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Company: BrightIdea
Started: 1999
Located: San Francisco, California
Geography: Global
Market: On-Demand Innovation Management
Products: WebStorm, Switchboard, Pipeline and Platform
Key Customers: Adobe, Bosch, Cisco, AMEX, Harley-Davidson, Experian, Thomson Corp, British Telecom, Bristol-Myers Squibb, and Honeywell
Website: Brightidea
Blog: Innovation Work
Twitter: @BrightideaHQ or @Brightidea
Recent News:
City of San Francisco Selects Brightidea to Power Open Innovation Campaign
Brightidea Releases Idea Management Apps for iPhone and Android Platforms
I asked, Brightidea’s Vincent Carbone, the company’s co-founder and COO a few questions about his business and his view of the SaaS market during 2010.
Did you start out as a Software-as-a-Service company?
Yes, Brightidea was founded in 1999 and from day one our solution was designed on a multi-tenant database architecture that supports our SaaS application solutions. The concept of SaaS was still in its infancy, but with the launch of Salesforce.com and their brilliant “No Software” tagline, we believed SaaS was the future. We really believe Brightidea is the Salesforce.com for Innovation.
Why do your customers buy from Brightidea?
Unlike 50 years ago, companies today must continuously innovate at an accelerating pace to stay competitive. Companies buy from Brightidea because there is a fundamental organizational shift underway in medium and large companies who are moving their core business function from a “how to make” to “what to make” mindset. Most companies currently have no infrastructure or software to help them effectively manage their employee, partner or customer ideas that will lead to the development of future products and services. Similar to how companies implemented Customer Relationship Management solutions 15 years ago to manage and optimize their sales pipelines, companies are now starting to implement Innovation Management Software to better manage and optimize their Innovation Pipeline.
Our customers choose Brightidea because we have over 10 years of experience implementing innovation systems in large, complex organizations. Unlike more generic SaaS social software, like Jive and Lithium, Brightidea’s Innovation Management Solutions are grounded in a core business need around innovation, which delivers a true return on our customer’s investment. These business returns are measured in how our customers can manage large-scale projects, encourage new ideas that can improve innovation around product development, cost cutting and even safety ideas.
What do you see as the key trend emerging in the SaaS industry?
One of the key trends we see is user-adoption of social networking components inside of SaaS software for collaboration. It wasn’t until consumers started to get comfortable with sharing information on Facebook, that the workplace began to feel comfortable sharing information in a similar manner. We believe most SaaS applications will continue to adopt more social and collaborative functionality.
What is your outlook for 2010?
We think the future is bright in 2010 for several reasons.
Acceptance of Cloud Computing is going to grow within most IT organizations, so companies will be looking to adopt more SaaS-based solutions.
As I mentioned, users of SaaS software are going to get more comfortable with social networking and collaboration capabilities and organizations will continue to add internal resources that are focused on driving business value through collaboration. We also believe that innovation is inherently a social activity, which means that all of these trends should be good news for Brightidea.
Company: Patersons
Started: 1996
Located: Salisbury, United Kingdom
Geography: Global
Market: On-Demand Global Payroll
Products: Click4HR, Free HR, and Global HR and Payroll
Key Customers: Constellation Europe, Henderson Global Investors, Interdean International Relocation, Siemens
Website: Patersons
Blog: Patersons Blog
Twitter: @patersons
Recent News:
Patersons Announces New Partnership with Lawson
CEO Honored At Growing Business Awards | APA Article
Patersons Shakes Up the Market Again Adding ESS to Free HR Offering
Patersons Shakes Up The Market Again With ESS Added To Free HR Offering
I asked Karen Paterson, Patersons Chief Executive Officer a few questions about her business and her view of the SaaS market as we move into 2010.
Did you start out as a Software-as-a-Service company?
Yes
Why do your customers buy from Patersons?
Patersons ‘Software-as-a-Service’ payroll platform delivers payroll on one single database, one technology platform worldwide. This is the only multi-tenant, multiple country online payroll processing platform in the world. Clients also only have one global contract with Patersons. The leading-edge platform promotes scalability and we can cater for any size payroll anywhere in the world, whether a client has 1 employee in Kazakhstan to 10,000 employees in China. Patersons Logon2 solution is as feature rich as major ERP solutions. It also delivers instant Sarbanes Oxley and SAS70 compliance with its unique International Payroll Workflow, therefore making sure all local requirements are adhered to in a timely and accurate manner. Patersons comprehensive global consolidated reporting suite allows quick analysis of global client data.
