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

SaaS Blogs

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

As Zach Nelson kicked off last week’s Netsuite’s Partner and Developer Conference – SuiteCloud 2010 in San Francisco, there was a real focus on the importance of their platform as a way for partners to play a critical part in helping to take his company to the next level.

They kicked of the special launch event that featured a video of some of their key partners including TrueCloud, InsideView (who has been profiled in this blog), Aria, Hein & Associates, PaceJet, RootStock Software and Demand Solutions Group.

I think it is great with companies are building their business around their partners and creating a cool ecosystem where everyone can make money… more on that in a minute.

Zach then covered some Cloud Computing trends;

· Fake SaaS – He compared the NetSuite offerings, which are Cloud-based to Microsoft’s GreatPlains offering which is just a hosted version of their same on-premise offering. Still single tenant, version locked and requires Citrix to make it work like a true SaaS application. These types of business models will find it almost impossible to make money using a Fake SaaS. Other vendors mentioned here were Lawson and SAP.

· SaaS-based Financial Systems Are Popular. He showed a Gartner market slide (from 2008) that showed NetSuite as the fastest growing FMS provider.

· Traditional License Software Firms Are Hurting – This is nothing new because Saugatuck Technologies, Ray Wang from Altimeter and Montclair Advisors have all written about this but this slide says it all…

Customers are moving away from the old software model.

· The Cloud can now handle complex business processes. This has been demonstrated by vendors like NetSuite, Workday (Flextronics), Amazon AWS and SuccessFactors (Siemens) servicing very large and complex clients.

· Customization is no longer the Achilles heel of Cloud applications. In fact, it was argued that customization with NetSuite is now a killer feature of their Cloud offerings.

· Channels are emerging as an important component of a successful Cloud business model.

· The Cloud is getting social. With applications like Twitter, Facebook, LinkedIn, blogs, Fluid, Mzinga, InsideView, applications are more focused on communities and content than ever before.

There was a funny segment that discussed the complexity associated with the development of years of on-premise software, which he called an infrastructure hairball. It is much more cost effective to manage a single architecture, database and system of record. He mentioned that the cost of managing an SAP system (ala hairball) was approximately 3% of a company’s revenues, while operating their system was only 0.1%.

Then Zach got back to the partners and referenced a number of applications that are being built on top of the NetSuite platform – SuiteCloud , like RootStock Software’s MRP application. Other providers who have integrated into SuiteCloud include Amazon Web Services, Google, InsideView and HostAnalytics.

I thought the most interesting part of this session was when they brought IRON Solutions and NewHolland on stage to discuss the vertical application they had built on top of SuiteCloud.

New Holland has approximately 9,800 customers and they wanted to automate and enhance their relationship with their partners/distributors. They started working with NetSuite in 2007.

IRON Solutions is the Kelly Blue Book of agricultural equipment and offered a very complex product configurator along with CRM capabilities that allowed distributors better create and manage pricing and leads. They launched their new products built on NetSuite, IRON HQ for new product promotions, IRON Builder for pricing and lead management, IRON Guides for appraisal and trade and IRON Search for promotion and sales.

New Holland wanted to balance both the science and art of their business to move more of their customers to the web. Darwin Melnyk, CEO from IRON Solutions and David Greenberg from NewHolland whipped out their iPads and demonstrated their new applications.

Increasingly these type of vertical partner applications are going to be popular with customers looking for more tailored solutions for their specific businesses. NetSuite has more than 200 channel partners and sales through their channel has grown by 40% on a compounded annual basis. Which is quite healthy given our recent recession.

New partner announcements included;

· ISV/OEM’s – JCurve Solutions

· Systems Integrators – Hein & Associates (a Top 50 CPA firm), Fujitsu that is forming a strategic relationship for Japan with NetSuite and WIPRO who is building a practice around NetSuite OneWorld.

· BPO – GenPact is building an ERP Outsourcing business on NetSuite

I mentioned at the beginning why working with partners like NetSuite can be really profitable and with their new SP100 program, channel partners can get 100% of their first years revenue when they move older client/server applications to NetSuite.

