0
Company: Yammer
Started: 2007
Located: San Francisco, California
Geography: North America
Market: Enterprise Microblogging Platform
Products: Yammer Desktop, Yammer on your Mobile Device, and Yammer Plug-Ins
Key Customers: Deloitte, AMD, AAA of Northern California, Nevada and Utah, SMG, Cargill, Thomson Reuters, Sungard, Hill & Knowlton and SunCorp.
Website: Yammer
Blog: Yammer Blog
Twitter: @Yammer
Recent News:
Yammer is Selected as an MIT Sloan CIO Symposium Innovation Showcase Finalist
Fortune 500 Companies Flock to Yammer
Yammer Secures $10 Million in Series B Funding from Emergence Capital and Previous Investors
I asked David Sacks, Yammer’s Founder, CEO and Chairman of the Board 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 did start out as a SaaS company. Our company was incubated inside of Geni, which develops family tree software. I was also involved with the consumer Internet with my experience starting PayPal. As both companies scaled, I found it was hard to keep tabs on what everyone was doing, and Yammer was developed to address this challenge. We found that microblogging was a great way to keep current on the status of important projects, individual profiles and information feeds inside of an enterprise.
Then in 2008, we spun out Yammer and that same year won the TechCrunch 50’s Best in Show award.
Initially we were targeting small and medium sized businesses but we are now seeing that Yammer has strong appeal for large enterprises like AAA, AMD, Cargill, Cisco, Deloitte, and Thomson Reuters.
Yammer is very viral because it was very easy for anyone to sign-up, confirm their company’s email address and start using the system. You don’t need to wait for an IT administrator to set up Yammer and you can quickly invite your work colleagues, with the same company email domain, to join in and begin collaborating with you.
When a company wants to claim the network being used by it’s employees, they pay a nominal subscription fee, and then we provide a set of administrative tools that allow them to manage upgrades, security, compliance, deliver premium support, and customize their site.
Part of our initial business model was to base Yammer on the consumer model of software, but make it enterprise-class. We wanted to remove the traditional friction from our software sales process by making our product as easy to use as Facebook.
Why do your customers buy from Yammer?
Our customers never have to pay or upgrade our software unless their employees are using it. This is very attractive, when you compare it to the traditional software selection process where you have to vet vendors, choose one, negotiate the contract, implement the product, pay a lot of money and then no one uses it. Yammer is de-risking the traditional enterprise software value proposition. Employees are valuing it because they use it.
When large companies see thousands of employees using Yammer what do they do? They can do three things - wait and see what happens, shut it down or buy it and we are finding the vast majority of companies are buying Yammer because their employees are being productive and want to collaborate using the software.Our customers also really like our administrative tools for e-discovery, security, directory integration, and network administration.
“If Facebook and Twitter had a baby, it would be Yammer.”
We are like Twitter because we offer a real-time feed of information; you can follow any one, join groups and sort information feeds by hash tags. We are like Facebook because there is no 140-character limit, you can have attachments, threaded replies and we offer a variety of enterprise management tools.
Yammer is a like a virtual office where workers can feel more connected to each other, especially remote workers. We act like the traditional company water cooler for these distributed organizations. As workforces become more mobile, Yammer just make a lot of sense for enterprise collaboration. Today we only offer Yammer in English but we have noticed that there are an increasing number of new customers who are signing up outside of North America. In the near future we will be supporting multiple languages in addition to English.
Customers also like our value-based pricing model. We charge between $3 and $5 per seat per month, depending on the level of support and administrative tools. We also provide volume discounts for our larger customers. This is much more cost attractive than purchasing Chatter from Salesforce.com for $15 per seat, which is quite expensive and most employees don’t want to communicate through the company’s corporate CRM system. Our very fast viral Freemium approach appears to be working, because since we have been live for only the last 18 months we now have over 1 million seats today.
What do you see as the key trend emerging in the SaaS industry?
The first trend is the consumerization of enterprise software; Yammer is a great example of this trend. Real innovation in the technology space over the past 10 years has been on the consumer-side of the software market with products like Facebook and Twitter. At Yammer we want to take these learnings back into the enterprise software world. When I was at PayPal, we were very successful using the Freemium model to promote adoption. This type of approach to software can definitely result in the overall democratization of enterprise software. SaaS is the first step, when the delivery model changed, then there were no upfront costs and the risk is dramatically lower. Using techniques developed by consumer software firms, more and different kinds of buyers can now access enterprise-class software.