SaaS is based on the concept of ‘Pay-as-you-go‘ on-demand and customers only pay for what they use and nothing more. The solution is regularly updated and developed to stay in the forefront of the industry. There is also no additional expense for customers when upgrades or updates are made to the solution, and as the system is delivered via the Internet, customers receive upgrades in real-time. Patersons technology is developed 100% in-house, therefore we do not have to pay third party fees.
What do you see as the key trend emerging in the SaaS industry?
There is a strong move from on-premise ERP to SaaS as a serious alternative global solution. Many companies are looking for best-of-breed in a vertical industry rather than an ERP which generally gets 20% functional use of what has been paid for. The mistrust of not hosting and relying on an outsourcer to provide an IT function is interesting and an indication that internal IT department have been failing the HR function.
What is your outlook for 2010?
2010 will be the Year of SaaS and the Cloud. Coming out of recession companies are seeking single process outsourcing solutions and best of breed choices from software vendors.
After our post on January 26th we got several great comments about the cost of starting a SaaS company. It definitely takes a commitment to build a true SaaS company, especially when you consider some the following facts about the 15 public companies that I tracked in my high level analysis:
- Average Start-up Capital Required: $44M
- Average Time Required from Start-up till IPO: 7 years
- Average Capital Required per Year till IPO (Burn): $6.8M
- Average IPO Proceeds: $76M
- Additional Capital Raised After the IPO: $243M
- Average Total Capital Raised: $363M
- Average Market Capitalization: $1,262M
- Companies Who are Profitable: 8
The costs of getting a SaaS start-up off the ground are substantial but only about half of the firms we tracked actually started out as a pure SaaS company. These other Cross-Over firms started out as either Application Service Providers (ASP’s) or were traditional On-premise ISV’s that move to SaaS through a combination of organic migration or through a series of acquisitions. Companies like Concur, Kenexa, Taleo and Ultimate Software have all transitioned to SaaS from an on-premise heritage.
Montclair Advisors - SaaS Start Up Costs - Pre IPO
The shortest time to go from start-up phase to an IPO was 4 years and the longest was 13 years. Most of the firms we tracked were founded between 1997 to 1999, which was prior and during the Internet Bubble.
When these firms went public they raised a range between $30M (LivePerson and Ultimate Software) to over $150M (DealerTrack and NetSuite), but on average they raised about $75M. All the firms then went on to do additional capital raises from $32M (LivePerson) up to $750M (DealerTrack) but on average each raised $243M! The total capital raised, when considering both pre IPO, IPO and post IPO capital raised, these firms raised between $100M (LivePerson and Ultimate Software) to close to more than $500M (DealerTrack, Salesforce.com and SuccessFactors).
Montclair Advisors - SaaS Start Up Costs - Post IPO
After going public, this SaaS market basket of companies have done well as a group. The majority of the firms are profitable, which makes for solid cash flow performance, revenue visibility and overall stability of the company’s stock, for the real SaaS firms.
The most valuable company, based on their Market Cap is Salesforce.com at more than $8B and there are at least 4 other SaaS firms with valuations over $1B (Blackboard, Concur, NetSuite and SuccessFactors). When comparing the amount of capital raised to the market valuation, the 5 best performing firms are Salesforce.com (.09), Ultimate Software (.13) , Concur (.19), RightNow (.22) and LivePerson (.31).
Montclair Advisors - SaaS Start Up Costs - Market Caps
This year, as the economy improves, promises to launch a few new SaaS IPOs and we will continue to track this core group as well as a larger group of Hybrids and Cross Overs and will periodically report back with our findings.
Company: Cornerstone OnDemand
Started: 1999
Located: Santa Monica, California
Geography: Global
Market: Integrated Talent Management
Products: Onboarding, Learning Management, Social Networking, Compliance, Performance Management, Compensation, Succession Planning and Extended Enterprise
Key Customers: Barclays, Barnes & Noble, Kelly Services, MasterCard, Turner Broadcasting, Starwood Hotels & Resorts, Flextronics, Ticketmaster, Sanford Health, Save the Children
Website: Cornerstone OnDemand
Blog: Talent Management Blog
Twitter: @Cornerstoneinc
Recent News:
Cornerstone OnDemand EMEA General Manager to Give Keynote Presentations at iLearning Forum 2010
NRF Foundation Chooses Cornerstone OnDemand’s Industry-Leading LMS for Global Training Initiatives
I asked Adam Miller, Cornerstone OnDemand’s President and CEO a few questions about his business and his view of the SaaS market as we move into 2010.
