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It is always hard to predict the future, but here are my 10 Predictions for the SaaS market in 2011, and they might just happen:
Blockbuster Subscription Software IPO’s
A number of large consumer subscription software players including Facebook, Groupon, LinkedIn, Zynga and Skype could really open up the public markets with a major blockbuster IPO (or IPO’s) in 2011. SaaS firms that look to get everyone’s attention with potential IPO’s next year include Cornerstone OnDemand, Workday, Marketo, Service-Now and possibly Plateau.
Major Players Merge to Form the Next Big SaaS Brand
So my prediction (which is a pure guess) is that SuccessFactors and Taleo finally get over their respective CEO ego issues and decide to merge. Sounds a little crazy, but when you really consider their product portfolios, there might not be as much of an overlap as you might think. SuccessFactors is basically a performance and analytics company and Taleo is a recruiting and learning (after acquiring Learn.com) company. They both have some additional components that could be plugged into to create a more comprehensive suite of CPM and Talent Management offerings.
This would also create a combined company with a market cap approaching (SFSF + TLEO) $4B and annual revenues in excess of $400M, which would be the second largest SaaS firm in the market, and a clear leader in their space. Another potential marriage might be Concur and Ultimate Software.
Oracle Finally Pulls the Trigger on NetSuite
It seems like most Oracle SaaS rumors involve the acquisition of Salesforce.com, and that may happen some day, but the more likely combination for 2011 is NetSuite. Larry Ellison is a major investor in NetSuite (early investor) and own/controls more that 50% of the company’s shares. He may come to the conclusion that he needs some real SaaS DNA inside of Oracle to help grow their Fusion business in 2011 and beyond.
SAP Throws in The Towel and Buys Leading SaaS Player
Similar to the realization that many other major traditional ISV’s will come to in 2011, that they are too far beyond in SaaS to catch up organically, SAP will buy their way into SaaS. The Business ByDesign project for SAP, by some estimates, has cost more than $1 billion and there isn’t much to show for it. I always thought that the Sybase acquisition was just a smoke screen to cover up how little progress has been made with BBD at their most recent Sapphire user meeting. Like Oracle, I think SAP reaches out into the market and purchases a SaaS firm to jump start BBD. RightNow would be an interesting choice since SAP wants to make a splash in the CRM market.
Master Brands Continue to March Towards SaaS
These big software companies are no longer just paying lip service to SaaS or the Cloud, they continue to catch up with the subscription software market transition that is happening everywhere. All sizes of customers who were battered during the recession are no longer interested in spending a lot of capital and time that has been associated with traditional software projects and are becoming increasing comfortable with SaaS. This shift in the Software market is massive and is going to take at least 10 years, and we are probably only in the second year (post-recession) of this shift. Continue to look to see what SaaS moves firms like Oracle, SAP, HP, CA and Infor make in 2011.
Continued Explosion of PaaS offerings
Look at Salesforce.com’s recent moves to expand their Force.com Platform-as-a-Service portfolio with VMForce and then buying Ruby on Rails provider Heroku for over $200 million. Beyond Force.com there are many other offerings here today and coming in 2011 including App Engine by Google, Apprenda, Azure by Microsoft, Corent, Engine Yard, Facebook, Flex by Adobe, Fusion by Oracle, Intalio, IPP by Intuit, LongJump, Nimbula, SuiteCloud by NetSuite, and Wolf Frameworks.
As long as traditional ISV’s continue to move towards SaaS, there will be a green field opportunity for all types of PaaS solutions. Look for several of these firms to be acquired in 2011 by larger ISV’s.
Salesforce.com Continues to Expand Beyond CRM
After attending Dreamforce this month, it was curious to see a number of Force.com firms offering ERP extensions starting to gain real market momentum. Companies like FinancialForce.com (they purchased Appirio’s PSE business) who are delivering a growing suite of financial and accounting applications, JobScience who continue to build out their Talent Relationship Management suite on Force.com, Less Software who is selling a targeted Supply Chain Management solution and even Remedy’s Service Desk offering, RemedyForce Cloud. If Salesforce offers an attractive exit for any of these firms or their Force.com products, like they did with Heroku, then it might be possible to do a quick roll-up of key partners to create a competitive Cloud-based ERP solution.
Interestingly this type of move might be triggered by Oracle buying Netsuite or Workday going public.
Fake SaaS Firms That Use Private Clouds Will Loose Altitude
Although Private Clouds might be a viable alternative for enterprises who are looking to leverage the economics of the Cloud, for software companies this type of approach will only provide short term ‘Fake SaaS‘ types of solutions. This type of business model of hosting single-tenant software was known as Application Service Providers (ASP’s) and none of these companies that emerged about 10 years ago were able to find a business model that really scaled profitably. Private Clouds will offer a short term technology transition steps for software companies who are moving away from just offering traditional on-premise software but this trend will really start to fade by later next year.
New Revenue Streams for SaaS Firms That OEM
At Dreamforce ‘10 Salesforce.com announced that they are launching their new Database.com offering, a Database in the Cloud. What was interesting about this news is that Salesforce is really just reselling a private-label version of Oracle’s database technology. For Salesforce this is a unique way to take proven Oracle software, designed for on-premise deployment, and create a true subscription-based version of this product. No doubt that Salesforce will need to do some work to create a massive multi-tenant version of an ORACLE database and then deliver it as a service, but they are already doing this today through their Force.com platform. This could be a significant new revenue stream for both companies and look for other SaaS firms to try OEM’ing their software as a way to improve their CAGRs in 2011.
This should be an interesting year as the economy improves and the SaaS market really begins to gain some serious momentum. It should be a fun time to be in the Software business again.
Kevin Dobbs, Montclair Advisors, LLC
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
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.
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