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Unlike some tech giants that have notoriously pulled the plug on beloved products (remember Google's sudden discontinuation of Google Reader?), 37signals takes a vastly different approach with their pledge to support ALL of their products for the life of the internet.
This week host Kimberly Rhodes sits down with Jason Fried and David Heinemeier Hansson, the co-founders of 37signals, to explore the importance of longevity and trust in the SaaS industry.
Drawing parallels to iconic brands like Porsche and Rolex, Jason and David take a deep dive into the challenges of product discontinuation and its impact on loyal customers. From Ta-da List to Basecamp, listen in as they reveal the principles that drive their support decisions and why longevity matters when building a brand that customers will rely on for decades.
Show Notes:
[00:00] - Kimberly introduces the podcast and the topic of 37signals' core principle to maintain its products until the end of the internet.
[00:36] - David discusses the risk of relying on big companies for software services, sharing the recent example of Google killing off its domain selling service.
[02:06] - David explains why Google tends to abandon services leaving users to deal with the aftermath.
[03:50] - How to become a legacy brand—like Porsche.
[05:20] - David shares 37signal's philosophy to keep products running until the end of the internet (example: 17 years of maintaining Ta-da List).
[06:08] - Short-term profitability vs. long-term commitment to customers: The moral obligation (and trade-off) of maintaining legacy products.
[08:07] - Kimberly draws a parallel between the changing ownership of mortgages and software services.
[08:58] - Brand building through commitment and longevity.
[10:05] - Jason shares how 37signals prioritizes their commitment to customers with their core apps.
[12:16] - The challenge of balancing the desires of existing customers with the need to appeal to new customers.
[15:47] - The most profitable product in the 37signals portfolio.
[17:37] - Kimberly asks about the decision-making process between creating new versions of Basecamp versus adding features to the existing ones.
[18:02] - Some updates are like facelifts—others involve fundamental changes.
[20:20] - The costs involved in maintaining apps like Ta-da List.
[21:35] - David highlights the BIG return on investment in brand power that comes with the commitment to maintaining products.
[23:12] - How the murder of Google Reader still impacts users' trust in new Google products a decade later.
[24:06] - The high failure rate of venture-backed companies.
[23:48] - Did you know full video of episodes of Rework are available? Check out our YouTube channel or find us on Twitter. As always, if you have questions for David and Jason about a better way to work and run your business, we’d love to answer them. Leave your voicemails at 708-628-7850 or send an email. And don’t forget you can find show notes and transcripts on our website.
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Creators & Guests
Guest
What is Rework?
A podcast by 37signals about the better way to work and run your business. Hosted by Kimberly Rhodes, the Rework podcast features the co-founders of 37signals (the makers of Basecamp and Hey), Jason Fried and David Heinemeier Hansson sharing their unique perspective on business and entrepreneurship.
Kimberly (00:00):
Welcome to Rework, a podcast by 37signals about the better way to work and run your business. I'm your host, Kimberly Rhodes. One of the core principles of 37signals is the company will maintain its products until the end of the internet. That means that when you sign up for a service, you continue using it forever but that's not the way of big business. We've even seen things like the Google graveyard here to talk about that are Jason Fried and David Heinermeier Hansson, the co-founders of 37signals. David, let's start with you. I know you wrote two pieces recently about this concept of killing off products, which we've seen a lot recently.
David (00:36):
Yeah. What really brought this back up, this is an evergreen topic we like to touch on, was that Google killed their domain selling service. And it just reminded a lot of people that even if something is from a big company, you can't necessarily trust it when it comes to software as a service. Because software as a service can be taken away. It requires someone to continue to turn the wheels and continue to operate the systems in order for you to have access to that product. You can't just buy it once and then it's yours. And that puts a lot of faith in who you choose to do business with because most of these software services, they're actually a pain to switch between. Even if you can export your data, you can export your data from Basecamp or from HEY or whatever. It's not often that it just fits.
