0
Company: BrightIdea
Started: 1999
Located: San Francisco, California
Geography: Global
Market: On-Demand Innovation Management
Products: WebStorm, Switchboard, Pipeline and Platform
Key Customers: Adobe, Bosch, Cisco, AMEX, Harley-Davidson, Experian, Thomson Corp, British Telecom, Bristol-Myers Squibb, and Honeywell
Website: Brightidea
Blog: Innovation Work
Twitter: @BrightideaHQ or @Brightidea
Recent News:
City of San Francisco Selects Brightidea to Power Open Innovation Campaign
Brightidea Releases Idea Management Apps for iPhone and Android Platforms
I asked, Brightidea’s Vincent Carbone, the company’s co-founder and COO a few questions about his business and his view of the SaaS market during 2010.
Did you start out as a Software-as-a-Service company?
Yes, Brightidea was founded in 1999 and from day one our solution was designed on a multi-tenant database architecture that supports our SaaS application solutions. The concept of SaaS was still in its infancy, but with the launch of Salesforce.com and their brilliant “No Software” tagline, we believed SaaS was the future. We really believe Brightidea is the Salesforce.com for Innovation.
Why do your customers buy from Brightidea?
Unlike 50 years ago, companies today must continuously innovate at an accelerating pace to stay competitive. Companies buy from Brightidea because there is a fundamental organizational shift underway in medium and large companies who are moving their core business function from a “how to make” to “what to make” mindset. Most companies currently have no infrastructure or software to help them effectively manage their employee, partner or customer ideas that will lead to the development of future products and services. Similar to how companies implemented Customer Relationship Management solutions 15 years ago to manage and optimize their sales pipelines, companies are now starting to implement Innovation Management Software to better manage and optimize their Innovation Pipeline.
Our customers choose Brightidea because we have over 10 years of experience implementing innovation systems in large, complex organizations. Unlike more generic SaaS social software, like Jive and Lithium, Brightidea’s Innovation Management Solutions are grounded in a core business need around innovation, which delivers a true return on our customer’s investment. These business returns are measured in how our customers can manage large-scale projects, encourage new ideas that can improve innovation around product development, cost cutting and even safety ideas.
What do you see as the key trend emerging in the SaaS industry?
One of the key trends we see is user-adoption of social networking components inside of SaaS software for collaboration. It wasn’t until consumers started to get comfortable with sharing information on Facebook, that the workplace began to feel comfortable sharing information in a similar manner. We believe most SaaS applications will continue to adopt more social and collaborative functionality.
What is your outlook for 2010?
We think the future is bright in 2010 for several reasons.
Acceptance of Cloud Computing is going to grow within most IT organizations, so companies will be looking to adopt more SaaS-based solutions.
As I mentioned, users of SaaS software are going to get more comfortable with social networking and collaboration capabilities and organizations will continue to add internal resources that are focused on driving business value through collaboration. We also believe that innovation is inherently a social activity, which means that all of these trends should be good news for Brightidea.
After our post on January 26th we got several great comments about the cost of starting a SaaS company. It definitely takes a commitment to build a true SaaS company, especially when you consider some the following facts about the 15 public companies that I tracked in my high level analysis:
- Average Start-up Capital Required: $44M
- Average Time Required from Start-up till IPO: 7 years
- Average Capital Required per Year till IPO (Burn): $6.8M
- Average IPO Proceeds: $76M
- Additional Capital Raised After the IPO: $243M
- Average Total Capital Raised: $363M
- Average Market Capitalization: $1,262M
- Companies Who are Profitable: 8
The costs of getting a SaaS start-up off the ground are substantial but only about half of the firms we tracked actually started out as a pure SaaS company. These other Cross-Over firms started out as either Application Service Providers (ASP’s) or were traditional On-premise ISV’s that move to SaaS through a combination of organic migration or through a series of acquisitions. Companies like Concur, Kenexa, Taleo and Ultimate Software have all transitioned to SaaS from an on-premise heritage.
