By Kevin Dobbs

The last few months have been quite active in the SaaS market and here are some things that caught my attention:

• Who would have believed that we would be seeing Initial Public Offerings after our recent recession but new offerings include SciQuest (NASDAQ: SQI), Qlik Technologies (NASDAQ: QLIK), Ancestory.com (NASDAQ: ACOM) and Financial Engines (NASDAQ: FNGN).  There are a number of upcoming IPO’s including Talent Management provider Cornerstone OnDemand.

• You can tell the SaaS and Software markets continue to gain momentum based on the number of M&A deals over the past 90 days including Oracle buying Art Technology Group, hardware company Dell purchased SaaS integration firm Boomi, Deltek buys government market research firm INPUT, talent management leader SuccessFactors buys analytics firm Youcalc, Taleo purchasing Learn.com for $125M, recruiting firm Kenexa acquired Salary.com and even PE-owned SumTotal Systems buying Softscape.

• Firms that are making good progress in their SaaS transitions include Callidus (NASDAQ: CALD) and Plateau Systems.

• Software companies who seem to be having more trouble with their current subscription and license models include Concur (NASDAQ: CNQR), MicroStrategy (NASDAQ: MSTR), Manhattan Associates (NASDAQ: MANH), and SAP (NYSE: SAP).

• The Venture community continues to fund SaaS and Cloud Computing firms, several who have been profiled by this blog have received funding in the last six months (congrats!) internet billing firm Zuora lands $20M, Cloud management platform RightScale grabbed $25M, multi-tenancy Cloud platform firm Nimbula raises $15M, marketing automation provider Marketo, Bill.com, social platform provider Jive Software raises $30M, Gooddata and Cloud9 Analytics.

• SaaS, Software and Cloud Computing firms have also made some interesting management changes over the past few months including; ex-Oracle president Charles Phillips (video) moved over to become the new CEO at Infor, Taleo lands a new CFO former Palm executive Douglas Jefferies, Saba has added a SaaS-experienced CMO Karen Steele, SuccessFactors brings in seasoned President from Salesforce.com - Doug Dennerline, PeopleclickAuthoria Chairman Charles Jones returns as CEO to run company and well-respected analyst Ray Wang joins Constellation Research.

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.

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:

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.

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

Boomi Announces Integration Widget Challenge for Dreamforce ‘09, Salesforce.com’s User and Developer Conference

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.

Updated on February 2012

Company:        Host Analytics

Started:            2000

Located:           Redwood City, California

Geography:       Global

Markets:           Financial Performance Management

Products: Performance Management Suite, Budgeting and Planning, Financial Consolidations, Scorecard and Dashboarding, Reporting, and Host Analytics Decision Hub (External content)

Customers:      AT&T, NexTag, Crocs, Thule, Otis Spunkmeyer, Schumacher

Website:          Host Analytics

Blog:               Host Analytics Blog

Recent News:

Host Analytics Introduces Packaged Cloud Integration for ERP

Strategic Cloud Finance Planning and Sophisticated Business Intelligence Applications Take Center Stage in 2012

Host Analytics Named Red Herring Global 100 Award Winner

We asked Jon Kondo, Host Analytics Chief Executive Officer a few questions about his business and his view of the SaaS market in 2012.

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

We started out as a founder and angel investor funded, on-demand service in 2000, that enabled our customers to run our innovative budgeting and planning solutions on a hosted application. We launched our SaaS based service in 2005 and expanded our solution to include a comprehensive and integrated Corporate Performance Management suite. In 2008, we secured our first round of venture capital funding and introduced editions of our SaaS solution targeted to the needs of small to medium sized businesses, departmental enterprise users, public sector and non-profit organizations.

Why do your customers buy from Host Analytics?

Host Analytics helps organizations streamline the performance management process, align the planning process with business strategy and effectively measure performance and manage change. As a SaaS delivered solution, Host Analytics customers realize fast time to value through quick implementation of solutions, the highest levels of user adoption, effective empowerment of business users and a continuous flow of Host Analytics provided solution innovations and improvements. Businesses relying on error prone, complex and inefficient spreadsheets for budgeting and planning experience improved productivity and effectiveness by converting to Host Analytics’ integrated suite of corporate performance management solutions.

Host Analytics’ “Excel in a Browser”, user interface style, minimizes the learning curve for finance, accounting and managerial professionals and helps to deliver fast time to value. Businesses with complex performance management requirements find Host Analytics solutions to be cost effective, easy to learn and fast to implement while delivering the required corporate performance management functionality when compared to legacy in-house and on-premise license based software solutions. Host Analytics is the only SaaS-based integrated Corporate Performance Management solution suite available for businesses of all sizes and industries.

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

The biggest story in Cloud is the impending impact of Cloud computing. The combination of Cloud based corporate performance management and Cloud computing will make “Plug and Plan” a reality. “Plug and Plan” budgeting and planning is an integrated approach to business planning.  Data from multiple sources like ERP, HCM and CRM systems is quickly and transparently integrated into a Corporate Performance Management solution to extend and optimize budgeting, revenue planning, financial consolidation and score carding processes. This allows businesses to convert their planning from an annual or semi-annual event to a continuous process of timely and current adjustments.

What is your outlook for 2012?

A new year brings new opportunities for businesses to excel, as long as they have the right tools to do so. One of the longstanding barriers to business success, however, is dealing with increasingly unpredictable economic conditions. Some companies have begun to turn to financial planning to combat the uncertainty and enable better business success.

In fact, a recent survey by Dimensional Research explored the correlation between strategic financial planning and business success, with 72 percent of businesses surveyed reporting better business results through financial planning. However, the survey also found that sophisticated financial planning capabilities that can drive business results are still lacking in many organizations.

