Happy New Year!

In February Montclair Advisors launched our SaaS Business Profile Series and have been focused on covering as many SaaS companies as possible during 2009. As it turns out we were able to profile more than 30 SaaS companies of all types including pure SaaS firms, Cross-Overs and Hybrids!

We would like to thank all of the executives and companies that participated during 2009 and we look forward to continuing to follow their progress during 2010.

What we learned from these thirty-four profiles:

• SaaS is an evolving business model - It is still a new concept and few firms are running a pure subscription software models. Beware that there is still a lot of “Fake SaaS” out in the market overall.
• There are many variations of SaaS - these variations are based on the company’s starting point, the market they serve and the types of products they sell. Interestingly, Salesforce.com is actually not a very representative SaaS business model for the broader market.
• It takes time to build a real SaaS company - For many SaaS firms it takes up to 7 years to reach breakeven and nearly 10 years to ultimately gain scale with their business model.
• Cross-over providers will still need to hold onto their on-premise legacy for the foreseeable future, because it is hard to switch customers to SaaS all at once.  It is also difficult to upset your maintenance revenue streams, especially during tough economic times.
• The Great Recession has permanently changed the Software buyer’s behavior towards SaaS due to the lack of available capital. When you see SAP and Oracle and many of these profiled ISV’s moving their businesses to SaaS, you know it isn’t a fad.
• Penetrate and Radiate. The successful SaaS firms have started small, with easy to sell, easy to consume solutions.  They then develop additional software, services and content solutions to sell back into their installed base.

Here is an overview of the thirty-four companies Montclair Advisors covered in 2009:

Profiles by SaaS Category

Pure SaaS:        15     Started out and only offer SaaS subscription services

Cross-Overs:    11      Started out as on-premise, but have fully transitioned to SaaS

Hybrids:             8      Continue to offer SaaS services AND on-premise software

Public vs. Private

Public:               6

Private:             28

Profiles by Age of Company

0-5 Years:         9

5-8 Years:        10

8+ Years:         15

M&A by Companies

Sell-side:            2    Mint.com by Intuit for $170M and QuickArrow by NetSuite for $20M

Buy-side:           4    Lithium Technologies (Keibi Technologies), RightNow (HiveLive), Taleo

(Worldwide Comp), Xactly (Centive)

Fundraising Public & Private

What was also interesting to see is that even in the toughest economic climate since the Dot Com meltdown, that many firms that were profiled were able to raise capital in both the private and public market places.   The big winners were SuccessFactors who raised more than $200M in a public offering and Workday, raised an impressive $75M private round that was led by New Enterprise Associates.  As the economy begins to turn in 2010, expect to see more SaaS firms going back out to raise growth capital.

We hope these profiles have been helpful to our readers and we will continue to profile interesting SaaS firms in 2010, because we learn a lot about our emerging industry and we will continue to build back into the Montclair Advisors advisory services that help our clients become successful SaaS companies.

Please let us know what you think, because we would welcome any ideas on how to improve the Saas Business Profile Series for 2010.  Just drop me an email at kevin@montclairadvisors.com.

Company:         Daptiv

Started:             1997

Located:            Seattle, Washington

Geography:       Global

Market:             On-demand Collaborative Business Software

Products:          Daptiv PPM, Daptiv Scrum, Daptive SMB and Daptiv Platform

Key Customers:    BP, Chase Paymentech, Frontier Airlines, Honeywell and UCSD.

Website:           Daptiv

Blog:                Daptiv Community

Recent News:

SaaS Model Sees Growing Demand Overseas

Daptiv Brings Kevin Hickey on Board as Chairman of the Board of Directors

Daptiv Adds More Than 30 New Customers and New Solution for Software Development in Q2 2009

Daptiv Named a Winner of a ‘Project & Portfolio Management Innovation Award’

I asked Tim Low, Daptiv’s VP of Marketing 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 in 1997 as an on-demand project portfolio management firm. Over the last ten years Daptiv has evolved into a leading firm in the Collaborative Business Software market. Project Portfolio software helps companies to more effectively manage new product development to operations and service delivery, Daptiv’s on-demand solutions streamline employees’ day-to-day interaction and collaboration while dramatically reducing the complexity of managing multiple teams, projects and tasks.

Daptiv developed what they are calling a mid-office set of solutions that sit between traditional back-office solutions like SAP and ERP products and front-office solutions like Salesforce.com and other CRM Today, Daptiv has more than 700 customers with over 100,000 users.

Why do your customers buy from Daptiv?

Daptiv offers a wide variety of products. Our Dapitv PPM solution is ideally suited for mid-market firms with revenues between $50M - $2B in annual revenues. Daptiv PPM is attractive for vertical markets such as financial services – specifically for insurance, consumer packaged goods and higher education. Our Daptiv SMB offering was designed for small companies with 10-25 users. Daptiv SMB provides a pre-configured solution at a lower price point. Daptiv Scrum is for large firms who are developing complex applications for SAP, Oracle, Salesforce and Microsoft. The product offers over 150 pre-configured connectors, to make integration more straightforward.

Customers also like the fact that Daptiv takes about 28 days on average to implement, which provides rapid time-to-value. This ‘Subscribe-to-Live’ approach encompasses all the time associated with product provisioning, configuration and training.

Daptiv also offers an interactive user community that contains blogs, forums with best practice advice and a complete solutions library. This customer community is very useful and provides a way for Daptiv customers to connect with other users.

Lastly customers like the flexibility of the products because they are configurable and provide dashboards, custom fields and views. The Daptiv applications are easily extendable using the company’s dynamic data model.

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

As I mentioned, organizations value the time it takes to access as well as how long it takes to pay off their investment, which is why our Subscribe to Live packages are so popular.

We are also seeing a broader adoption of PPM solutions in the market as companies are looking for tools that help them better manage their organizations, especially as they try and do more with less resources.

At Daptiv we believe the maturity of the On-demand delivery model is a major trend. As more customers are deploying software on-demand they are realizing the importance of solutions that have thought through issues like security, controls and integration.

What is your outlook for 2009?

This has been a challenging year but we are seeing a strong demand globally for our solutions, in fact, more than 40% of our deals in 2009 coming from outside the United States. We have seen a lot of demand for our products in Europe, Latin America, Australia and New Zealand. More than 20 percent of Daptiv’s overall customer base is headquartered internationally, a growing percentage, as nearly 50 percent of Daptiv’s second quarter new customers are based overseas. International customers like our affordable, flexible licensing model as a primary advantage of the SaaS model, as well as ease of use and configurability for managing the various types of work and projects throughout their organizations.

We have seen a lot of pent up demand in the first half of the year. It is early but we are seeing some good signs and look forward to a strong second half of the year.

Thank you to Tim Low and Zoe Vandeveer for contributing to this profile.