Here is our updated Public Company SaaS interactive spreadsheet.  Enjoy!

Company:            Yammer

Started:                2007

Located:               San Francisco, California

Geography:          North America

Market:                Enterprise Microblogging Platform

Products:            Yammer Desktop, Yammer on your Mobile Device, and Yammer Plug-Ins

Key Customers:  Deloitte, AMD, AAA of Northern California, Nevada and Utah, SMG, Cargill, Thomson Reuters, Sungard, Hill & Knowlton and SunCorp.

Website:               Yammer

Blog:                    Yammer Blog

Twitter:                @Yammer

Recent News:

Yammer is Selected as an MIT Sloan CIO Symposium Innovation Showcase Finalist

Fortune 500 Companies Flock to Yammer

Yammer Secures $10 Million in Series B Funding from Emergence Capital and Previous Investors

I asked David Sacks, Yammer’s Founder, CEO and Chairman of the Board few questions about his business and his view of the SaaS market in 2010.

Did you start out as a Software-as-a-Service company?

Yes, we did start out as a SaaS company. Our company was incubated inside of Geni, which develops family tree software. I was also involved with the consumer Internet with my experience starting PayPal. As both companies scaled, I found it was hard to keep tabs on what everyone was doing, and Yammer was developed to address this challenge. We found that microblogging was a great way to keep current on the status of important projects, individual profiles and information feeds inside of an enterprise.

Then in 2008, we spun out Yammer and that same year won the TechCrunch 50’s Best in Show award.

Initially we were targeting small and medium sized businesses but we are now seeing that Yammer has strong appeal for large enterprises like AAA, AMD, Cargill, Cisco, Deloitte, and Thomson Reuters.

Yammer is very viral because it was very easy for anyone to sign-up, confirm their company’s email address and start using the system. You don’t need to wait for an IT administrator to set up Yammer and you can quickly invite your work colleagues, with the same company email domain, to join in and begin collaborating with you.

When a company wants to claim the network being used by it’s employees, they pay a nominal subscription fee, and then we provide a set of administrative tools that allow them to manage upgrades, security, compliance, deliver premium support, and customize their site.

Part of our initial business model was to base Yammer on the consumer model of software, but make it enterprise-class. We wanted to remove the traditional friction from our software sales process by making our product as easy to use as Facebook.

Why do your customers buy from Yammer?

Our customers never have to pay or upgrade our software unless their employees are using it. This is very attractive, when you compare it to the traditional software selection process where you have to vet vendors, choose one, negotiate the contract, implement the product, pay a lot of money and then no one uses it. Yammer is de-risking the traditional enterprise software value proposition. Employees are valuing it because they use it.

When large companies see thousands of employees using Yammer what do they do? They can do three things - wait and see what happens, shut it down or buy it and we are finding the vast majority of companies are buying Yammer because their employees are being productive and want to collaborate using the software.Our customers also really like our administrative tools for e-discovery, security, directory integration, and network administration.

“If Facebook and Twitter had a baby, it would be Yammer.”

We are like Twitter because we offer a real-time feed of information; you can follow any one, join groups and sort information feeds by hash tags. We are like Facebook because there is no 140-character limit, you can have attachments, threaded replies and we offer a variety of enterprise management tools.

Yammer is a like a virtual office where workers can feel more connected to each other, especially remote workers. We act like the traditional company water cooler for these distributed organizations. As workforces become more mobile, Yammer just make a lot of sense for enterprise collaboration. Today we only offer Yammer in English but we have noticed that there are an increasing number of new customers who are signing up outside of North America. In the near future we will be supporting multiple languages in addition to English.

Customers also like our value-based pricing model. We charge between $3 and $5 per seat per month, depending on the level of support and administrative tools. We also provide volume discounts for our larger customers. This is much more cost attractive than purchasing Chatter from Salesforce.com for $15 per seat, which is quite expensive and most employees don’t want to communicate through the company’s corporate CRM system. Our very fast viral Freemium approach appears to be working, because since we have been live for only the last 18 months we now have over 1 million seats today.