Overall, it is nice to see major players embrace their partners and give them an opportunity to build their business and help their partner - a real win-win for everyone.

On a recent client engagement I was asked to provide a simple set of definitions for basic terms and concepts around Software-as-a-Service and Cloud Computing (which I often use inter-changeably).   What was interesting is that there is a lot of buzz out there but I can see why people get confused because there isn’t a standard set of definitions.

So my Friday contribution to the SaaS industry I am publishing the Montclair Advisors’ SaaS Glossary of Terms.  I would be interested in your feedback on the definitions and if I miss any key ones.

I often hear the question, “What is the difference between Software-as-a-Service and Cloud Computing?”  The answer is that the Cloud is a utility based resource that companies can use to deliver software and services.  This can sometimes even be more confusing when Cloud Computing is referred to as Platform-as-a-Service.  SaaS is really the business model associated with the delivery of that software and services.

Until recently, it was a difficult for both customers and SaaS providers to use the Cloud to deliver robust, enterprise-class solutions because the Public Cloud was not really industrial strength.  There are real issues in using a Public Cloud solution for your SaaS offering today including security, integration, manageability, data location, auditing, reporting and overall compliance.

Computer Weekly - Top Five Cloud Computing Security Issues

ComputerWorld - Twitter Breach Revives Security Issues with Cloud Computing

One scary revelation that I heard recently is that the same billing system that is used in Amazon’s EC2 service is also the one that is used to buy that big screen TV at Amazon.com.  That might turn out to be an  issue if you were trying to maintain your SAS70 or Sarbanes-Oxley certification.

There have been a lot recent announcements regarding new Virtual Private Cloud offerings over the past few months by Amazon, OpSource, Savvis, GoGrid, Sun, IBM, Rackspace because the market is looking for a better alternatives to the Public Cloud.  Some of these Private Cloud offerings are more advanced than others, but the Cloud Computing providers are now moving in the right direction by offering solutions that are hardened to be much more acceptable to enterprise customers.  SaaS providers are also in need of truly reliable infrastructure solutions too, because they have to support their customers with robust SLA’s, especially for their enterprise customers.

Why SaaS providers are happy is because this type of enterprise Infrastructure-as-a-Service approach helps companies:

- Innovation.  It should be possible to try out a new product ideas with a small beta communities and if their tests work, then they can very quickly ‘productize’ them.  Because of the lower cost and rapid availability of resources it should make innovation process more productive.  How often do I remember working with someone on a Friday afternoon and them spending their entire weekend building out their idea. Now with this type of utility computing approach you can take it from concept to rollout much faster.

- Faster time to value.  Based on the Private Cloud product that I recently saw demonstrated, you can initially set up a secure, multi-tenant instance of your favorite infrastructure in less than 30 minutes and then create additional instances in just a couple of minutes.

- Security. Being able to leverage infrastructure that can pass muster when a customer’s Chief Security Officer is reviewing your offerings.  Even some small and medium sized businesses are publicly traded and operate globally and even these smaller firms have the same types of compliance and regulatory constraints that large companies have.  Private Clouds will make using a Cloud-based infrastructure more realistic for SaaS firms selling to these types of organizations (ie. most of them).

Then there are all the other benefits of pay-as-you-go and scalability that come with Cloud Computing, which are always of value to a SaaS company.

For software companies who haven’t already rewritten or moved over to a SaaS model already, a Private Cloud may offer other benefits.  There are still many companies who are concerned about not being able to offer a multi-tenant, SaaS solution to their customers and prospects.  Leveraging a Private Cloud type of infrastructure for these non-SaaS software firms, allows them to develop a migration path to SaaS that is much more affordable and realistic than in the past.  The days of building out your own data center, or even your own cage in someone else’s data center, are coming to an end.

Face it, even the Obama administration is rolling out their own Cloud based initiative - Apps.gov.  It is still quite early but Private Clouds will really speed the adoption of Cloud Computing by the majority of SaaS companies over the next five years.

Company: Enwisen
Started: 1999
Located: Novato, California
Geography: Global
Market: On-demand Workforce Communications
Products: AnswerSource

HR Portal/Knowledgebase

Onboarding/Offboarding

Total Reward Statements

HR Shared Services

Key Customers: Fox Entertainment, Nissan, Hershey, State of Montana, Yahoo!