Montclair Advisors - SaaS Start Up Costs - Pre IPO
The shortest time to go from start-up phase to an IPO was 4 years and the longest was 13 years. Most of the firms we tracked were founded between 1997 to 1999, which was prior and during the Internet Bubble.
When these firms went public they raised a range between $30M (LivePerson and Ultimate Software) to over $150M (DealerTrack and NetSuite), but on average they raised about $75M. All the firms then went on to do additional capital raises from $32M (LivePerson) up to $750M (DealerTrack) but on average each raised $243M! The total capital raised, when considering both pre IPO, IPO and post IPO capital raised, these firms raised between $100M (LivePerson and Ultimate Software) to close to more than $500M (DealerTrack, Salesforce.com and SuccessFactors).
Montclair Advisors - SaaS Start Up Costs - Post IPO
After going public, this SaaS market basket of companies have done well as a group. The majority of the firms are profitable, which makes for solid cash flow performance, revenue visibility and overall stability of the company’s stock, for the real SaaS firms.
The most valuable company, based on their Market Cap is Salesforce.com at more than $8B and there are at least 4 other SaaS firms with valuations over $1B (Blackboard, Concur, NetSuite and SuccessFactors). When comparing the amount of capital raised to the market valuation, the 5 best performing firms are Salesforce.com (.09), Ultimate Software (.13) , Concur (.19), RightNow (.22) and LivePerson (.31).
Montclair Advisors - SaaS Start Up Costs - Market Caps
This year, as the economy improves, promises to launch a few new SaaS IPOs and we will continue to track this core group as well as a larger group of Hybrids and Cross Overs and will periodically report back with our findings.
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 EMEA General Manager to Give Keynote Presentations at iLearning Forum 2010
NRF Foundation Chooses Cornerstone OnDemand’s Industry-Leading LMS for Global Training Initiatives
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.
When speaking with entrepreneurs and investors about the investment required to start up a new Software-as-a-Service company, I often refer back to this list. At Montclair Advisors thought this would be a handy reference for those looking to start a SaaS company during 2010.
Looks like you might need a money tree to start a SaaS company, but for those that reach critical mass and go public, there is a tremendous payback. This is information has been gathered from various sources including Wachovia, CrunchBase and Google Finance.
| Company | Investment | Current Market Cap | Ticker Symbol |
| (in 000’s) | (in 000’s) | ||
| Blackboard | $100.7M | $1,300M | BBBB |
| Concur | $30.2M | $2,100M | CNQR |
| Constant Contact | $37.3M | $527M | CTCT |
| DealerTrack | $48.0M | $774M | TRAK |
| Kenexa | $54.5M | $256M | KNXA |
| LivePerson | $41.6M | $335M | LPSN |
| LogMeIn | $20.0M | $448M | LOGM |
| NetSuite | $84.9M | $1,000M | N |
| RightNow | $32.2M | $553M | RNOW |
| Salary.com | $5.7M | $40M | SLRY |
| Salesforce.com | $64.5M | $8,500M | CRM |
| SuccessFactors | $54.5M | $1,100M | SFSF |
| Taleo | $36.9M | $891M | TLEO |
| Ultimate Software | $25.1M | $755M | ULTI |
| Vocus | $26.4M | $345M | VOCS |
I often hear the question, “What is the difference between Software-as-a-Service and Cloud Computing?” The answer is that the Cloud is a utility based resource that companies can use to deliver software and services. This can sometimes even be more confusing when Cloud Computing is referred to as Platform-as-a-Service. SaaS is really the business model associated with the delivery of that software and services.
Until recently, it was a difficult for both customers and SaaS providers to use the Cloud to deliver robust, enterprise-class solutions because the Public Cloud was not really industrial strength. There are real issues in using a Public Cloud solution for your SaaS offering today including security, integration, manageability, data location, auditing, reporting and overall compliance.
Computer Weekly - Top Five Cloud Computing Security Issues
ComputerWorld - Twitter Breach Revives Security Issues with Cloud Computing
One scary revelation that I heard recently is that the same billing system that is used in Amazon’s EC2 service is also the one that is used to buy that big screen TV at Amazon.com. That might turn out to be an issue if you were trying to maintain your SAS70 or Sarbanes-Oxley certification.
