By Kevin Dobbs

Montclair Advisors, LLC

Let’s face it, Hunters and Farmers are very different types of sales people.  One is into the thrill of the chase and the high anxiety of selling the next big deal.  The other is into cultivating relationships, building communities and patience.

When it comes to sales people inside of a SaaS company, these same attributes apply to this team as well.   Trying to get your major account or direct sales reps to effectively manage your existing accounts and still hit an aggressive quota, that usually doesn’t work that well.  The same holds true if you are trying to get your account managers to push their customers to close a big deal, and they just don’t want to push too hard because they might ruin their relationship.  Then why are you trying to get them to do the same job?

The other big difference is usually how these sales professionals get compensated.  A typical software sales rep will have a $1.5-$3M annual quota and want to make at least $200K, where as an account manager might have a much smaller quota, $300-$750K and be making $110-150K.  That’s because they have different skill sets but both types of sales are critically important when building your SaaS sales team. Philippe Botteri from BVP discusses what Gary Messiana an EIR told him about how he compensated his reps for delivering MRR:

• • For 0-25% of the quota, $0.25 commision per $1 of MRR
  • For 25%-50% of the quota, $0.5 per $1 of MRR
  • For 50%-75% of the quota, $1.0 per $1 of MRR
  • For 75%+ of the quota, $1.5 per $1 of MRR

I like the simplicity of the concept and it can be applied to all types of sales roles.

Depending on the type of products/services you are selling, you may actually not have high priced outside sales reps and actually focus more on building out a low cost tele-sales capability.  Even if you do this, you should still separate out your new sales team from your account management teams.  Because SaaS is perfect for the ‘penetrate and radiate‘ sales model, you need teams that can sell that first product and then another team that keeps the customer happy and renewing as well as buying more products and services.

Bessemer Venture’s  10 Laws for being SaaSy also recommends separating your hunters from your farmers.  It is important to be able to find new customers but it is also important to be able to renew, upsell and cross-sell customers additional products, which will increase your company’s Monthly Recurring Revenues.  This well defined sales structure works well with many of the leading SaaS firms including RightNow and Salesforce.com.

One of the big objections about this type of approach is that if forces the customer to deal with two different sales teams.  Although this can be a problem, I have found that these types of channel conflicts can be remedied by using team based compensation plans that have everyone getting paid based on shared goals related to existing customers.  This type of approach also encourages development of up-sells/cross-sell opportunities by the account management team, since they often require the new sales team to engage in these deals and close them.  The team compensation approach means everyone wins, including the customer.

I keep coming back to skills and personalities when structuring your SaaS organization.  Keep your teams small and focused.  Make sure you have ways for those promising team members, who might start out in tele-marketing or account management, to have a path to progress up the sales food chain.  Just make sure that your organization structure is well defined, there are clear rules of engagement and that that compensation plans encourage your sales teams to work together and keep your customers satisfied.

Stay tuned for Tip #3 Test Everything

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.

Company:             BrightIdea

Started:                 1999

Located:                San Francisco, California

Geography:           Global

Market:                  On-Demand Innovation Management

Products:              WebStorm, Switchboard, Pipeline and Platform

Key Customers:  Adobe, Bosch, Cisco, AMEX, Harley-Davidson, Experian, Thomson Corp, British Telecom, Bristol-Myers Squibb, and Honeywell

Website:               Brightidea

Blog:                    Innovation Work

Twitter:               @BrightideaHQ or @Brightidea

Recent News:

City of San Francisco Selects Brightidea to Power Open Innovation Campaign

Ireland Launches an Exciting Competition to Help Build Job Opportunities and Secure Prosperity for Ireland, Powered by Brightidea

Brightidea Releases Idea Management Apps for iPhone and Android Platforms

I asked, Brightidea’s Vincent Carbone, the company’s co-founder and COO a few questions about his business and his view of the SaaS market during 2010.

Did you start out as a Software-as-a-Service company?

Yes, Brightidea was founded in 1999 and from day one our solution was designed on a multi-tenant database architecture that supports our SaaS application solutions.    The concept of SaaS was still in its infancy, but with the launch of Salesforce.com and their brilliant “No Software” tagline, we believed SaaS was the future. We really believe Brightidea is the Salesforce.com for Innovation.

Why do your customers buy from Brightidea?