What do you see as the key trend emerging in the SaaS industry?

The first trend is the consumerization of enterprise software; Yammer is a great example of this trend. Real innovation in the technology space over the past 10 years has been on the consumer-side of the software market with products like Facebook and Twitter. At Yammer we want to take these learnings back into the enterprise software world. When I was at PayPal, we were very successful using the Freemium model to promote adoption. This type of approach to software can definitely result in the overall democratization of enterprise software. SaaS is the first step, when the delivery model changed, then there were no upfront costs and the risk is dramatically lower. Using techniques developed by consumer software firms, more and different kinds of buyers can now access enterprise-class software.

The second trend we see is that enterprise software products will be designed more for the end-user than power users or administrators. A good example is how Facebook and Twitter don’t do every possible feature or function and they don’t clutter the user’s screen. This simplified approach to software allow causal users to be more engaged with their products and other users. These types of causal use software products will also appeal to younger employees who have used Facebook and LinkedIn and expect their enterprise software products to be that easy to use.

Social Networking is also a major trend we are seeing. We started thinking about this over the last couple of years, since 2007. Now it seems so obvious, that social networking would grow into an unstoppable trend. The ability to connect workers, to leverage expertise and content all in real-time, which allows everyone to work smarter, just makes a lot of sense. I still think that there is confusion about Enterprise Social Networking, for instance Salesforce sees it as a CRM newsfeed, and we see it as enterprise real-time communication. Eventually we see Enterprise Social Networking replacing corporate email and instant messaging.

What is your outlook for 2010?

In January we raised $10M, led by Emergence, that  provided capital to allow us to expand our team. Our investors liked the fact that we have built a very cost effective business, based on our viral distribution model. Our Q1 sales were greater than all of our sales for last year combined.

The software industry is realizing that Enterprise Collaboration is going to be a huge space. Most software companies will want to get into this market because every company will want one of these collaboration platforms to deploy. The only problem is that most enterprise software firms looks at these types of tools backwards, because they already have multiple different product lines, then they will need to stuff it through their sales channel. At Yammer we have already solved this distribution channel problem and we can actually open up our channel to these companies as a Distribution as a Service model.

We continue to sign up a number of large customers, and this type of adoption makes other large companies comfortable using our technology. Things look great and our traction is accelerating.

Last week I participated in the annual Kenexa Analyst meeting in really hot Philadelphia. I had profiled Kenexa last year (July 2009) about their rebranding and active transition to SaaS, so this was a great opportunity to peak behind the curtain and see how they are doing.

Company Update

The last 18 months have been difficult for many software firms, especially those who are moving to a subscription based business model but Kenexa seems to have been doing well during this period:

• Revenue guidance for 2010 is between $162-169M
• 4,000+ customers, adding about 30 new logos per quarter
• Top 80 customers are spending about $1M+ per year
• The CAGR from 2003-10 has been 25%
• 65% of all recent deals have been multi-component deals
• The average Kenexa customer has 58K employees

Some new customers in 2010 include Accenture, Aetna, Facebook, Novo Nordisk, Saudi Aramco, SAP, Walmart (with 2M employees) and Whirlpool. Customers who bought additional products from Kenexa this year include Conagra, Deloitte, General Dynamics, Johnson & Johnson, Unilever and Volvo.

Even with this solid progress, Kenexa was still finding it hard to compete for mindshare against their two other SaaS talent management competitors SuccessFactors and Taleo. I was also told that Kenexa is also considered a very solid competitor in the Recruitment Process Outsourcing (RPO) market, but my focus for this profile is on SaaS. Let’s take a quick look at this SaaS TM market basket:

• SuccessFactors (NASDAQ: SFSF). Shares in the last 12 months are up by more than 200%, with a market cap of $1.45B
• Taleo (NASDAQ: TLEO). Shares in the last 12 months are up by 30%, with a market cap of $950M
• Kenexa (NASDAQ: KNXA). Shares are flat over the last 12 months, with a market cap of $270M

The stock market currently values SuccessFactors more than 5X and Taleo more than 3.5X than Kenexa. Why is that? Because transitioning to SaaS is difficult, especially when you are a public company. But they are making progress.