There have been a lot recent announcements regarding new Virtual Private Cloud offerings over the past few months by Amazon, OpSource, Savvis, GoGrid, Sun, IBM, Rackspace because the market is looking for a better alternatives to the Public Cloud. Some of these Private Cloud offerings are more advanced than others, but the Cloud Computing providers are now moving in the right direction by offering solutions that are hardened to be much more acceptable to enterprise customers. SaaS providers are also in need of truly reliable infrastructure solutions too, because they have to support their customers with robust SLA’s, especially for their enterprise customers.
Why SaaS providers are happy is because this type of enterprise Infrastructure-as-a-Service approach helps companies:
- Innovation. It should be possible to try out a new product ideas with a small beta communities and if their tests work, then they can very quickly ‘productize’ them. Because of the lower cost and rapid availability of resources it should make innovation process more productive. How often do I remember working with someone on a Friday afternoon and them spending their entire weekend building out their idea. Now with this type of utility computing approach you can take it from concept to rollout much faster.
- Faster time to value. Based on the Private Cloud product that I recently saw demonstrated, you can initially set up a secure, multi-tenant instance of your favorite infrastructure in less than 30 minutes and then create additional instances in just a couple of minutes.
- Security. Being able to leverage infrastructure that can pass muster when a customer’s Chief Security Officer is reviewing your offerings. Even some small and medium sized businesses are publicly traded and operate globally and even these smaller firms have the same types of compliance and regulatory constraints that large companies have. Private Clouds will make using a Cloud-based infrastructure more realistic for SaaS firms selling to these types of organizations (ie. most of them).
Then there are all the other benefits of pay-as-you-go and scalability that come with Cloud Computing, which are always of value to a SaaS company.
For software companies who haven’t already rewritten or moved over to a SaaS model already, a Private Cloud may offer other benefits. There are still many companies who are concerned about not being able to offer a multi-tenant, SaaS solution to their customers and prospects. Leveraging a Private Cloud type of infrastructure for these non-SaaS software firms, allows them to develop a migration path to SaaS that is much more affordable and realistic than in the past. The days of building out your own data center, or even your own cage in someone else’s data center, are coming to an end.
Face it, even the Obama administration is rolling out their own Cloud based initiative - Apps.gov. It is still quite early but Private Clouds will really speed the adoption of Cloud Computing by the majority of SaaS companies over the next five years.
Company: Enwisen
Started: 1999
Located: Novato, California
Geography: Global
Market: On-demand Workforce Communications
Products: AnswerSource
Key Customers: Fox Entertainment, Nissan, Hershey, State of Montana, Yahoo!
Website: Enwisen
Recent News:
I asked Walter Smith, Enwisen’s Chief Executive Officer 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?
Yes, when we started Enwisen in 1999 our vision was to leverage the power of the Internet to deploy robust, highly configured technology for HR using a Software-as-a-Service business model. At the time the term “SaaS” wasn’t commonly used to describe our model… ASP or Application Service Provider… was the more commonly used term for a hosted application. But truly our model from the beginning was to combine software and services in a multi-tenant environment. A key advantage we have had in the marketplace is delivering a suite of products that have all been built internally as a SaaS solution without the challenge of converting from an enterprise foundation or integrating acquired solutions.
Why do your customers buy from Enwisen?
Fundamentally it boils down to compelling economic value and great service. Our technology solves a critical issue for HR – how to deliver quality service to their internal customer (employees) at a lower cost per employee. In today’s economy HR is being challenged to be far more efficient, but without compromising quality. It’s a real conundrum – high touch HR delivery and internal systems are just too expensive and ineffective. Not only do we streamline HR operations, but we improve the service experience for employees. Our solutions are very reasonably priced for the robust capabilities and bottom-line impact we deliver. Customers have to provide services to employees, it’s mission critical, we just give them a better and more cost effective way to do it. Combine that with great, highly attentive service and that’s why customers buy from Enwisen. The validation is there… despite the down economy we grew profitably at 62% during our last quarter and over the last 10 years our retention rate has exceeded 98%.
