s initial business model wasn’t profitable.

Earlier this week we checked in with Carr to see how she—and the company—are doing 10 months into this next phase with new leadership. Earth Class, she says, has undergone a “seismic shift” in that short period of time. We posed five questions to Carr, and she shared with us via e-mail a little bit about the effort to restructure the company’s revenue model, the future of Earth Class a few years down the line, and her merit-based approach to leadership.

Xconomy: You’ve done a lot since taking up your post as CEO less than a year ago. What is your new vision for the company? How are you going about implementing this new vision?

Sarah Carr: When I am figuring out how to make a business successful, I start with the customers that are most loyal to us. In examining the data about our customers it was clear to me that Earth Class Mail (in our retail business) is actually a business process outsourcing company. We have some really creative customers that are leveraging our solutions as part of their workflow in order to save time, money and scale their businesses without adding headcount. Given this, I reoriented the company to support this model. Our tag line has been changed to “making time for business” to reflect this new focus.

My vision for Earth Class Mail is to serve three markets: the small business customer through our retail channel; corporate enterprise mailrooms and mailroom service providers with our enterprise offering; and postal partners with our postal platform. All of these segments can be supported in a Software-as-a-Service (SaaS) model, or we can build a custom environment in the data center, as we did for our postal licensee, Swiss Post.

Evidence of how we are implementing this vision abounds—from our new product offerings, updated pricing plans, and revamped website, to our continued service improvements and product innovations.

X: What have been the biggest obstacles you’ve faced since coming on board (both as COO and CEO)?

SC: Unfortunately, the funds that were raised to support Earth Class Mail were spent before I took the helm. So we have had to re-build the company while at the same time cutting our burn rate by more than 80 percent. We were able to secure a small amount of additional funding from our very supportive and patient VC, as well as a few of our investors, but it has been a constant tradeoff around innovation and profitability. I have a really creative team. We have used this talent to build many things in-house such as the product demo on our website. We even built our own teleprompter for the filming of the demo!

X: Has there been a big shift in Earth Class Mail’s revenue model and/or customer strategy?

SC: There has been a seismic shift. The original vision for Earth Class Mail was … Next Page »

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IT executives from some of San Diego’s better-known employers, including Amylin Pharmaceuticals, Sony Electronics, and Broadcom are banding together to find new ways to retain local IT jobs and to counter the effects of foreign outsourcing.

The formation of a new regional business group, the San Diego-based Industry Council for Competitiveness and Globalization (ICCG), comes as the Washington D.C.-based Alliance for American Manufacturing released a study that claims the U.S. lost 2.4 million jobs to China from 2001 to 2008.

The Alliance, an advocacy and lobbying organization formed in 2007 by the U.S. steel industry and its labor union, says California accounts for almost 370,000 of the job losses—including high-tech and IT jobs in data processing, computer programming, and technical support. The alliance contends that the 370,000 lost jobs represents about 2.2 percent of California’s workforce. On its website, the alliance says Massachusetts lost 72,800 jobs (or 2.2 percent of its statewide workforce) and the state of Washington lost 44,000 jobs (or 1.4 percent of its workforce) over the same period.

Alliance spokesman David Roscow tells me the group issued the report as part of its continuing effort to focus the attention of U.S. policymakers on China’s trade subsidies, currency policies, and other practices that have adverse effects on the U.S. economy, and amount to “cheating,” according to the Alliance.

The formation of the new business group in San Diego also comes as many local technology and life sciences companies—especially the biotech startups—are turning to … Next Page »

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ModusLink Global Solutions (NASDAQ: MLNK), a Waltham, MA-based supply chain management and e-business outsourcing provider, said today that it has acquired Boulder, CO-based e-retailer Tech For Less for $30 million in cash. Tech For Less refurbishes and sells consumer electronic equipment and business machines returned by customers.