The second trend we see is that enterprise software products will be designed more for the end-user than power users or administrators. A good example is how Facebook and Twitter don’t do every possible feature or function and they don’t clutter the user’s screen. This simplified approach to software allow causal users to be more engaged with their products and other users. These types of causal use software products will also appeal to younger employees who have used Facebook and LinkedIn and expect their enterprise software products to be that easy to use.
Social Networking is also a major trend we are seeing. We started thinking about this over the last couple of years, since 2007. Now it seems so obvious, that social networking would grow into an unstoppable trend. The ability to connect workers, to leverage expertise and content all in real-time, which allows everyone to work smarter, just makes a lot of sense. I still think that there is confusion about Enterprise Social Networking, for instance Salesforce sees it as a CRM newsfeed, and we see it as enterprise real-time communication. Eventually we see Enterprise Social Networking replacing corporate email and instant messaging.
What is your outlook for 2010?
In January we raised $10M, led by Emergence, that provided capital to allow us to expand our team. Our investors liked the fact that we have built a very cost effective business, based on our viral distribution model. Our Q1 sales were greater than all of our sales for last year combined.
The software industry is realizing that Enterprise Collaboration is going to be a huge space. Most software companies will want to get into this market because every company will want one of these collaboration platforms to deploy. The only problem is that most enterprise software firms looks at these types of tools backwards, because they already have multiple different product lines, then they will need to stuff it through their sales channel. At Yammer we have already solved this distribution channel problem and we can actually open up our channel to these companies as a Distribution as a Service model.
We continue to sign up a number of large customers, and this type of adoption makes other large companies comfortable using our technology. Things look great and our traction is accelerating.
Started: 2003
Located: Palo Alto, California
Geography: Global
Market: Electronic Signature and Contract Management
Products: EchoSign Web, EchoSign Salesforce, EchoSign for Google Apps, EchoSign for Netsuite, and EchoSign for Oracle CRM OnDemand
Key Customers: British Telecom, Comcast, Delta Airlines, GE Capital, Qualcomm, and Time Warner Cable
Website: EchoSign
Blog: EchoBlog
Twitter: @fromechosign
Recent News:
EchoSign Electronic Signature Reaches 1,000 Customers on Salesforce.com’s AppExchange 2
EchoSign Integrates Its Electronic Signature Software with NetSuite’s Cloud Computing Platform
EchoSign Now Available Through the Google Apps Marketplace
I asked Jason Lemkin, EchoSign’s CEO and co-founder 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?
When we started our company in 2006 the market wasn’t that clear on what SaaS really meant. Our vision has always been clear to build a web or Cloud service where companies could execute a contract electronically on the Web.
This is my 4th start-up and the second company that I have co-founded. I was a lawyer at the Venture Law Group here in the Bay Area and it was really obvious to me that this was the right way to get contracts done but lawyers tend to be slow to adopt new technologies.
It always seemed logical to be able to execute contracts electronically, because it saves time and headaches but our vision might have been a bit early. Our early customers were an odd mix of web-centric folks who read TechCrunch, use BaseCamp project management products, and other companies that wanted to automate their business contracting processes. Now we are seeing regular businesses are catching up to our early adopters by leveraging the Web for their contracting processes. We believe this might be one of the last open areas for the automating of business processes using the Internet. Like a lot of other paradigm changes contracts will be going from the analog world to digital, and most contracts in the next 5 years will all be executed electronically.
Why do your customers buy from EchoSign?
We have sold to nearly 20,000 customers of all sizes including Proctor & Gamble to Real Hip Hop Records to Dell and more than 80% of our customers use our products for sales oriented tasks. The real advantage for our customers is going from an older fax-based contract process to EchoSign. We can take a process that currently takes days and compress it down to just a few minutes; in fact we have found that the average time to execute a contract with EchoSign is less than 45 minutes.
Aetna likes EchoSign because healthcare professionals can complete contracts faster and more reliably and can reduce the expenses associated with faxing or mailing these agreements. The company has found that by using EchoSign, they can reduce contract-processing time from three weeks to one day on average. Currently about 70% of all of Aetna’s transactions with healthcare providers are electronic and EchoSign helps with these processes and provides visibility throughout the contract lifecycle.