What do you see as the key trend emerging in the SaaS industry?
Collaboration and integration of various enterprise applications through the “Cloud.” Almost every company today has multiple systems and multiple service providers. Here’s an example – one system for the Intranet, one for HR, outsourced payroll, outsourced benefits, performance and succession planning, learning (LMS), and dozens of benefits providers for health and retirement. Users are simply overwhelmed by the complexity of getting to all of these different sites – how many user IDs and passwords can you remember? If a system cannot be easily accessed, it won’t be used. Companies spend millions of dollars on systems, yet most acknowledge they are underutilized. Also, many companies lock their applications behind the firewall, making it harder if not impossible for many employees to use. One of the biggest trends is to leverage the “Cloud” in a way to seamlessly integrate data and applications to make it easier for user to access everything through a single location.
What is your outlook for 2009?
Now that the fear of financial Armageddon has subsided we see companies getting back to Business 101 as usual. Companies have to continue to innovate, deliver service, retain talent, and drive greater efficiencies to the bottom line. Budgets will remain tight, but companies will continue to invest in ways that make them more efficient in the near term but also prepare them to grow and be more competitive in the long term. We anticipate our current growth rate to continue since part of our success is because of, versus in spite of, the down economy. Companies no longer will buy status quo products due to brand. They will continue to seek best of breed solutions that will give superior performance at a much lower cost even if they are a new vendor to them.
Thank you to Walter Smith for contributing to this profile.
Company: Marketbright
Started: March 2005
Located: San Bruno, California
Geography: Global
Market: On-Demand Marketing Automation Solution
Products:
Marketing Automation
B2B Sales Portal using Social Networking
Key Customers: Varonis, Serena Software, SAP Business Objects and Genesys
Website: Marketbright
Recent News:
Marketbright Grows Customer Base by 43% in Q1 2009
Marketbright Expands Capabilities for Salesforce CRM Customers
Raab Guide Ranks Marketbright Among Top Demand Generation Systems
Marketbright and Rackspace Hosting Announce Solution Partnership
I asked Dom Lindars, Marketbright Chief Executive Officer 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?
When we started out in 2005 our vision was to create a better way to automate and integrate SaaS functionality using tools and systems to streamline large scale marketing efforts, and improve marketing ROI. I have more than 18 years experience as a veteran of online marketing and website management and Marketbright’s senior team has its roots in large enterprise marketing operations, web content management, business and enterprise software sales.
Why do your customers buy from Marketbright?
Our customers turn to us for sophisticated lead nurturing and management programs, which emphasize listening closely to customer feedback, communicating proactively and building relationships. Lead nurturing is a new business practice for many companies, where the typical mode of operation usually has marketing throwing all leads over the wall to pre-sales or sales –who often cherry-pick leads and leave the others to grow cold. Nurture marketing involves building multistage campaigns that interact with customers across multiple touch points. These nurture programs can create complex customer interactions that are difficult to manage and run the risk of causing customer fatigue if not handled properly or efficiently. Our customers choose the Marketbright approach because it automates the difficult task of managing multi-touch campaigns and the resulting, often complex flows. The platform provides an easy way to deploy and manage multi-touch campaigns across all marketing channels:
Our customers rely on us to deliver marketing automation solutions that check all the boxes, are easy to use for all team members, make complex tasks simple, and are integrated, secure, scalable and reliable.
What do you see as the key trend emerging in the SaaS industry?
The advent of social media has had an enormous impact across industry. In light of the economic instability (and at the risk of discussing the economy ad nauseam), most organizations are making efforts to save money and tighten their belts. Often the first way to do this is to cut spending on marketing for one, but the problem is, this is the time when money spent on marketing is probably more critical than ever. Companies just have to spend their money in the right place, and social media is emerging as a pretty safe bet. Even better, a SaaS solution combined with social media efforts will give you more bang for your buck. SaaS does well in a downturn economy, especially when big organizations are looking to cut back and outsource. It’s also a good alternative when organizations have no or small IT groups, or their IT teams simply don’t have the bandwidth to contribute to social media efforts.
