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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.
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: 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.
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:
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Financial |
Human Capital |
CRM + |
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Kenexa (KNXA) |
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Intuit (INTU) |
RightNow (RNOW) |
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Mint.com (Acquired by Intuit) |
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SuccessFactors (SFSF) |
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Taleo (TLEO) |
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Collaboration |
Infrastructure |
Other |
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i365 – Seagate (STX) |
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QuickArrow (Acquired by Netsuite) |
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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.
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Public |
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Amount Raised |
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SuccessFactors (SFSF) |
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Taleo (TLEO) |
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Private |
Lead Investor(s) |
Amount Raised |
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Bill.com |
August Capital, Emergence |
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Genius.com |
Deep Fork Capital |
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Host Analytics |
StarVest |
$8.6M |
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InsideView |
Emergence and Rembrandt |
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Jive Software |
Sequoia Capital |
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Lithium Technologies |
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$18M |
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M-Factor |
Bay Partners |
$10M |
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OpSource |
NTT |
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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.
Company: i365 – A Seagate Company
Started: 1997 (EVault)
Located: Santa Clara, California
Geography: Global
Market: Cloud-based Storage
Products: Data backup, eDiscovery, and Data Recovery
Key Customers: ArtsMemphis, Meritan, CBRE and People’s First Community Bank
Website: i365
Recent News:
I asked Valerie Fawzi, Vice President of Product Marketing at i365 a few questions about her business and her view of the SaaS and Cloud Computing market in 2009.
Did you start out as a Software-as-a-Service company?
i365 is a wholly owned subsidiary of Seagate and was created through a number of acquisitions around the data protection market, starting with EVault. eVault was started in 1997 and was acquired by Seagate in 2007 and was always based on a software subscription business model.
We service mid-market companies who have between 10 and 1,000 employees. i365 also services large companies but usually for their remote or branch offices. I365 is an online service, that protects data on Windows, Linux Unix and other operating systems on both virtual and physical platforms.
Why do your customers buy from i365?
It’s hard today for small business customers because they have to glue together many different storage solutions but they would prefer to have a single provider. The small business customer usually only has a small number of IT resources to handle these important storage and backup challenges, and i365 offers a broad array of storage solutions and we make it easy purchase and support our products through many different channels.
For example, in October we announced EVault Offsite Replication Service that offers a hybrid pricing model, a passive vault and disaster recovery including D2D2T – Data to Disc to Tape, D2C - Disc to Cloud, and D2D2C - Disc to Disc to Cloud.
We provide our technology in many different formats including a license for large companies, a managed service and as a hardware/software appliance. All these deployment options are based on our same technology platform in the Cloud.
i365 distributes our solutions both directly and through channel alliances with major tele-communictions companies. We can offer our services through one of our ten SAS70 Type II data centers across North America and Europe.
What do you see as the key trend emerging in the SaaS industry?
We think customers are going to be careful about moving to the Cloud but would be more open to a blended on-premise and Cloud solution. The ability to provide storage to a variety of on-premise solutions like Microsoft Exchange, SharePoint, SQL databases and even desktops that could be backed up in the Cloud. This is especially attractive for customers in regulated industries such as healthcare, legal and pharmaceuticals who need a data protection plan. This is the type of bridge approach that customers are looking for from us.
What is your outlook for 2009?
We have recently had an important change in management, Terry Cunningham, the former President and COO of Seagate Software, with a track record of success, has rejoined the company to head up i365. Today Seagate is the largest independent storage company. Our new vision is to use our SaaS and Clouding Computing core competencies and move into becoming the leading managed services storage firm. This is a very exciting time for i365 and Seagate.
Thank you to Valerie Fawzi and Rachel Levine for contributing to this profile.