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San Diego’s MadCap Software may stand as an exemplar in showing how a small American technology company can compete against rivals that take advantage of low-cost development offshore.

The startup, founded in 2005, specializes in developing authoring software that is used by technical writers and others to create owners’ manuals, user guides and other types of technical documentation. MadCap announced late yesterday the release of new versions of its mainstay Flare software for print and online publications, and Blaze, its alternative to Adobe FrameMaker.

The updated versions of both products support DITA, the Darwin Information Typing Architecture, which MadCap’s Mike Hamilton says is significant because the companies that have adopted the DITA standard tend to be Fortune 500 companies. “This opens up a whole new world to us in terms of gaining entry to enterprise-level customers,” Hamilton says.

The privately held company says it has more than 4,000 customers, and boasts that Microsoft Health Solutions Group, for example, is using Flare to streamline publishing for the just-released version of its Amalga Unified Intelligence System. The results were encouraging enough for Microsoft to allow MadCap to use the Redmond, WA, giant as a promotional case study on MadCap’s website—and to extend Flare across its entire Health Solutions Group. As Hamilton puts it, the introduction of Flare 5.0 and Blaze 2.0 also moves MadCap away from competing directly against Adobe and its RoboHelp software—and therein lies the lesson of MadCap’s origins.

Hamilton and MadCap CEO Anthony Olivier were both at San Diego-based eHelp, which originally developed the RoboHelp software, when San Francisco-based Macromedia acquired the little company for $69.3 million in 2003. Olivier had been eHelp’s CEO, and had stayed on as business manager following the Macromedia buyout. But Olivier says what Macromedia really wanted was RoboDemo, a Flash-based program used to create software simulations (which is now known as Adobe Captivate). Macromedia soon began to lay off members of the RoboHelp development team in San Diego and moved the work offshore, first to the Philippines and later to India.

Adobe, which acquired Macromedia for $3.4 billion in late 2005, was even more indifferent about RoboHelp and the rest of the eHelp product line. Adobe moved more software development work from San Diego to India, and according to Olivier, the products languished.

Seeing an opportunity to create a more versatile sourcing tool, core members of eHelp’s development team, including Hamilton and Olivier, founded MadCap in 2005 with less than $1 million in funding from angel investors who were former software industry executives. “We wanted the VC help without the VC strings attached,” says Olivier. Although eHelp had originated in 1990 as a bootstrapped business, Olivier says venture investors who invested … Next Page »

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Over the last couple of years, we have been witnessing a resurgence of the “Internet as the new computing platform” idea. I say resurgence because that was the premise of the late 90′s “Internet Bubble.” Given that history, it would be a mistake to use the same term, of course. Instead, we’ve coined a new one— “cloud computing.” New term aside, the core premise of providing applications & services over the Internet remains at the heart of this resurgence. The Internet Bubble has taught our industry to be more circumspect. Furthermore, with 10+ years of multiple successful Internet services under its belt, the industry is that much more mature. Amazon, Google, Hotmail, Yahoo, and SalesForce.com are all great proof points of this maturity.

Yet, as I observe this resurgence, I see the hype is rebuilding and we might be getting carried away again. History is a great place to look for patterns to help predict patterns in the future. Here are some I see.

Fallacy of paradigm shifts

Mainframes to PCs, and now PCs to the Cloud. I’ve noticed that when there is a paradigm shift, a set of people take on the task of re-implementing existing applications in the new paradigm. Somehow, a mindset develops that “paradigm shift” means it is an opportunity to replace the incumbent solutions by re-implementing them in the new paradigm and suddenly the world will move over. I believe that it is a waste of time & energy to re-implement applications that work well in the existing paradigm. ROI for making the shift rarely exists for the majority of the market. It is important to internalize that computing is a tool for most organizations and individuals, not a way of life (like it is for some of us) so they won’t make the change unless there is a very good reason to do so.