Over the next few years we’ll see social media as a baked-in element of all multi-channel marketing solutions. At Marketbright, we’re already bringing in 17% of our leads through social media, such as LinkedIn, Twitter, Facebook, and staff blogs. Most importantly, no one objects to spending on marketing when it directly results in delivering qualified leads to sales.
What is your outlook for 2009?
In this year of pocket change, trying to find a way to sell more with less, stretching less of last year’s marketing dollars to meet more of this year’s is a top priority. The challenge for many businesses today is they seek a silver bullet, one solution that will solve everything, which of course is non-existent.
For the remainder of 2009, B2B companies should focus on the lead generation activity delivered in the past that directly produced the greatest return. Spend on those programs that generated the majority of business last year. (Seems obvious? Do any of your budgets show trimming of activities you should really be stopped altogether?) Work with sales to identify those accounts that have the greatest propensity to move through the pipeline. Get proactive. Find out what is the minimum amount of information you need to give to a prospect to make them a customer and give it to them proactively.
There is no point in pretending 2009 hasn’t been a challenging year for business thus far, but we may as well make the best of it. Apply your best judgment in becoming more agile, more creative, and above all pay attention to the data that is sitting in your businesses. Find out what worked, do more of it. Accept what didn’t. Don’t do so much of that.
Thank you to Dom Lindars, Erik Bower and Lilly Hanscom for contributing to this profile.
I was listening to an interesting panel discussion at a recent SIIA show in San Francisco that a very good panel:
Joe Talley, Partner at Deloitte who was the moderator; Ken Goldman CFO at Fortinet a large privately held firm and former CFO at Siebel; Sandip Gupta, President, NetMagic a profitable private company; Jeffery Kuhn, Managing Partner FLG Partners, a CFO advisory firm; and Bill Soward, CEO at Adaptive Planning.
Here were some of the interesting tidbits I picked up.
General perceptions on the panel of the economic outlook were cautiously optimistic for the SaaS market. Adaptive Planning just conducted a survey of financial executives in the last 60 days that stated that these buyers are more pessimistic about the future than they were at the end of December. A lot of that pessimism was due to the lack of marketplace visibility, challenges in hitting quarterly sales targets and future cost reductions.
Important Business Metrics
Others felt that SaaS companies are faring better during this recession because of the importance of taking a metrics-based approach to running their businesses. Key business indicators that need to be carefully monitored include:
MRR - Monthly Recurring Revenues. Are they predictable? Have they been consistent? Are they shrinking or growing? These are all important MRR trends to monitor on a monthly basis.
Churn - The percentage of customers who don’t renew your software service. This is a critical metric because no matter how effectively you sell, if you are losing more than you are selling it can be impossible to reach profitability. Another Churn component to keep an eye on are if your Churn or Renewals percentage is consistent but your overall number of seats or dollar amounts shrink.
Renewals - Percentage of customers who renew your service. See above. Another important indicator is if customers are renewing for multiple year terms, this can save your firm precious resources annually to renew your customers.
Cashflow - How much cash are you generating on a monthly/quarterly basis. This is vital in modeling a future path to profitability as well as effective expense control. Cash management is really important in this environment especially for smaller firms because VC funding is very difficult.
Another good point that was made, is that when times are tough, many smaller firms will take on debt when cash is tight. The panelists felt this was a very bad idea and that pursuing debt makes it harder to run a business in a downturn. It is a better idea to think about ways of selling more services, software or content to your existing customers
Communications
I agree with several of the panelists that one good way to improve renewals and reduce churn is to over-communicate with your customers. During the last recession, many software companies went out of business and your customers are nervous unless you are a large publicly traded firm. This type of communications strategy is especially important with large customers who might provide most of the MRR for your company.
In addition, this approach is also applicable for your employees and investors as well. Opening the lines of communication, good and bad, will calm everyone down and make it somewhat easier to manage these key relationships. Talk about corporate goals, KPI’s and several panelists said it is important to practice empathy.
