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Company: NetDocuments
Started: 1998
Located: Orem, Utah
Geography: Global
Market: Enterprise Content Management
Products: NetDocuments – Basic, Professional and Enterprise
Key Customers: Kegler Brown, Sterling Futures, Xtreme Mountain Development, National Retail Properties and IPiphany
Website: NetDocuments
Community: NetDocuments Community – Marketplace, blogs, forums, channel partners
Blog: NetDocuments SaaS Blog
Twitter: @netdocuments
Facebook: NetDocuments on Facebook
LinkedIn: NetDocuments Group on LinkedIn
Recent News:
NetDocuments® Develops Integration With Google Wave
I asked Ken Duncan, NetDocument’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?
NetDocuments started about ten years ago as a single instance and multi-tenant solution. The majority of the company came out of Novell, and had experience with Netware and the Internet. We started with ten principles from Novell and half of them were vice presidents or general managers.
Many of us started out at SoftSolutions Technology which was acquired by WordPerfect and then Novell bought them. SoftSolutions was a document and content management software company using Data General mini computers. Then when we started NetDocuments, the team took their knowledge of document and content management and immediately jumped at the chance to use the Internet.
After the Dot Com crash, we just learned how to survive. Prior to the Crash many Fortune 500 companies who were tired of using traditional content management systems, started to work with a web-based content management systems. That changed after the Crash, they all just went back to their old content management solutions, but we just stuck with it.
Why do your customers buy from NetDocuments?
More than 70% of our customers are either in the legal field or law firms. This was a logal vertical market for NetDocuments to specialize in, because law firms are so document-intensive.
We are the leader in the Internet-base document management based on functionality, features, multiple languages and patented technologies. NetDocuments architecture is not tied to a database, which improves efficiency and performance.
One of our key benefits is a strong and powerful search engine. NetDocuments uses, the Fast Search & Transfer product, which was purchased about a year ago by Microsoft. This was good news for us because Microsoft will support the Fast technology for the long term. Microsoft has now embedded the Fast search engine with their SharePoint products.
It is important for us to keep our customers satisfied and earn their business every month. Whether they pay monthly, quarterly or annually, we need to make our customers successful. We work with all types of law firms, on average they have about 250 users, with offices worldwide. NetDocuments offers a high level of security and availability for our customers using two state-of-the-art data centers.
What do you see as the key trend emerging in the SaaS industry?
Indirect channels are becoming very important to the SaaS industry. The major trend we see is that SaaS now makes it possible for the large industry players like Microsoft, Google and EMC to reach the SMB market much more effectively. Over time these large firms are going to either form partnerships or acquire companies who have figured this out. New ISV’s are not only trying to figure out how to build Software-as-a-Service businesses, but also trying to create compensation plans that drive business for them and their channel partners.
What is your outlook for 2009?
NetDocuments has been doing well during the recession and we have been experiencing double digit growth while still being profitable. The legal market is resilient and we have been able to cherry pick old Interwoven and OpenText customers by offering a better service at a lower cost.
I attended Plateau Systems’ Analyst day in San Francisco this week, and they are one of many emerging Talent Management software providers. The briefing was hosted by Paul Sparta, the company’s CEO and Brian Murphy, their COO. What was really refreshing was the level of transparency that the company provided to those who attended, especially in relation to their annual financial performance.
Since most of those analysts who attended were focused on Human Capital Management, I wanted to provide my review of the company’s progress in moving their business model towards Software-as-a-Service.
Company Background
Started: 1996
Located: Arlington, Virginia
Geography: Global
Market: Talent Management
Products: Plateau Learning Management, Plateau Talent Management, Plateau Talent Gateway (New) and iContent. Launched their first on-demand product set in June 2006.
Employees: 300
Key Customers: Boehringer Ingelheim, Irish Life & Permanent, Zions Bancorporation, Yahoo!, Department of Labor, General Electric, Schering Plough and Bristol Meyers.
330 customers and about 10 million users. customers are about 35% Public sector, 45% commercial but regulated (Pharma, financial services, healthcare) and 20% commercial but not regulated. Target customer is a large, complex, global organization.
