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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:
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Financial |
Human Capital |
CRM + |
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Kenexa (KNXA) |
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Intuit (INTU) |
RightNow (RNOW) |
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Mint.com (Acquired by Intuit) |
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SuccessFactors (SFSF) |
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Taleo (TLEO) |
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Collaboration |
Infrastructure |
Other |
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i365 – Seagate (STX) |
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QuickArrow (Acquired by Netsuite) |
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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.
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Public |
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Amount Raised |
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SuccessFactors (SFSF) |
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Taleo (TLEO) |
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Private |
Lead Investor(s) |
Amount Raised |
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Bill.com |
August Capital, Emergence |
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Genius.com |
Deep Fork Capital |
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Host Analytics |
StarVest |
$8.6M |
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InsideView |
Emergence and Rembrandt |
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Jive Software |
Sequoia Capital |
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Lithium Technologies |
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$18M |
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M-Factor |
Bay Partners |
$10M |
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OpSource |
NTT |
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Workday |
NEA |
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.
I attended Plateau Systems’ Analyst day in San Francisco this week, and they are one of many emerging Talent Management software providers. The briefing was hosted by Paul Sparta, the company’s CEO and Brian Murphy, their COO. What was really refreshing was the level of transparency that the company provided to those who attended, especially in relation to their annual financial performance.
Since most of those analysts who attended were focused on Human Capital Management, I wanted to provide my review of the company’s progress in moving their business model towards Software-as-a-Service.
Company Background
Started: 1996
Located: Arlington, Virginia
Geography: Global
Market: Talent Management
Products: Plateau Learning Management, Plateau Talent Management, Plateau Talent Gateway (New) and iContent. Launched their first on-demand product set in June 2006.
Employees: 300
Key Customers: Boehringer Ingelheim, Irish Life & Permanent, Zions Bancorporation, Yahoo!, Department of Labor, General Electric, Schering Plough and Bristol Meyers.
330 customers and about 10 million users. customers are about 35% Public sector, 45% commercial but regulated (Pharma, financial services, healthcare) and 20% commercial but not regulated. Target customer is a large, complex, global organization.
Website: Plateau Systems
Twitter: @PlateauSystems
Facebook: Plateau on Facebook
Moving to SaaS
Plateau has some unique market constraints that make it difficult to completely move to a pure SaaS model, due to some of the government and regulated industry segments and their inability to accept a third party hosting of their internal systems. Examples of this would include Department of Homeland Security and Department of Defense to name a few clients who will require a traditional on-premise solution for the foreseeable future.
Other than this market reality, my question was, ‘How is Plateau managing the SaaS transition that they started in 2006?’ To my pleasant surprise, they are doing quite well.
Here are some basic statistics on their overall business:
- Plateau’s 5 year Compound Annual Growth Rate is 24%, which is respectable given what has happened to the economy over the last 18 months. The industry average for traditional software firms under $100M in revenues is 9.8% and an average CAGR for all sizes of SaaS firms is 20.3%, so this is a respectable number for a Hybrid SaaS firm.
- Plateau is profitable.
- Revenues were up in 2008.
- More than 40% of their business comes from customers based outside of the US during the first half of 2009. This is a growth area for Plateau.
- 55% of their deals are for their Learning Management products only and 45% of their deals are Talent Management suite deals, and the trend towards suite purchases continues to grow. Suite purchases in 2008 made up only 17% of all deals and in Q2 2009 that number has increased to 40%.
Business SaaS statistics
- Plateau’s SaaS revenues are up 31% year/year.
- The SaaS customer base is up by 100% to 90 customers, out of 330 total, which is almost 30%.
- More than 50% of new software bookings are SaaS.
- A large majority of the total revenues are now recurring.
- Some large enterprise customers are now beginning to move from on-premise to SaaS including General Electric.
- Customer retention is 99%, or 1% churn which would be considered best in class for either an on-premise or SaaS company. Based on the materials shown at the briefing, Plateau focuses a lot attention on customer satisfaction.
Plateau will continue to support their more than 200 on-premise customers as well as sell new on-premise deals, this is a requirement of the regulated markets that they sell into. Over time, the company will move away from on-premise and try to optimize operating efficiencies and will look to standardize and leverage the SaaS product as an on-premise option. Plateau would be considered a Hybrid SaaS company and over the next 2-3 years should have a wide majority of their business operations and revenues focused on SaaS.
New Product Announcements
A couple other interesting developments is that Plateau has rewritten their product interface, for their Talent Management Suite, using Adobe Flex, which looks really good. More and more SaaS firms are writing their applications using Flex including Workday, Taleo and Intuit’s latest SaaS offerings. This is a good move from a user experience perspective and it will be interesting to see how this works for Plateau’s larger clients, since Flex uses more code on the client than a pure thin client implementation.
The other announcement was the Plateau Talent Gateway which is a portal and social collaboration hub that facilitates knowledge sharing, collaboration, and learning activities. This platform extension helps to reign in informal learning and acts as a social collaboration API for companies, so that they can package or ‘portletize’ social connectivity with tools like Twitter and LinkedIn, collaboration capabilities and repositories of content that reside all around the enterprise. This Plateau platform extension is based on Liferay, which is a leading open source portal and collaboration platform. I think this is a very smart move for Plateau because it offers an often-requested set of capabilities and since it is open source, it can be delivered at a low cost to the customer, with a very high perceived value.
Conclusion
My overall impression of Plateau’s transition to SaaS was very positive. A reasonable transition to a subscription business model for most software companies takes three to five years. Since Plateau announced their first on-demand offering in June 2006, three years into their transition, they have made a significant movement towards SaaS and I think they could be one of the surprise stories in the SaaS Talent Management market over the next few years.
Thank you to Paul Sparta, Brian Murphy and Jeff Kristick for contributing to this profile.
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