We built EchoSign to be a very easy to use sales tool, not just a product for lawyers. All types of business people are executing contracts today. Business professionals and sales reps just don’t have time to learn how to use new tools; they just want to focus on closing contracts and getting back to their business.
Like Aetna, many of our larger customers also see the benefits of EchoSign for their legal organizations because we provide visibility into their overall contracting process, which helps with compliance by creating electronic audit trails, delivering a secure signing process, which can also help to avoid fraud.
What do you see as the key trend emerging in the SaaS industry?
When we started the company three years ago, customers were just buying SaaS point solutions like Salesforce.com and WebEx. Today companies are running their entire business using Cloud-based software. So the concept of signing and closing contracts can no longer be viewed as just a point solution, but a component of a larger, integrated business process.
For example, a typical integrated sales process for one of our customers might be capturing a new lead from Google Adwords, then demonstrating their product over the Web using WebEx and managing the sales process using Salesforce.com and then executing the new customer contract using EchoSign. Our customers would ideally like all of their SaaS tools and processes to be integrated because it saves them time and money. Applications should just be loosely connected together using API’s, they want these products to work together in a more integrated way.
Another trend we see is the rise of many different partner ecosystems that companies like ours will need to work with over time. EchoSign is a Salesforce AppExchange partner; in fact in 2009 we were the signal highest rated application on the AppExchange. We also work with Google Apps, Oracle, Salesforce, Box.net and others. We have these partnerships because our customers are looking to integrate all of these web products together to run their businesses and we want EchoSign to be a part of these expanding set of business processes.
Even though Salesforce has over 70,000 customers, the Laws of Attach Rates would tell us that we can only assume that 1-2% of their customers will consume our service. We just announced we have signed our 1,000th Salesforce customer, so we are doing well but we need to work with many of these partners who support large eco-systems of customers. Because we are relatively easy to integrate into, we should have a higher attach rate to these solutions and this partner leverage will enable us to grow our business quickly.
What is your outlook for 2010?
Last year, during the recession, we saw elevated churn rates but now our business is back to pre-recession levels. The churn was related to bankruptcies and other similar types of recession fallout.
Our customer’s buying patterns are pretty consistent. Prior to the recession, we had many lower quality customers, but now we are seeing more stable, higher quality customers who are less likely to churn in the future.
These stronger companies are buying our solutions now, which is fueling the growth of our business and we are not seeing those lower quality customers out in the market. I guess it was easier to build a company when equity and debt were available to start a business. Today, strong companies are succeeding and accelerating out of the recession and EchoSign can help these companies optimize their sales processes.
A good sign for our business is that we are starting to see our customers asking to pre-pay for multi-year deals as a way to lock in future pricing.
There were a number of keynotes at last week’s All About the Cloud conference that focused on Public and Private Clouds and the market. What was interesting is that the typical hype associated with Cloud Computing appears to be calming down. It seems like it is no longer necessary to justify or explain the Cloud, or at least for the audience at that conference. According to Gartner the Cloud Computing market will be $150B in IT spend by 2013 as compared to $56B in 2009 and is the #1 Strategic Technology for CIO’s in 2010
The new Cloud attitude appears to be more about ‘when’ and ‘how’ enterprises will be utilizing Cloud solutions rather than ‘if’.
Coexistence is ‘In’
The other interesting change, which I first noticed at the end of last year at both OracleWorld and Dreamforce, was that everyone seemed to be talking about co-existence or hybrid uses of the Cloud with on-premise assets. This more reasoned approach is going to make more sense to CIO’s and business executives to who have spend millions building out their infrastructure over the past 10 years. Cloud can be complimentary. Starting with fringe or edge applications and then over time becoming more useful for mission critical functions.
The Consumer Cloud
Tuesday’s press panel with [insert names] focused mostly on the use of the Cloud for consumer applications like Facebook, Google, Amazon, eBay and future offerings like iTunes LIVE and Microsoft Office 2010 (launched on May 12th). Cloud is everywhere but the average consumer doesn’t even know they are in the Cloud. With the advent of ubiquitous broadband access, smart devices and massive data centers, there are all sorts of Cloud based consumer services emerging. But the market is still evolving because the Generation X’ers are plugged into the Cloud but as Kevin O’Brien from Oracle said in his session, ‘My mom still doesn’t know what the Cloud is’, and she is probably isn’t alone.