Unlike 50 years ago, companies today must continuously innovate at an accelerating pace to stay competitive.   Companies buy from Brightidea because there is a fundamental organizational shift underway in medium and large companies who are moving their core business function from a “how to make” to “what to make” mindset. Most companies currently have no infrastructure or software to help them effectively manage their employee, partner or customer ideas that will lead to the development of future products and services.   Similar to how companies implemented Customer Relationship Management solutions 15 years ago to manage and optimize their sales pipelines, companies are now starting to implement Innovation Management Software to better manage and optimize their Innovation Pipeline.

Our customers choose Brightidea because we have over 10 years of experience implementing innovation systems in large, complex organizations. Unlike more generic SaaS social software, like Jive and Lithium, Brightidea’s Innovation Management Solutions are grounded in a core business need around innovation, which delivers a true return on our customer’s investment. These business returns are measured in how our customers can manage large-scale projects, encourage new ideas that can improve innovation around product development, cost cutting and even safety ideas.

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

One of the key trends we see is user-adoption of social networking components inside of SaaS software for collaboration.  It wasn’t until consumers started to get comfortable with sharing information on Facebook, that the workplace began to feel comfortable sharing information in a similar manner.  We believe most SaaS applications will continue to adopt more social and collaborative functionality.

What is your outlook for 2010?

We think the future is bright in 2010 for several reasons.

Acceptance of Cloud Computing is going to grow within most IT organizations, so companies will be looking to adopt more SaaS-based solutions.

As I mentioned, users of SaaS software are going to get more comfortable with social networking and collaboration capabilities and organizations will continue to add internal resources that are focused on driving business value through collaboration. We also believe that innovation is inherently a social activity, which means that all of these trends should be good news for Brightidea.

Company:                   Patersons

Started:                       1996

Located:                      Salisbury, United Kingdom

Geography:                  Global

Market:                        On-Demand Global Payroll

Products:                    Click4HR, Free HR, and Global HR and Payroll

Key Customers:          Constellation Europe, Henderson Global Investors, Interdean International Relocation, Siemens

Website:                      Patersons

Blog:                           Patersons Blog

Twitter:                       @patersons

Recent News:

Patersons Announces New Partnership with Lawson

CEO Honored At Growing Business Awards | APA Article

Patersons Shakes Up the Market Again Adding ESS to Free HR Offering

Patersons Shakes Up The Market Again With ESS Added To Free HR Offering

I asked Karen Paterson, Patersons Chief Executive Officer a few questions about her business and her view of the SaaS market as we move into 2010.

Did you start out as a Software-as-a-Service company?

Yes

Why do your customers buy from Patersons?

Patersons ‘Software-as-a-Service’ payroll platform delivers payroll on one single database, one technology platform worldwide. This is the only multi-tenant, multiple country online payroll processing platform in the world. Clients also only have one global contract with Patersons. The leading-edge platform promotes scalability and we can cater for any size payroll anywhere in the world, whether a client has 1 employee in Kazakhstan to 10,000 employees in China. Patersons Logon2 solution is as feature rich as major ERP solutions. It also delivers instant Sarbanes Oxley and SAS70 compliance with its unique International Payroll Workflow, therefore making sure all local requirements are adhered to in a timely and accurate manner. Patersons comprehensive global consolidated reporting suite allows quick analysis of global client data.

SaaS is based on the concept of ‘Pay-as-you-go‘ on-demand and customers only pay for what they use and nothing more. The solution is regularly updated and developed to stay in the forefront of the industry. There is also no additional expense for customers when upgrades or updates are made to the solution, and as the system is delivered via the Internet, customers receive upgrades in real-time. Patersons technology is developed 100% in-house, therefore we do not have to pay third party fees.

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

There is a strong move from on-premise ERP to SaaS as a serious alternative global solution.  Many companies are looking for best-of-breed in a vertical industry rather than an ERP which generally gets 20% functional use of what has been paid for.  The mistrust of not hosting and relying on an outsourcer to provide an IT function is interesting and an indication that internal IT department have been failing the HR function.

What is your outlook for 2010?

2010 will be the Year of SaaS and the Cloud.  Coming out of recession companies are seeking single process outsourcing solutions and best of breed choices from software vendors.