Changing Sales Environment
The recession is definitely changing software buying habits. Customers are now more attuned to buying a subscription rather than an upfront software license. Part of the reason for this is that capital is really tight, and your customers are trying to manage their cash carefully. Some firms, like Adaptive Planning, claim to be able to collect up to 12 months of cash upfront at the time of their deals being signed. This is a good best practice because it provides much needed operating capital for the SaaS firm and it also can be a way for customers to get up to an additional 5% discount on their deal for a 1 year upfront payment.
The panel agreed that customers were buying fewer seats, training less people and looking at longer roll outs. The deals tend to be a little smaller but deals are still getting done. Because SaaS deals are usually handled as an operating expense, it may be possible to get deals done without the intervention of the CFO. But there are still many deals that require not only the CFO to sign-off but also require the CEO and even sometimes the Board to approve the deal.
Customer Acquisition Costs
CAC or Customer Acquisition Costs, is another metric that is important for SaaS companies to monitor. These costs during the recession have also risen. Even though growth is not viewed as important during the recession as cash conservation, it is an ideal time to take share from competitors. This is why many firms are looking at extended trials and even giving their software away to seed their pipeline with future deals that can be harvested as the recession ends and companies start buying again.
Other Marketing and Sales Ideas
Think seriously about shifting your model from an enterprise, field sales orientation to more of a tele-sales approach. Continue to do lead generation and automate your processes, because your sales teams still need leads. Cutting out your lead generation activities to save some near term money can cripple your company later on.
Know who your real sales performers are and upgrade those who are not performing. There are a lot of talented people available in the market, now is the time to improve your team. Re-organize your sales team to be leaner, more focused and effective.
Regional seminars can be very effective. Partially because there are too many webinars but also because people can travel anymore but might want to get out the office to see you in person. It is also a way for the potential customer to see if you and your company are for real.
What I took away from the panel is that if you manage your SaaS firm by monitoring these important Key Performance Indicators and are decisive about making decisions, today’s SaaS firms will emerge from this recession as not only survivors but winners.
Company: Sonoa Systems
Started: 2005
Located: Santa Clara, California
Geography: North America, APAC
Market: Cloud Computing : Enabling technology / API Infrastructure
Products: Analytics, Management and Governance solutions for APIs, feeds and services - available as software, hardware or as a Cloud-based service
Key Customers: MTV Networks, SelectMinds, Innotas, TrueCredit, InfoNGen, ING, Warner Music Group and others.
Website: Sonoa Systems
Recent News:
Sonoa Builds the Enterprise-Class Content Policy Cloud
Cloud Management Provider Sonoa Systems Lands Deal With MTVN
I asked Chet Kapoor, Sonoa Systems Chief Executive Officer 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?
We started out shipping our technology on hardware appliances. Fundamentally, our software is architected like a networking device for deployment on the edge in high-scale environments. Last year we began shipping this same technology on a software virtual appliance to meet some OEM opportunities and also because more customers are in a virtualized environment. We soon saw demand for ServiceNet as an on-demand service because some customers wanted ServiceNet as a subscription-based cloud offering.
Why do your customers buy from Sonoa Systems?
We have very deep technology for very high-scale, very configurable policy enforcement. The design center for our technology is around meeting the unique challenges that enterprises, SaaS providers, or media companies find in managing APIs, feeds, and cloud services.
What do you see as the key trend emerging in the SaaS industry?
While a recession isn’t a good thing –it’s actually accelerated adoption of Cloud Computing technologies in the enterprise. We see a definite pickup in adoption of SaaS, APIs, Mashups, and mobile apps in the enterprise. It’s a ‘survival of the fittest’ environment and business managers are under the gun to either rework costs or come up with new ways to build revenue and share. Cloud Computing is a powerful weapon to do both , and the challenge is, how do you do this and still maintain the enterprise security, compliance, and service levels? You would never use a utility service without metering and circuit breakers – enterprises are very aware that they need this function when using cloud services, feeds, and APIs.
What is your outlook for 2009?
Our outlook is very excited and we are pumped! We’ve got some great partners that embed our technology in enterprise products and we’re very excited that customers are deploying ServiceNet in the Cloud. We’ve just passed 50 customers selecting our technology, and the bottom line is that we’ll continue to work towards making it very easy to get started using our technology.
