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After working at Oracle for almost five years in the early 90’s, I can tell you that when Larry sets his mind to something he usually gets it.
Let’s take a trip down memory lane…
It started by just plain beating your competition at sales and marketing. Remember, crush Ingres, destroy Informix, smash Sybase … they were close to dead and Larry let them slip away. He would have obliterated DB2 and SQLServer but IBM and Microsoft were too big. Still he ended up owning the database market.
With the database market securely in his grasp, he started looking to other places where data resided… Ah, applications. Larry had always said that Oracle didn’t care about applications and that they were focused only on the database market. Then starting in 2005, he started his assault on the applications market first with Retek, then PeopleSoft, J.D. Edwards, Portal, Siebel and then Hyperion. SAP is too big to take out and you still need an aspirational competitor anyway.
Humm… if you combine middleware into databases, you probably would sell more databases… then he acquired BEA and Agile.
In September 2008, Larry ranted about “What the Hell is Cloud Computing?” Then just a few months ago Oracle buys Sun Microsystems and is arguably now one of the leading Cloud Computing providers. I guess the ‘Network really is the Computer‘. Now with his new toy Exadata, he is going after Teradata but when he gets his new toys from Sun - Java, MySQL, storage, grid computing, virtualization - he will have a lot of Cloud Computing fun. It will be interesting to see if Oracle keeps the hardware part of Sun or spins it out to his friends at HP.
So now we come to SaaS.
The battle between mentor and protege. Marc Benioff, with the help of Larry Ellison, has done a phenomenal job launching the leading Software-as-a-Service firm, Salesforce.com and creating the entire SaaS industry. At Oracle’s earnings call last week Larry claimed that although Salesforce.com is the largest SaaS firm at $1 billion annual run rate, and Oracle is now the second largest SaaS provider at an $750 million annual run rate. This included some high profile wins for their CRM on-demand offering last quarter including NetApps, McAfee, Land O’Lakes and Conoco. But I can imagine that Salesforce.com won their unfair share of the on-demand CRM deals last quarter.
Oracle Fusion finally arrives.
What I found interesting is that the new Oracle Fusion suite of applications is now code complete and in beta. This means it will be available from an Oracle sales rep near you in the fall. Oracle Fusion is on-demand ready and will offer three delivery models; traditional On-Premise, SaaS and then there is On-Premise SaaS. On-premise SaaS, is that like military intelligence? This is usually and incredibly bad idea unless you are a $23 billion dollar company that generates more than $5 billion in profits. The new Oracle SaaS suite will all ERP modules including CRM and HCM applications focused mainly on F1000 sized organizations.
Even though Fusion might be a positive development for the Oracle On-Demand sales team, it is doubtful this will be enough to enable Oracle to control the SaaS market organically. So look for Oracle do what they have always done when they want to control a market, buy their way to the top. That would mean that some Oracle alumni’s like Marc Benioff or NetSuite’s (Larry and his family own a majority of Netsuite) Zack Nelson will probably be on Uncle Larry’s radar screen. This is just like other Oracle alumni’s Craig Conway from Peoplesoft - who is also on the board of directors of Salesforce.com and Tom Siebel were pursued.
I guess in the end if you can’t beat’em, join’em.
Looks like someone is assuming an attack formation … the end of 2009 should be very interesting for the ever-evolving SaaS market landscape.
June has been a big SaaS month for Intuit! Over the past few months I had noticed that Intuit had quietly started moving more into the Software-as-a-Service market. These moves became more apparent this month with these announcements:
June 2 - Intuit acquires PayCycle, a leading SaaS payroll firm
June 4 - Intuit announced their new SaaS partner platform - Intuit Partner Platform, releases their online portal Intuit Workplace and pulls in their Intuit Marketplace.
So what does this all mean?
Well, for a company that couldn’t seem to spell SaaS and has traditionally sold almost all of their products in CD’s, this is a really major shift. Intuit had dabbled in on-line versions of Quicken and QuickBooks but these announcements were a real strategic departure in their business away from the old software model.
Consider the Intuit business franchise for a moment;
* 4 million QuickBooks customers, representing 25 million users
* 1 million Intuit Payroll customers, about 14 million employees. Of this maybe 100,000 are onlinebut that still represents about 1.5 million employees. With the PayCycle deal adding another 80,000 customers.
* QuickBase adds another 250,000 customers to the portfolio.
* The Intuit Developer Network has approximately 75,000 developers enrolled.
These are big numbers, in a market segment, Small and Medium Business, that everyone in the software market is looking to penetrate.
Why Buy Another Payroll Engine?
This was the first thing that crossed my mind when I heard the news. I guess it’s obvious. Moving Intuit’s existing payroll engine over to SaaS would cost too much and take too long, so they bought the leading SaaS payroll product.