Website: Enwisen

Enwisen Blog

Recent News:

Enwisen Creates Emergency Notification Center for Customer Twentieth Century Fox – Response to Possibility of Swine Flu Epidemic

Enwisen Announces Release of AnswerSource Application Framework 2.1 – Enables Rapid Development of Web 2.0 Applications for HR Service Delivery

Enwisen AnswerSource HR Shared Services 4.0 Introduces Richer Knowledgebase Integration, Next-Generation Graphical Dashboards

Enwisen to Sponsor 13th Annual North American Shared Services Week; EVP Barry Maxon to Chair HR Transformation Track

I asked Walter Smith, Enwisen’s Chief Executive Officer 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?

Yes, when we started Enwisen in 1999 our vision was to leverage the power of the Internet to deploy robust, highly configured technology for HR using a Software-as-a-Service business model. At the time the term “SaaS” wasn’t commonly used to describe our model… ASP or Application Service Provider… was the more commonly used term for a hosted application. But truly our model from the beginning was to combine software and services in a multi-tenant environment. A key advantage we have had in the marketplace is delivering a suite of products that have all been built internally as a SaaS solution without the challenge of converting from an enterprise foundation or integrating acquired solutions.

Why do your customers buy from Enwisen?

Fundamentally it boils down to compelling economic value and great service. Our technology solves a critical issue for HR – how to deliver quality service to their internal customer (employees) at a lower cost per employee. In today’s economy HR is being challenged to be far more efficient, but without compromising quality. It’s a real conundrum – high touch HR delivery and internal systems are just too expensive and ineffective. Not only do we streamline HR operations, but we improve the service experience for employees. Our solutions are very reasonably priced for the robust capabilities and bottom-line impact we deliver. Customers have to provide services to employees, it’s mission critical, we just give them a better and more cost effective way to do it. Combine that with great, highly attentive service and that’s why customers buy from Enwisen. The validation is there… despite the down economy we grew profitably at 62% during our last quarter and over the last 10 years our retention rate has exceeded 98%.

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

Collaboration and integration of various enterprise applications through the “Cloud.” Almost every company today has multiple systems and multiple service providers. Here’s an example – one system for the Intranet, one for HR, outsourced payroll, outsourced benefits, performance and succession planning, learning (LMS), and dozens of benefits providers for health and retirement. Users are simply overwhelmed by the complexity of getting to all of these different sites – how many user IDs and passwords can you remember? If a system cannot be easily accessed, it won’t be used. Companies spend millions of dollars on systems, yet most acknowledge they are underutilized. Also, many companies lock their applications behind the firewall, making it harder if not impossible for many employees to use. One of the biggest trends is to leverage the “Cloud” in a way to seamlessly integrate data and applications to make it easier for user to access everything through a single location.

What is your outlook for 2009?

Now that the fear of financial Armageddon has subsided we see companies getting back to Business 101 as usual. Companies have to continue to innovate, deliver service, retain talent, and drive greater efficiencies to the bottom line. Budgets will remain tight, but companies will continue to invest in ways that make them more efficient in the near term but also prepare them to grow and be more competitive in the long term. We anticipate our current growth rate to continue since part of our success is because of, versus in spite of, the down economy. Companies no longer will buy status quo products due to brand. They will continue to seek best of breed solutions that will give superior performance at a much lower cost even if they are a new vendor to them.

Thank you to Walter Smith for contributing to this profile.

Company: Sonoa Systems
Started: 2005
Located: Santa Clara, California
Geography: North America, APAC
Market: Cloud Computing : Enabling technology / API Infrastructure

Products: Analytics, Management and Governance solutions for APIs, feeds and services - available as software, hardware or as a Cloud-based service      

Key Customers: MTV Networks, SelectMinds, Innotas, TrueCredit, InfoNGen, ING, Warner Music Group and others.