Thank you to Chet Kapoor and Raksha Varma for contributing to this profile.
Company: M-Factor
Started: 2004
Located: San Mateo, California
Geography: Global
Market: Predictive analytics for marketing and trade investment management
Products: M4 – Marketing Investment Management
T4 – Trade Spending Effectiveness
P4 – Portfolio Pricing Optimization
Key Customers: Coca-Cola, Kellogg’s, Alberto Culver, Ocean Spray, White Wave Foods, Wendy’s
Website: M-Factor
Recent News:
M-Factor Named “Cool Vendor” by Leading Analyst Firm
M-Factor Announces Global Partner Program called “M-power”
M-Factor Appoints Dirk Beyer as Chief Scientific Officer
M-Factor Announces Record Performance & Additional Funding
I asked Lawrence Whittle, M-Factor’s Chief Executive Officer 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?
Yes, the background to most of our early team is heavily influenced by On Demand / SaaS delivery. From the beginning it was clear that our target customers were looking for solutions that could offer advanced functionality, but with a lower risk, lower total cost and faster time to value than on-premise solutions would allow and importantly without any significant dependency on IT organizations. Customers want the continuous innovation that is typically only possible with a SaaS delivery model that allows ongoing seamless enhancements — an unthinkable proposition with traditional licensed software.
Why do your customers buy from M-Factor?
Our clients and prospects (primarily Consumer Product and Quick Serve Restaurant companies), have never faced a greater need for forward-looking, predictive solutions so they can optimize where and how to spend their marketing and trade dollars. Simple point in time analysis and backward-looking assessments are of limited value unless you can harness this insight to be forward-looking and enable you to positively change the future outcome of your business.
M-Factor’s solutions provide companies the ability to fully understand what happened in the past by breaking down sales to see the impact of various trade and marketing strategies this is then coupled with an even more important ability to look at constraint-based simulations to accurately predict what will happen in the future. Examples include what will happen if a company shifts advertising support from a brand or product or moves trade funds from one brand to another across channels and time.
M-Factor’s solutions can optimize marketing and trade spend up and down a product/market hierarchy so that aggregate views (such as at a national or regional level) are clear and companies can ultimately construct the best overall plan to meet corporate objectives.
The solutions being delivered as SaaS provides companies with the lower cost and faster time-to-value that they desire in today’s fast moving and highly competitive business environment
What do you see as the key trend emerging in the SaaS industry?
We are seeing interest in SaaS solutions growing significantly as companies want to take advantage of the comparatively low total cost of ownership and quicker returns of implementing SaaS technologies. This trend was already underway but the economic downturn seems to be driving more companies to evaluate SaaS solutions over the traditional on-premise applications. We expect this trend to continue for the foreseeable future. Any operational or security risks around SaaS have been eliminated, in fact the performance, scalability and uptime demands of SaaS have led to a superior level of customer service, way ahead of traditional software applications.
There also needs to be a continued focus on customer satisfaction and innovation from SaaS providers. Since companies more or less rent the software, SaaS providers must provide unparalleled customer support and product functionality to ensure that customers renew. We take great pride in how we address both with our customers and believe that both are required for SaaS companies to be successful.
What is your outlook for 2009?
In this down economy it may be a bit crass to say, but our 2009 outlook is quite positive. We offer a unique and compelling value proposition that is in high demand right now since our solutions can provide companies a holistic view of their marketing and trade spend. Our solutions provide the ability to dynamically plan across accounts, channels, and various time frames and can predict what will happen in the future through constraint-based models. In a downturn year for almost every company, across every sector, we have advanced our customer count, our revenues and our headcount
The proven referenceability of our customers has significantly fueled the overall market interest in our solutions. The lower cost of ownership, faster time to value and ongoing innovation that the SaaS model allows along with advanced functionally of M-Factor’s solutions are also key drivers behind our positive outlook.
Thank you to Lawrence Whittle and Jason Gatoff for contributing to this profile.
Back to top