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I had an interesting briefing with Bill Soward, CEO and Greg Schneider VP of Marketing at Adaptive Planning the other day, which I wanted to share. In the spirit of full disclosure, I will let you know that I worked with Bill years ago at Edify but I have been very impressed with what he has done at Adaptive Planning.
The original purpose of the meeting was to finalize a SaaS business profile but what I thought was even more interesting was their company’s approach to building a SaaS sales pipeline, especially in these tough economic times. I have heard many executives talk about reducing the barriers to sales but Adaptive Planning is really going to the extreme in terms of test drives and transparency for their prospects.
Having run sales, I can tell you that sales reps always have a lot of excuses why prospects aren’t buying and I know there are plenty of excuses to be had these days. What I think we can all learn from Adaptive Planning is that by addressing these potential sales objectives earlier in the sales process, you can build in more predictability and ultimately more sales into your SaaS sales process. Here’s what they have done…
The New Improved Test Drive
30 day trials are no longer new and innovative, they are table stakes for SaaS firms trying to sell their software. Adaptive Planning is no different. They offer a 30 day trial but they also offer…
- A Hosted Express version, which is easy to set up and start to use. This is managed and maintained by Adaptive Planning and is free to use. Most of their prospects have opted for this approach to their trial.
OR
- Download the software for FREE, forever. You can go to SourceForge and download the source code and the Adaptive Planning Express product. To date they have had more than 79,000 downloads. Many of whom will become future paying customers. So if someone says I am not sure that your software will do what the marketing literature claims, just tell them to download it and use it.
Over-Educating Their Prospects
Bill and Greg agree that it is important to provide their prospects with as much information as possible and allow them to select what they need as part of their sales education process. This is also part of the company’s approach to relationship transparency, more about this in a minute. So part education building blocks consist of;
- A Resource center which is a collection of information like collateral, white papers, archived webinars and case studies. Most companies provide this type of information library.
- Pre-recorded video demo where the prospect can get a guided tour of the software, which isn’t really breaking in new ground but can be helpful for busy executives.
- Live Webinar demo, where prospects can interact with Adaptive Planningt team, again this is nothing new.
- On-line Training, which allows you to go into more depth around the product, which I think is a great idea. Because you always have the deeply technical buyers who need deep domain information.
- On-line Price List, this isn’t new for some of the newer SMB SaaS applications like 37Signals or FreshBooks but I think for this type of application this is quite a different approach.
- Online Community is another great idea. Using social networking to build a strong community around not only your products but also your company. Adaptive is using the Jive Software platform to provide chat threads, videos, blogs, polls and best practice advice. They even offer private collaboration spaces where customers can share best practice ideas privately.
By combining all of these building blocks, it gives the prospective buyer almost every way to learn about and evaluate Adaptive Planning’s software.
WYSIWYG Transparency
Bill spoke about having a transparent relationship with their prospect and ultimately their customer. They feel that their open information approach provides a prospect with virutally every way to experience and learn about their products, support, pricing and company. This is a powerful differentator when buying software but more importantly when a prospect is shopping for a vendor relationship. The reality is that today’s software buyer is more sophisticated but also realizes that their relationship with a software firm is typically lasts between 5-7 years and that they really do want to ‘try before they buy’. For Adaptive Planning their transparent approach is paying off.
Lowering Customer Acquisition Costs and Building a SaaS Pipeline
A term you hear a lot about in the SaaS world is CAC or Customer Acquisition Costs. This is basically the cost of finding, qualifying and signing up new customers. In the enterprise software world, where you were getting large up-front payments, you could sell with a team of sales professionals. In the SaaS world, where you are getting paid over time, it is imperative to sell using as close to a self-service sales model as possible and I believe this is what Adaptive Planning is doing. What I like is that they are not just cutting costs, they are putting everything out there in a transparent, logical way for their prospects to make their own decisions and self-qualify. There are still people at Adaptive Planning who will sell you software but only when you are ready to buy, which saves everyone time and money.
So far their approach appears to be working because they have more than 400 customers and continue to do well even in this recessionary environment.
In Charles Darwin’s landmark work on the Theory of Evolution, he stated that “…Natural selection acts only by taking advantage of slight successive variations; it can never take a great and sudden leap, but must advance by short and sure, though slow steps.” Based on what has been happening with our economy over the past six months, the Human Capital Management software world is going to be forced to do a quick evolution.
Times are tough; just consider the global economic slowdown over the past three years. In 2007 it was the sub-prime mortgage crisis, in 2008 it was the Banking crisis and in 2009 we are beginning to see the Human Resources crisis.