Historically, when computing shifted from mainframes to PCs, some believed that mainframes would go away and even tried to rewrite key mainframe applications on PCs. Mainframes remain and continue to be a very healthy business. Most batch/transaction processing applications that worked extremely well on these systems continue to do so. What popularized the PCs was killer applications such as spreadsheets, word processing, etc. that made computing tools much more accessible to businesses and individuals at large, and significantly increased efficiency and productivity compared to using paper and typewriters.

The same is going to be true as we make the shift from PCs to the cloud. PCs aren’t going away—in fact, they are at the heart of popularizing the Internet and fueling the adoption of this new computing paradigm. So PC applications such as Microsoft Office and Adobe PhotoShop that harness the power of local computing capacity, storage, and huge existing user bases aren’t going to be easily replaced, if at all. In fact, I believe that such efforts will see very limited success. I encourage entrepreneurs and innovators … Next Page »

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The economy is forcing companies of all sizes to do more with less. The big winners are increasingly the small businesses and specialized sole proprietors. On one hand, they provide the “just in time” component services no longer staffed at the downsized firms, and on the other, they are adept at operating with lean resources and contracting for component services themselves.

This atomization of business is more than a reaction to the current economy. It’s a function of the nature of work today, and of the growing availability of technologies that will soon transform this approach to business-as-usual.

In the U.S. we are increasingly a knowledge worker economy, which lends itself perfectly to digitized deliverables. The ability to provide results electronically (vs. manual labor on the factory floor) greatly benefits small businesses and individual contractors, as geographical location and infrastructure are no longer barriers. More and more opportunities will be available to productive workers to serve countless niches.

The supply side is coming via the fracturing of integrated companies into specialty service firms and contractors. With the pay-for-performance contract, results become the job cost of the contractor. Companies can now hire highly specialized experts, spec out the results they want and pay only when the contractor achieves those results.

As an example, our small company Smartsheet outsources Graphics Production, Press Calendar Monitoring, Case Studies, Website Development, Website QA , Accounting, Video Production, Copy Review, and some Product Testing to different people who work an average of 1 – 4 days per month for our company. In addition, we use crowdsourcing (high volume on-demand outsourced data gathering) for prospect profile information, e-mail addresses, list building, and website keyword surveys, to name a few.

The main barrier to this volume of atomization has traditionally been the “productivity tax” on the coordinator who manages all the players working outside the company. The information overload becomes intense with too many e-mails, spreadsheets, and overhead material with so many separate contributors. The logistics and technological challenges often outweighed the gains. But new online tools are changing all that.

New technologies are making it very easy for delivered work to be traded online. These tools are also departing from the forced project management structure and process that has been the impediment to successful work management technology adoption for the past 20 years. They have been the equivalent of being required to understand how stock and bond trading worked in order to use eTrade.

Collaborative work management tools will be tightly integrated with online work marketplaces (LivePerson, eLance, RentaCoder) as well as crowdsourcing technologies (Amazon Mechanical Turk, Smartsourcing). Think of these solutions as part of a global switchboard that connects real and virtual teams on an as-needed basis in order to accomplish specific work. They will be as universally accessible as Gmail, and available to all. And the important components—the tasks, milestones and deadlines, as well as the team members who own specific responsibilities—will always be clearly visible to whoever owns the end results.

As the overhead costs of internal employees continue to rise from regulated increases in health care, payroll, and other taxes, looking outside the company walls will become more and more appealing. Integrated work collaboration tools enable every business to be a services provider and every business to be a services requestor.

My advice to everyone is to be very good at what you enjoy doing, and be prepared to shop it to the highest bidders around the world. Businesses will pay 3 – 4 times the rate of an internal employee for the same work delivered in a quarter the time with higher quality and less management. In fact, it will become table stakes to stay competitive.

