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As it turned out I was right about 50% of my predictions last year, so here’s my educated guesses for what is going to happen to the SaaS market in 2012:
#10 Oracle will buy Netsuite.
I know this isn’t much of a surprise since Larry Ellison owns approximately 65% of Netsuite, but with the RightNow acquisition, this type of move makes more sense as part of coordinated Cloud acquisition strategy.
#9 SaaS IPO window remains open.
There are a number of SaaS firms who have either filed, like Eloqua, or are seriously considering going public in 2012, like Workday, Dropbox, Box, and Guidewire. This window can be opened even wider by successful IPO’s from companies like Yelp and Facebook. The only problem is that there are over 100 companies who have already filed to go public in 2012, so it might be difficult for smaller SaaS firms to do their IPO.
#8. Master brands will continue to chase SaaS offerings.
IBM just purchased DemandTec and SAP bought SuccessFactors, while Oracle bought RightNow. This is a big change from 2010 when most of these companies were not interested in the Cloud or SaaS. All of these master brands have tried to build their own SaaS businesses, but I think they have now finally realized that SaaS is a business model, not just new technology. The smart firms will keep their SaaS businesses and their core license businesses separate and not try and merge them. Good luck.
#7. Workday will have a monster IPO.
There is no doubt that the 2012 IPO of Facebook will set all sorts of records but for enterprise software, I think Workday will be one of the biggest on record. The company just took in $85 million in funding over the past few months, in what was termed an IPO preview round. Workday could raise as much as $500 million in an IPO, which would force the big ERP players to start building out their SaaS businesses as a defensive strategy at the bare minimum.
#6. SaaS starts to go global.
I was involved in an Oracle SaaS webinar a couple of weeks ago for an audience in Europe and the response was really impressive. I initially thought that most of the registrants would be from the UK, the Netherlands, Germany and Scandinavia. Actually there were attendees from almost every country in Europe. I have also started to hear about strong SaaS interest in Australia, New Zealand, Brazil, Japan, China and many other countries. 2012 will just continue to build on the SaaS market’s growing global momentum.
#5. Salesforce continues to expand beyond CRM.
During 2011 Salesforce purchased several firms that added new capabilities to their platform including DimDim (collaboration), Radian6 (social analytics), Model Metrics (mobility) and then they bought Rypple in December, which launched them into the Human Capital market. I predict that Salesforce will add several other HCM tuck-in acquisitions (JobScience, Jobvite), financial applications (FinancialForce, Zuora), or even supply chain management (Glovia OM, Kenandy).
#4. IT Management and Security SaaS offerings emerge.
Companies like CA have been successful in launching their new Nimsoft ITM SaaS offering during 2011, but there are also many other firms that are beginning to gain momentum with their new SaaS offerings as well. This is a very big market opportunity to replace existing legacy infrastructure and security offerings. Companies to watch include Service-Now, Trustwave, Splunk, PingIdentity and Proofpoint.
(Note: CA/Nimsoft and PingIdentity are Montclair Advisors clients)
#3. SaaS continues to be social.
With Jive going public during December 2011, they are just the most recent example of SaaS social applications gaining market acceptance. Salesforce has been very successful with their Chatter and Radian6 offerings. Independents like Yammer, SocialCast, Lithium and CentralDesktop will continue to see increased demand for their social/collaboration platforms.
#2. More big VC rounds for SaaS firms.
2012 will continue to see VC’s put a lot of money to work with leading SaaS companies. We saw some major investments during 2011 including Box ($81 million), Dropbox ($250 million), HubSpot ($32 million), Marketo ($50 million), Workday ($85 million) and Zuora ($35 million). This trend will continue in 2012 and companies will be putting a lot of money to work to build out their platforms and distribution capabilities.
#1. Storage is a major story for 2012.
As more and more data is stored in the Cloud, consumers and businesses are looking to all different types of on-line storage services. During the year that Apple launched its iCloud small business and music storage service, we also saw major funding rounds for SaaS companies including Dropbox and Box. We even saw a new IPO from Carbonite that provides a small business/consumer Cloud back-up service. This is definitely a segment of the SaaS market to keep an eye on in 2012.
