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.

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

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Company:            Cloud9 Analytics

Started:                2007

Located:               Redwood City, California

Geography:          Global

Market:                 On-Demand Performance Management Solutions for Sales

Products:              Cloud9 Pipeline Accelerator Suite and Cloud9 Analyst Suite.

Key Customers: Aspect, Avaya, Beckman Coulter, Inc., Carestream Health, Inc., D&B, Jigsaw, MySpace, Rolls-Royce, Schneider Electric, Siemens Enterprise Communications, Splunk, Thermo Fisher Scientific, Thomson Reuters Healthcare

Website:               Cloud9 Analytics

Community:         Cloud9 User Community

Twitter:                @Cloud9Analytics

Recent News:

Cloud9 Achieves Breakout Performance in 2009

Karen M. Steele Joins Cloud9 Analytics as Vice President, Marketing

Cloud9 Analytics Integrates Goals, Bookings and Sales Data For salesforce.com Customers

Cloud9 Announces Major Business Expansion - Large organizations accelerating adoption of Cloud9 solutions

I asked Swayne Hill, Cloud9 Analytics 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, from its inception, Cloud9 has been a 100% multi-tenant platform for performance management applications like sales pipeline management and forecasting. The company is also SAS-70 certified.

Why do your customers buy from Cloud9?

Cloud9 Analytics provides SaaS performance management applications designed for customer-facing front office functions including sales, operations, marketing, services and support. Cloud9 solutions help companies optimize revenue by providing real-time visibility into what’s changed in key management processes such as managing the sales pipeline or managing the forecast.  Cloud9 solutions deliver sales leaders and executives with actionable insight into the state of their business with a single, consistent and flexible view.  Unlike other business intelligence tools designed for the IT department to build Ad Hoc reports, Cloud9 provides domain-specific analytic applications delivered through a software subscription, that are immediately relevant and consumable for line-of-business users. Using Cloud9 solutions, customers report increased win rates and forecast accuracy leading directly to increased revenue.

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

As Cloud Computing platforms such as Salesforce’s Force.com, Amazon AWS, Google’s App Engine, Intuit’s IPP and others emerge for Cloud Computing development, there will be greater opportunity for ISVs to provide solutions and broaden their reach.

What is your outlook for 2010?

Cloud9 sees continued rapid expansion of SaaS business analytics, driven by trends like:

Technology: Smarter automation support for key management processes that are currently bogged down by today’s disconnected manual approaches.

Data Transparency: Businesses need to stem the flow of disappearing data from transactional systems like CRM and put that data to work on the front lines.

Economic Turnaround: The economy will expand again and business will invest in technology that creates competitive advantage - SaaS will become the model of choice with minimal upfront costs and quick time-to-value.