Private Clouds
There were many sessions that discussed how there is money to be made in the Private Cloud market. You can have many of the advantages of the Public Cloud without the security and control issues. IDC projects that by 2014, $11.8B will be spend on servers to create Private Clouds, considering overall IT spend in the US is approximately $1T, that’s not big percentage today, but it will be in the future.
Scared of the Cloud
Are CIO’s scared of the Cloud because of their potential for loss of control, security issues and resource impacts? Several sessions touched on this aspect of the Cloud Computing market including CIO’s creating hurdles to adoption.
Given the cost and scalability advantages why wouldn’t organizations like the State of California quickly adopt Cloud based solutions? What about the switching costs like decommissioning your own data centers, software and restructuring personnel. If you already own PeopleSoft and it is working, will you really be open to a Workday ‘rip and replace’ scenario? Enterprise organizations are warming up to the idea, just ask Flextronics.
One panelist cited a recent Google Docs deal that went sideways at UC Davis where they scrapped their trial for several thousand users. Maybe there were other considerations than the Cloud but most of the sessions agreed that the benefits of the Cloud outweigh the risks and CIO’s are starting to think in terms of intelligent trade-offs instead of just being against the Cloud. This is probably smart, given the recent economic conditions and every CEO is looking to optimize their IT spend.
Cloud 2010 and Beyond
Cloud is just the new thing. According to Bill McNee at Saugatuck Technologies, their most recent Cloud Computing survey indicated that 86% of the respondents thought that the Cloud would be part of mainstream IT by 2014.
There appears to be reasonable optimism that Cloud Computing is not a fad and its going to happen, it’s just going to be the way people are operating today in the future. The Google Docs business is adding 3,000 new companies a day, that doesn’t seem like a fad. According to Gartner, their Hype Curve for Cloud Computing showed that July 2009 was the peak and it really appears that the market is maturing about the Cloud.
Venture Capital firms are only funding Cloud-based start-ups and large technology companies like Cisco, CA and IBM are buying SaaS and Cloud based companies (like CastIron Systems) because they realize they need to overcome the ‘Innovators Dilemma’ around the Cloud. There will be an increase in successful SaaS and Cloud companies as the market continues to mature, as well as a lot more M&A activity.
As one speaker so aptly described the current market situation for many companies when evaluating Cloud Computing, ‘When a piano falling from the sky, you should be worried more about will it hit you not where it is while it is falling.’
I listened to an interesting panel discussion at the Opsource, SaaS Summit a few days ago and I thought I would share what I heard.
Venture capital panelists were from Intel Capital, Emergence Capital Partners, CrossLink Capital and Hummer Winblad Venture Partners and Merrill Lynch.
New Investments
Seems like there was no agreement from the panel about what stage of investment was the most popular given the downturn. There were several Series A and Seed investments that were mentioned including Crowd Factory and Zuberance. One bright spot for investors was the fact that OpenTable has filed for an IPO, which would be a good step in the right direction given 2008’s anemic IPO performance.
Zombie Venture Capitalists
Most of the panelists had done some investments in the past six months but it is clear that SaaS entrepreneurs need to be on the look out for Zombie VC’s, who are still operating but are no longer making investments. These walking dead have their lights on, they have websites, and cash to support existing investments but no longer have enough cash to add new portfolio companies. In writing this post I even discovered that peHUB publishes a list of these Zombie VC’s. If they haven’t made any new investments during 2008, then I would be careful about wasting any time with these firms.
Flat is the New Up
One phrase that was uttered more than once is that ‘Flat is the New Up’. Although when it comes to Software as a Service… it appears that ‘Up is still Up’. Even in 2008, most publicly traded SaaS companies have bounced back from their lows by an aggregate of 20%, which is much better than the S&P 500. Apparently Wall Street likes SaaS companies and now are valuing them at 3 to 3.5 times their recurring revenues, unfortunately at the beginning of 2008 that number was closer to 8x. Keep in mind that this is better than a lot of public firms that are currently trading at their cash values. Other Wall Street analysts are valuing SaaS firms at 12x their cash flow but it is difficult to understand if there is a consistent valuation metric that firms or investors should be using.
Another interesting development is that Venture firms are now forced to value their private portfolio the same way they would value a portfolio of publicly traded stocks due to new accounting regulations (FASB 157). Based on the discussion this new regulation, it will only create more company valuation compression on top an already tough market for portfolio companies.
What Does a Good Investment Look Like?