(01:25):
And the same thing with the many Google services. So the latest one was their domain service that suddenly gets killed off. And I thought back on like, do you know what, we use like, I don't know, four or five different domain buying services because that's just what's accumulated over the years because it's actually not that comfortable to change your domain name. There's all this DNS and what if it doesn't go right. That's why people tend to stick with these services as they go with them. So this fact that Google just goes like, do you know what? This business is only making, I think it was making $180 million a year. It's just not enough. It doesn't meet our standard. We're just gonna sell it off to some third party that you perhaps would never have signed up with, but now it's owned by them and they're gonna try to incorporate it into their systems.
(02:06):
And maybe that goes well. I'd say that's the minority of the time and maybe what doesn't go so well is you end up with a different system you would never have bought from the first place. You would not have bought from that vendor, you would not have bought that system. You were like, I trusted Google, and you can't trust Google. I think that's like the bottom line here is that this is a generic concept that you need to do a risk assessment of the service providers you're getting something from. But Google is particularly pernicious when it comes to just killing off even services making hundreds of millions a year because they have this resource curse that they have these ad words products, they have search and these other places where they can sell advertising that's making billions and billions and billions. So for a service to reach the bar of it being worth Google's attention, it really has to be a billion dollar business.
(02:59):
And how did they know? They don't. So they continue to launch stuff. And it may seem to the outside world like, wow, that was a great success. I mean, if we launched the domain service and we were doing $200 million almost a year in business, I'd be like, hallelujah. What a slam dunk! And the Google executives can rightfully go like, do you know what, ehh. Meh? We thought it was gonna be 5 billion a year. It's only 200 million. Let's, uh, let's get it off the plate so we can try some new shots at another chance at 5 billion. Right? And I always thought like, do you know what? There's such a depressing place to be for anyone trying to buy software. And I liken it often to these other historic brands. If you bought a 911 Porsche from Porsche back in '77, you can still get parts for that.
(03:50):
Like Porsche doesn't make any money off you really for owning that car, but they take such a pride in keeping up the legacy of the product portfolio that they've created since inception. That is inspirational. Why can't we do that for software? And people will give you all sorts of answers for that. Well, it requires resources to keep things going. And so yeah, it does, but it also requires that Porsche keeps this huge stockpile of spare parts or the methods and the know-how to be able to produce them again. I mean, Jason and I both like watches and that's another domain where you can get parts or find a way to service your watch that might be a hundred years old or at least 50 years will be an easy case. And in software you can barely depend on something for like three years, five years.
(04:34):
I forget how long Google Domains has been around, but I think it wasn't that much longer than five or seven years. In the grand scheme of like domain names, things that people buy and then in some cases wanna keep forever, that's nothing. Why does it have to be like this? So our counter to that has been this promise both to our customers, but also obligation to ourselves. What kind of business do we want to be? We wanna be a business like Porsche, like the great watchmakers that keep the spare parts around that customers have bought something, can continue to use it and enjoy it. They're not being pushed out. So that resulted in this promise of we're gonna just keep things running until the end of the internet. To the point of being almost silly about it. We've talked about Tada List in the past. Tada list is silly on purpose.
(05:20):
This was a free service that we gave away starting in 2005. Never made any money of it. It was, it was basically like an advertisement for Basecamp at the time. Hey, look how easy it is to manage your to-do list online, which used to be a sort of novel thing. And then we didn't do much with it. I think the last update, material update was probably 2006. Like try to count that up. Is that what, 17 years ago? So 17 years ago. Like that's the product, that's how old that product is, which is about like 200 years in mechanical terms, 17 years in digital terms. And we're still keeping it around. We moved it, I think across maybe four different hosting methods. That's not free. I worked on Tada List as early as this year. It was our first, uh, venture out of the cloud.