Why is payroll important? Because if you think about a sticky application for any size business, payroll has got to be one of the most important. Look at ADP, Paychex and Ultimate Software to see the type of rock solid franchise you can build with a great payroll engine. Considering how many small businesses already use Intuit’s other off-line software products, some basic cross selling of payroll could dramatically increase their revenues and help them to move these customers on-line, where the real revenue play is.
So Once You Get Your Customers On-line, Then What?
This has been one the bigger challenges for most software companies transitioning to the SaaS world, how best to bring along their legacy customers. Just telling your customers that you can get the same application over the Internet, won’t get customers to move. If you are luck you can get 10-25% of them to move to a new platform over their lifetime.
A different approach to getting them on-line is to offer very compelling products that they need and aren’t currently offering as an off-line or on-premise solution. Payroll? This is also where the Intuit Partner Platform comes in. Bob Warfield, in a recent blog post about Intuit’s plans, relays what Bill Lucchini, Intuit’s GM for their IPP, told him about the platform:
1. Need to offer a platform that you can truly build great applications on
2. Partners must be able to build a profitable business on top of the Intuit platform
3. Intuit must offer developers significant cost and time to market savings
The plan seems to be to start offering all types of new products on-line, make it easy and really affordable, then you might have a fighting chance of moving a majority of your customers over time.
More about the Intuit Partner Platform
Intuit really made an interesting decision that was quite a contrast to others in the maketplace by picking a third party technology for their IPP Software Development Kit (SDK), Adobe Flex. Salesforce, Google,NetSuite, FaceBook and every other Platform as a Service (PaaS) player is based on their own proprietary technology, but Intuit must have believed that their best shot at delivering a platform to build great applications on was to use someone else’s technology. Flex is also complimentary to SAP, Salesforce, Amazon and others.
Another thing to like about the IPP is that you don’t have to use the IPP SDK to develop SaaS applications. You can use any other technology or Cloud infrastructure and then publish to the IPP. The advantage to the developer is, develop once but publish in many places. This Federated Applications approach will provide for faster adoption. The advantage to Intuit is that existing AppExchange and other SaaS developers can move their products over to the IPP quickly, which will provide a lot of application choices for their customers. So not only the 75,000 Intuit Developer Network members but also all the other SaaS ISV’s will be able to leverage the IPP to expand their SMB market penetration.
Intuit also provides the Intuit Workplace which allows customers to integrate Intuit and non-Intuit applications using their federated integration and security structure. The Intuit Workplace provide single sign-on to all types of applications, all offered inside of an Intuit Cloud infrastructure.
The ability to access the Intuit customer base is also priced reasonably. Partner revenue sharing ranges from 14-20% plus a small fee for monthly usage. Some early adopters of the IPP include Vertical Response (email marketing), DimDim (web conferencing), Rypple (performance management), Setster (appointment management) and Expenseware (T&E expense reports). It looks like Intuit has about 100 applications in their marketplace today and it will be interesting to check back with them in six months. There appear to be other go-to-market services that can help the partner market, manage and bill for their applications as well.
My general conclusion is that Intuit is clearly making some good moves towards migrating its business model to SaaS, but it is going to take time to make the move and old habits die hard. If I were offering a competitive offering like Workday, Netsuite or Intacct, I would be watching their progress very carefully over the next 6-12 months.
Other commentary on the Intuit Partner Platform include:
Jeff Kaplan, THINKStrategies: Why Intuit Can Become A Major SaaS Platform Player
Phil Wainwright, ZDNet: Intuit makes two-pronged PaaS and SaaS push
Laurie McCabe, Horwitz: Intuit Partner Platform: Changing the Rules of Cloud Platforms with Federated Applications
Intuit Partner Platform on Twitter: http://twitter.com/ippdev
Intuit IPP Blog: IPP Team Blog
Company: InsideView
Started: 2005
Located: San Francisco, California
Geography: North America
Market: Sales 2.0
Products: SalesView
Key Customers: Ariba, Borland, IBM, Omniture, Serena Software, SuccessFactors and Synq.
Website: InsideView
Blog: InsideView Blog
Recent News:
INSIDEVIEW NAMED TO JMP SECURITIES’ HOT 100: BEST PRIVATELY HELD SOFTWARE COMPANIES LIST
INSIDEVIEW HARNESSES TWITTER TO POWER SALES
I asked Umberto Milletti, InsideView’s 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?
Yes. Since the most complete and valuable business intelligence is available in the cloud, SaaS delivery has been built into our business model from day one. Also, since SaaS has become the delivery model of choice to our target audience – sales and marketing professionals - it was essential that we bring them the intelligence they need in their preferred model.
Why do your customers buy from InsideView?