Did you start out as a Software-as-a-Service company?
We started the company in 1999 as CyberU, which was an on-demand Internet content company, focused on e-Learning. We were on-demand before there was Software-as-a-Service.
The original idea for the company was to provide access to education on-line for individuals and small businesses, which was more of a consumer business model than what we are doing today. CyberU was a distributor of on-line training content as opposed to delivering the courses through a traditional classroom.
What we started to realize is that large companies were interested in educating their employees, so we then begin selling to large Fortune 100 type companies. Many of these companies had a strong resistance to using any type of on-line business solutions, because they felt that it should be inside their own data center behind a secure firewall. There were a lot of concerns around security, scalability and control of business applications. This was about the same time that Amazon.com was launching their on-line retail operations and consumers had similar issues putting their credit card information on-line. From about 2000 through 2006 we were just a small software company that sold training and content over the Internet.
We held to our belief in on-line solutions and even as recently as 2004 we lost many of our deals because we wouldn’t deliver our product as an on-premise offering, but we knew if we did that for even one client we would undo our economic model.
Then over time we were still managing training on-line but our customers wanted to tie the courses back to leadership and succession plans and then led us to rollout an integrated Talent Management suite of solutions. Well, as it turns out the SaaS model has caught on and has grown form less than 300,000 to now over 3.3 million eLearning and Talent Management users, who are happy we decided to deliver our products over the Internet.
Why do your customers buy from Cornerstone OnDemand?
Our customers buy from us because our solutions are better, faster and cheaper than traditional Talent Management solutions.
We are better because we offer a fully integrated talent management platform that covers all of the different aspects of managing people all the way from ‘hire-to-retire’.
Cornerstone OnDemand is faster because our entire system is configurable with 11 discrete modules and over 9,000 individual features, that all can be personalized to address our customer’s business requirements. Our customers can also start with a single model and then turn on incremental modules over time as they are ready for more functionality. Our system can scale to serve the needs of the largest organizations and down to very small companies. In fact, our largest customer is Kelly Services with over 750,000 users and we have eight customers who have more than 150,000 users each. Our average customer has about 14,000 users.
The reason we are cheaper is because we are a pure-play SaaS provider. Our customers have found that it is cheaper to only have to buy from a single supplier, not have to buy hardware and have a lot of staff having to manage multiple systems and relationships.
Our customers also like that we only build products based on their enhancement requests because we don’t build software they don’t want. We currently offer five integrated products including Learning, Performance, Succession, Connect or what some are calling Social Networking and Extended Enterprise which services the needs of non-employees using both our Learning and Connect products. Cornerstone offers global capabilities and has users in 141 countries and supports 16 languages. We think we are doing a good job because we have 95% customer retention rates and that is very important to us.
What do you see as the key trend emerging in the SaaS industry?
The biggest trends we see are Cloud Computing and Mashups. Mashups can be Platform-as-a-Service (PaaS) methods to combine application functionality and even integrations between different company’s systems. It is like delivering third party content to customer and they don’t know where it comes from but it is valuable. We anticipate that customers in the near future will be able to do basic integrations between content and systems themselves without needed the assistance of any third party or system integrators and that will be very popular.
We are also starting to see more, large-scale deployments as SaaS becomes more mainstream. As I mentioned earlier we have eight customers with over 150,000 users including some very large banks, insurance and two of the largest healthcare companies who are now deploying Cornerstone OnDemand solutions, which is exciting.
What is your outlook for 2010?
2009 was the best year we have ever had and broke all of our records. We think that 2010 is even going to be better and we are very bullish.
Last year we were able to gain some significant marketshare and we will continue our expansion this year. For instance our partnership with ADP is just getting off the ground and this year we will anticipate more deals from a growing partner pipeline. ADP is proving to be a great partner and has brought a lot of resources to the table and we are optimistic about 2010.
But we are still not out of the woods with the broader economy and there are still has some weak spots, so we will continue to monitor things carefully.
