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:         Responsys

Started:             1998

Located:            San Bruno, California

Geography:       Global

Market:             Business to Consumer Marketing Automation

Products:          Responsys Interact

Key Customers:   Continental Airlines, Corel, Carlson Hotels, E-Loan, RSA and Salesforce.com

Website:            Responsys

Recent News:

Responsys Wins Prestigious OMMA Award for Creative Excellence

Responsys Expands Email Marketing Program for Continental Airlines

Responsys Continues Strong Growth in First Half of 2009

Responsys Revolutionizes Data-driven Marketing with Industry’s First Self-Service Data Integration Solution

I asked John Berkley, Vice President of Product Marketing at Responsys 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?

Responsys was founded in 1998 and there have been many chapters of the company’s history. The current chapter is about five years old, when the current management team arrived. Responsys has always been a SaaS company, and it is core to our business strategy. We live and breath SaaS and our future roadmap is all based on SaaS.

The current chapter of Responsys is all based on building out our platform and managing all the data that we store for our customers.  Our strategy is to enable sophisticated, high-impact marketing campaigns for our clients.  Our biggest verticals are travel, technology and retail - although we serve a number of others as well.  Responsys is ideal for these types of firms who require automation of very complex processes; importing/exporting of data, business rules, personalization, analysis all related to managing sophisticated marketing campaigns.

Why do your customers buy from Responsys?

Our customers appreciate Responsys’ ability to handle the marketing campaign complexity required for huge product catalogs, directed at thousands or millions of customers. For these types of promotions, granular personalization and targeting is critical for the campaigns’ success. We also automate all aspects of the marketing workflow, like the transfer of data and meaningful analytics, this helps to make our customers much more efficient.

We make our customers more efficient, so that they can do more sophisticated marketing campaigns, all without having to expend additional effort. Email programs can also be used to build loyalty using strong, targeted content. Doing more with less is important in this current economic climate and email is an affordable, interactive channel.

Good email marketing campaigns have very high ROI because it is measurable. For our customers, most who are business-to-consumer (B2C) companies, they can track the actual campaign results directly to increased revenues. This tracking can be handled either inside of Responsys or with their preferred Customer Relationship Management (CRM) system.

The Responsys platform provides an ideal solution for global organizations and their marketing needs. We have offices in London, Singapore and Sydney to provide local support to our regional customers.

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

For industry pioneering SaaS companies like Salesforce and Omniture, the big trend has been the demands placed on their SaaS applications by larger customers - more complexity, data intensive, and transactional.

Over the past ten years SaaS firms have had to address these enterprise challenges and now there is no longer major barriers that SaaS solutions can’t handle. There is an increasing range of SaaS solutions that can now handle the most challenging back office requirements, what some people are now calling ‘SaaS-Heavy’.

What is your outlook for 2009?

This has been a good year for Responsys. Clients are moving more budgets into the email marketing automation because it is a cost-effective way to promote their brands and increase revenues. Our pipeline going forward is strong and we feel like we in a good position in the right market. We have a proven solution, which is valuable no matter what the economy looks like and even more in demand during a down market. Tighter economic times have focused our customers on real value, which is definitely good for us.

Thank you to John Berkeley and Raksha Varma for contributing to this profile.