2
By Kevin Dobbs
Montclair Advisors, LLC
When thinking about your transition to SaaS, there are many questions to consider including target customers, value propositions, packaging, pricing and how best to build customer relationships.
After conducting more than 50 Smart SaaS business profiles of all different types including pure SaaS, Hybrids and Cross-Overs, all of these companies would probably answer many of these types of questions differently depending on their type of customer, functionality, geography, vertical markets and the only way they can get useful answers is to continually test everything. Best in class SaaS firms are always trying different pricing, packages, messages in order to optimize their businesses, like a recent firm we profiled - Clarizen.
Some resources when thinking about these types of considerations include:
Software Pricing Partners - Jim Geisman
Chaotic Flow - Joel York
Sixteen Ventures - Lincoln Murphy
4 Pillars of SaaS - Phil Wainewright, ZDNet
In addition to testing, it is a good idea to measure everything including website traffic, marketing campaigns, product usage, customer satisfaction and a myriad of other SaaS and business metrics. Again, the best firms track and monitor all the key business metrics in order to improve their ability to generate revenues, build market share and reduce unnecessary customer churn. SaaS requires a very tight operational model and has moved business an art to a science and now there are an entire new class to tools to improve revenue performance and reduce costs. Some of these next generation of tools include:
Sales Automation
EchoSign - Provides electronic signature and contract management.
InsideView - Sales business intelligence and social media platform.
JigSaw - Business information and data services.
NetSuite - CRM and ERP suite.
RightNow - CRM, call center and social platform.
Salesforce.com - Salesforce is not only a solid Customer Relationship Management system but also a great system of record for all types of sales, marketing and service information and applications. Also offers a application marketplace that provides value added extensions. Salesforce also offers Chatter a collaboration platform to improve internal communications.
SugarCRM - Open source based CRM that provides a robust no cost solution.
Marketing Automation
Eloqua - Marketing automation platform.
Genius.com - Sales and lead automation.
MarketBright - Marketing and lead generation management.
Marketo - Marketing and revenue management.
Pardot - Business to Business lead automation.
SaaS Analytics
Birst - On demand business intelligence product.
Cloud9 Analytics - SaaS performance management.
GoodData - SaaS business intelligence product.
PivotLink - On demand business intelligence product.
Using many of these tools companies can help a SaaS firm track their business, sales and marketing performance. The question that I often get is ‘what should I be tracking?’ There are an emerging set of SaaS-based business metrics that include Monthly Recurring Revenues (MRR), Churn, Customer Acquisition Costs (CAC), The Magic Number (MN) and others that provide very precise views into how a SaaS business is performing. Here is a chart that details some of the more common SaaS business metrics by functional area:
Other resources to learn about SaaS metrics;
5 C’s of SaaS Finance - Bessemer Ventures
Chaotic Flow - Joel York
For Entrepreneaurs - David Skok, Matrix Partners
Haut Tech - Michael Dunham at Scio Development
My opinion about the SaaS business model is that there are a lot of new considerations about building a profitable subscription business today. The buyers are different, there are many robust low-cost tools available, Cloud technology that can radically change your cost model and time to market as well as many other business factors, so the only real way to really tune your business for SaaS is to continually test everything!
I would be interested in your comments and hearing about what you are testing.
Stay tuned for Tip #4 Sales & Marketing on a Budget
The broader SaaS market (I would include PaaS and Cloud Computing) have been really interesting this year and here are some of the notable news items that have caught my attention over the past couple of months:
Mergers & Acqusitions
SuccessFactors buys CubeTree for $50M… Interesting move into the collaboration space
IBM buys CastIron … Nice compliment to their Cloud Infrastructure offerings. Is Boomi next?
… then IBM buys CoreMetrics.
Salesforce.com buys JigSaw for $142M! … Surprised that they would pay up for a content company.
CA buys Nimsoft for $350M … gets into the SaaS infrastructure management market. Good company.
SAP buys Sybase for $5.8B … not sure about this one? A diversion to deflect attention away from BBD?
RedPrairie buys SmartTurn … traditional SCM provider begins their move to SaaS.
VMWare looking at EngineYard … interesting since Amazon funded this Ruby-on-Rails PaaS startup.
Fundings & IPO’s
Marketing Automation: Marketo raises $10M Series D, led by Mayfield.
Enterprise Collaboration: Yammer raises $10M Series B, led by Emergence Capital.
Financial Analytics: Host Analytics raises $15M Series C, led by Next World Capital.
Cloud Business Intelligence: Cloud9 Analytics raises $8M Series C, led by Mayfield.
Recent SaaS/Cloud IPO’s include Convio, SPS Commerce and Financial Engines.
New Products and Launches
Broadvision launches Clearvale … Ning for the enterprise.
Plateau launches PaaS platform for Talent Management
Mercer partners with PeopleClick Authoria, first combination of HR consulting content with Talent Management technology platform
VMware and Force.com partner, launch VMForce.
Lawson launches ERP Cloud offering on Amazon AWS … too little, too late?
Recently Profiled SaaS Companies by Montclair Advisors
Birst, CentralDesktop, Cloud9 Analytics, GoodData, Marketo, Netsuite and WOLF Frameworks.