After our post on January 26th we got several great comments about the cost of starting a SaaS company.  It definitely takes a commitment to build a true SaaS company, especially when you consider some the following facts about the 15 public companies that I tracked in my high level analysis:

• Average Start-up Capital Required:                                   $44M
• Average Time Required from Start-up till IPO:                 7 years
• Average Capital Required per Year till IPO (Burn):             $6.8M
• Average IPO Proceeds:                                                    $76M
• Additional Capital Raised After the IPO:                           $243M
• Average Total Capital Raised:                                          $363M
• Average Market Capitalization:                                      $1,262M
• Companies Who are Profitable:                                            8

The costs of getting a SaaS start-up off the ground are substantial but only about half of the firms we tracked actually started out as a pure SaaS company.   These other Cross-Over firms started out as either Application Service Providers (ASP’s) or were traditional On-premise ISV’s that move to SaaS through a combination of organic migration or through a series of acquisitions.  Companies like Concur, Kenexa, Taleo and Ultimate Software have all transitioned to SaaS from an on-premise heritage.

Montclair Advisors - SaaS Start Up Costs - Pre IPO

The shortest time to go from start-up phase to an IPO was 4 years and the longest was 13 years.  Most of the firms we tracked were founded between 1997 to 1999, which was prior and during the Internet Bubble.

When these firms went public they raised a range between $30M (LivePerson and Ultimate Software) to over $150M (DealerTrack and NetSuite), but on average they raised about $75M.  All the firms then went on to do additional capital raises from $32M (LivePerson) up to $750M (DealerTrack) but on average each raised $243M!   The total capital raised, when considering both pre IPO, IPO and post IPO capital raised, these firms raised between $100M (LivePerson and Ultimate Software) to close to more than $500M (DealerTrack, Salesforce.com and SuccessFactors).

Montclair Advisors - SaaS Start Up Costs - Post IPO

After going public, this SaaS market basket of companies have done well as a group.  The majority of the firms are profitable, which makes for solid cash flow performance, revenue visibility and overall stability of the company’s stock, for the real SaaS firms.

The most valuable company, based on their Market Cap is Salesforce.com at more than $8B and there are at least 4 other SaaS firms with valuations over $1B (Blackboard, Concur, NetSuite and SuccessFactors).  When comparing the amount of capital raised to the market valuation, the 5 best performing firms are Salesforce.com (.09), Ultimate Software (.13) , Concur (.19), RightNow (.22) and LivePerson (.31).

Montclair Advisors - SaaS Start Up Costs - Market Caps

This year, as the economy improves, promises to launch a few new SaaS IPOs and we will continue to track this core group as well as a larger group of Hybrids and Cross Overs and will periodically report back with our findings.

Company:              Cornerstone OnDemand

Started:                  1999

Located:                 Santa Monica, California

Geography:            Global

Market:                  Integrated Talent Management

Products:              Onboarding, Learning Management, Social Networking, Compliance, Performance Management, Compensation, Succession Planning and Extended Enterprise

Key Customers:   Barclays, Barnes & Noble, Kelly Services, MasterCard, Turner Broadcasting, Starwood Hotels & Resorts, Flextronics, Ticketmaster, Sanford Health, Save the Children

Website:               Cornerstone OnDemand

Blog:                    Talent Management Blog

Twitter:                @Cornerstoneinc

Recent News:

Cornerstone OnDemand Spotlights Key Learning and Talent Management Trends at Learning Technologies 2010

Cornerstone OnDemand EMEA General Manager to Give Keynote Presentations at iLearning Forum 2010

NRF Foundation Chooses Cornerstone OnDemand’s Industry-Leading LMS for Global Training Initiatives

Cornerstone OnDemand Rated as a Leader in Bersin & Associates’ “Talent Management Systems Customer Satisfaction” Report

New Features Put Cornerstone OnDemand’s Enterprise Social Networking Platform on Par with Stand-Alone Solutions

I asked Adam Miller, Cornerstone OnDemand’s President and CEO a few questions about his business and his view of the SaaS market as we move into 2010.

Did you start out as a Software-as-a-Service company?

We started the company in 1999 as CyberU, which was an on-demand Internet content company, focused on e-Learning. We were on-demand before there was Software-as-a-Service.

The original idea for the company was to provide access to education on-line for individuals and small businesses, which was more of a consumer business model than what we are doing today. CyberU was a distributor of on-line training content as opposed to delivering the courses through a traditional classroom.

