By Kevin Dobbs

Montclair Advisors, LLC

When thinking about your transition to SaaS, there are many questions to consider including target customers, value propositions, packaging, pricing and how best to build customer relationships.

After conducting more than 50 Smart SaaS business profiles of all different types including pure SaaS, Hybrids and Cross-Overs, all of these companies would probably answer many of these types of questions differently depending on their type of customer, functionality, geography, vertical markets and the only way they can get useful answers is to continually test everything.   Best in class SaaS firms are always trying different pricing, packages, messages in order to optimize their businesses, like a recent firm we profiled - Clarizen.

Some resources when thinking about these types of considerations include:

Software Pricing Partners - Jim Geisman

Chaotic Flow - Joel York

SaaS Blogs

Sixteen Ventures - Lincoln Murphy

4 Pillars of SaaS - Phil Wainewright, ZDNet

In addition to testing, it is a good idea to measure everything including website traffic, marketing campaigns, product usage, customer satisfaction and a myriad of other SaaS and business metrics.  Again, the best firms track and monitor all the key business metrics in order to improve their ability to generate revenues, build market share and reduce unnecessary customer churn.  SaaS requires a very tight operational model and has moved business an art to a science and now there are an entire new class to tools to improve revenue performance and reduce costs.  Some of these next generation of tools include:

Sales Automation

EchoSign - Provides electronic signature and contract management.

InsideView - Sales business intelligence and social media platform.

JigSaw - Business information and data services.

NetSuite - CRM and ERP suite.

RightNow - CRM, call center and social platform.

Salesforce.com - Salesforce is not only a solid Customer Relationship Management system but also a great system of record for all types of sales, marketing and service information and applications. Also offers a application marketplace that provides value added extensions.  Salesforce also offers Chatter a collaboration platform to improve internal communications.

SugarCRM - Open source based CRM that provides a robust no cost solution.

Marketing Automation

Eloqua - Marketing automation platform.

Genius.com - Sales and lead automation.

MarketBright - Marketing and lead generation management.

Marketo - Marketing and revenue management.

Pardot - Business to Business lead automation.

SaaS Analytics

Birst - On demand business intelligence product.

Cloud9 Analytics - SaaS performance management.

GoodData - SaaS business intelligence product.

PivotLink - On demand business intelligence product.

Using many of these tools companies can help a SaaS firm track their business, sales and marketing performance.  The question that I often get is ‘what should I be tracking?’  There are an emerging set of SaaS-based business metrics that include Monthly Recurring Revenues (MRR), Churn, Customer Acquisition Costs (CAC), The Magic Number (MN) and others that provide very precise views into how a SaaS business is performing.  Here is a chart that details some of the more common SaaS business metrics by functional area:

Other resources to learn about SaaS metrics;

5 C’s of SaaS Finance - Bessemer Ventures

Chaotic Flow - Joel York

For Entrepreneaurs - David Skok, Matrix Partners

Haut Tech - Michael Dunham at Scio Development

My opinion about the SaaS business model is that there are a lot of new considerations about building a profitable subscription business today.  The buyers are different, there are many robust low-cost tools available, Cloud technology that can radically change your cost model and time to market as well as many other business factors, so the only real way to really tune your business for SaaS is to continually test everything!

I would be interested in your comments and hearing about what you are testing.

Stay tuned for Tip #4 Sales & Marketing on a Budget

The broader SaaS market (I would include PaaS and Cloud Computing) have been really interesting this year and here are some of the notable news items that have caught my attention over the past couple of months:

Mergers & Acqusitions

SuccessFactors buys CubeTree for $50M… Interesting move into the collaboration space

IBM buys CastIron … Nice compliment to their Cloud Infrastructure offerings.  Is Boomi next?

… then IBM buys CoreMetrics.

Salesforce.com buys JigSaw for $142M! … Surprised that they would pay up for a content company.

CA buys Nimsoft for $350M … gets into the SaaS infrastructure management market.  Good company.

SAP buys Sybase for $5.8B …  not sure about this one?  A diversion to deflect attention away from BBD?

RedPrairie buys SmartTurn … traditional SCM provider begins their move to SaaS.

VMWare looking at EngineYard … interesting since Amazon funded this Ruby-on-Rails PaaS startup.

Fundings & IPO’s

Marketing Automation: Marketo raises $10M Series D, led by Mayfield.

Enterprise Collaboration: Yammer raises $10M Series B, led by Emergence Capital.

Financial Analytics:  Host Analytics raises $15M Series C, led by Next World Capital.

Cloud Business Intelligence:  Cloud9 Analytics raises $8M Series C, led by Mayfield.

Recent SaaS/Cloud IPO’s include Convio, SPS Commerce and Financial Engines.

New Products and Launches

Broadvision launches Clearvale … Ning for the enterprise.

Plateau launches PaaS platform for Talent Management

Mercer partners with PeopleClick Authoria, first combination of HR consulting content with Talent Management technology platform

VMware and Force.com partner, launch VMForce.

