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Started: 2002
Located: Santa Clara, California
Geography: Global
Market: Cloud Operations
Products: OpSource On-Demand, OpSource Billing CLM, and OpSource Connect, OpSource Cloud (new offering!)
Key Customers: Agile, HotWire, JasperSoft, Kana, LookSmart and SAP/BusinessObjects.
Website: OpSource website
Blog: Executive Blog
Recent News:
OpSource Introduces OpSource Cloud, the First True Enterprise Cloud
ATEL Ventures Completes $4 Million Financing for Cloud Operations Leader, OpSource
Finalists Selected for 2009 CompTIA SoftwareCEO Software Innovation Awards
Century Consulting and OpSource Redefine Student Management Software
I asked Treb Ryan, OpSource’s Chief Executive Officer a few questions about his business and his view of the SaaS market in the second half of 2009.
Did you start out as a Software-as-a-Service company?
We started the company in 2002 focused on telecom industry to help them better manage hosting space for their many acquisitions. But by 2004, we had shifted to targeting software companies who wanted to move to the SaaS business model. We discovered that the biggest driver for the adoption of SaaS was the generational shift in the people inside of these companies, because they had higher expectations about technology — it should be immediately available any time, anywhere and share it with anyone they wanted to.
This generation shift was because commercial technology like Google and the Web were easy and ready to use. There was only one problem, large enterprise systems weren’t built to be easy to use because they are concerned about scalability, security, integration and compliance. But this has become a market opportunity for OpSource.
Why do your customers buy from OpSource?
OpSource provides Cloud operations for SaaS companies. As I mentioned, SaaS applications are enterprise class and OpSource provides a complete infrastructure solutions including:
Technical operations – Cloud infrastructure including systems storage, networking security, disaster recovery and backup.
Application operations – Data management, physical storage, performance management, change management and the ability to push out application updates.
Application optimization – Performance and scalability.
Compliance – Complete support for SAS70, PCI, HIPPA and Safe Harbor requirements.
Business operations – OpSource Connect provides a consolidated Web-based interface for billing, integration, support and promotion management.
OpSource supports over 175 companies including traditional software companies like Adobe and SAP as well as pure SaaS firms such as Taleo and Xactly.
What do you see as the key trend emerging in the SaaS industry?
Cloud Computing is a very broad term sort of like talking about the Internet. We believe that SaaS is the business-side of managing applications in the Cloud and that the Cloud Computing is actually just infrastructure. Even though enterprises are increasingly looking to get their technology through the Internet, they are still looking at buying these resources carefully. The emerging trend for SaaS companies is the ability to interconnect their solutions with both on-premise and other SaaS applications. The big opportunity in the market is to answer the question ‘how do I integrate all these resources, new channels, platforms, security and again, make it easy to use.’
Amazon.com’s EC2 is leading the way in Cloud Computing by providing a cheap way to get server capacity, and what’s really amazing is how quickly they have built their business without much investment in sales and marketing. Considering that they only launched their Cloud offerings three years ago, they have already built at least a $100M business, and this is really impressive. Amazon has really deployed a frictionless sales model, which makes it easy to buy from them because they don’t require any upfront investments, just pay for what you use. They were smart by creating a viral community, solid products that are priced right, and as a result they have created a powerful new revenue channel, because their partners are now building solutions on top of their Cloud infrastructure. Again, this generational shift around application immediacy, community and interconnectivity are creating opportunities in the Cloud Computing market and for us.
What is your outlook for 2009?
Companies that are succeeding during the downturn are using a real SaaS business model. It is really difficult for young SaaS companies who are in the early part of their business cycle because venture capital funding is not easy to get right now and that is why you are seeing companies like LucidEra and CogHead struggle and sometimes fail. As Jason Green at Emergence Capital says, one of the main rules of SaaS is that it takes $1 of sales and marketing to yield $1 of recurring revenue. For many SaaS companies it can take up to $60 million in investment to get a company to scale, usually at a $60 - $100 million run rate. Towards the end of the first half of 2009, valuations are improving and there is now some ability to raise some VC funding.
In the second half of 2009, we believe there will be more aggressive spending in sales and marketing for SaaS firms for the balance of 2009, because the recession has really helped the market adoption of SaaS.
Thank you to Treb Ryan, Rick Lebherz and Eileen Conway for contributing to this profile.
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