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Almost by definition, anyone who gets to the point of submitting an online help request to a software or services company is frustrated, possibly even angry. Responding to a flood of help requests constructively takes calmness and strength—and that’s what Zendesk, a help desk management outsourcing company, tries to supply to its own customers, including big names like Twitter, MSNBC, and Rackspace.

The provider of Web 2.0-style help request tracking software announced today that it has collected on some of that good karma, raising an unspecified amount of Series A venture funding from Charles River Ventures of Waltham, MA. The startup, originally founded in Copenhagen, Denmark in 2007, also announced it has opened its U.S. headquarters near South Station in Boston.

Many of Zendesk’s 1,000-plus customers are themselves Web 2.0 or software-as-a-service companies such as JungleDisk, SlideRocket, Viddler, CakeMail, and WebExpenses.They have all gravitated to Zendesk’s Web-based system for managing help requests because it’s based on Web standards and is therefore easy to integrate with their own services. They may also like the company’s reasonable prices, which range from $19 to $475 per month (depending on how many support agents will be using the software) and are considerably cheaper than competing help-desk software such as BMC’s Remedy. Then there’s the matter of convenience—help tickets created by Zendesk users can be accessed and managed remotely from any Web browser.

Zendesk “has provided us with a platform that works really well for remote teams like ours,” David Abrahams, chief software architect at Sydney, Australia-based Web application design company KMS Systems, says in a testimonial on Zendesk’s website. “Zendesk provides the perfect central point, so we all know what our customers need, who from our team is looking after them and the history of previous communications in case we need to pick up where someone left off.”

Zendesk supplies customers with “help portals”—branded to look like part of their own sites, but actually operated from Zendesk’s own servers—where users can browse troubleshooting FAQs, submit support requests, and check on existing requests. And that’s about it. The company’s interface is employs a clean, no-frills design that reminds me of programs built by 37signals, the Chicago Web software firm known for its “less is more” philosophy.

“Beautifully simple. That is all you need to know about Zendesk,” says Zendesk co-founder and CEO Mikkel Asger Svane in an announcement today about the Series A funding. “This financing will help us build on our success and bring good help desk karma to any organization seeking enlightenment.” (As its name suggests, the company takes the Buddhist theme pretty seriously; among its innovations is an online “Buddha Machine Wall” consisting of 21 simulated FM3 Buddha Machine players, each programmed to play a different loop of droning New Age music.)

Of course, all is not bliss is the land of technical support. Here at Xconomy, we spent quite a bit of time using Zendesk’s system back in February, and March, and April, as we attempted to get Twitter—probably Zendesk’s highest-profile customer—to evict a squatter who was using the “Xconomy” name. We’ve written about the gory details here and here so I won’t repeat them. Suffice it to say that a help-desk support system is only as effective as the people administering it.

When I learned about the financing, I felt compelled to share my Twitter story with Zendesk. Svane replied as follows: “As you can imagine, Twitter Support may very well be one of the world’s largest online support organizations right now, providing support to millions of free users. While we cannot control individual response times, the nice thing about Zendesk is its ability to scale to support that tremendous task. But we also know it’s a colossal support process that won’t be nailed from one day to the other.”

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San Diego serial entrepreneur John Dobak got the best quip off right out of the starting gate yesterday when Biocom, the local life sciences trade association, held a panel discussion on the “virtual company” as a new model business model for startups. Dobak, a featured speaker who was late for the breakfast meeting, told the crowd, “We have three kids under the age of 8 at home, and my wife went virtual on me this week. So we outsourced and my babysitter didn’t meet my timeline.”

Such pitfalls of outsourcing seemed to be a common theme as Dobak and three other biotech CEOS talked about the pros and cons of operating “virtually” with only a small staff overseeing the development of new drugs and biomedical technologies. With the economy still languishing and venture deals few and far between, the concept is compelling and the panel discussion attracted drew well over 100 people to the event.