Lawson launches ERP Cloud offering on Amazon AWS … too little, too late?

Recently Profiled SaaS Companies by Montclair Advisors

Birst, CentralDesktop, Cloud9 Analytics, GoodData, Marketo, Netsuite and WOLF Frameworks.

There are definitely a lot going on in the SaaS and Cloud Computing markets and we will continue to cover newsworthy events and profile leading players throughout 2010.

Company:             Wolf Frameworks

Started:                2006

Located:               Bangalore, India  and Herndon, Virginia

Geography:          Global

Market:                Cloud and Platform-as-a-Service

Products:            Wolf Frameworks PaaS

Key Customers: TRA, GMR, Wipro, Delhi Frieght Carriers, HLB Mann, eCounting, Head Start, Juice Junction, SEDS and eDok

Website:             Wolf Frameworks

Blog:                   Wolf PaaS Blog

Twitter:                @WolfPaaS

Recent News:

ARTIST - Learn2turn builds E-DoK on WOLF PaaS

I asked Sunny Ghosh, WOLF Frameworks, Director and CEO a few questions about his business and his view of the SaaS and PaaS market in 2010.

How did you get started?

We started WOLF in 2006 as a pure play Cloud Computing company about 4 years ago. My partner Ralph Vaz started the company and we have both been in the technology industry for more than 30 years collectively.

We have worked on building many exciting products such as Invensys Skelta, Ebbon-Dacs, DB Query, Digimaker CMS that are widely used in the United States, Europe and Scandinavia.

We have seen technology as a growing burden to a customer’s business. When the technology changes like when COBOL transitions to Pascal, then to .Net, then to the next big technology. But why couldn’t technology be separated from the business because it doesn’t make much sense to tightly render a technology specific assembly for customers, which cannot be changed without technical programming? If you could just keep technology complexity and business requirements separate, then technology could be democratized and be made available to all sizes of companies.

Since the Browser is now the focal point of all modern computing, this means this is the end of the operating system and PC-centric approach to applications. By simplifying technology and making easier to access and less expensive, there is a much larger customer base to build our new business on.

Why do customers buy from WOLF Frameworks?

We have three different types of customers that we sell through our partners:

• SaaS Startup’s who have a great idea and want to build a prototype. This type of customer will be a single user and spend a month to build out their concept.
• Professional Services companies that offers business of services and wants to develop a tool that eliminates services time and to create a new recurring revenue stream.
• Enterprises and ISV’s that are looking to create line-of-business applications, and mashups like GoToMeeting integration with their CRM system or corporate dashboard solutions.

At WOLF we offer a zero code Platform-as-a-Service offering. Since most of our customers and users are business analysts, we needed to make a product that was easy to use. WOLF Frameworks consists of a five layer of architecture including XML integration, billing, presentation, application development and database layers.

WOLF Frameworks offers a variety of capabilities that make it a rapid development environment like the following:

• Templates
• Reports
• API’s
• Multiple devices
• Built in storage
• Business rules and workflow engine
• Access rights
• Support for multiple databases

All of these capabilities allow customers to develop applications 70% faster than traditional approaches at half the cost. Customers have used different types of applications including accounting systems and also electronic patient record system.

We also use open standards like XML, AJAX for inter-operability and portability. WOLF also is based on leading technologies like .Net, MySQL, and SQLServer. Our platform also works with leading Infrastructure-as-a-Service providers like Amazon Web Services, Rackspace and a Canadian provider iWeb.

The WOLF platform can also operate in a hybrid environment that supports both Cloud and on-premise applications. In fact we can take a license of your OnDemand Cloud application into your Private Cloud whenever and since we use a single code base it is possible to sync-up hybrid environments.

One of the major reasons customers like to use our platform is because WOLF Frameworks offers minimal vendor lock-in. Applications developed with WOLF are portable since they built with XML. The data, application design and the hosting providers can be moved, with minimal effort.

What broad trends are you seeing in the SaaS/Cloud markets?

Obviously one major trend is the emergence of the Platform-as-a-Service solutions like WOLF. Our customers are looking for fast, cost-effective ways to develop new Cloud-based solutions to either replace older products or to build out totally new ideas.

There are many different PaaS solutions emerging;

• Application-led solutions from Netsuite and Salesforce;
• Application development-centric solutions like WOLF, Force.com or Intuit’s Quickbase
• Development-centric solutions built on LAMP, Ruby on Rails or Microsoft’s Azure and
• Community-centric platforms like Linkedin and Facebook.

The other trend Private Clouds. Our same customers are looking for ways to extend their existing solutions out to the Cloud but are concerned about security and Private Clouds offer a great alternative to on-premise software. WOLF also offers the ability to develop applications that can run in a hybrid mode, both on-premise or in a Private Cloud as well as out in the Public Cloud. You can also migrate existing web applications into WOLF’s multi-tenant platform rapidly.

What’s your outlook for the balance of 2010?

We are feeling good about our growth and have 10,000 users today and look forward to continuing a solid 2010.

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:              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.