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: CentralDesktop
Started: 2005
Located: Pasadena, California
Geography: Global
Market: Social Technology Platform
Products: Workgroup, Enterprise and Community editions
Key Customers: Humane Society of the US, CBS, US Department of Health and Human Services, Avid Technology, Omniture, Gymboree, InterContinental Hotels and University of Wisconsin-Madison.
Website: CentralDesktop
Blog: CentralDesktop Blog
Twitter: @centraldesktop
Recent News:
Central Desktop Unveils Version 2.0 of Social Technology Platform
Central Desktop and ActiveWord Systems Partner to Provide Customized Version of Productivity Tool
Central Desktop Named 2010 Hot Companies Finalist
Central Desktop Builds Momentum, Poised to Continue Accelerated Growth in 2010
I asked Isaac Garcia, CentralDesktop’s co-founder and CEO 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?
Yes, we were very deliberate from the very beginning that we wanted to be a subscription-based product with an architecture based on a single-code base. We were focused on becoming the Salesforce.com of the Collaboration industry. Just how Salesforce was the disruptive force in the highly fragmented CRM market, we wanted to do the same thing for the Collaboration market.
Back in 1999 we founded Upgradebase, which was a large database of information targeted to high-end enterprises but the product was not multi-tenant. We also operated Vendorbase, which was written on a single-code base, and customers paid a monthly subscription fee for usage.
When market tanked in 2002, our enterprise business suffered but Vendorbase did well, because it was affordable, low touch and had a multi-tenant architecture. We kept telling ourselves to avoid the allure of the enterprise software market and stick to the subscription model and that was the right thing to do.
Why do your customers buy from Central Desktop?
Three reasons why people buy our product. First, we offer a lot of tools under a single umbrella including document, collaboration and project management. Just subscribe once and your company gets all these tools.
Second, our delivery mechanism is designed for small and medium sized businesses and can be deployed very quickly. Over the next few years, the SaaS delivery model in our market will need to get faster and easier to use versus some of the more enterprise-focused tools like Jive or Telligent.
The last reason is that since we’re a SaaS company, we really understand and deliver a true SaaS solution. We have SaaS DNA. Our customers expect an easy to use, dependable, affordable solution and we need to win their business every single day. So we spend a lot of our time focusing on providing very good customer service, which is a big difference as compared to a software firm that operates under a traditional on-premise model.
Our customer is typically a SMB with less than 100 employees and the buyer is usually the owner or CEO of the company. These buyers are not only the decision-maker but usually the CentralDesktop administrator too, so our products need to be easy to use.
Sometimes our customers compare CentralDesktop to free or very simple alternatives that are available in the market like Zoho or even 37Signals’ BaseCamp product. Some of these offerings offer good self-service support but no live customer support or professional services. Other products have pieces of the collaborative environment our customers are looking for but don’t offer the breadth of CentralDesktop. This is the opposite problem when customers look at more complex solutions that offer deep functionality, but for our SMB customer, these type of products are too confusing, which makes them hard to use.
What do you see as the key trend emerging in the SaaS industry?
I am seeing many new pricing models emerging, like charging for utilization and usage, instead of by annual commitments for seat counts. Start-up companies are experimenting with charging for bandwidth, storage, uploads and other models. These newer pricing structures are all based on some variation of utility computing, similar to what Amazon.com’s AWS is doing. The original pricing for Salesforce.com was designed to position them more as a utility but over time they shifted back to more of a traditional seat-based pricing model.
We are also seeing more flexibility around contracts. In the future, customers are going to be looking for not only annual pricing around seat counts but also utility-based concepts that will move monthly subscription fees up or down based on utilization, which the industry will need to be ready to accommodate.
What is your outlook for 2010?
CentralDesktop grew by 50% last year and we are predicting 80-100% growth for 2010, as the economy recovers.
Customers are being more aggressive about buying software products, before the job market has really started to improve, which is a little worrisome. I am still being cautiously optimistic but I feel that the overall the market has a false sense of confidence. Even with this type of market, I know that CentralDesktop will continue to be successful.
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