Website: Plateau Systems
Twitter: @PlateauSystems
Facebook: Plateau on Facebook
Moving to SaaS
Plateau has some unique market constraints that make it difficult to completely move to a pure SaaS model, due to some of the government and regulated industry segments and their inability to accept a third party hosting of their internal systems. Examples of this would include Department of Homeland Security and Department of Defense to name a few clients who will require a traditional on-premise solution for the foreseeable future.
Other than this market reality, my question was, ‘How is Plateau managing the SaaS transition that they started in 2006?’ To my pleasant surprise, they are doing quite well.
Here are some basic statistics on their overall business:
- Plateau’s 5 year Compound Annual Growth Rate is 24%, which is respectable given what has happened to the economy over the last 18 months. The industry average for traditional software firms under $100M in revenues is 9.8% and an average CAGR for all sizes of SaaS firms is 20.3%, so this is a respectable number for a Hybrid SaaS firm.
- Plateau is profitable.
- Revenues were up in 2008.
- More than 40% of their business comes from customers based outside of the US during the first half of 2009. This is a growth area for Plateau.
- 55% of their deals are for their Learning Management products only and 45% of their deals are Talent Management suite deals, and the trend towards suite purchases continues to grow. Suite purchases in 2008 made up only 17% of all deals and in Q2 2009 that number has increased to 40%.
Business SaaS statistics
- Plateau’s SaaS revenues are up 31% year/year.
- The SaaS customer base is up by 100% to 90 customers, out of 330 total, which is almost 30%.
- More than 50% of new software bookings are SaaS.
- A large majority of the total revenues are now recurring.
- Some large enterprise customers are now beginning to move from on-premise to SaaS including General Electric.
- Customer retention is 99%, or 1% churn which would be considered best in class for either an on-premise or SaaS company. Based on the materials shown at the briefing, Plateau focuses a lot attention on customer satisfaction.
Plateau will continue to support their more than 200 on-premise customers as well as sell new on-premise deals, this is a requirement of the regulated markets that they sell into. Over time, the company will move away from on-premise and try to optimize operating efficiencies and will look to standardize and leverage the SaaS product as an on-premise option. Plateau would be considered a Hybrid SaaS company and over the next 2-3 years should have a wide majority of their business operations and revenues focused on SaaS.
New Product Announcements
A couple other interesting developments is that Plateau has rewritten their product interface, for their Talent Management Suite, using Adobe Flex, which looks really good. More and more SaaS firms are writing their applications using Flex including Workday, Taleo and Intuit’s latest SaaS offerings. This is a good move from a user experience perspective and it will be interesting to see how this works for Plateau’s larger clients, since Flex uses more code on the client than a pure thin client implementation.
The other announcement was the Plateau Talent Gateway which is a portal and social collaboration hub that facilitates knowledge sharing, collaboration, and learning activities. This platform extension helps to reign in informal learning and acts as a social collaboration API for companies, so that they can package or ‘portletize’ social connectivity with tools like Twitter and LinkedIn, collaboration capabilities and repositories of content that reside all around the enterprise. This Plateau platform extension is based on Liferay, which is a leading open source portal and collaboration platform. I think this is a very smart move for Plateau because it offers an often-requested set of capabilities and since it is open source, it can be delivered at a low cost to the customer, with a very high perceived value.
Conclusion
My overall impression of Plateau’s transition to SaaS was very positive. A reasonable transition to a subscription business model for most software companies takes three to five years. Since Plateau announced their first on-demand offering in June 2006, three years into their transition, they have made a significant movement towards SaaS and I think they could be one of the surprise stories in the SaaS Talent Management market over the next few years.
Thank you to Paul Sparta, Brian Murphy and Jeff Kristick for contributing to this profile.
I often hear the question, “What is the difference between Software-as-a-Service and Cloud Computing?” The answer is that the Cloud is a utility based resource that companies can use to deliver software and services. This can sometimes even be more confusing when Cloud Computing is referred to as Platform-as-a-Service. SaaS is really the business model associated with the delivery of that software and services.
Until recently, it was a difficult for both customers and SaaS providers to use the Cloud to deliver robust, enterprise-class solutions because the Public Cloud was not really industrial strength. There are real issues in using a Public Cloud solution for your SaaS offering today including security, integration, manageability, data location, auditing, reporting and overall compliance.