So what are the VC’s looking for in an attractive investment in this market? Apparently the same things they were looking for in the past; a game changing idea, the team, the product and a big market. If you are a software company you better be offering a real SaaS solution or be leveraging the Cloud Computing to even be considered.
They are also looking for new portfolio companies to be more conservative about spending their precious cash. There is now an overt trade-off between the rapid growth rates of the last five years and capital efficiency to provide a longer runway for portfolio companies. The panelists indicated that they would like to see their new Series A companies, for example those who might raise $4 million, to survive at least for 18-24 months before going out for their next round! With the difficult market dynamics it is important for SaaS firms to form a strong syndicate when raising capital because your next round will be an insider round.
The panel indicated that they are looking for operating executives who know how to manage cash and scrub expenses. Another observation was that many of the early stage companies that they are seeing now are much more mature and well run than they were just a few years ago.
There also won’t be any more Salary.com (NASDAQ: SLRY) IPO’s of $15 million companies. IPO candidates will need to be $50 to $70 million in revenues and ideally profitable before filing their S-1.
For public SaaS companies you are going to see a slow down in the rapid growth rates we were seeing from companies like Salesforce.com (NYSE: CRM) and SuccessFactors (NASDAQ: SFSF). Public markets want to see profitability first and growth now comes second. Momentum stocks, those with high growth rates were trading at 8-9 times revenues, like Salesforce and SuccessFactors, are giving way to slower growth companies that are profitable and are given a multiple on cash flows.
Customer Acquisition Costs
When building your SaaS business model, it is important to assume that for every dollar of recurring revenue you will probably need to invest $.50 to $1.00 in your Customer Acquisition Costs (CAC). It is important than ever to have an active program of testing various CAC channels and tactics to maximize your investments. Then you need to have a smart statistical framework that you can explain to your investors.
Smart firms like EchoSign and YouSendIt are creating leads virally by infecting their customers and they are finding that they are finding 1/3 to 1/2 of all of their leads are generated organically. It is also important to leverage distribution channels, especially companies that have access to large customer bases like Salesforce.com, Google, and Intuit. Take more of a focused approach to your customer acquisition efforts by targeting a vertical market and use the power of your customer referrals because ‘word of mouth’ is the least expensive and most effective lead generation engine. Keep in mind that your sales process needs to be as easy as possible, in other words it needs to be ‘friction-less’. When your prospects sign up for a trial, it only takes a few minutes and weeks and they can do it without any involvement from your company. Give them a free trial, a sandbox a free version.
So I came away from this panel discussion with the following advice for companies looking for funding in this environment:
- You need to still need to have a great idea, product and team but you might need to have reduced risk for your potential investors.
- Demonstrate your company knows how to stretch a dollar as far as possible. Fewer employees is better… think Craigslist.
- Show traction. Number of transactions, members, customers, revenues, profits.
- Shop carefully for your potential investors and don’t waste time with Zombies.
Good Luck!
SMB Financial Productivity Software
There is an increasing number of Software-as-a-Service (or SaaS) firms jumping into the smallest end of the Small and Medium-size Business (SMB) market, and they are offering a variety of office productivity solutions. This is the fastest growing segment of the economy according to the Bureau of Labor Statistics there are up to 21 million self-employed consultants and small firms in the US.
This has traditionally been the sweet spot in the market for companies like Microsoft. Although most customers are somewhat happy with their offerings, Microsoft offerings tend to be cumbersome, packed with way too many features, hard to use and upgrade.
A new set of SaaS providers has emerged with products designed specifically for the small business owner. These packages are all delivered through the Internet as a service, so no more visits to Best Buy were required. Many of these new software services are very low cost and some were even free, and because of this, the adoption of these products has been rapid.
This Sector Report is only covers the incumbent software provider and the promising new SaaS suppliers.
Office Productivity Suite Profiles
Word, Excel, Outlook, PowerPoint and many other productivity products.
Microsoft has owned the SMB office-based software market for at least the last ten years. Their suite is large and includes all the main office productivity software modules.
Microsoft Office has been delivered as shrink-wrapped software. Microsoft is now experimenting with delivering their products through the Cloud along with using their Azure operating system. Most alternative office solutions are SaaS-based.
There are millions of Microsoft Office customers.
Public company (NASDAQ: MSFT)
New Alternatives
On-demand documents, spreadsheets, calendar, presentations, email and more.