This is very different environment for HR professionals than the old War for Talent era that was discussed by industry experts over the past five years; this current crisis is more related to a dramatic reduction in jobs in the economy and unemployment approaching 10%. Human Resources related budgets and headcount have been cut way back in an effort to stem the financial tide. Unfortunately most companies were not ready to eliminate anywhere from 5-30% of their workforces overnight. Not only were they not prepared for this change but they probably don’t completely understand what the future impact of their actions will be for their workforces. These dramatic changes have left HR in a precarious position looking forward because they have little in the way of staff or resources but their charter remains the same.
HR’s Rapid Evolution
As someone who sold HCM software for the last 12 years, it was always part of the sales pitch that the HR organization is always expected to do more with less. Now that the environment has really changed, when senior executives now say to HR, ‘do more with less,’ they really mean it.
Just like in natural selection, the HR survivors need to evolve. So in this brave new world, you no longer have the level of resources that that you have taken for granted for years. Resources like IT support, capital dollars in your annual budget, a team of people to work on projects and time. You may ask, how do I evolve? With dramatically less people, budget and basically the same responsibilities, you need to automate as much of your workload as well as your personal interactions. In this new world, the human touch is going to be at a real premium when it comes to HR.
Well - now that you are completely depressed, let’s review some ideas on how you can be an HR survivor. Did you know that most companies have up to 200 different HR suppliers, depending on the size of your company? Do you really need all of them? Since you are now in a zero sum budget exercise, start looking at your operating expenses as one big pot of money and start determining what is essential and what is optional. As you start your process, you need to free up budget to fund critical automation projects that can enable HR to continue to push along its strategic objectives. This may actually be a process that your IT business partners might actually be willing to help you with, since they are feeling HR’s pain like never before.
Natural Selection
So as you start thinking about your natural selection budget project, you should start to build out your game plan by trading out your old software for new software. My general conclusion about software is simple, old software is bad and new software is good.
Let me explain…
Many of the current Human Capital Management software providers evolved from PeopleSoft. PeopleSoft was the leading HR software provider in the market for nearly twenty years and spawned a complete suite of Enterprise Resource Planning applications including benefits administration, payroll and other HR applications. When PeopleSoft was purchased by Oracle in 2005, Oracle became the dominant provider but they appear to have no clear future plans for their HR software. So you need to continue to pay maintenance for old software, which keeps getting older.
When thinking about natural selection for HR software, think about the clear disadvantages in the current environment for your old school software provider:
- Software requires a large capital investment. This might be really difficult to get funded in our current environment, no matter how critical the software is to your company’s objectives.
- Implementation projects are both long and complex. Lots of investment to support customization and an expensive team of consultants who will live on-site for months or years. The consultants have to install your software in your data center, which will require a significant investment in hardware and infrastructure.
- Massive software upgrades. Whether it is moving from PeopleSoft 8 to PeopleSoft ? or to the latest version of SAP, these upgrades are expensive and require a lot of internal support resources and a big hardware investment.
- Lack of flexibility. The older software providers typically have rigid products, which make it tough to make even basic changes to features, reports or anything else. This is also a big disadvantage of buying all your HR software from a single vendor, like Oracle or SAP.
- Don’t play well with others. Ideally all of the software works together to make it easier to configure workflows, data elements, reports, and analytics because your data is sitting in a lot of different systems. If your software isn’t open to working with other systems, it can get really expensive, and you don’t have any budget to glue everything together.
Now you can see why old software is bad… and why they may be going the way of the dinosaur in the next 5-10 years. That’s right, even Oracle and SAP. Remember MSA and McCormick & Dodge!
What attributes should you be looking for in your future surviving HCM software suppliers?
These survivors have these clear market advantages:
- Software-as-a-Service. You have probably heard this term but it is simply when the software company rents you the software and you subscribe to their service the next 3-5 years. Because of this approach to delivering software as a service, SaaS firms are forced to be more cost-efficient because they get paid over time. SaaS software is delivered to your users through the Internet, which means your IT department doesn’t have to have to buy or support any software or hardware – this can save your company a lot of money.
- Long-term relationships. Because you rent the software, your SaaS provider has a vested interest in keeping you happy because you will want to continue to renew your subscription to the their software. Unlike old software firms who would sell you their software and disappear, SaaS firms are encouraged to stay close their clients and listen to your input.
- Incremental changes. It was not only the expense but also the tremendous organizational disruption associated with large software upgrades that customers really dislike about the old software model. SaaS clients enjoy a ongoing stream of transparent upgrades, that fix bugs, add features and their software literally evolves over time.
- Less extra costs. Since SaaS providers host their software in their own data centers, your company doesn’t need any IT staff to support their software or infrastructure (servers, firewalls and security) typically required to run HR applications.