Computer Weekly - Top Five Cloud Computing Security Issues
ComputerWorld - Twitter Breach Revives Security Issues with Cloud Computing
One scary revelation that I heard recently is that the same billing system that is used in Amazon’s EC2 service is also the one that is used to buy that big screen TV at Amazon.com. That might turn out to be an issue if you were trying to maintain your SAS70 or Sarbanes-Oxley certification.
There have been a lot recent announcements regarding new Virtual Private Cloud offerings over the past few months by Amazon, OpSource, Savvis, GoGrid, Sun, IBM, Rackspace because the market is looking for a better alternatives to the Public Cloud. Some of these Private Cloud offerings are more advanced than others, but the Cloud Computing providers are now moving in the right direction by offering solutions that are hardened to be much more acceptable to enterprise customers. SaaS providers are also in need of truly reliable infrastructure solutions too, because they have to support their customers with robust SLA’s, especially for their enterprise customers.
Why SaaS providers are happy is because this type of enterprise Infrastructure-as-a-Service approach helps companies:
- Innovation. It should be possible to try out a new product ideas with a small beta communities and if their tests work, then they can very quickly ‘productize’ them. Because of the lower cost and rapid availability of resources it should make innovation process more productive. How often do I remember working with someone on a Friday afternoon and them spending their entire weekend building out their idea. Now with this type of utility computing approach you can take it from concept to rollout much faster.
- Faster time to value. Based on the Private Cloud product that I recently saw demonstrated, you can initially set up a secure, multi-tenant instance of your favorite infrastructure in less than 30 minutes and then create additional instances in just a couple of minutes.
- Security. Being able to leverage infrastructure that can pass muster when a customer’s Chief Security Officer is reviewing your offerings. Even some small and medium sized businesses are publicly traded and operate globally and even these smaller firms have the same types of compliance and regulatory constraints that large companies have. Private Clouds will make using a Cloud-based infrastructure more realistic for SaaS firms selling to these types of organizations (ie. most of them).
Then there are all the other benefits of pay-as-you-go and scalability that come with Cloud Computing, which are always of value to a SaaS company.
For software companies who haven’t already rewritten or moved over to a SaaS model already, a Private Cloud may offer other benefits. There are still many companies who are concerned about not being able to offer a multi-tenant, SaaS solution to their customers and prospects. Leveraging a Private Cloud type of infrastructure for these non-SaaS software firms, allows them to develop a migration path to SaaS that is much more affordable and realistic than in the past. The days of building out your own data center, or even your own cage in someone else’s data center, are coming to an end.
Face it, even the Obama administration is rolling out their own Cloud based initiative - Apps.gov. It is still quite early but Private Clouds will really speed the adoption of Cloud Computing by the majority of SaaS companies over the next five years.
Company: SpringCM
Started: 2006
Located: San Mateo, CA
Geography: Global
Market: On-demand Document Management and Workflow
Products: SpringCM On-Demand Platform and Privia
Key Customers: ACS, Comcast, CSC, Dresser, HealthNet, Siemens and Stratus Technologies
Website: SpringCM
Recent News:
SpringCM Adds Eight New Partners in Most Recent Quarter
SpringCM Announces New Version Of ECM
SpringCM and XRSolutions Partner To Streamline Government Proposal Process
SpringCM Privia Helps Government Contractors Collaborate To Win Contracts
I asked Dan Carmel, SpringCM’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?
We started out in Chicago in 2006 but we were founded a SaaS company. Because we are a SaaS company we have a different way of developing, managing, upgrading and deploying our solutions than a traditional on-premise software firm. In terms of a category we are focused exclusively on Enterprise Content Management (ECM).
Why do your customers buy from SpringCM?
One of the main reasons is because we are a true ECM SaaS company, that can offer equivalent functionality as some of the traditional on-premise players at 1/10th of the cost. For our customers it means that they can get their solution installed and go live in a matter of months, not years. Traditional ECM implementations have been complex, difficult and then hard to extend over time. SpringCM offers a more streamlined approach that provides for rapid deployment and at a more reasonable price point.
As I mentioned, traditional ECM deployments are complex and this is often because customers need to integrate different components like faxing, image scanning, email, workflow and other capabilities into their existing ECM platform. With SpringCM we have simplified this process by pre-integrating 25 pieces of functionality into our platform.