Some applications are very similar to the depth of functionality you would find in the Microsoft Office suite of products. Other Google Apps offer very lightweight functionally and don’t appear to be very useful. All Google Apps are delivered through the Cloud as a subscription offering. Google provides for free usage for up to three users and then offer the applications for $50/user per month.
Approximately 10 million users and 1 million customer companies.
Estimated 3,000 companies are signing up for Google Apps per day.
Public company (NASDAQ: GOOG)
Zoho Productivity and Collaboration Free and $
On-demand documents, spreadsheets, calendar, presentations, email and more.
Most of the Zoho applications have similar functionality to Microsoft’s products and provide many other capabilities beyond their Office suite. The Zoho application suite has better functional depth than Google Documents. All products are delivered through a SaaS subscription model.
Estimate 1.2 million users/customers.
Private company based in California and India. 250 employees.
Zimbra Collaboration Suite Free and $
Hosted documents, calendar and email.
Hosted, open source applications that are less functionally rich than Microsoft, Google or Zoho offerings. One concern with using Zimbra is that if Microsoft finally purchases Yahoo! they might shut Zimba down and force their users to use Microsoft Office.
Estimate hundreds of thousands of users/customers.
Public company (NASDAQ: YHOO)
Other players in the SMB Office software market include Sun Microsystems StarOffice, Apple’s iWork, and Corel’s WordPerfect suite. Small businesses have many choices when considering an Office productivity suite and many of the best options are for free.
Small businesses are actively looking for ways to save money and using any of the SaaS-based office productivity tools will very quickly pay dividends. For example the City of Washington D.C. decided to switch from using Microsoft Office and related software to Google Apps and is now saving nearly $3.5 million annually.
Given the current state of the economy, many individuals are now setting up their own businesses. Using these new subscription-based Office Productivity tools can not only be very affordable for start-up your businesses but also give the consultant or SMB many of the same capabilities they had at their larger firms.
The good news is that there is no shortage of SaaS-based Office products out there to choose from and this is just a top line summary of what is available. Many of these products are available at very attractive price points, including many who are free. Given the experience that the City of Washington D.C., using these solutions not only can save a lot of money but also make SMB’s more competitive in this tough economic environment.
Company: MrTed, Ltd
Started: 1999
Located: Across the globe with 10 offices – Headquarters in London, UK
Geography: Global presence, with strong experience in Europe
Market: Human Capital Management – Talent Acquisition / Recruiting Technology
Products: MrTedTalentLink™ - Enterprise Applicant Tracking System (ATS)
SmartRecruiters™ - Small and Medium Businesses (SMB) ATS
Key Customers: Siemens, Heineken, Levi Strauss & Co, TomTom, Tommy Hilfiger
Website: MrTed Website
SmartRecruiters Website
Blog: SmartRecruiters Blog
Recent News:
Leading European RPO Ochre House selects MrTed to support its European delivery model
MrTed releases latest version of flagship Talent Acquisition Solution
MrTed Taps eQuest to Provide Job Postings on SmartRecruiters
Ready, Set, Recruit! Talent Acquisition Leader MrTed Launches Free Applicant Tracking System
Free Applicant Tracking System Shakes Up Recruiting Software Market
I asked Jerome Ternynck, MrTed’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, we did. The company was started in 1999 to provide an ASP solution, yet our Applicant Tracking Software (ATS) has always been sold on a subscription-based model for our customers. After the launch of MrTed, we faced some interesting market developments and survived. We learned a lot from the dot-com crash in 2001 and we realized that that being a pure subscription business, or what is now being called Software-as-a-Service, is important for our company’s long term stability and growth.
Being a pure SaaS company during a recession provides more visibility into our future revenue streams and eliminates the up’s and downs we see traditional ATS competitors experiencing. We are now more than 20 quarters profitable and have strong recurring revenue; we are able to maintain our investments in our product roadmap.
Why do your customers buy from MrTed?
For the last ten years MrTed has been servicing the talent acquisition needs of large, complex, global organizations. Our customers are one of the largest companies in the world and we also provide the technology infrastructure for some of the largest Recruitment Process Outsourcers (RPO’s), who also service these types of complex, multi-national companies.