What we started to realize is that large companies were interested in educating their employees, so we then begin selling to large Fortune 100 type companies. Many of these companies had a strong resistance to using any type of on-line business solutions, because they felt that it should be inside their own data center behind a secure firewall. There were a lot of concerns around security, scalability and control of business applications. This was about the same time that Amazon.com was launching their on-line retail operations and consumers had similar issues putting their credit card information on-line. From about 2000 through 2006 we were just a small software company that sold training and content over the Internet.

We held to our belief in on-line solutions and even as recently as 2004 we lost many of our deals because we wouldn’t deliver our product as an on-premise offering, but we knew if we did that for even one client we would undo our economic model.

Then over time we were still managing training on-line but our customers wanted to tie the courses back to leadership and succession plans and then led us to rollout an integrated Talent Management suite of solutions. Well, as it turns out the SaaS model has caught on and has grown form less than 300,000 to now over 3.3 million eLearning and Talent Management users, who are happy we decided to deliver our products over the Internet.

Why do your customers buy from Cornerstone OnDemand?

Our customers buy from us because our solutions are better, faster and cheaper than traditional Talent Management solutions.

We are better because we offer a fully integrated talent management platform that covers all of the different aspects of managing people all the way from ‘hire-to-retire’.

Cornerstone OnDemand is faster because our entire system is configurable with 11 discrete modules and over 9,000 individual features, that all can be personalized to address our customer’s business requirements. Our customers can also start with a single model and then turn on incremental modules over time as they are ready for more functionality. Our system can scale to serve the needs of the largest organizations and down to very small companies. In fact, our largest customer is Kelly Services with over 750,000 users and we have eight customers who have more than 150,000 users each. Our average customer has about 14,000 users.

The reason we are cheaper is because we are a pure-play SaaS provider. Our customers have found that it is cheaper to only have to buy from a single supplier, not have to buy hardware and have a lot of staff having to manage multiple systems and relationships.

Our customers also like that we only build products based on their enhancement requests because we don’t build software they don’t want. We currently offer five integrated products including Learning, Performance, Succession, Connect or what some are calling Social Networking and Extended Enterprise which services the needs of non-employees using both our Learning and Connect products. Cornerstone offers global capabilities and has users in 141 countries and supports 16 languages. We think we are doing a good job because we have 95% customer retention rates and that is very important to us.

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

The biggest trends we see are Cloud Computing and Mashups. Mashups can be Platform-as-a-Service (PaaS) methods to combine application functionality and even integrations between different company’s systems. It is like delivering third party content to customer and they don’t know where it comes from but it is valuable. We anticipate that customers in the near future will be able to do basic integrations between content and systems themselves without needed the assistance of any third party or system integrators and that will be very popular.

We are also starting to see more, large-scale deployments as SaaS becomes more mainstream. As I mentioned earlier we have eight customers with over 150,000 users including some very large banks, insurance and two of the largest healthcare companies who are now deploying Cornerstone OnDemand solutions, which is exciting.

What is your outlook for 2010?

2009 was the best year we have ever had and broke all of our records. We think that 2010 is even going to be better and we are very bullish.

Last year we were able to gain some significant marketshare and we will continue our expansion this year. For instance our partnership with ADP is just getting off the ground and this year we will anticipate more deals from a growing partner pipeline. ADP is proving to be a great partner and has brought a lot of resources to the table and we are optimistic about 2010.

But we are still not out of the woods with the broader economy and there are still has some weak spots, so we will continue to monitor things carefully.

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:              Workday
Started:                  Founded in March 2005 by former PeopleSoft executives Dave Duffield an                                       Aneel Bhusri

Located:                 Pleasanton, California

Geography:            Global

Market(s):               Software-as-a-Service
Products:               Human Resources, Payroll and Financial Management  

Key Customers:     Flextronics, Chiquita Brands, H.B. Fuller, Salesforce.com,

                              McKee Foods

Website:                Workday

Blog:                     Workday Blog

Recent News:

-Workday Delivers Pay for Performance and Worker Spend Management

-More than 30 Companies Live on Workday

-Workday Passes 50 Customer Milestone      

I asked Workday’s Chief Technology Officer Stan Swete a few questions about Workday and the Company’s view of the SaaS market in 2009.

Did you start out as a Software-as-a-Service company?