- Configuration. SaaS firms offer more flexibility in the way they set up your software. Unlike the older software firms that bring a cast of thousands to customize and install your software, SaaS companies can set up an initial version of your software in minutes or hours rather than in months. Then once they understand your business needs, the software can be configured without custom programming. This approach saves you both time and money.
- Open for business. In this new world it will be difficult for any company to purchase every type of HR software from a single provider, so it is important for software to communicate and share information with many different software packages. This sharing will enable you to automate as many HR tasks as possible, allowing you to do more with fewer resources over time.
Slow Evolution of HCM Software
A little known fact is that the original Software-as-a-Service provider is Automatic Data Processing. They have been delivering payroll and HR services as a service, for nearly fifty years. Their offerings started out as a basic payroll service and their internal software just helped them to deliver their service more efficiently to their clients.
In the 1990’s, the next generation of on-line solutions appeared - where on-premise software was transitioned to being hosted in providers’ data centers (commonly referred to as Application Service Providers). A number of HR ASP software providers emerged including: Employease, PeopleSoft eCenter, and Workscape.
Then about ten years later, the conversation evolved from just hosting traditional software and a new model emerged - on-demand software, that provided a pay-as-you-go pricing model along with streamlined upgrades and new support processes. Some of these on-demand providers included: Authoria, Kenexa, SumTotal, Stepstone and Ultimate Software.
Then just a few years ago SaaS providers started to gain momentum. These firms really looked at delivering their software truly as a service and never delivered it on premise, sold in the traditional way. The HR SaaS providers always delivered their software over the Internet, with a modest amount of services, no upgrades, per-employee-month pricing and self-service support. Many better known HR SaaS providers include SuccessFactors, Taleo and Workday.
The next generation of HCM software might be based on Cloud Computing, where the SaaS providers no longer own their data centers and use providers like Google or Amazon.com to deliver world-class infrastructure support at on a pay-per-transaction fee. This approach could drive down costs, complexity and make a wide range of traditionally expensive HCM software much more affordable for small and medium-sized businesses.
Darwin Speaks
The HCM software market has undergone a number of wide ranging transformations over the last thirty years. We come back to the premise of old software is bad and new software is good. Old software is bad because it is expensive to maintain, modify and upgrade. Software teams that have the experience of working on traditional software but now working at new companies where they are using modern techniques might find it difficult to make their software better, faster and cheaper.
As you think of your portfolio of HCM software providers, maybe Darwin could help. And if Darwin were alive today, and knew about Human Capital Management software, I think he could put many of your company’s providers into these categories:
- Endangered – they are doing some of the right things to turn themselves into survivors but haven’t turned the corner just yet. These are the providers you need to keep a close eye on, just in case they become extinct.
- Extinct – those providers who are on the downside of innovation, living off of your precious maintenance, old architectures, delivered on premise and probably won’t be around for the long term.
- Survivors – those software firms who are worthy of your investment and will be in the market for the long term.
To read the rest of the post go to our website and download the white paper.
Company: RightNow
Started: 1997
Located: Bozeman, Montana
Geography: Global
Market: On-Demand Customer Relationship Management
Products: RightNow CRM Suite RightNow Service RightNow Marketing RightNow Sales
Key Customers: Drugstore.com, TomTom and Electronic Arts
Website: RightNow
Blog: Voice of the Customer
Recent News:
- RightNow Ups the Ante on SaaS with Service Level Credits
- New Product Registration Capabilities in RightNow February ’09 Drives Top Notch Customer Care
- drugstore.com Customizes Online Shopping Experience with Beauty Chat
- Good Customer Care, Not Prices, Wins Loyalty of Credit Crunched Holidaymakers
I asked Greg Gianforte, RightNow Chief Executive Officer a few questions about his business and his view of the SaaS market in 2009.
Did you start out as a Software-as-a-Service company?
RightNow has been a pioneer of SaaS / On-Demand technology since our company inception in 1997. Our underlying services are built to dynamically scale our client’s customer service and support up or down as they need. Unlike other providers, our solution is built to deliver exceptional experiences to our customers across service, marketing and sales interactions.
Why do your customers buy from RightNow?
RightNow’s on demand hosted CRM business model delivers quick time-to-benefit and helps our clients reduce operating costs, improve customer experience, retention and advocacy, and maintain a competitive edge.
What do you see as the key trend emerging in the SaaS industry?
As Cloud Computing gains momentum, it will become even more vital for a SaaS company to stand behind its service commitments since they are responsible for system reliability and performance. Customers are expecting a high level of availability and providers are using their ability to deliver as a competitive advantage.