At MrTed, we understand global recruiting. With over 9 years experience we are able to capitalize our knowledge into our products and service delivery. Our enterprise product, MrTedTalentLink™, is a proven solution that is functionally rich but can be set up very quickly, which is attractive for our customers. We support the local regulations and languages of all countries in Europe and most of Asia and North America. Because of this, our clients don’t need to work with local software providers in country where they have a presence. All they have to do is work with us and we have them covered, one single solution for one global workforce. As recruiting in Germany is still not the same as recruiting in China, an enterprise needs to be flexible in its requirements. MrTedTalentLink™ is able to fulfill all the local requirements, but meanwhile maintaining the consistency on the highest level of the company. Because of our user-friendly configuration capabilities of MrTedTalentLink™ a company is able to set its own requirements and configure MrTedTalentLink™ on its own.
Our latest offering, SmartRecruiters – which is still in beta – is designed specifically for small business recruiters and hiring managers who, until now, have been forced to use expensive enterprise systems that are complicated and difficult to implement. By contrast, SmartRecruiters is easy to use, deploys in just a few minutes, and is 100% free. Integrated with the SmartRecruiters ATS is a set of pay-per-use services and vibrant and supported by a growing user community. After only 90 days, we have over 350 SMB clients who have signed up for SmartRecruiters! This Open SaaS product was designed to be free and easy to use, which is what SMB’s are looking for. We started our mission with the believe that SmartRecruiters can change the Recruiting Software industry and that SmartRecruiters has become the fastest-growing ATS in only three months is testament to the great need in the market for something new. We will continue to improve the application through input from the community and the addition of new services, and we are optimistic that SmartRecruiters will be the number one ATS in the industry by the end of the year.”
What do you see as the key trends emerging in the SaaS industry?
The urgency for enterprises to have one global platform and be able to adopt the local requirements, while maintaining the global consistency. If you don’t provide a single hosted and one code base solution to your customers, this will be difficult times for you.
With the launch of our SmartRecruiters Open SaaS offering for SMB’s we believe that free software is the wave of the future, especially when it comes to the SMB market. For many mature software categories, sales penetration into smaller organizations is costly and difficult. By adopting some of the business approaches of firms like Google, Yahoo!, Linkedin and Skype, if you can aggregate a large user community, there are many ways of monetizing the customer base without having to sell software.
Our approach to the ATS market is to use an Open SaaS approach, which is a mash-up of both Open Source and SaaS principals. Offer the software for free, its hosted and maintained but provide pay-per-use services and wrap it with a strong user community. We think that this trend has the potential to change the SaaS industry.
What is your outlook for 2009?
We continue to grow and see opportunities in the market on both enterprises as well for the SMB businesses.
In the enterprise market, it’s time to take control and grow from one global platform and get rid of the numerous local solutions. Customers want to consolidate on numerous local solutions into a single global solution, covering and managing their global workforce. We are ideally positioned for this 2nd buyers market. A couple of years ago this buyers group were the early adaptors of the first ATS wave, but now they understand the urgency of the current market to improve their processes, create a global workforce and be ready for the new phase of growth after the recession.
Introducing ATS technology for free to the SMB market turns the SmartRecruiters proposition into a gateway to the estimated $40 Billion staffing services spend by SMB’s in the US alone. Free ATS technology levels the playing field in the War for Talent and ensures that corporate recruiters and hiring managers in smaller businesses can be more competitive.
Although we will need to manage our business very carefully during this recessionary period, we also have new products and markets that we are now attacking, so we see continued growth potential. Unfortunately, we don’t control the current state of market or economy, but for our SmartRecruiters Open SaaS offering – which is Free & Easy – our timing couldn’t be better to launch a free recruiting tool and turn an industry upside down.
Thank you to Jerome Ternynck, Matthijs van Etten and Ralph Brasker for contributing to this profile.
Company: Zuora
Started: 2006
Located: Redwood Shores, California USA
Geography: North America
Market: Subscription Billing
Products: Z-billing: Complete billing solution for subscription businesses
Z-payments: Payment solution for subscription businesses
Z-Force: Billing and payment system fully integrated with salesforce.com
Z-Commerce Platform: Commerce platform for cloud developers
Key Customers: Boomi, Clickability and Marketo
Website: www.zuora.com
Blog: Z-blog
Recent News:
Zuora Introduces the Business Cloud With Launch of the Z-Commerce Platform
Zuora Enables Growth, Reduces Time to Invoice and Increases Productivity at Marketsync
I asked Gary Hagmueller, Zuora’s Chief Financial Officer a few questions about his business and his view of the SaaS market in 2009.
Why did you start your company?