Major categories that we have pre-integrated include image capture, scanners, OCR, and faxes that can be searchable as full text and PDF’s that can be marked up using a standard browser, eSignature, email and print on-demand. Our platform also provides Business Process Management (BPM) automation; it is rules based with routing and approvals along with full workflow. SpringCM provides all of these capabilities, and more, with full enterprise security. These solutions are bundled together and can be purchased for as little as $49.99/month per seat with 5 view-only licenses, so getting started with the SpringCM platform is easy and affordable.
With all of these capabilities bundled into the SpringCM platform, we are finding more and more partners looking to work with us to create specific templated solutions for contracts management, proposal management and accounts payable, to name a few. Our Privia®
Solution was designed specifically to streamline the government bid and proposal process and provides a complete end-to-end government Contract Lifecycle Management solution.
All of these templated partner solutions are available through the SpringCM Solutions Central Marketplace, which is just like the Salesforce.com AppExchange that is available on the Force.com platform. SpringCM is a Salesforce.com partner and we offer the ability to extend their platform because although there is a lot of data in their system, they have a hard time managing content. Simple things like email and fax re-use, being able to configure and manage content-based applications like proposals.
Most of our customers typically start out as a departmental system addressing a single business challenge and then would roll-out a broader enterprise solution later. This process can be difficult and costly because it traditional ECM solutions were not modular or open, making expansion from a single application or departmental solution to a full enterprise instance a real challenge. SpringCM solves this problem by allowing multiple departmental systems to run all from a single platform. This means our customers can start with a single application, solving a specific problem and then roll out more functionality over time when it makes sense for their business. Most of our customers are using the SpringCM platform to solve anywhere for 2 to 6 different ECM challenges.
What do you see as the key trend emerging in the SaaS industry?
We clearly see the emergence of powerhouse SaaS platforms. This is because there are so many new SaaS solutions on the market and for customers it takes time to vet a SaaS provider including their integration, security and service levels. The IT organization at most large companies does not want to work with a lot of different SaaS vendors, they are looking for platforms that can make this vetting process easier for them and that is why Force.com and SpringCM are attractive.
The three phases of SaaS adoption we are seeing are that customers start with a pilot that is easy to do and you can achieve fast Return On Investment (ROI). Then once their pilot project is successful, the customer then will increase the number applications they are using and expand usage across their organization. They might have considered extending their on-premise legacy system but instead decided to try SaaS instead. The last phase of SaaS adoption is when the customer’s existing systems become end-of-life and they are replaced with newer SaaS solutions. Think of solutions like OpenText, Documentum or Interwoven and it is time to upgrade, even after paying maintenance I still need to buy new hardware and software to support the upgrade. This becomes a trigger event for the customer to start looking for alternatives. Now that they are familiar with your SaaS solution, they are already using you for smaller projects, you gain their confidence, your solution becomes a viable alternative.
These powerhouse SaaS platforms are where customers are going to start looking for their next SaaS solutions. SpringCM also helps enterprises better manage their diverse content requirements including Human Resources and business process likes like benefits administration, resume management and HR policy development. We see areas in the Finance organization that need a SpringCM ECM platform to help them with accounts payable, collections, accounts receivables, SEC regulations and business planning.
From IT’s perspective, these powerhouse SaaS Platforms, like SpringCM, provide solutions from trusted relationships, with a single set of web services that make integration of additional solutions easier. They also offer a consistent user interface, SpringCM is similar to Microsoft Office and the employees who know how to use one application, can figure out how to use all the others. This usability lowers training costs and streamlines user adoption.
With the SaaS market maturing, there is a strategic opportunity for a handful of these SaaS platform providers to dramatically improve the overall market adoption of SaaS solutions. SpringCM just launched our platform about 9 months ago and we have seen dramatic adoption by not your our clients but also new partners who are excited about the opportunity to build content applications on top of our platform.
What is your outlook for 2009?
I am very optimistic because we have seen substantial growth, even during the downturn. We believe more and more software companies will move to SaaS, and we are signing up at least one new solution partner per month. These partners are looking to leverage the SpringCM platform to actually become a SaaS company, so we can be that SaaS business enabler.
Thank you to Dan Carmel for contributing to this profile.