(06:08):
Again, we had put Tada List into the cloud, like this is how many generations it, it gets to survive like before the cloud was even a thing. Then we moved it into the cloud, then we move it back out of the cloud and we continue to just do it. And why? Because like we have some eternal moral obligation to the, I don't know, 800 people who still use it every week, which by the way blows my mind, right? 17 year old product and there's still hundreds of people who use it every week. What? Um, no, I think we could reasonably explain to them like, yeah, you know what, it just doesn't, it doesn't add up or whatever. Um, and we're like, no, we freaking gotta do it. Like these principles, they have to cost something to mean something. And this is the trade-offs that myopically, I think a lot of software companies look at it like, no, it, it's not gonna pay.
(06:56):
If it's cost us a little more to run it, then it, we will make back on it, therefore we won't do it. Which is not that far off the equation of fight club, right? We won't do a recall unless the cost of each settlement for an exploding car is more than the cost of the recall, right? That's a really shitty bean counter way to run your business. And I don't think it works on the full calculus. I think the companies like Porsche and Leica and the great watchmakers, they are the companies they are, they have the brand value they do because they treasure that legacy. This is some of the feedback that came back with the Google response, right? People rightfully went like, okay, so what's next? If they can kill a business that's worth 200 million, what are they gonna do about Google photos? What are they gonna do about the Google Cloud that they've been losing billions on? Like, is that gonna go away tomorrow? That's exactly the seeds of doubt you plant when you don't stick and keep and cherish your legacy.
Kimberly (07:54):
It kind of reminds me of my mortgage that keeps getting bought by different companies. And you're like, this is not who I signed up for and your service is shitty and I just now have to go with it. Like that doesn't seem right. It kind of feels like the same thing to be honest.
David (08:07):
It's, you are a piece being sold and you're like, that's the wrong direction for the transaction. Like if I buy the watch, like that's my watch, right? Like it shouldn't be then like 15 years later, Rolex gets sold to some other company and now I'm a, uh, whatever customer and I'm an Omega customer. No, we, we completed our transaction and, and that was it. It just doesn't work like that in software or it doesn't appear to work like that. We're making it work. You can make it work. These aren't super exotic choices that only we could make in some alternate universe of whatever charity. No, we run a business and we go like, do you know what the analysis is both, it's fun to do. It feels like the right thing, but also that it's good business that when someone looks at HEY, HEY is a great example, right?
(08:58):
People don't change email addresses like ever. They probably change their email provider less often than they change their bank or their insurance provider, which is to say very, very rarely. So for someone to consider, even consider that they should buy HEY and move all their stuff over, that is such a leap of faith. Like, I'm not gonna wanna change away from this in two years because you just got bored with HEY. So we can sort like, all right, fair point. But look at this. Look at 20 years history. Look at the 17 years we've been maintaining Tada List, which we make no money off. You can trust us. And I think that's the essence of brand building. We often think about brand building, it's about marketing, it's about advertising. It's, yeah, it's about those things, but it's also about like following through and committing to something for long enough that people will actually believe you. So many people in so many situations have gotten ripped off, right? They bought one thing, they got another, the relationship's sour. So if you can stick to what you say is true for long enough that people will believe it, that is incredible branding power.
Kimberly (10:05):
Okay. So when you guys started, you weren't thinking about shutting down apps at all. I'm assuming, like you started with a product, built it, didn't decide at that point to have this philosophy. Like was there a point along the process where you decided (a) we need to have this as a philosophy? And did you ever waver or ever consider not keeping that kind of idea?
Jason (10:27):
There's been one or two things I think that we, we shut down. Um, one was this thing called Basecamp Breeze, which was a email, like we had this idea to make a group email address. It was like the simplest version of, well it is a group email address, but you got to come up with your own name for it. And anyone who emailed it just blast out to everybody else. That was like all it did. Um, and we charged, I forget what it was like nine bucks. I don't even remember what it was. It was some cheap number and then we ran it for a while and just didn't really work and we actually, I think gave everyone their money back. It was a, it just like, it was that. So we're like, we decided this is just not going to work, so we don't deserve your money either. Here. It goes back to you and we're gonna shut this thing down.