Financial planning will play an important role for businesses in the new year, as well as many other factors. The following is a list of the top predictions for businesses around financial initiatives in 2012, compiled by Host Analytics, the leading provider of SaaS corporate performance management (CPM) solutions.

Top Predictions and Themes for Finance in 2012

The Cloud CFO: A modern breed of CFO to bring finance to the cloud for larger and mid-size enterprises.

The role of CFO will become more strategic than ever before through the adoption of cloud computing. Finance departments from the world’s largest global organizations will reap the benefits as they catch up with mid-market businesses and enterprises already integrating the cloud into their strategic financial processes.

Next year’s business climate will push corporate finance and CFOs to take on more important responsibilities in planning and decision support for potential risks and opportunities. This trend has already begun. Sixty-four percent of businesses revealed that the CFO is more likely to be involved in strategy discussions now versus five years ago, according to Dimensional Research.

Organizations, large and small, will struggle to deliver business advantage if they are not enabled with the tools and processes to conduct strategic financial planning and analysis.

Financial Landmines: Financial missteps to have greater consequences.

Economic uncertainty and the clock speed of business will continue to accelerate in 2012. The penalties associated with the risks of missteps will increase greatly, leading to a constant struggle for companies to keep up with their accelerated pace.

Planning for the future and anticipating alternate decisions depending on the potential business drivers in the economy will not only be a necessary evil, it will be a main driver for all companies. The most successful companies will blend self-reflection of internal operations with external benchmarks and economic indicators to better anticipate the volatile swings in the economy and use advanced planning techniques to monetize those risks and rewards.

Business Introspection: More business self-reflection with business intelligence applications.

As businesses begin to realize the necessity to plan for future/alternate decisions based on business drivers, the need for business applications that shed light on their inner workings will greatly increase. Interest in and innovation around finance and business intelligence technologies will surge, especially as more vendors offer their solutions via the cloud.

Business users will be more comfortable consuming applications as services, if one of the main drivers is business agility—because the cloud means data and applications are always available and up to date. Cloud finance and business intelligence applications will significantly increase the performance of organizations.

Company:           Zuora
Started:               2006
Located:              Redwood Shores, California   USA
Geography:         North America
Market:                Subscription Billing
Products:             Z-billing: Complete billing solution for subscription businesses
                             Z-payments: Payment solution for subscription businesses
                             Z-Force: Billing and payment system fully integrated with salesforce.com
                             Z-Commerce Platform: Commerce platform for cloud developers
Key Customers:   Boomi, Clickability and Marketo
Website:               www.zuora.com
Blog:                     Z-blog

Recent News:

Zuora Introduces the Business Cloud With Launch of the Z-Commerce Platform

Zuora Enables Growth, Reduces Time to Invoice and Increases Productivity at Marketsync
 

I asked Gary Hagmueller, Zuora’s Chief Financial Officer a few questions about his business and his view of the SaaS market in 2009.
 

Why did you start your company? 

Thanks to the power of the Internet and cloud computing, many products are moving to subscription services delivered online—everything from music and DVDs to software and infrastructure to groceries and cars.
 
However, companies that deliver these new services need a way to run their subscription business AND support their unique billing needs. For example, they need pricing flexibility to address different customer groups, operational scalability for growth, and key metrics like churn and monthly recurring revenue (MRR) to assess the health of the business.
 
That’s where Zuora comes in. Just as Amazon makes it easy to become an online retailer, Google makes it easy for anyone to advertise online, and PayPal makes it easy to accept online payments, Zuora’s vision is to make it easy for any company to build, manage and grow a subscription business.
 
Did Zuora start out as a Software-as-a-Service company?
Yes- Zuora was built from the ground up by SaaS industry visionaries and veterans from Salesforce.com, WebEx, Postini (now Google), and Oracle. The Zuora team grew up in the subscription services world and started Zuora with the mission in mind to help other SaaS companies build and grow. Moreover, Zuora runs its business completely in the cloud, using such applications as WebEx, eFax and Google.
 

Why do customers buy from Zuora?
Zuora is the fastest-growing on-demand subscription billing and payment service designed specifically for subscription companies. Its innovative products are able to meet a wide range of customer problems. Whether a company is having trouble processing recurring payments or spending too much time and resources of manual billing, Zuora’s team can understand and assess the issue. The Zuora platform changes the way subscription businesses manage and sell to customers and allows them to bring new products to market in less time, with less hassle.
 
What do you see as the key trend emerging in the SaaS industry?
In the current economic climate, an increasing number of companies will begin offering their products as subscription services. The success of the SaaS movement has even prompted other industries outside of software like cars and movies (i.e Zipcar and Netflix) to adopt this lucrative model of recurring revenue. The problem is…running a subscription business like salesforce.com or WebEx is hard no matter how the economy is doing, and mastering the metrics of a subscription business is even harder.
 
A key trend emerging is the Business Cloud, any easy way to add commerce capabilities such as subscription billing and recurring payments to the services that developers are building. More and more companies will be looking for a set of cloud-based services dedicated to giving them the tools they need to monetize the services that they are building on cloud platforms.
 

What is your outlook for 2009?

Our outlook for 2009 is extremely bright. The demand for our subscription billing and payment services are expected to grow, particularly in this economic environment, when businesses get lean and mean, regain focus on building differentiation in their core business, and divest non-core activities or outsource them to best of breed vendors like Zuora.

Thank you to Gary Hagmueller, Annette Giambroni and K.V. Rao for contributing to this profile.