Company: Magic Software Enterprises Americas
Started: 1990
Located: Or Yehuda, Israel
Geography: Global
Market: Multiple-mode application platform and business process integration solutions
Key Customers: Adecco, Adidas Canada, Allstate, BNP Paribas, CBIA, Clinical Financial Services, Club Med, DHL, Manpower, Praxair and Vodafone
Website: Magic Software Website
Blog: Magic Software Blog
Twitter: @MagicSoftware
Recent News:
Magic Software to Partner with Astadia
Magic Software Sells Company Office Building for about $5.2 million in Cash
I asked Regev Yativ, CEO and president of Magic Software Enterprises Americas a 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?
No we are a mix of SaaS, Cloud and On-premise solutions. Our company is almost 25 years old, and has been public (NASDAQ: MGIC) since 1991, with millions of users, 2,500 partners, 12 physical offices worldwide in 50 countries and through our distributors and partners.
Magic Software is everywhere, our headquarters is in Israel but most of the company is outside of Israel. In the United States alone we have 400 active partners and a large customer community.
Why do your customers buy from Magic Software?
Magic Software’s products can help our technology customers, if their client starts with client/server technologies; Magic gives them multiple product options including solutions for the Cloud. Magic is not a Force.com-type of Platform-as-a-Service (PaaS) provider, but we offer various development and deployment environments because customers are looking for a single, integrated way to manage all of their environments.
We offer two main technology platforms uniPaaS (formerly eDeveloper), which is a business application platform that provides a multi-development language environment. Our customers like uniPaaS because it offers the power of choice by allowing them to re-use all different types of their software, no matter what language it was written in. This means that their software can always be relevant, because Magic offers complete backward compatibility.
Our second platform is iBOLT, and Enterprise Application Integration (EAI) Business Process Management System (BPMS) platform, which allows customers to connect everything to everything including popular systems from Salesforce.com, SAP, Oracle and Siebel, for instance. We are finding more integration projects are moving to the Cloud, so our iBOLT, allows for a simpler way of connecting systems. iBOLT is fully integrated with the Cloud. SAP uses Magic iBOLT with their Business One application, Quest and IBM uses the platform to connect to JD Edwards products, even those running on S/400 hardware.
Customers see the clear value of Magic Software’s products for re-using or modernizing old products that have been written in ancient languages like COBOL and being able to move it to the Cloud.
At recent Cloud Computing tradeshow in San Jose, Yahoo! released a new Cloud Computing protocol. Their customers were concerned about having to rewrite their applications but Magic was working on a transparent OEM deal including bundling a full Business Intelligence capability embedded into the platform. This way Yahoo’s customers could leverage the new protocol while harvesting customer information by using the included BI capability, that’s value.
One of our insurance customers told me that by using Magic Software, they no longer feel that their vendors can force them into technology dead ends. It will keep their software investments relevant for longer periods of time, which is key to their company’s success. We believe that co-existence is the right business model, which means that our customers can use either SaaS, the Cloud or On-premise, and it is still their choice.
What do you see as the key trend emerging in the SaaS industry?
I see three trends that everyone is talking about. The first one is Cloud Computing and there is a lot of hype around all the players, languages and environments. The second one we see is Software-as-a-Service and all of the new applications emerging. The third one is Co-existence, which allows customers to have the environment they need for their business and they can have a spectrum of solutions including SaaS.
What is your outlook for 2010?
2009 was a year that we are glad to get behind us, even through we were profitable, and we still had to be very cautious with expenses.
We are now starting to see customers and partners are waking up. Things are getting a little bit better and we are looking to the middle of 2010 for the real recovery.
Crisis and the eventual recovery are good for companies like Magic because we deliver robust technology for innovation and improved business efficiency. Customers are looking for products that help them innovate and we provide products that help to open up new business opportunities, like our new products for the mobile market.
At Magic Software, our company spirit and mentality puts our customers first and in tough times this re-enforces our commitment to our customers.
Company: OpenAir, a NetSuite Company
Started: 1999
Located: Boston, Massachusetts
Geography: Global
Market: Cloud Computing PSA Solutions
Products: OpenAir Business Development, Resource Management, Project Management,
Knowledge Management and Project Accounting
Key Customers: American Federation of Teachers, Clickability, MetricStream, Model N,
PreVisor, Selectica, State of Oregon, and SupportSoft
Website: OpenAir
Twitter: @OpenAir
Recent News:
OpenAir CEO Joins SIIA Panel to Discuss Growting a SaaS Business Internationally
OpenAir Launches OpenAir Connect for SAP, Oracle and Salesforce.com
I asked Morris Panner, OpenAir’s CEO a few questions about his business and his view of the SaaS market as we move into 2010.