When I was learning to drive many, many years ago, I remember my dad telling me to pay attention to not only where the other driver’s eyes were looking but also to where their wheels were pointed. So it was with my search for SaaS at the recent Oracle OpenWorld event in San Francisco. Amid the hundreds of exhibitors and sessions, Cloud Computing in the form of SaaS based applications was being called out, acknowledged and exhibited. There were “campgrounds” of SaaS based applications exhibiting and the normal spread of CRM On Demand sessions. Clearly, Oracle senses the need to position itself as a supporter of Cloud Computing which requires them to encompass and embrace the growing proliferation of SaaS-based services and vendors. Like Levi Straus during the Gold Rush, who made his fortune supplying the miners with clothes and supplies, Oracle has the opportunity to provide the platform and infrastructure that can be a significant enabler in the Cloud Computing story.
But this blog is not about Cloud Computing, it’s about where Oracle is with SaaS-based applications. Certainly, they are continuing their efforts to build out their primary SaaS offering, CRM On Demand with new features and social networking capabilities. There were large banners in the exhibit areas for CRM On Demand and a section of the exhibit hall was dedicated to a few dozen SaaS add-on applications like Helpstream, Adaptive Planning and Eloqua. Oracle’s decision to allow a huge presence for one of their primary SaaS competitors, Salesforce.com, in the west convention hall was interesting. Even more interesting was the opportunity that was provided to Salesforce.com’s CEO, Marc Benioff, to present at an SRO executive session. Marc eloquently thanked Oracle for the opportunity to participate in OracleWorld, talked about the growth of Cloud Computing, their newest offering, Service Cloud 2 and gave away copies of his insightful new book “Behind the Cloud.” In comparison to the exhibits of SaaS vendors and the mega-exhibit of salesforce.com, Oracle’s SaaS offerings had a relatively small presence. No new SaaS offerings for key markets like Human Capital Management or Enterprise Performance Management.
So back to my original point, where is Oracle looking regarding SaaS but also, where are their wheels pointing? Gauging by my OracleWorld observations, Oracle definitely feels the need to acknowledge the proliferation of SaaS-based applications. In my opinion, allowing Salesforce.com to present and exhibit is a huge change in course regarding SaaS. Salesforce.com is Oracle’s biggest competitor in the Customer Relationship Management marketplace but they also are built on top of Oracle database technology. This is not a unique situation in the Oracle world of co-opetition. SAP, their biggest competitor in the enterprise resource management marketplace, is also built on top of Oracle database technology. SaaS is here to stay and though Oracle is not showing any signs of interest in building out its SaaS offerings, it is very interested in ensuring that its database, middleware technologies and possibly its expansive infrastructure are used in the SaaS gold rush. The question of why Oracle is not looking at SaaS as an application delivery vehicle but has its wheels pointed to supporting SaaS vendors and gets into a discussion of Oracle’s business priorities and culture.
Oracle’s business model is heavily dependent on maintenance and support revenue. At 22% of license revenue, this represents a significant portion of Oracle’s revenue and margin. Any significant move away from license sales and to SaaS will disrupt this model and the business culture that has been built upon it. A second factor to Oracle’s delay to move to SaaS-based applications can be found in their sales model. The SaaS sales model is significantly different than the license sales model. SaaS sales typically involve a higher volume of transactions at a lower total contract value. Because SaaS based applications are pay-as-you-go and require limited configuration to be production ready, not only is the software component of the total sale reduced, the consulting component of the total sale is reduced as well. Getting a massive sales organization like the one at Oracle to embrace a SaaS applications focus will be a time consuming, culturally altering and expensive proposition. This is not likely to happen soon.
A more likely strategy for Oracle to pursue if they want to become a leader in SaaS based services would be to focus on the small or medium size business market with a dedicated and independent sales team selling SaaS based applications and not try to convert their existing base of global 2000 enterprise customers. Given the investment by Oracle’s CEO, Larry Ellison, in Netsuite, I am tempted to think of them as an experiment to test a new SMB sales model for Oracle. I suspect that part of the reason that Oracle allowed such a significant presence for Salesforce.com at Oracle OpenWorld is that they do not see them as a significant competitive threat to their installed base and need for them to continue their success to help drive the growing need for platform as a service and infrastructure as a service technology, a market that Oracle is definitely interested in. Of course, Oracle could use their merger and acquisition machine to quickly become the leading provider of SaaS based applications. There are definitely candidates out there other than salesforce.com that could help Oracle accomplish that.