Since its inception in 2005, Workday has always been a Software-as-a-Service company.  Our co-founders, Dave Duffield and Aneel Bhusri, both spent many years in the on-premise world and identified the opportunity for industry change.  Business software that was designed in the 80s and 90s had become far too complex and expensive to deal with, and it wasn’t meeting the needs of contemporary organizations.  There was a big opportunity to scrap all traditional software, start from scratch and take an entirely new approach.  Just 3 years out of the gate, Workday delivers Human Resources, Payroll and Financials – all via SaaS.

Why do your customers buy from Workday?

First, low cost of ownership and fast time to value are huge right now. Companies that are using on-premise applications are looking to get out from under the maintenance burden and many are turning to SaaS.  And, since SaaS can be implemented quickly, many Workday customers are measuring fast returns.

Second, customers are looking for innovation.  As I mentioned earlier, most on-premise software was built in the 80s and 90s.  Workday is new - built from the ground-up on modern Web-based technologies.  We’ve incorporated search, links and tags throughout the application, making it intuitive for the user.  And, by the nature of the SaaS model, the product is always getting better. 

Finally, and we take this very seriously, we are committed to being a trusted partner.  Our customers are our most valued and important partners, and in fact, our product is a direct reflection of their feedback.  Workday has recently achieved a 100 percent customer satisfaction rating, and we attribute this to our commitment to them as partners. 

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

Especially because of the hassles associated with on-premise maintenance and upgrades, companies will continues to replace their current traditional systems with SaaS.  I think the bigger driver over the next 18 months may be that companies start really looking at how to emerge from the tough economic environment in a strong leadership position – having a modern technology footprint will be a central part of those efforts. 

What is your outlook for 2009?

SaaS is ready for the enterprise.  We’ve hit a tipping point, and “Enterprise-Ready SaaS” will continue to prove itself this year as large companies continue to go live on Workday and other best-of-breed providers.  Mid- and large-sized companies will continue to select SaaS for many of the reasons I’ve outlined above: lower cost of ownership, faster time to value, continued innovation, and vendor commitment to be trusted partners.

 Thank you to Stan Swete, Jeff Pulver and Christine Cefalo for contributing to this profile.

Company:          Host Analytics
Started:              2000
Located:             Redwood City, California
Geography:        North America
Market(s):          Financial Budgeting and Planning
Products:           Performance Management Suite

                           Budgeting and Planning

                           Revenue Planning

                           Financial Consolidations

                           Scorecard and Dashboarding

Key Customers:  P&G, JPMorgan Chase, Thule and Pitney Bowes

Website:             Host Analytics

Blog:                  Host Analytics Blog

Recent News:

Host Analytics Soars Into 2009 With Record Fourth Quarter Result

Host Analytics Partners With Boomi to Revolutionize Delivery of Corporate Performance Management Solutions

Host Analytics Continues Market Leadership in Manufacturing Companies

I asked Jon Kondo, Host Analytics 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 as a founder and angel investor funded, on-demand service in 2000, that enabled our customers to run our innovative budgeting and planning solutions 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 SaaS is the impending impact of Cloud computing. The combination of SaaS 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 2009?

We have a very positive outlook for Host Analytics in 2009.  Today’s challenging economic conditions have created an environment where corporate performance management is more important than ever before. The current environment of non-stop significant economic news and events is driving businesses to reinvent their budgeting and planning processes by adopting new processes, methodologies and technology enabled solutions.  We are seeing a significant increase in interest in SaaS based CPM and believe that 2009 will be an inflection point for SaaS, cloud computing and business planning solutions like CPM.  Clearly, adoption of SaaS based CPM is increasing across a broad spectrum of businesses and industries.

Having lived inside of a sub-$40M, publicly traded, SaaS provider for a number of years, I can tell you how hard it is!

Today, there are a number of firms in this position and with the pressures of this economic slow down, it is hard just to survive.  As an example, take a look at our listing of Publicly Traded SaaS Index firms, and I can imagine all the firms with market caps less than $100M are having a hard time.

This last week, Salary.com filed a Shareholder’s Rights Plan, or as some refer to it, a poison pill.  Companies usually pursue a poison pill strategy when their market valuation falls to the point where the company becomes attractive for an unwanted suitor to come along and buy the company for a very low price.  Keep in mind that Salary.com is building a nice franchise in the emerging compensation software market.  In fact, the company just announced a new suite of products and a top industry award at the recent HR Technology show in October.  This makes for an attractive SaaS acquisition target.  Stay tuned.

I guess if you are a small fish in this market, and you want to survive, you better swim fast!