Started: 2002
Located: Santa Clara, California
Geography: Global
Market: Cloud Operations
Products: OpSource On-Demand, OpSource Billing CLM, and OpSource Connect, OpSource Cloud (new offering!)
Key Customers: Agile, HotWire, JasperSoft, Kana, LookSmart and SAP/BusinessObjects.
Website: OpSource website
Blog: Executive Blog
Recent News:
OpSource Introduces OpSource Cloud, the First True Enterprise Cloud
ATEL Ventures Completes $4 Million Financing for Cloud Operations Leader, OpSource
Finalists Selected for 2009 CompTIA SoftwareCEO Software Innovation Awards
Century Consulting and OpSource Redefine Student Management Software
I asked Treb Ryan, OpSource’s Chief Executive Officer a few questions about his business and his view of the SaaS market in the second half of 2009.
Did you start out as a Software-as-a-Service company?
We started the company in 2002 focused on telecom industry to help them better manage hosting space for their many acquisitions. But by 2004, we had shifted to targeting software companies who wanted to move to the SaaS business model. We discovered that the biggest driver for the adoption of SaaS was the generational shift in the people inside of these companies, because they had higher expectations about technology — it should be immediately available any time, anywhere and share it with anyone they wanted to.
This generation shift was because commercial technology like Google and the Web were easy and ready to use. There was only one problem, large enterprise systems weren’t built to be easy to use because they are concerned about scalability, security, integration and compliance. But this has become a market opportunity for OpSource.
Why do your customers buy from OpSource?
OpSource provides Cloud operations for SaaS companies. As I mentioned, SaaS applications are enterprise class and OpSource provides a complete infrastructure solutions including:
Technical operations – Cloud infrastructure including systems storage, networking security, disaster recovery and backup.
Application operations – Data management, physical storage, performance management, change management and the ability to push out application updates.
Application optimization – Performance and scalability.
Compliance – Complete support for SAS70, PCI, HIPPA and Safe Harbor requirements.
Business operations – OpSource Connect provides a consolidated Web-based interface for billing, integration, support and promotion management.
OpSource supports over 175 companies including traditional software companies like Adobe and SAP as well as pure SaaS firms such as Taleo and Xactly.
What do you see as the key trend emerging in the SaaS industry?
Cloud Computing is a very broad term sort of like talking about the Internet. We believe that SaaS is the business-side of managing applications in the Cloud and that the Cloud Computing is actually just infrastructure. Even though enterprises are increasingly looking to get their technology through the Internet, they are still looking at buying these resources carefully. The emerging trend for SaaS companies is the ability to interconnect their solutions with both on-premise and other SaaS applications. The big opportunity in the market is to answer the question ‘how do I integrate all these resources, new channels, platforms, security and again, make it easy to use.’
Amazon.com’s EC2 is leading the way in Cloud Computing by providing a cheap way to get server capacity, and what’s really amazing is how quickly they have built their business without much investment in sales and marketing. Considering that they only launched their Cloud offerings three years ago, they have already built at least a $100M business, and this is really impressive. Amazon has really deployed a frictionless sales model, which makes it easy to buy from them because they don’t require any upfront investments, just pay for what you use. They were smart by creating a viral community, solid products that are priced right, and as a result they have created a powerful new revenue channel, because their partners are now building solutions on top of their Cloud infrastructure. Again, this generational shift around application immediacy, community and interconnectivity are creating opportunities in the Cloud Computing market and for us.
What is your outlook for 2009?
Companies that are succeeding during the downturn are using a real SaaS business model. It is really difficult for young SaaS companies who are in the early part of their business cycle because venture capital funding is not easy to get right now and that is why you are seeing companies like LucidEra and CogHead struggle and sometimes fail. As Jason Green at Emergence Capital says, one of the main rules of SaaS is that it takes $1 of sales and marketing to yield $1 of recurring revenue. For many SaaS companies it can take up to $60 million in investment to get a company to scale, usually at a $60 - $100 million run rate. Towards the end of the first half of 2009, valuations are improving and there is now some ability to raise some VC funding.
In the second half of 2009, we believe there will be more aggressive spending in sales and marketing for SaaS firms for the balance of 2009, because the recession has really helped the market adoption of SaaS.
Thank you to Treb Ryan, Rick Lebherz and Eileen Conway for contributing to this profile.
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