The CEOs who participated all represented San Diego biotech startups at different points along the continuum of business development. Lithera, a two year-old startup headed by Dobak with backing from Domain Associates and Alta Partners, represented the earliest stage venture. At the other end of the spectrum is Ambrx, which was founded in 2003 to develop new amino acid building blocks for new types of protein drugs.

Jeff Stein, a Sofinnova Ventures partner who also serves as chief executive at Trius Therapeutics, told the audience he represents a counterpoint to the case for creating a virtual biotech company. Stein emphasized that Trius has gained key insights by conducting its own research and drug development internally. “There are incredible synergies at a full-fledged company that makes things happen so much faster,” Stein said.

Nevertheless, Stein conceded, “A lot of VCs are looking very hard now—and they have been for a while—at the virtual model. It’s very attractive to get an asset that’s at a later stage with a minimal staff around it, and with the downsizing in Big Pharma, there are some incredible CROs (Contract Research Organizations) available.”

Among the recommendations and warnings the panel provided:

—Maintaining close control over a contract research organization “is absolutely critical,” said Charles Theuer, CEO of Tracon Pharma. He emphasized the importance of selecting a CRO “really carefully.” … Next Page »

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Issaquah, WA-based Digini announced it has merged with Shanghai, China-based Vyk Games to form a new company called Blade Games. The new firm will provide game development software and outsourcing services to game makers. Financial terms weren’t disclosed. Blade Games will be headquartered in Bellevue, WA, and headed by Digini CEO Tony Garcia.

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It was a relatively light week for deals in the Northwest, with modest activity in business software, Internet, and biotech.

—PivotLink, a software firm specializing in business intelligence with offices in Bellevue, WA, and San Francisco, CA, closed a $10 million Series C round led by StarVest Partners. Other investors included Trident Capital and Emergence Capital Partners. PivotLink was called SeaTab Software until January 2008.

—Seattle-based Ontela, a mobile-imaging startup, closed an undisclosed amount of new funding from Eastven Venture Partners. Ontela has also signed deals with four of the top five handset makers to pre-install its photo-management software on mobile phones.

—Beaverton, OR-based Infinity Softworks raised an undisclosed amount of financing from undisclosed investors. The company makes software for doing calculations and creating reports on the iPhone, BlackBerry, and other mobile devices.

—Luke reported that Helix BioMedix (OTCBB: HXBM), a Bothell, WA-based developer of peptide molecules, raised $3.2 million through debt that can convert into shares of stock plus warrants to buy its stock. The company’s peptides are used in skin care and other cosmetic products.

—Bothell, WA-based MDRNA, a developer of RNA interference drugs, agreed to license some of its technology for a one-time, non-refundable execution fee from Roche, the Swiss drug giant. The deal is non-exclusive to Roche, as Luke reported, and the financial terms were not disclosed.

—Seattle-area startup Frugal Mechanic, an online search engine for auto parts, closed a round of seed funding from Seattle-based Founder’s Co-op, a peer-to-peer investment fund. The exact amount was not disclosed, but is between $250,000 and $500,000. Frugal co-founder Eric Peters told me the story behind the company and how it got funded in a difficult climate.

—Smartsheet, a Bellevue, WA-based firm that makes work-management software for businesses, formed a partnership with Amazon to deliver outsourcing services to mass consumers. The new offering is powered by Amazon Mechanical Turk’s 100,000 virtual workers, and rates for outsourced tasks run between $0.01 and $5.

—In a snapshot of Seattle-area tech startups, four companies formed significant new partnerships, though no financial terms were disclosed. Bellevue-based Apptio, an IT optimization firm, made deals to work with Amazon Web Services, Skytap, VMware, and Citrix. Seattle-based Earth Class Mail licensed its online postal-mail delivery software to Swiss Post. Seattle-based Evri is providing its content recommendation widgets to the Washington Post for online news stories. And Seattle’s Redfin announced new partnerships with more than a dozen real estate brokers around the country, representing a shift in the company’s business strategy.

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