Did you start out as a Software-as-a-Service company?
We started the company in 1999 and were one of the original Software-as-a-Service pioneers like Salesforce.com according to Phil Wainewright who was at ASP News at the time.
Professional Services Automation or PSA started out because the world economy was moving to more of a Human Capital intensive market. Companies where beginning to leverage talent wherever they could get it through outsourcing, consulting and all types of value added professional services. Product companies were also evolving into services companies that were trying to solve all types of complicated business challenges. Companies like PRTM, a global strategy firm, Lafarge Cement, Siemens, AstraZeneca, Software AG, Progress Software and BMC were all evolving into product and services companies.
All the OpenAir founders came out of a variety of professional services organizations and we realized at that time, there were no good ways to manage complex, global services projects, especially using spreadsheets and email. Then the Internet came along and OpenAir saw this market need, where existing companies were struggling, then we refined our strategy and began developing products to meet this opportunity. There were other PSA firms at the time, including Niku, who moved into IT management, but the overall PSA market space was and continues to consolidate around fewer, larger players.
About 18 months ago, Zach Nelson, the CEO at NetSuite approached me and we agreed that the market was moving towards not just SaaS-based Enterprise Resource Planning (ERP) market but to a Service Resource Planning market. At that point we agreed to merge the companies and since then we also acquired QuickArrow and now the OpenAir PSA segment of NetSuite comprises more than 1,000 customers and 85,000 users globally.
Why do your customers buy from OpenAir?
We think our customers are looking for a knowledgeable, long-term PSA partner. This type of partnership is very different than an infrastructure or transaction-type of software relationship, because professional services is it is really complex business process software. Our customers expect us to bring them our specific professional services domain expertise to help to make their businesses operate more efficiently.
For example, when we launched in Europe, we did a presentation to Siemens in Barcelona. They had SAP but didn’t like using their platform for managing complex services. Siemens wanted to select a services- oriented software platform that was referenceable with large enterprises like theirs. OpenAir’s difference wasn’t just the platform; it was our deployment approach for enterprise customers as well as our people.
Being a SaaS player is also an advantage because you don’t have to install anything, which saves our customers time and cost. This especially important for large global companies, because the types of services problems they face are distributed and complex, so SaaS just makes a lot of sense for them. Typically our customers are probably using Oracle, SAP platforms or even email and spreadsheets, to manage their services projects, but they aren’t easy-to-use or efficient solutions.
Our partnership with NetSuite has definitely helped us step on the gas with regard to new customer acquisition. Zach really understands markets and how they evolve, which is why he choose to work with OpenAir. Services and consulting executives are at the center of this market shift to a Service-based economy and OpenAir is helping them improve their businesses.
What do you see as the key trend emerging in the SaaS industry?
We see the major drivers as Cloud Computing and the shift from a manufacturing-based economy to a people and services-baed economy. OpenAir’s Cloud-based solutions are going to do for the service economy, what is what SAP did for the manufacturing economy.
NetSuite is making a big bet on Professional Services Automation and now have put the resources behind our Service Resources Planning approach to the market.
What is your outlook for 2010?
Even though last year was difficult for most software companies, 2009 was a great year for OpenAir.
As we look to 2010, growing our talent is the key to the success of our company and we will continue to build out our capabilities in Boston, Austin, London and the Philippines. We doubled our headcount in 2009 and we building a great team.
We’re very thankful for our good results in 2009 and 2010 looks to be on track for us.
Given we are starting a new decade and many could argue that SaaS started in during the last ten years, I thought it would be appropriate to recognize leaders of the SaaS movement. Here are the winners of the Montclair Advisors 2010 SaaS Hall of Fame:
Most Influential SaaS Company: Salesforce.com
Salesforce has have been the most vocal proponents of the SaaS business model for the last 10 years. They are also the largest SaaS Company based on revenues ($990M) and market value ($8.5B).
Most Influential SaaS Individual: Marc Benioff
As the CEO of Salesforce, Marc has been the major evangelist for the past ten years. His recent book Behind the Cloud is a great primer for entrepreneurs who are considering starting their own SaaS Company.
Best Transition to SaaS: Concur (Steve Singh)
Concur was the most visible company to move their business model to Software-as-a-Service from a traditional on-premise model. He moved his company from a low of .90 a share to creating a company with revenues of $250M and a market cap of over $2B.