SaaS Transition

Kenexa has done more than 20 acquisitions of both technology and services companies over their history. They have also purchased many overlapping technologies in recruiting (e.g. Webhire and BrassRing), which usually causes concern and confusion among customers. Unlike Taleo, who acquired Vurv, Kenexa is offering their customers business and product choices including transitioning to their latest products on the 2X platform as well as staying put. Rudy Karsan, Kenexa’s Chairman and CEO, even said for some customers who really want to stay on old, decommissioned products, his company will work out an arrangement to give the customers a copy of the source code and they can maintain their own products. Not the easiest solution but it shows that Kenexa is trying to work with their customers to help them be successful, which is unique among the leading talent management providers.

The company has been quietly working on building out their next generation integrated talent management platform, Kenexa 2X, for the last few years. This project included investing $40M in R&D, building out a new technology center in India and creating their next generation multi-tenant SaaS platform. This type of project is very difficult to successfully manage and similar next generation technology projects have sunk other companies like Authoria and SAP has invested almost $1B in Business ByDesign. All Kenexa 2X applications are SaaS-based and delivered out of their two data centers, one in North America and the other in Ireland.

We saw a brief demonstration of some of their new mobile capabilities on Kenexa 2X, but the real test is not with a room full of analysts but how well these new solutions are accepted in the market by customers and prospects.

As Rudy said during the meeting, he has felt like the last 10 quarters they have been walking through the desert but now they feel like they are coming out the other side.

For those of us on the outside, the technology is just one part of Kenexa’s business; they also offer a robust RPO service as well as a variety of assessment and analytical services for their customers.

Progress and Promise

As I just mentioned the major milestone for Kenexa is that their new 2X platform is generally available in the market. Like all big projects this platform transformation will take several years to rollout across their entire suite of technology products but they now have something to rally around. The 2X Recruit and 2X Onboarding products were launched in Q1 and the balance of the products will be rolled out over the next 24-36 months. Kenexa is following an Agile development process for their SaaS platform and applications which will allow for faster releases of products and capabilities.

Because this is a big initiative, I think it was really positive to see a roadmap prioritization of the products that were being transformed and launched. The product priority seems clear: recruiting, onboarding, training and development, succession, workforce planning, performance and compensation and learning. As they Kenexa progresses with the 2X transformation, we can expect to see small functional bundles as products are made available and then at some point out in the future, their full talent management suite.

There are some new platform capabilities that will add value to their traditional applications, including mobility. We were able to see the new mobile applications they are launching for the Blackberry and iPhone around recruiting, onboarding and performance management transactions. These mobile apps appeared to be simple to use and are based on basic approvals and routing, which make a lot of sense for busy managers and executives. The Kenexa 2X platform also supports complex workflows, like those required for their new onboarding application as well as support for 37 languages.

Kenexa also discussed the growing market opportunities for their recruiting and talent solutions outside of the US. In fact, their China business alone has grown by 4x in the last 5 quarters. They have also seen solid growth in the Middle East, Latin America and India. This strategy of focusing not only on the US but also new high growth markets should help Kenexa to continue to grow at a brisk pace.

The last area and possibly the most interesting has little to do with Kenexa’s technology products. Kenexa has several other service businesses, which are also growing including their RPO and Assessment practices. In the book ‘Crossing the Chasm’, one of Geoffrey Moore’s key tenants was for technology providers to listen to customer requirements and deliver a ‘whole product’ that doesn’t just consist of technology but contains services, integration, data, content and whatever else the customer needs to solve their business problems. The technology provider who can deliver a whole product solution can easily differentiate themselves from other providers and deliver more value to their customers, making their solutions ‘sticky’. If you need an example of delivering a whole product, look to Apple and the iPhone and iTunes.

Maybe by focusing on delivering complete, whole product solutions, Kenexa can become the Apple Computer of global recruiting and talent management.