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With Dreamforce ‘11 coming up later this month, I thought it might be interesting to do a quick review of what I am seeing in the market around the Force.com initiative. Salesforce has been one of the early proponents of using a Platform-as-a-Service or PaaS solution in building out your SaaS business. I believe that the Force.com platform offers new and existing ISV’s several real value propositions:
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Pay-as-you-go pricing model. This is really helpful to small companies just getting started and Salesforce will allow the customers to tie their their revenues to the royalty fees for the platform.
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Packaged platform. The platform contains everything from a development kit, database, configurable UI, reporting and the hosting infrastructure, all for one price. In addition to the price advantages it is just the streamlining of vendor relationships by getting all of your technology from a single supplier.
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Elastic scalability. Because Force.com is built on the Salesforce infrastructure, it can scale up and down to meet the needs of high transaction or even periodic type applications. This is a very nice feature that makes true multi-tenant Cloud Computing infrastructures so cost efficient to operate.
For a company that is new to the Cloud and looking to launch a SaaS business quickly, Force is a great way to start. Based on some of my discussions with clients and other ISVs, here are some of the real and perceived challenges associated with Force.com and other PaaS solutions.
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Lock-in. Most companies tell me that having a PaaS package is attractive but they don’t like putting all of their technology needs in the hands of a single provider.
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Development environment. For many companies who are used to coding in Java or other languages, the Apex 4GL language is not very appealing to hard core developers. It also doesn’t offer enough flexibility for certain types of applications.
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Complexity. Companies who offer complex enterprise applications that require robust rules and calculation engines, workflow, integration or are offering other types of deep infrastructure solutions, find that Force is not a good match for their requirements.
Even with these potential drawbacks, there are many companies who are building their SaaS businesses on top of the Force platform. Here is my short list of some of the more well know firms:
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FinancialForce. The company is a joint venture between Salesforce.com and Unit4, a Dutch ERP firm. FinancialForce offers both financial and professional services applications.
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RemedyForce. Developed by BMC Software and Salesforce.com, it is based on the popular Remedy ITIL and help desk product.
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AgileVision. This is CA Technologies Agile development tool based on Force.com.
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ServiceMax. Independent company that is offering a Cloud-based Field Service Management solution. The company just landed a Series B round of funding for $14M.
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JobScience. Offers a talent relationship management suite on top of Force.com.
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Veeva Systems. Offers CRM and regulated content management solutions.
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BasicGov. Delivers a suite of applications designed for the needs of state and local governments.
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CyberU. Cloud-based learning management system.
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Less Software. Provides a light-weight supply chain management software product.
Other traditional software firms, or Hybrids, and even some SaaS firms are using the Force.com platform to extend their existing products and solutions. Some of these companies include:
- Axway. Axway Community Management (ACM) is a new offering that extends the company’s existing on-premise B2B and EDI products.
- Callidus Software. This hybrid company built a new set of Cloud-based SMB sales performance management solutions, Plan Communicator and Commission Manager.
- Convio. Their Common Ground product extends their constituent engagement solution for non-profit organizations.
- Xactly. A leading SaaS firm that offers incentive compensation and sales performance management solutions. Built a very lightweight solution on Force.com for very small companies called Xactly Express.
- Zuora. Offers their Z-Force 4.0 subscription management platform for Salesforce.com customers who want a tightly integrated solution.
There are many more applications being developed and I am sure more will be announced at Dreamforce at the end of August. What is clear is that there are many different use cases and the PaaS market is evolving very quickly, it is just important for companies to carefully evaluate their needs before committing to any platform.
I would also recommend to connect to other firms that are doing similar types of products or services and ask them about what has worked and what to watch out for. When used in the proper situation Salesforce can really offer a nice Force multiplier for your SaaS business.
By Kevin Dobbs
The last few months have been quite active in the SaaS market and here are some things that caught my attention:
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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.
Remember to attend one of the biggest SaaS industry events - Dreamforce 2010 in San Francisco from December 6-9, there is sure to be many important announcements.
Enjoy your lunch!
As the economy continues to struggle, it also presents some interesting opportunities for stronger SaaS companies to pick up marketshare and eliminate competitors.
In a deal announced last Friday, Xactly - the leading SaaS company in the Sales Performance Management (SPM) market, acquired Centive in an all stock deal. Centive is a long time player in the SPM market with many large customers and a gradually improving subscription revenue stream. The company has been on a slow transition to an on-demand model for the past few years. When I heard about the deal I thought about the old addage, ‘If you can’t beat ‘em, join ‘em’. By combining the two firms, Xactly now increases their overall size and revenue footprint, adds new clients and gains a substantial East Coast presence, since Centive is based in Boston. What was also announced is that Xactly will support the Centive platform for 18 months but will migrate all of the existing Centive customers to the new combined Xactly platform, which is a very smart move. Don’t support two or more platforms, ever! Consolidate the technologies now, you will save money and it is the only way the acqusition will make financial sense over time.
What is really happening in the background is the stage is being set for the main event, which is the battle for the control of the SPM space between Xactly and Callidus (NASDAQ: CALD) some time over the next 12 -18 months. Callidus has been in the market for many years and in fact, Chris Cabrera, Xactly’s CEO is a Callidus alumni, so it will be interesting to see how this plays out.
Callidus has been diligently trying to move to an on-demand model for many years but their legacy of highly customized, on-premise deployments will be difficult (ie. impossible) to convert to a real on-demand solution. Or put another way, I doubt their customers will want to re-buy their on-demand system from Callidus, because once it is installed and working, you really don’t want to touch it again.
Smartly, Xactly has used the recession to their advantage. This is just the first of many deals as the Software market will begin a period of very active consolidation during 2009.
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