There are definitely a lot going on in the SaaS and Cloud Computing markets and we will continue to cover newsworthy events and profile leading players throughout 2010.
Company: Birst
Started: 2005
Located: San Francisco, California
Geography: Global
Market: On-demand Business Intelligence
Products: Business Intelligence Suite
Key Customers: Children’s Choice Learning Centers, Citrix, Key Technology, Rackspace Hosting, RBC Wealth Management, Securian, UE Vision and Metro Atlanta YMCA
Website: Birst
Blog: Birst Blog
Recent News:
Birst Delivers More Power to the Business User with Launch of Birst 4 Spring Release
I asked, Brad Peters, CEO of Birst 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?
I started Birst after leaving Siebel Systems, where I was running the Siebel Analytics products, that are now owned by Oracle. My team managed the analytics platform and applications for all business intelligence, which at the time was competing with MicroStrategy and BusinessObjects.
When Siebel was sold to Oracle, our division was the biggest business at Siebel and was growing fast while all other business lines were shrinking. What we were finding is that BI was better tuned for changing buyer preferences of better, faster cheaper than were our existing enterprise CRM products.
At Siebel, we saw value of analytics and SaaS and because of that, Birst was started as a real BI SaaS company. It was really hard to get to true SaaS since many of our initial customers were large financial services companies back in 2004, who wanted customized solutions. We figured out how to build and deploy products quickly but we didn’t want to build these giant, complex, customized products. SaaS was a great way for us to get back to basics.
What is interesting is that CRM problems are similar to BI business challenges. Business Intelligence is more dispersed than CRM with multiple data sources, scoreboards, dashboards, data transformation, and reporting. Because it is complex and data comes from many different places, that’s why many companies have often given up and just used Excel to solve these BI challenges.
We started the company in 2005 with the philosophy that BI is never going to be easy, but if we could solve the problem for large companies, then we could charge more for our solutions. Birst launched a simpler self-service version in 2008 which only took ¼ of the time and resources that it took to deploy traditional BI from firms like BusinessObjects or Cognos, but customers get the same functionality.
At about this same time, we discovered that other BI providers were cheating, by using a single-tenant, or a ‘fake SaaS’ approach, they would also cripple their product’s functionality or offer just a single table. This approach just frustrates customers. Birst can also access data wherever it lies, even if it is on-premise, in existing systems, which saves customers costs and cuts out huge chunks of deployment time.
Why do your customers buy from Birst?
SaaS BI is not just Excel on the Web; it is hard to develop and deploy true BI. Actually is easier to develop a CRM system. We also believe that delivering incremental and value-add BI capabilities is also difficult. BusinessObjects and Cognos have never launched a product on single platform, and often orphan older products.
The current SaaS BI market is not about ‘rip and replace’, our customers don’t want to do that because it has been expensive and painful to get to where they are today. More customers want to extend their existing BI investments. For traditional BI firms this is difficult because all of their product suites are an amalgamation of different products and companies they have purchased. We find that our target customer has spent a minimum of $250K rolling out an enterprise BI solution. If you can’t pay that amount, you do without and use Excel. A good example of this is one of our customers Metro Atlanta YMCA, who is using Cognos for finance but the marketing department wanted to use it too but didn’t have the resources, now they use Birst to extend Cognos, which is a great alternative.
Our products appeal to companies that have dispersed groups and are looking to pull data from many different sources and run centralized reports or create dashboards. Organizations like sales, finance and even supply chain appreciate the flexibility of Birst.
One lesson we learned was that the toolkit approach to BI or transforming BI into data applications doesn’t really work well for customers. At Siebel we sold sales and marketing analytics applications that came with hundreds of pre-packaged reports but our customers never used them because their data models were all different. In the end, one size doesn’t fit all, because you have to match the BI product to each customers business model. Birst delivers a set of templates for sales, finance, and supply chain that deliver 80% of the functionality required and this helps to reduce our implementation times dramatically. BI doesn’t fit easily into a box, your tools need to be flexible and deployment should just be personalizing the last 20% of the solution.
Birst sells to both IT and Line of Business executives who are frustrated getting access to important business information and IT is constrained and they want to get the BI monkey off their back without sinking their organization.
What do you see as the key trend emerging in the SaaS industry?
I think the major trend we are seeing is that SaaS is migrating to mainstream acceptability. People didn’t even know that SaaS existed five years ago and at that time was still an early adopter market. Salesforce.com has done a great job evangelizing the SaaS business model as well as convincing customers that Cloud Computing and SaaS are more secure than customers may have thought. Today we don’t have to do a lot of basic SaaS education because the market is well along the maturity curve.
The other major trend is industry consolidation of the major BI vendors into mega suites. This high degree of consolidation is resulting in a feeling of vendor lock-in, which is disenfranchising customers because there are fewer pure play BI alternatives.
What is your outlook for 2010?
We have been working hard on launching Birst 4, which is a huge leap forward in our plans to bring a full SaaS BI solution to market. During 2009 we continued to build out our company, to be ready to go to market this year. We also announced big partnerships with Salesforce.com, RightNow, OEM partners and 30 system integrator partners.
I find it hard to correlate our business success to the outside economic conditions. We get the sense that the economy is loosening up but our future is going to be more determined by how well we execute on our business in 2010 and beyond.
Back to top