Our customers come to us because they need to improve sales productivity and accelerate deal velocity. SalesView delivers just that: It maximizes sales team productivity by delivering a one-stop shop for prospecting needs and accelerates the sales cycle by enabling sales people to call the right prospects at the right time. And it does so by aggregating intelligence from thousands of sources, both traditional and social, to ensure accuracy, timeliness, and mostly importantly, relevance.
While having an efficient sales and marketing engine has always been essential, the economic downturn has pushed the need to “do more with less” to priority #1 for most sales organizations. That’s a big reason for the success we’ve enjoyed in the last two+ quarters – the brutal economic environment has actually accelerated the need for and adoption of Sales 2.0 technologies like SalesView.
What do you see as the key trend emerging in the SaaS industry?
With Cloud computing platforms becoming more mature, it’s becoming easier and easier to develop SaaS applications. That’s good news for customers, since as choices multiply, prices diminish. And with the base infrastructure in place, customers can focus on sales and marketing productivity applications, like ours, that sit on top of the Cloud and deliver relevant intelligence to the employee, at the right time and place.
SaaS and Cloud computing are allowing Enterprises to give their employees the same quality of applications and information that have become the norm for Internet users/consumers. Enterprise 2.0/3.0 is happening.
What is your outlook for 2009?
The tight economic environment will continue to force companies to focus on their core assets and competencies. Usually that means revenue generation and IP development. Anything that is not directly contributing to revenue or core company competencies is going to be under great budget pressure. Anything that drives efficiencies in revenue generation or IP development is going to get a lot of attention (we saw this earlier this decade with the explosion of technologies like web conferencing and SaaS).
Thank you to Umberto Milletti, Marc Perramond, Rand Schulman and Raksha Varma for contributing to this profile.
Company: Enwisen
Started: 1999
Located: Novato, California
Geography: Global
Market: On-demand Workforce Communications
Products: AnswerSource
Key Customers: Fox Entertainment, Nissan, Hershey, State of Montana, Yahoo!
Website: Enwisen
Recent News:
I asked Walter Smith, Enwisen’s 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?
Yes, when we started Enwisen in 1999 our vision was to leverage the power of the Internet to deploy robust, highly configured technology for HR using a Software-as-a-Service business model. At the time the term “SaaS” wasn’t commonly used to describe our model… ASP or Application Service Provider… was the more commonly used term for a hosted application. But truly our model from the beginning was to combine software and services in a multi-tenant environment. A key advantage we have had in the marketplace is delivering a suite of products that have all been built internally as a SaaS solution without the challenge of converting from an enterprise foundation or integrating acquired solutions.
Why do your customers buy from Enwisen?
Fundamentally it boils down to compelling economic value and great service. Our technology solves a critical issue for HR – how to deliver quality service to their internal customer (employees) at a lower cost per employee. In today’s economy HR is being challenged to be far more efficient, but without compromising quality. It’s a real conundrum – high touch HR delivery and internal systems are just too expensive and ineffective. Not only do we streamline HR operations, but we improve the service experience for employees. Our solutions are very reasonably priced for the robust capabilities and bottom-line impact we deliver. Customers have to provide services to employees, it’s mission critical, we just give them a better and more cost effective way to do it. Combine that with great, highly attentive service and that’s why customers buy from Enwisen. The validation is there… despite the down economy we grew profitably at 62% during our last quarter and over the last 10 years our retention rate has exceeded 98%.
What do you see as the key trend emerging in the SaaS industry?
Collaboration and integration of various enterprise applications through the “Cloud.” Almost every company today has multiple systems and multiple service providers. Here’s an example – one system for the Intranet, one for HR, outsourced payroll, outsourced benefits, performance and succession planning, learning (LMS), and dozens of benefits providers for health and retirement. Users are simply overwhelmed by the complexity of getting to all of these different sites – how many user IDs and passwords can you remember? If a system cannot be easily accessed, it won’t be used. Companies spend millions of dollars on systems, yet most acknowledge they are underutilized. Also, many companies lock their applications behind the firewall, making it harder if not impossible for many employees to use. One of the biggest trends is to leverage the “Cloud” in a way to seamlessly integrate data and applications to make it easier for user to access everything through a single location.
What is your outlook for 2009?
Now that the fear of financial Armageddon has subsided we see companies getting back to Business 101 as usual. Companies have to continue to innovate, deliver service, retain talent, and drive greater efficiencies to the bottom line. Budgets will remain tight, but companies will continue to invest in ways that make them more efficient in the near term but also prepare them to grow and be more competitive in the long term. We anticipate our current growth rate to continue since part of our success is because of, versus in spite of, the down economy. Companies no longer will buy status quo products due to brand. They will continue to seek best of breed solutions that will give superior performance at a much lower cost even if they are a new vendor to them.
Thank you to Walter Smith for contributing to this profile.
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