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:                i365 – A Seagate Company

Started:                    1997 (EVault)

Located:                   Santa Clara, California

Geography:              Global

Market:                    Cloud-based Storage

Products:                 Data backup, eDiscovery, and Data Recovery

Key Customers:      ArtsMemphis, Meritan, CBRE and People’s First Community Bank

Website:                  i365

Recent News:

i365®, A Seagate Company, Launches EVault® Offsite Replication Storage Service for Cloud-Based Protection

Medical Business Service, Inc. Chooses i365™, A Seagate® Company, to Bolster Disaster Recovery and Data Security Capabilities

i365™, A Seagate Company, to Demo EVault Remote Disaster Recovery Services at Disaster Recovery Journal Fall World 2009

I asked Valerie Fawzi, Vice President of Product Marketing at i365 a few questions about her business and her view of the SaaS and Cloud Computing market in 2009.

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

i365 is a wholly owned subsidiary of Seagate and was created through a number of acquisitions around the data protection market, starting with EVault. eVault was started in 1997 and was acquired by Seagate in 2007 and was always based on a software subscription business model.

We service mid-market companies who have between 10 and 1,000 employees. i365 also services large companies but usually for their remote or branch offices. I365 is an online service, that protects data on Windows, Linux Unix and other operating systems on both virtual and physical platforms.

Why do your customers buy from i365?

It’s hard today for small business customers because they have to glue together many different storage solutions but they would prefer to have a single provider. The small business customer usually only has a small number of IT resources to handle these important storage and backup challenges, and i365 offers a broad array of storage solutions and we make it easy purchase and support our products through many different channels.

For example, in October we announced EVault Offsite Replication Service that offers a hybrid pricing model, a passive vault and disaster recovery including D2D2T – Data to Disc to Tape, D2C - Disc to Cloud, and D2D2C - Disc to Disc to Cloud.

We provide our technology in many different formats including a license for large companies, a managed service and as a hardware/software appliance. All these deployment options are based on our same technology platform in the Cloud.

i365 distributes our solutions both directly and through channel alliances with major tele-communictions companies. We can offer our services through one of our ten SAS70 Type II data centers across North America and Europe.

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

We think customers are going to be careful about moving to the Cloud but would be more open to a blended on-premise and Cloud solution. The ability to provide storage to a variety of on-premise solutions like Microsoft Exchange, SharePoint, SQL databases and even desktops that could be backed up in the Cloud. This is especially attractive for customers in regulated industries such as healthcare, legal and pharmaceuticals who need a data protection plan. This is the type of bridge approach that customers are looking for from us.

What is your outlook for 2009?

We have recently had an important change in management, Terry Cunningham, the former President and COO of Seagate Software, with a track record of success, has rejoined the company to head up i365. Today Seagate is the largest independent storage company. Our new vision is to use our SaaS and Clouding Computing core competencies and move into becoming the leading managed services storage firm. This is a very exciting time for i365 and Seagate.

Thank you to Valerie Fawzi and Rachel Levine for contributing to this profile.