Website: Sonoa Systems

Recent News:

Sonoa Builds the Enterprise-Class Content Policy Cloud

Sonoa Systems Positioned in Visionaries Quadrant of Integrated SOA Governance Technology Sets Magic Quadrant

Cloud Management Provider Sonoa Systems Lands Deal With MTVN

I asked Chet Kapoor, Sonoa Systems Chief Executive Officer 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?

We started out shipping our technology on hardware appliances. Fundamentally, our software is architected like a networking device for deployment on the edge in high-scale environments. Last year we began shipping this same technology on a software virtual appliance to meet some OEM opportunities and also because more customers are in a virtualized environment. We soon saw demand for ServiceNet as an on-demand service because some customers wanted ServiceNet as a subscription-based cloud offering.

Why do your customers buy from Sonoa Systems?

We have very deep technology for very high-scale, very configurable policy enforcement. The design center for our technology is around meeting the unique challenges that enterprises, SaaS providers, or media companies find in managing APIs, feeds, and cloud services.

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

While a recession isn’t a good thing –it’s actually accelerated adoption of Cloud Computing technologies in the enterprise. We see a definite pickup in adoption of SaaS, APIs, Mashups, and mobile apps in the enterprise. It’s a ‘survival of the fittest’ environment and business managers are under the gun to either rework costs or come up with new ways to build revenue and share. Cloud Computing is a powerful weapon to do both , and the challenge is, how do you do this and still maintain the enterprise security, compliance, and service levels? You would never use a utility service without metering and circuit breakers – enterprises are very aware that they need this function when using cloud services, feeds, and APIs.

What is your outlook for 2009?

Our outlook is very excited and we are pumped! We’ve got some great partners that embed our technology in enterprise products and we’re very excited that customers are deploying ServiceNet in the Cloud. We’ve just passed 50 customers selecting our technology, and the bottom line is that we’ll continue to work towards making it very easy to get started using our technology.

Thank you to Chet Kapoor and Raksha Varma for contributing to this profile.

In Charles Darwin’s landmark work on the Theory of Evolution, he stated that “…Natural selection acts only by taking advantage of slight successive variations; it can never take a great and sudden leap, but must advance by short and sure, though slow steps.” Based on what has been happening with our economy over the past six months, the Human Capital Management software world is going to be forced to do a quick evolution.

Times are tough; just consider the global economic slowdown over the past three years. In 2007 it was the sub-prime mortgage crisis, in 2008 it was the Banking crisis and in 2009 we are beginning to see the Human Resources crisis.

This is very different environment for HR professionals than the old War for Talent era that was discussed by industry experts over the past five years; this current crisis is more related to a dramatic reduction in jobs in the economy and unemployment approaching 10%. Human Resources related budgets and headcount have been cut way back in an effort to stem the financial tide. Unfortunately most companies were not ready to eliminate anywhere from 5-30% of their workforces overnight. Not only were they not prepared for this change but they probably don’t completely understand what the future impact of their actions will be for their workforces. These dramatic changes have left HR in a precarious position looking forward because they have little in the way of staff or resources but their charter remains the same.

HR’s Rapid Evolution

As someone who sold HCM software for the last 12 years, it was always part of the sales pitch that the HR organization is always expected to do more with less. Now that the environment has really changed, when senior executives now say to HR, ‘do more with less,’ they really mean it.

Just like in natural selection, the HR survivors need to evolve. So in this brave new world, you no longer have the level of resources that that you have taken for granted for years. Resources like IT support, capital dollars in your annual budget, a team of people to work on projects and time. You may ask, how do I evolve? With dramatically less people, budget and basically the same responsibilities, you need to automate as much of your workload as well as your personal interactions. In this new world, the human touch is going to be at a real premium when it comes to HR.

Well - now that you are completely depressed, let’s review some ideas on how you can be an HR survivor. Did you know that most companies have up to 200 different HR suppliers, depending on the size of your company? Do you really need all of them? Since you are now in a zero sum budget exercise, start looking at your operating expenses as one big pot of money and start determining what is essential and what is optional. As you start your process, you need to free up budget to fund critical automation projects that can enable HR to continue to push along its strategic objectives. This may actually be a process that your IT business partners might actually be willing to help you with, since they are feeling HR’s pain like never before.