RightNow recently announced an ‘up-time’ commitment to our customers of 99.9%, forcing our team to take uptime seriously, and making sure the right level of attention is being paid to the issue.
No amount of “money back” will take the place of performance, but a company’s willingness to put real dollars at stake underscores the confidence they have and that their customers should have in their solution.
What is your outlook for 2009?
Times are tough, but projects are still getting done and forcing some tough decisions. The best companies are continuing to adopt CRM technologies because they have identified that CRM and superior customer experiences are the best ways to keep and expand a customer base in a weakened economic state. Customers don’t grow on trees and in tough economic times it is even harder to attract new ones.
Thank you to Greg Gianforte, Jason Mittelstaedt, Joseph Brown and Katie O’Connell for contributing to this profile.
Company: SuccessFactors
Started: 2001
Located: San Mateo, California
Geography: Global
Market: On-Demand Performance and Talent Management
Products: Goal Management
Business Performance Accelerators
Key Customers: Advo, Allianz SE, Cadbury Schweppes, Hilton, Kimberly-Clark, Gen-Probe, PETCO, and Rexel
Website: SuccessFactors
Blog: Performance and Talent Management Blog
Podcast: People Performance Radio – US Edition
Recent News:
Orange Deploys SuccessFactors to 13,000 Employees in the UK
I asked Lars Dalgaard, SuccessFactors’ Chief Executive Officer a few questions about his business and his view of the SaaS market in 2009.
Did you start out as a Software-as-a-Service company?
Absolutely. Since the beginning, we built SuccessFactors as an on-demand platform in the cloud from the ground up. The underlying technology platform is called the SuccessFactors Web Component Engine, and it’s the basis for all SuccessFactors’ applications. The Web Component Engine was built on a multi-tenant architecture with a single-code base incorporating expertise gained from working with more than 2,600 customers worldwide. The platform includes a set of reusable technology components such as a business process template designer, workflow engine and data permission model. It’s the foundation of SuccessFactors’ Performance and Talent Management Suite and enables us to quickly innovate and create new applications to drive business performance for our customers.
Why do your customers buy from SuccessFactors?
By using the latest research, the smartest technology, and the most secure systems on the planet, SuccessFactors works every day to help companies achieve tangible and measurable results, lower costs, and align their organizations.
Since day one, SuccessFactors has been focused on customer success and our on-demand platform helps us do this quickly – getting customer-driven product evolution and frequent enhancements up-and-running when they need it. We also deliver innovative, customer-driven new features on an iterative monthly basis, allowing customers to continuously increase the value they receive from us.
By listening to what our customers want and then taking action immediately to deliver what they need, we’re providing the ultimate level of customer service while providing fun, easy-to-use, user-centric software that creates real business value for our customers and encourages better adoption companywide.
What do you see as the key trend emerging in the SaaS industry?
• It’s going to accelerate. Hard economic times force innovation and companies are keeping a close eye on the bottom line, so this is going to speed up the pace that companies adopt lower cost of deployment SaaS offerings, delivered via Cloud Computing
• SaaS and Cloud Computing will continue to innovate and be easier to use. We are going to see more companies making SaaS as easy to use as Google, Amazon and a slew of other consumer applications and Web sites. Driving adoption and everyday usage will continue to be very important.
• Customer service is HUGE. Today companies care most about doing more with less and keeping their existing customers DELIGHTED. They had to do this before but now it’s critical – they can’t afford to lose customers. We interact and work closely with our customers on a daily basis – a paradigm shift from the legacy, on premise software sales model of selling multi-million dollar license deals and then reengaging the customer five years later. Companies with lots of customers and smart strategies are pouring everything into keeping customers DELIGHTED and the SaaS model makes the product more relevant, flexible, and scalable to the customers’ needs.
What is your outlook for 2009?
Our customers are putting increased focus on their top talent and high performers to make sure these people are motivated and engaged – a critical strategy during today’s economic downturn. SuccessFactors is giving them the tools to really hone in on who’s doing great work, while also providing the clarity to help them make tough business decisions. The War for talent has not ended. A company’s top performers are still being targeted by competition.
There has been a lot of discussion about the strength and resilience of the SaaS model during uncertain economic times. We get that. But what is more crucial is that companies really need to focus on energizing, retaining and keeping their best people motivated. It’s not a ”nice to have,” it’s a must have. Currently, companies are spending about 70 percent of operating expenses on their people. Companies need to be ahead of the curve, and SuccessFactors helps provide ways to make better business decisions in today’s tough economy.
Thank you to Lars Dalgaard and Jennifer Gazin for contributing to this profile.
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