Biggest SaaS Acquisition: Omniture (Josh James)
Adobe purchased Omniture firm for $1.8B in October 2009.
Largest SaaS IPO: NetSuite (Zach Nelson)
The largest SaaS IPO so far is Netsuite’s public offering in December 2007 for $185M. This event made Larry Ellison quite happy since he owned more than half of the company.
Largest SaaS Deployment: SuccessFactors (Siemens)
In 2009 SuccessFactors announced the largest SaaS applications deployment to date with Siemens where they will deploy their performance management software for more than 400,000 managers and employees.
Biggest SaaS Comeback: Dave Duffield (Workday)
After his company PeopleSoft was acquired by Oracle, Dave Duffield formed one of the most successful pure SaaS companies, Workday, designed to create the next generation of ERP solutions.
Most SaaS Customers: Salesforce.com
Since they are one of the original SaaS companies it is not hard to believe they would have the largest customer base but they are clearly much larger than any other SaaS company with more than 65,000 customers.
Most Influential SaaS Analyst: Bill McNee (Saugatuck Technologies)
Bill, a Gartner Group alumni, has built his firm, Saugatuck Technologies to be exclusively focused on Software-as-a-Service and Cloud Computing for the past ten years.
Most Influential SaaS Journalist: Phil Wainewright
Phil has been a blogger and journalist with many different publications including ZDNet doing a comprehensive job of covering SaaS industry events, companies and trends.
Most Influential SaaS Pundit: Jeff Kaplan (THINKstrategies)
Jeff has been a very visible figure at industry events, associations, publications where he has promoted and commented on SaaS trends and players for the past ten years.
Most Influential Investment Firm: Bessemer Venture Partners
Byron Deeter and his colleague Philippe Botteri published a very popular Top 10 Laws for Being ‘SaaS-y’ as well as having invested in many leading SaaS companies.
Company: Clarizen
Started: 2005
Located: San Mateo, California
Geography: Global
Market: Online work and project management software
Products: Online work and project management software
Key Customers: AutoDesk, Clara, Enlaso, Fortinet, Lenovo, NBC Universal, NEC, O2 and UPS
Website: Clarizen Website
Blog: Clarizen Blog
Twitter: @Clarizen
Recent News:
Clarizen Secures $8M in Financing From Leading VCs
More than 100 Service Providers Enrolled in Clarizen’s Vendors Connect Initiative
Clarizen Reports More Than 100 New Customers in Q3 2009
I asked Guy Shani, Clarizen’s vice president of Sales a few questions about his business and his view of the SaaS market as we start 2010.
Did you start out as a Software-as-a-Service company?
The company was started four years ago by a group of executives who had come from a company called SmarTeam, that specialized in enterprise Product Lifecycle Management (PLM) solutions.
The idea for Clarizen came after SmarTeam was acquired by Dassault Systemes and IBM. During the 10 years we all worked at SmarTeam, we built very expensive, heavy, customized enterprise project management software solutions. But after talking to our clients over the years, we began to realize that they were looking for lighter weight enterprise solutions on a different platform, and this is when we started looking into Web 2.0 technologies.
At Clarizen we began to evolve project management into work management. This involved a more active way to manage both structured and unstructured work activities. Work management revolved around resource loading, document management, and all types of communications involving wiki’s, bug tracking, expense management and time sheets. The traditional way to do project management was more related to planning and less about activities and execution.
During our transition away from an on-premise company mentality to starting Clarizen we learned many lessons the hard way. One of the core beliefs of the company is that we have to measure everything, and in my area of sales, we track all campaigns, conversion rates and gates, average sales cycles, adoption and churn rates just to name a few of the metrics we monitor. We also track all of our costs – costs per lead, customer acquisition costs and many other metrics. The on-premise model of sales was all based on relationship selling, where as the SaaS model is much more about endless testing and monitoring what works and then doing it again and again.
We have been funded by very well-known venture capital firms including Benchmark Capital and Carmel Ventures who is based in Israel. In December 2009, we announced our ‘C’ Round of funding of $8M, which was led by our newest investor DAG Ventures, who is based in Silicon Valley.
Why do your customers buy from Clarizen?
Main reason was our new idea around a lightweight work management solution, that no provider was really focused on delivering. The market has been traditionally dominated by Microsoft Project, which is a very static way to view projects, with little or no collaboration capabilities. Clarizen was developed to be collaboration-oriented. This worked well with our customers who are working in a cross-organization frameworks, especially outside just their own organization, which is challenging for a standard on-premise software solutions.