Natural Selection

So as you start thinking about your natural selection budget project, you should start to build out your game plan by trading out your old software for new software. My general conclusion about software is simple, old software is bad and new software is good.

Let me explain…

Many of the current Human Capital Management software providers evolved from PeopleSoft. PeopleSoft was the leading HR software provider in the market for nearly twenty years and spawned a complete suite of Enterprise Resource Planning applications including benefits administration, payroll and other HR applications. When PeopleSoft was purchased by Oracle in 2005, Oracle became the dominant provider but they appear to have no clear future plans for their HR software. So you need to continue to pay maintenance for old software, which keeps getting older.

When thinking about natural selection for HR software, think about the clear disadvantages in the current environment for your old school software provider:

• Software requires a large capital investment. This might be really difficult to get funded in our current environment, no matter how critical the software is to your company’s objectives.

• Implementation projects are both long and complex. Lots of investment to support customization and an expensive team of consultants who will live on-site for months or years. The consultants have to install your software in your data center, which will require a significant investment in hardware and infrastructure.

• Massive software upgrades. Whether it is moving from PeopleSoft 8 to PeopleSoft ? or to the latest version of SAP, these upgrades are expensive and require a lot of internal support resources and a big hardware investment.

• Lack of flexibility. The older software providers typically have rigid products, which make it tough to make even basic changes to features, reports or anything else. This is also a big disadvantage of buying all your HR software from a single vendor, like Oracle or SAP.

• Don’t play well with others. Ideally all of the software works together to make it easier to configure workflows, data elements, reports, and analytics because your data is sitting in a lot of different systems. If your software isn’t open to working with other systems, it can get really expensive, and you don’t have any budget to glue everything together.

Now you can see why old software is bad… and why they may be going the way of the dinosaur in the next 5-10 years. That’s right, even Oracle and SAP. Remember MSA and McCormick & Dodge!

What attributes should you be looking for in your future surviving HCM software suppliers?

These survivors have these clear market advantages:

• Software-as-a-Service. You have probably heard this term but it is simply when the software company rents you the software and you subscribe to their service the next 3-5 years. Because of this approach to delivering software as a service, SaaS firms are forced to be more cost-efficient because they get paid over time. SaaS software is delivered to your users through the Internet, which means your IT department doesn’t have to have to buy or support any software or hardware – this can save your company a lot of money.

• Long-term relationships. Because you rent the software, your SaaS provider has a vested interest in keeping you happy because you will want to continue to renew your subscription to the their software. Unlike old software firms who would sell you their software and disappear, SaaS firms are encouraged to stay close their clients and listen to your input.

• Incremental changes. It was not only the expense but also the tremendous organizational disruption associated with large software upgrades that customers really dislike about the old software model. SaaS clients enjoy a ongoing stream of transparent upgrades, that fix bugs, add features and their software literally evolves over time.

• Less extra costs. Since SaaS providers host their software in their own data centers, your company doesn’t need any IT staff to support their software or infrastructure (servers, firewalls and security) typically required to run HR applications.

• Configuration. SaaS firms offer more flexibility in the way they set up your software. Unlike the older software firms that bring a cast of thousands to customize and install your software, SaaS companies can set up an initial version of your software in minutes or hours rather than in months. Then once they understand your business needs, the software can be configured without custom programming. This approach saves you both time and money.

• Open for business. In this new world it will be difficult for any company to purchase every type of HR software from a single provider, so it is important for software to communicate and share information with many different software packages. This sharing will enable you to automate as many HR tasks as possible, allowing you to do more with fewer resources over time.

Slow Evolution of HCM Software

A little known fact is that the original Software-as-a-Service provider is Automatic Data Processing. They have been delivering payroll and HR services as a service, for nearly fifty years. Their offerings started out as a basic payroll service and their internal software just helped them to deliver their service more efficiently to their clients.

In the 1990’s, the next generation of on-line solutions appeared - where on-premise software was transitioned to being hosted in providers’ data centers (commonly referred to as Application Service Providers). A number of HR ASP software providers emerged including: Employease, PeopleSoft eCenter, and Workscape.