(11:14):
So we've done that. We've sold, we sold Sort Folio, which was a tool for people to find web designers. Um, it still exists. We sold We Work Remotely, which is a job ad board. So we've done a few things. Let's like just make sure that we're not being, you know, untort about that. We have done a few things, but the core apps that we have, we still maintain. So you can still use Backpack, which we launched in 2005. You can still use Highrise. We what, what our method has been is we're not gonna sell these to new customers anymore, but we're gonna maintain them for existing customers who have them. That's another way to do this, which is to say, I can understand why we might not wanna support these things moving forward in terms of dedicating resources to improving them, but we should maintain them for people who've already paid for them and who are currently paying for them. So that's sort of been our approach to this cuz there is at some point like you have only a certain number of resources and you have to understand and figure out how you're gonna direct those. Maintenance is a lot simpler than constantly improving something though so that's kind of been our, our formula.
David (12:16):
The funny thing about that is for a certain group of customers, that's the feature. Don't change it. Keep it exactly the same and I will love you more for it. That doesn't work when you're trying to sell to new customers. And that's the pickle that most companies find themselves into. Um, you have a vocal existing group who either want to keep things exactly the same because that's what they learned and now perfected or they want minor tweaks along that path. If you wanna do something materially different, you're actually at odds with your existing customers when it comes to software as a service. This was the dilemma we were faced when we did the first major revision of Basecamp because we had brand new ideas of what Basecamp should be, how it should look, what the screen should be. It was not an evolution, it was, revolution is an overused word, but evolution plus plus. Too much evolution in one go for someone to be able to swallow happily.
(13:12):
So we created a completely new code base, new product, new signup process, whatever for the new product. And then we kept the original Basecamp as it is because that's what the majority of the customers were on that platform actually would want. And how do we know that? Because they're still there. The original version of Basecamp, we stopped working on 2010. It's a multimillion dollar business to this day that includes a bunch of customers who will write us and be our biggest fans. So happy with Basecamp, Basecamp's amazing. Oh, which version of Basecamp are you on? Oh yeah. Basecamp Classic. Oh the one we haven't put any new ideas into for 13 years? Well that's awesome. Now the funny thing is that you can see parallels of that in these other domains we just talked about. There are people who absolutely adore their 1983 Porsche 911 who don't want the 2023.
(14:06):
The 2023 has a bunch of things and it is quote unquote better in every regard. It has another whatever, 40 years of ingenuity from Porsche's best engineers and reasonable customers can go, I don't want that. I don't want your new ideas. I thought you perfected this thing in '83 when the car was constantly trying to kill me and all the other foibles it had. The same thing with watches. There are people who adore vintage watches. They're worse in all regards. They are worse at telling time, they're worse at keeping water out. They're worse in all the ways. They enjoy that. Um, now maybe there's a little bit more nostalgia to those things than there is to software. I don't know, I haven't actually dug that deep. But I do think there is a fundamental respect for customers making purchasing decisions and feeling, do you know what?
(14:57):
I don't want the latest thing you're selling. I prefer this other thing. And that makes me really happy. It really does. I mean you look at the same way you look at it with musicians or with authors or filmmakers. Sometimes I'll like, I'll adore a certain artist for the work they did 20 years ago and I don't really care so much for the new stuff. We absolutely have customers on the original version of Basecamp who feel that way, that the new version of Basecamp just didn't appeal to them for whatever reason. And they can still appreciate and like, and continue to pay for, importantly, um, that old product that they bought way, way, way back then. Let's do more of that. And I think this is part why we take this so seriously and we're talking about it and we have a policy for it, is the hope that, you know what that could spread.