Our competition breaks into three different market segments; High-end enterprise solutions, that are highly customized like Primavera and Computer Associates; Lower-end unstructured collaboration tools like WebEx, BaseCamp, Zoho, many which are free; and Mid-market products that embrace both on-premise and hosted deployments, solutions like Daptiv and @Task which are targeted toward the professional project manager.
Clarizen is a scaleable, mid-market SaaS solution that is easy to use, serving the needs all employees who are involved in projects inside the enterprise.
The SaaS lessons we learned included that in order to be successful we needed to have wide user adoption, so our solution needed to be easy to use. This was also important because we would have a hard time training everyone who might want to use the system, so it needed to be a product that could be learned in five minutes. The other reason adoption was critical is that you wanted users to update their project status and completion, so we developed techniques like our email notifications that look like Microsoft Outlook invitations that encourage users to update their status. This type of interactivity makes the systems not only easy to use but the reporting much more reflective of how work and projects are actually progressing.
What do you see as the key trend emerging in the SaaS industry?
Many companies have tried to run a thin client, Web-based project management application solution over the past 10 years, not many have been successful. 2010 enterprise software buyers are now really looking at SaaS – for a serious and scaleable work management solution.
As we learned over the years, work management is an entirely different market, with different buyers, than trying to sell high-end, customized engineering solutions. Customers would always complain how long it took to implement our software, which was painful and a big business challenge we were constantly dealing with at SmarTeam. Things needed to be simplified. Our realization was that it wasn’t the solution that we were delivering but how we were delivering it that needed to change.
Based on our experience with on-premise approaches to project management, we definitely liked the Web-based approach and that’s why Clarizen started out as a SaaS company, which is what the market is looking for in 2010.
What is your outlook for 2010?
Customers are looking for real business savings, for friction-less solutions and functionality that is broader than today’s current on-premise offerings. Clarizen can offer a more flexible work management solution that addresses this unique business opportunity in the market.
Now with our recent funding, we have proved that we not only know how to build a SaaS machine but also by running our business by KPI’s and performance indicators as I mentioned earlier, we can fine tune and logically expand our business. This is why we have experienced a 400% growth in our subscription sales, since last year, even in this very difficult economy.
Happy New Year!
In February Montclair Advisors launched our SaaS Business Profile Series and have been focused on covering as many SaaS companies as possible during 2009. As it turns out we were able to profile more than 30 SaaS companies of all types including pure SaaS firms, Cross-Overs and Hybrids!
We would like to thank all of the executives and companies that participated during 2009 and we look forward to continuing to follow their progress during 2010.
What we learned from these thirty-four profiles:
- SaaS is an evolving business model - It is still a new concept and few firms are running a pure subscription software models. Beware that there is still a lot of “Fake SaaS” out in the market overall.
- There are many variations of SaaS - these variations are based on the company’s starting point, the market they serve and the types of products they sell. Interestingly, Salesforce.com is actually not a very representative SaaS business model for the broader market.
- It takes time to build a real SaaS company - For many SaaS firms it takes up to 7 years to reach breakeven and nearly 10 years to ultimately gain scale with their business model.
- Cross-over providers will still need to hold onto their on-premise legacy for the foreseeable future, because it is hard to switch customers to SaaS all at once. It is also difficult to upset your maintenance revenue streams, especially during tough economic times.
- The Great Recession has permanently changed the Software buyer’s behavior towards SaaS due to the lack of available capital. When you see SAP and Oracle and many of these profiled ISV’s moving their businesses to SaaS, you know it isn’t a fad.
- Penetrate and Radiate. The successful SaaS firms have started small, with easy to sell, easy to consume solutions. They then develop additional software, services and content solutions to sell back into their installed base.