Then about ten years later, the conversation evolved from just hosting traditional software and a new model emerged - on-demand software, that provided a pay-as-you-go pricing model along with streamlined upgrades and new support processes. Some of these on-demand providers included: Authoria, Kenexa, SumTotal, Stepstone and Ultimate Software.

Then just a few years ago SaaS providers started to gain momentum. These firms really looked at delivering their software truly as a service and never delivered it on premise, sold in the traditional way. The HR SaaS providers always delivered their software over the Internet, with a modest amount of services, no upgrades, per-employee-month pricing and self-service support. Many better known HR SaaS providers include SuccessFactors, Taleo and Workday.

The next generation of HCM software might be based on Cloud Computing, where the SaaS providers no longer own their data centers and use providers like Google or Amazon.com to deliver world-class infrastructure support at on a pay-per-transaction fee. This approach could drive down costs, complexity and make a wide range of traditionally expensive HCM software much more affordable for small and medium-sized businesses.

Darwin Speaks

The HCM software market has undergone a number of wide ranging transformations over the last thirty years. We come back to the premise of old software is bad and new software is good. Old software is bad because it is expensive to maintain, modify and upgrade. Software teams that have the experience of working on traditional software but now working at new companies where they are using modern techniques might find it difficult to make their software better, faster and cheaper.

As you think of your portfolio of HCM software providers, maybe Darwin could help. And if Darwin were alive today, and knew about Human Capital Management software, I think he could put many of your company’s providers into these categories:

• Endangered – they are doing some of the right things to turn themselves into survivors but haven’t turned the corner just yet. These are the providers you need to keep a close eye on, just in case they become extinct.

• Extinct – those providers who are on the downside of innovation, living off of your precious maintenance, old architectures, delivered on premise and probably won’t be around for the long term.

• Survivors – those software firms who are worthy of your investment and will be in the market for the long term.

Company: RightNow

Started: 1997

Located: Bozeman, Montana

Geography: Global

Market: On-Demand Customer Relationship Management

Products: RightNow CRM Suite RightNow Service RightNow Marketing RightNow Sales

Key Customers: Drugstore.com, TomTom and Electronic Arts

Website: RightNow

Blog: Voice of the Customer

Recent News:

• RightNow Ups the Ante on SaaS with Service Level Credits
• New Product Registration Capabilities in RightNow February ’09 Drives Top Notch Customer Care
• drugstore.com Customizes Online Shopping Experience with Beauty Chat
• Good Customer Care, Not Prices, Wins Loyalty of Credit Crunched Holidaymakers

I asked Greg Gianforte, RightNow Chief Executive Officer 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?

RightNow has been a pioneer of SaaS / On-Demand technology since our company inception in 1997. Our underlying services are built to dynamically scale our client’s customer service and support up or down as they need. Unlike other providers, our solution is built to deliver exceptional experiences to our customers across service, marketing and sales interactions.

Why do your customers buy from RightNow?

RightNow’s on demand hosted CRM business model delivers quick time-to-benefit and helps our clients reduce operating costs, improve customer experience, retention and advocacy, and maintain a competitive edge.

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

As Cloud Computing gains momentum, it will become even more vital for a SaaS company to stand behind its service commitments since they are responsible for system reliability and performance. Customers are expecting a high level of availability and providers are using their ability to deliver as a competitive advantage.

RightNow recently announced an ‘up-time’ commitment to our customers of 99.9%, forcing our team to take uptime seriously, and making sure the right level of attention is being paid to the issue.

No amount of “money back” will take the place of performance, but a company’s willingness to put real dollars at stake underscores the confidence they have and that their customers should have in their solution.

What is your outlook for 2009?

Times are tough, but projects are still getting done and forcing some tough decisions. The best companies are continuing to adopt CRM technologies because they have identified that CRM and superior customer experiences are the best ways to keep and expand a customer base in a weakened economic state. Customers don’t grow on trees and in tough economic times it is even harder to attract new ones.

Thank you to Greg Gianforte, Jason Mittelstaedt, Joseph Brown and Katie O’Connell for contributing to this profile.