Thanks to the power of the Internet and cloud computing, many products are moving to subscription services delivered online—everything from music and DVDs to software and infrastructure to groceries and cars.
However, companies that deliver these new services need a way to run their subscription business AND support their unique billing needs. For example, they need pricing flexibility to address different customer groups, operational scalability for growth, and key metrics like churn and monthly recurring revenue (MRR) to assess the health of the business.
That’s where Zuora comes in. Just as Amazon makes it easy to become an online retailer, Google makes it easy for anyone to advertise online, and PayPal makes it easy to accept online payments, Zuora’s vision is to make it easy for any company to build, manage and grow a subscription business.
Did Zuora start out as a Software-as-a-Service company?
Yes- Zuora was built from the ground up by SaaS industry visionaries and veterans from Salesforce.com, WebEx, Postini (now Google), and Oracle. The Zuora team grew up in the subscription services world and started Zuora with the mission in mind to help other SaaS companies build and grow. Moreover, Zuora runs its business completely in the cloud, using such applications as WebEx, eFax and Google.
Why do customers buy from Zuora?
Zuora is the fastest-growing on-demand subscription billing and payment service designed specifically for subscription companies. Its innovative products are able to meet a wide range of customer problems. Whether a company is having trouble processing recurring payments or spending too much time and resources of manual billing, Zuora’s team can understand and assess the issue. The Zuora platform changes the way subscription businesses manage and sell to customers and allows them to bring new products to market in less time, with less hassle.
What do you see as the key trend emerging in the SaaS industry?
In the current economic climate, an increasing number of companies will begin offering their products as subscription services. The success of the SaaS movement has even prompted other industries outside of software like cars and movies (i.e Zipcar and Netflix) to adopt this lucrative model of recurring revenue. The problem is…running a subscription business like salesforce.com or WebEx is hard no matter how the economy is doing, and mastering the metrics of a subscription business is even harder.
A key trend emerging is the Business Cloud, any easy way to add commerce capabilities such as subscription billing and recurring payments to the services that developers are building. More and more companies will be looking for a set of cloud-based services dedicated to giving them the tools they need to monetize the services that they are building on cloud platforms.
What is your outlook for 2009?
Our outlook for 2009 is extremely bright. The demand for our subscription billing and payment services are expected to grow, particularly in this economic environment, when businesses get lean and mean, regain focus on building differentiation in their core business, and divest non-core activities or outsource them to best of breed vendors like Zuora.
Thank you to Gary Hagmueller, Annette Giambroni and K.V. Rao for contributing to this profile.
Crazy like a fox.
With the economy in such tough shape, with customers on the sidelines with no budget to buy software, maybe now is the perfect time to embrace a Freemium software strategy. This concept was originally proposed by a venture captialist named Fred Wilson, the founder of Union Square Ventures.
This became really clear to me over the past 6 months that this trend towards free software might be the future. Initially I read a great article entitled Free! is the Future in Wired magazine (make sure you watch the Chris Anderson video), which I thought presented a very clear argument for free.
Think of all of the free software and services business models that went bust during the Internet Boom. But then again there have been many businesses that were built using a free business model including Google, Yahoo!, Skype, eBay, and Craigslist just to name a few. Some of the new kids on the freemium block include Facebook, LinkedIn, SimplyHired, Kijiji, 37signals and many of the open source software players.
My second realization of the power of free was using 37signals BaseCamp project management product. It was a great example of providing a free product that you liked so much that you had to buy into their paid version. If you need a project management tool, this one is worth a subscription and you may end up pulling out your credit card like me.
Then my third reason why I thought freemium could really be the future of software is based on working with a great company, MrTed, who makes Applicant Tracking or ATS software for large companies. MrTed just recently launched their new Small and Medium business freemium offering, SmartRecruiters, which is an Open SaaS product, which is a mashup of Open Source and SaaS business concepts. This Open SaaS model was developed by Jerome Ternynck MrTed’s CEO and founder. SmartRecruiters like many other freemium offerings is based on the development of a strong and passionate user community, who ultimately become the revenue engine for these companies. SmartRecruiters will monetize their business model by offering a collection of value-added services that are bundled with their free software.
As companies look at their 2009 business strategies, they need to balance gaining marketshare while keeping customer acquisition costs (CAC) as low as possible. By deploying a freemium software strategy now you might be considered crazy in 2009 but be laughing all the way in the not too distant future.
Back to top