(15:47):
And I think that's why it's actually important to mention that the original version of Basecamp is perhaps the most profitable product in our portfolio. It costs the least to run in terms of maintenance, in the ratio to how much money it takes in. How many, how big would this company have to be if it just had to maintain the original version of Basecamp –an ever shrinking business – but I mean we would have the most obscene profit margin, right? So it's not that this is all charity, it's not that this is all just brand building. It's also not in the case of Tada List and specific, but for Basecamp it's also business decision saying like, this is just good business. We'd like to encourage any old customers on Basecamp to get onto the new version if they're ready for it. If they're back in the market anyway, we wanna be there and we wanna sell them a product that's right for 2023.
(16:39):
Not the best you could get in 2010, but there's just a huge group of people who, who don't want that. And I just, yeah, I respect the heck out of it because I feel the same way. And sometimes the parallel I've drawn is I don't want an update to my printer. They'll send these updates. There's a new firmware, I just wanted to continue to print and I wanna learn nothing new about how you insert the paper or, I don't care if you came up with a slightly more convenient way to load the pages or to insert more ink or whatever. No. My life is perfect never having to think a new thought about a printer ever again. And do you know what, there are people who feel that way about software, even about Basecamp, which is sometimes hard for software makers to cope with that like, oh, this thing that like is my entire world for eight hours a day minimum or more is not the center of the universe for every person who buys it. Huh. I'm shocked.
Kimberly (17:37):
Well that's interesting cuz it makes me think about your decisions, if you will, to keep the old versus giving new features. To kind of talk me through that of the process. Cuz I know there's three versions of Basecamp. You had the option to make a fourth version that wasn't just the third version. Kind of talk me through when you make a new version that people can buy into versus just adding features to an old one.
Jason (18:02):
Typically it's when there's like a significant, we have a significantly new idea that does, doesn't fit into the old box in a sense. It could be technical, it could be design, it could be conceptual, just the way things work, the way things are. So Basecamp three to four – four is the current version – that was a very smooth transition because three had all the underpinnings we were gonna use for four. And four basically, three basically morphed into four. That made sense. The interface is roughly the same, the fundamental concepts are the same. Four does a lot more than three, but there's a path there from classic to two. For example, two had an entirely different paradigm. It was this page based metaphor, uh, like pieces of paper layering up, which is just totally different from a like a tab based metaphor. And it was just so different that it couldn't, it couldn't move from one to the other without like David saying completely upsetting the apple cart for tens of thousands of people who are happy with the way the other one worked.
(19:00):
So from three to four, if you had three and now you have four automatically you, you're not, there's no way to even be upset about four because four is what you already had just better. Moving from classic to two was, was jarring. Someone moved all the furniture, the doors were removed, the handles moved. Instead of turning the handle, you now flip the handle. Everything was different. So that's when you have to kind of make a major change. And we get back to the car thing. We think about it in terms of of, you know, cars have different, sometimes they have a facelift. So they might, a car might exist for six or seven years in a certain model range and then they might do a facelift half way through, but then they do a whole new chassis, a whole new motor, a whole new thing seven years down the road and there's a new generation of that same car.
(19:42):
That's kind of how we think about it. So sometimes it's a mid-cycle refresh, but sometimes like, like for example, the Honda Accord, the one that came out within the seventies could never made its way to 2023. Everything changed. The way even they make cars changed fundamentally. So that's, that's morphed from or not morphed, t hat has not morphed. That's just, it's been generation of generation upon generation upon generation of fundamental changes even though it's still the same model name. Um, that's how, that's how we look at Basecamp. Basecamp is still the same fundamental idea about project management and team communication and collaboration, but just applied differently over the years. And sometimes the changes are big, sometimes they're, they're small enough.
Kimberly (20:20):
And then last question before we wrap up in terms of cost, cuz obviously there is a cost to keep these apps going, especially like you're saying Tada List, people have never even paid for it. So we're paying to maintain it. What are kind of those categories of costs? I'm assuming it's like storage space, what else goes into those costs?