Company: SuccessFactors
Started: 2001
Located: San Mateo, California
Geography: Global
Market: On-Demand Performance and Talent Management

Products: Goal Management

Performance Management

Compensation Management

Learning and Development

Succession Planning

Recruitment Management

360 Degree Reviews

StackRanker

Employee Profile

Business Performance Accelerators

Mid-Size Business Solutions

Small Business Solutions

Individual Manager Solutions

Key Customers: Advo, Allianz SE, Cadbury Schweppes, Hilton, Kimberly-Clark, Gen-Probe, PETCO, and Rexel

Website: SuccessFactors

Blog: Performance and Talent Management Blog

Podcast: People Performance Radio – US Edition

Recent News:

SuccessFactors Drives Business Performance in Asia Pacific with Number of Customers Up 160% since 2006; Empowers Goal of Tens of Millions of Users in Emerging Markets

Top Analyst Firm Positions SuccessFactors in ”Leaders” Quadrant in 2009 Report on Employee Performance Management Software

Orange Deploys SuccessFactors to 13,000 Employees in the UK

I asked Lars Dalgaard, SuccessFactors’ Chief Executive Officer 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?

Absolutely. Since the beginning, we built SuccessFactors as an on-demand platform in the cloud from the ground up. The underlying technology platform is called the SuccessFactors Web Component Engine, and it’s the basis for all SuccessFactors’ applications. The Web Component Engine was built on a multi-tenant architecture with a single-code base incorporating expertise gained from working with more than 2,600 customers worldwide. The platform includes a set of reusable technology components such as a business process template designer, workflow engine and data permission model. It’s the foundation of SuccessFactors’ Performance and Talent Management Suite and enables us to quickly innovate and create new applications to drive business performance for our customers.

Why do your customers buy from SuccessFactors?

By using the latest research, the smartest technology, and the most secure systems on the planet, SuccessFactors works every day to help companies achieve tangible and measurable results, lower costs, and align their organizations.

Since day one, SuccessFactors has been focused on customer success and our on-demand platform helps us do this quickly – getting customer-driven product evolution and frequent enhancements up-and-running when they need it. We also deliver innovative, customer-driven new features on an iterative monthly basis, allowing customers to continuously increase the value they receive from us.

By listening to what our customers want and then taking action immediately to deliver what they need, we’re providing the ultimate level of customer service while providing fun, easy-to-use, user-centric software that creates real business value for our customers and encourages better adoption companywide.

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

• It’s going to accelerate. Hard economic times force innovation and companies are keeping a close eye on the bottom line, so this is going to speed up the pace that companies adopt lower cost of deployment SaaS offerings, delivered via Cloud Computing

• SaaS and Cloud Computing will continue to innovate and be easier to use. We are going to see more companies making SaaS as easy to use as Google, Amazon and a slew of other consumer applications and Web sites. Driving adoption and everyday usage will continue to be very important.

• Customer service is HUGE. Today companies care most about doing more with less and keeping their existing customers DELIGHTED. They had to do this before but now it’s critical – they can’t afford to lose customers. We interact and work closely with our customers on a daily basis – a paradigm shift from the legacy, on premise software sales model of selling multi-million dollar license deals and then reengaging the customer five years later. Companies with lots of customers and smart strategies are pouring everything into keeping customers DELIGHTED and the SaaS model makes the product more relevant, flexible, and scalable to the customers’ needs.

What is your outlook for 2009?

Our customers are putting increased focus on their top talent and high performers to make sure these people are motivated and engaged ­– a critical strategy during today’s economic downturn. SuccessFactors is giving them the tools to really hone in on who’s doing great work, while also providing the clarity to help them make tough business decisions. The War for talent has not ended. A company’s top performers are still being targeted by competition.

There has been a lot of discussion about the strength and resilience of the SaaS model during uncertain economic times. We get that. But what is more crucial is that companies really need to focus on energizing, retaining and keeping their best people motivated. It’s not a ”nice to have,” it’s a must have. Currently, companies are spending about 70 percent of operating expenses on their people. Companies need to be ahead of the curve, and SuccessFactors helps provide ways to make better business decisions in today’s tough economy.

Thank you to Lars Dalgaard and Jennifer Gazin for contributing to this profile.