Oracle OpenWorld as usual was an interesting window into the thinking and direction of Oracle. Regardless of the rhetoric that we have heard from Oracle about SaaS, as evidenced by the presence of SaaS on the exhibit floor and Marc Benioff’s presentation, Oracle is positioning to be a player in this market … someway, somehow.
This week’s Smart SaaS blogger is Gary Damiano.
He can be reached on LinkedIn or at gedamiano@gmail.com.
Company: Responsys
Started: 1998
Located: San Bruno, California
Geography: Global
Market: Business to Consumer Marketing Automation
Products: Responsys Interact
Key Customers: Continental Airlines, Corel, Carlson Hotels, E-Loan, RSA and Salesforce.com
Website: Responsys
Recent News:
Responsys Wins Prestigious OMMA Award for Creative Excellence
Responsys Expands Email Marketing Program for Continental Airlines
Responsys Continues Strong Growth in First Half of 2009
I asked John Berkley, Vice President of Product Marketing at Responsys 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?
Responsys was founded in 1998 and there have been many chapters of the company’s history. The current chapter is about five years old, when the current management team arrived. Responsys has always been a SaaS company, and it is core to our business strategy. We live and breath SaaS and our future roadmap is all based on SaaS.
The current chapter of Responsys is all based on building out our platform and managing all the data that we store for our customers. Our strategy is to enable sophisticated, high-impact marketing campaigns for our clients. Our biggest verticals are travel, technology and retail - although we serve a number of others as well. Responsys is ideal for these types of firms who require automation of very complex processes; importing/exporting of data, business rules, personalization, analysis all related to managing sophisticated marketing campaigns.
Why do your customers buy from Responsys?
Our customers appreciate Responsys’ ability to handle the marketing campaign complexity required for huge product catalogs, directed at thousands or millions of customers. For these types of promotions, granular personalization and targeting is critical for the campaigns’ success. We also automate all aspects of the marketing workflow, like the transfer of data and meaningful analytics, this helps to make our customers much more efficient.
We make our customers more efficient, so that they can do more sophisticated marketing campaigns, all without having to expend additional effort. Email programs can also be used to build loyalty using strong, targeted content. Doing more with less is important in this current economic climate and email is an affordable, interactive channel.
Good email marketing campaigns have very high ROI because it is measurable. For our customers, most who are business-to-consumer (B2C) companies, they can track the actual campaign results directly to increased revenues. This tracking can be handled either inside of Responsys or with their preferred Customer Relationship Management (CRM) system.
The Responsys platform provides an ideal solution for global organizations and their marketing needs. We have offices in London, Singapore and Sydney to provide local support to our regional customers.
What do you see as the key trend emerging in the SaaS industry?
For industry pioneering SaaS companies like Salesforce and Omniture, the big trend has been the demands placed on their SaaS applications by larger customers - more complexity, data intensive, and transactional.
Over the past ten years SaaS firms have had to address these enterprise challenges and now there is no longer major barriers that SaaS solutions can’t handle. There is an increasing range of SaaS solutions that can now handle the most challenging back office requirements, what some people are now calling ‘SaaS-Heavy’.
What is your outlook for 2009?
This has been a good year for Responsys. Clients are moving more budgets into the email marketing automation because it is a cost-effective way to promote their brands and increase revenues. Our pipeline going forward is strong and we feel like we in a good position in the right market. We have a proven solution, which is valuable no matter what the economy looks like and even more in demand during a down market. Tighter economic times have focused our customers on real value, which is definitely good for us.
Thank you to John Berkeley and Raksha Varma for contributing to this profile.
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