David (20:39):
It's actually mostly attention, brain power. People who need to know how to operate the thing, who need to migrate it. I mean I spent a couple of days of my time on Tada List in the beginning of this year as we were moving it over. That's billable time that like there's no immediate return from from that product. But when I think of like the investments in a brand that will stick to silly lengths to maintain something for just a handful of hundreds of people, that feels like an incredibly high return. Like how can you buy that kind of brand power? When people see, especially when they're reminded by huge conglomerates like Google that can't seem to track or focus on something for more than 3, 5, 7 years, that becomes even more valuable. Like in the early days of software as a service, like consumers couldn't pick from one to the other.
(21:35):
Eh it's all the same. Like one company, the other company, I don't know who's gonna stick around. Now you do know. Like now you have a track record that you can build on. This is what that sort of multi-decade long brand building of, again, if we do the comparisons here, the Porsches and the Leicas and the Rolexes of the world, how did that get to be that? If you asked someone about a watch in the, I don't know, fifties Rolex was not the brand it is now 70 years later, it needed 70 years of consistency and keeping its promises to get to where it is. You can't even speed that up. You can launch the greatest brand tomorrow, but if part of your appeal has to be longevity, there's no way to engineer that in. All you have is words. Words are so cheap and people have been tricked enough times that they don't trust words.
(22:26):
They trust actions, they trust legacy in this sense of multi-decade commitments that are just true. Like they're not up for debate. I'm not trying to convince you about anything. I'm just like, hey, here's our history. You can compare that history to another company that might have less history or have a different history and you can make your choice. And I think as we see more and more companies, not just Google, I mean we pick on Google here because they are the most egregious killer of their own services. I think the killed .com graveyard site is up to 447 services that they've murdered over the years. Um, no, not all of them were as big as Google Domains, but one of them still stands out in people's memory, which was Google Reader.
Kimberly (23:12):
That's what upset me. ,
David (23:14):
Yes. That was the one they killed in 2013. Isn't that amazing? That is negative brand value. Carried forward a decade that people still remember the murder of Google Reader, which by the way at the time I think had 300 or 400 million users because it is that seed that continues to sprout, oh what if. If I spend all this time getting into new Google product, will they just kill it like Google Reader? What if they don't get it to 400 uh, million users? So that's one part of it. The other one which we often rail against of course is venture-backed competitors. Venture-backed competitors are inherently volatile. Like the entire model is an extremely volatile ni rin, no what's it called? There's some like nitroglycerin. That's what I meant. Um, that compound where you're like, you don't wanna shake it too much because it's gonna blow up in your face, right?
(24:06):
That's venture backed companies. They mostly fail. That's just a VC company makes 10 investments. One of them goes to the moon and the other nine either blow up or die or gets sold off or or whatever, right? So when someone is looking at our competitors that are venture backed, we'd like them obviously to think about those things in much the same way that Rolex would compare their whatever, is it a hundred years? I don't remember how long they've been around, but something like that legacy to someone who's coming out to tomorrow, right? Like hey, we're a new watch company and we're gonna make uh, great things and and whatnot. So that's just even more true when it comes to software as a service because you can't even service it yourself if that venture back company that you're buying from goes out of business as most of them will in three to four to five years, you're just done.
(24:57):
There's nothing to do. You can't run it yourself like the watch you might be able to serve as at a third party or something. So I think we are in the business where that sense of commitment to longevity matters more than almost any other kind of business. There is more pain and frustration involved with moving between different software service products than almost any other kind of product that you could buy certainly for your company. And um, yeah, we'd like people to know that. We'd like people to know that we've been sticking with shit for 20 plus years and hopefully, or not even just hopefully probably we'll do so for another 20 years. Why? Probably cuz we're profitable cuz we've been profitable the whole time cuz we don't get out over our skis because da da da da.
Kimberly (25:42):
I love that. All right guys, well thanks for being here, joining us again. Rework is production of 37 Signals. You can find show notes and transcripts on our website at 37 signals.com/podcasts. Full video episodes are available on YouTube and Twitter. And if you have a specific question for Jason or David about a better way to work and run your business, you can leave us a voicemail at 708-628-7850 or send us an email to rework@37signals.com.