Here is an overview of the thirty-four companies Montclair Advisors covered in 2009:
|
Financial |
Human Capital |
CRM + |
|
Kenexa (KNXA) |
||
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Intuit (INTU) |
RightNow (RNOW) |
|
|
Mint.com (Acquired by Intuit) |
||
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SuccessFactors (SFSF) |
|
|
|
Taleo (TLEO) |
|
|
|
|
||
|
|
|
|
|
Collaboration |
Infrastructure |
Other |
|
|
||
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i365 – Seagate (STX) |
|
|
|
|
||
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QuickArrow (Acquired by Netsuite) |
|
|
|
|
Profiles by SaaS Category
Pure SaaS: 15 Started out and only offer SaaS subscription services
Cross-Overs: 11 Started out as on-premise, but have fully transitioned to SaaS
Hybrids: 8 Continue to offer SaaS services AND on-premise software
Public vs. Private
Public: 6
Private: 28
Profiles by Age of Company
0-5 Years: 9
5-8 Years: 10
8+ Years: 15
M&A by Companies
Sell-side: 2 Mint.com by Intuit for $170M and QuickArrow by NetSuite for $20M
Buy-side: 4 Lithium Technologies (Keibi Technologies), RightNow (HiveLive), Taleo
(Worldwide Comp), Xactly (Centive)
Fundraising Public & Private
What was also interesting to see is that even in the toughest economic climate since the Dot Com meltdown, that many firms that were profiled were able to raise capital in both the private and public market places. The big winners were SuccessFactors who raised more than $200M in a public offering and Workday, raised an impressive $75M private round that was led by New Enterprise Associates. As the economy begins to turn in 2010, expect to see more SaaS firms going back out to raise growth capital.
|
Public |
|
Amount Raised |
|
SuccessFactors (SFSF) |
|
|
|
Taleo (TLEO) |
|
|
|
|
|
|
|
Private |
Lead Investor(s) |
Amount Raised |
|
|
|
|
|
Bill.com |
August Capital, Emergence |
|
|
Genius.com |
Deep Fork Capital |
|
|
Host Analytics |
StarVest |
$8.6M |
|
InsideView |
Emergence and Rembrandt |
|
|
Jive Software |
Sequoia Capital |
|
|
Lithium Technologies |
|
$18M |
|
M-Factor |
Bay Partners |
$10M |
|
OpSource |
NTT |
|
|
Workday |
NEA |
We hope these profiles have been helpful to our readers and we will continue to profile interesting SaaS firms in 2010, because we learn a lot about our emerging industry and we will continue to build back into the Montclair Advisors advisory services that help our clients become successful SaaS companies.
Please let us know what you think, because we would welcome any ideas on how to improve the Saas Business Profile Series for 2010. Just drop me an email at kevin@montclairadvisors.com.
Company: Boomi
Started: 2000
Located: Berwyn, Pennsylvania
Geography: Global
Market: Integration Platform-as-a-Service
Products: Boomi Widgets and Boomi AtomSphere
Key Customers: Puma, Kodak, Ingres, OpenTable, Global Forex Trading, Siemens, Electronic Arts
Website: Boomi
Blog: Boomi Blog
Twitter: @Boomi
Video: Bob Moul, CEO Boomi at SIIA \’09
Recent News:
Taleo Business Edition to Embed Boomi’s Cloud Integration Technology
Salesforce.com Community Chooses WebEx Integration as Next Boomi Widget
Boomi AtomSphere to Power Integration Services for OpSource Cloud
I asked Bob Moul, Boomi’s CEO a few questions at Dreamforce ’09, about his business and his view of the SaaS market as we move into 2010.
Did you start out as a Software-as-a-Service company?
We originally started out as an on-premise software company but completely rebuilt the company and our products as a Software-as-a-Service offering beginning in 2006.
Why do your customers buy from Boomi?
For direct customers, it’s the ease of use, no maintenance costs, affordable pay-per-connection pricing and rapid time-to-value. For our ISV partners, we remove a huge sales barrier, increase their win rate and sales velocity as well as speeding up their implementations. For our Systems Integration partners, they get one centralized platform to implement and manage all of their customers and the ability to generate a recurring revenue stream.
What do you see as the key trend emerging in the SaaS industry?
Adoption of SaaS and Cloud software solutions by the enterprise - and for more than just storage and spare processing capacity. Enterprises are begging to move business applications to the Cloud, which of course requires orchestration of processes and integration of data among disparate applications and networks. Major enterprise software companies are moving to the Cloud in a big way including Microsoft, IBM, and SAP. The industry is picking up steam post economic melt-down.
What is your outlook for 2010?
With the economic recovery, the rate of SaaS and Cloud adoption will accelerate rapidly. This is the year the enterprise steps into the cloud in a major way. We are excited to be leading the way in cloud integration which we see as a key enabling technology for the rapid adoption and expansion of the cloud computing industry. At Boomi, we are very bullish on 2010.
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