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by Kevin Dobbs
Montclair Advisors, LLC
Now with all types of Software-as-a-Service alternatives in the market today, one tip that separates the winners from everyone else is the ability to create a product that is truly viral. Granted several of these companies listed above offer consumer-oriented offerings, not traditional enterprise or corporate software there are examples like Yammer, were large organizations have very quickly adopted their products because the internal usage spreads like wildfire. I profiled Yammer and they are definitely an organization that has built its sales and marketing model on being viral.
Here are some tips when thinking about incorporating viral adoption into your product and business strategy:
- Offer a free version of your software. For most SMB SaaS firms this is now table stakes to play in the game, but for firms like 37Signals, Freshbooks and Yammer have leveraged their free versions as a way to generate qualified paying customers. Keep in mind this is not pursing a Freemium strategy (ask like a SmartRecruiters, Dropbox or Mint.com), it is just a way of generating a lot of new users, which then can be converted into paying customers.
- Clear pricing for your product. By offering a high degree of transparency around pricing, software companies can take the pricing conversation off the table and allow their customers to make their own decisions before they ever contact you. Here is an example of how 37Signals’ Basecamp product pricing looks on their website… it’s really easy. This type of tiered pricing allows the customer to self-select the amount of software and service they need to get their job done, and it also enables the customer to start small and add more capability over time.
- Trials. If you have a tiered pricing structure but don’t offer a free version of your software, then it is highly recommended to to have a free trial version (up to 30 days free). This allows your prospects to experience your product first hand and explore its features and functionality. If the product is relatively straightforward then you can let the prospects just play in their own sandbox. On the other hand if you product is complex or requires some context-setting, then it would be a good idea to offer proctored assistance through assistance over the phone, webinars or even short videos to help them with individual features. Intuit has really embraced the SaaS business model and offer many trails including this one for their Intuit Websites product.
- Intuitive interface. Really think through your interface and make it as easy to use as possible. Most software users would prefer to do things themselves and your products interface is the key allowing them to do that. Companies like Intuit do a lot of testing around how their products behave in real-life situations and they observe their customers actually using their products. This helps with screen layout, workflows and even user roles for certain types of applications.
- Keep training to a minimum. If you offer an intuitive product, then there is less of requirement for training but most applications require some type of overview or setup. For anyone who uses an iPhone, iPad or MacBook Pro, Apple provides all types of training videos that are quite informative and help to get you started using their products. Also providing a solid knowledgebase of information as well as a vibrant user community also helps to get customers up and running successfully with your product. Check out what Constant Contact’s Learning Center.
- Small consumable chunks. We can learn a lot from many of the learning consumer Internet firms like Facebook, LinkedIn and even Zynga. Especially gaming firms like Zynga (Farmville) have taught us to start small and then expose more functionality over time. This allows for easier consumption of capabilities and viral adoption of solutions.
- Rapid Time to Value. Even more complex systems need to be able to be ’stood up’ quickly. We often recommend creating a generic version of the software that can be provisioned very rapidly and made available to the customer. For an SMB type of product I would recommend <1 days to get a basic version and for complex enterprise applications, you should try to deploy a generic version <5 days. Even though this version of the software will have its functionality and UI configured, data added, workflows tailored, it is important to give the customer something they can start using as close to immediately as possible. This is also a good idea from a revenue perspective as well because you can start to charge once your customers start using your systems.
Just to recap, getting a product to go viral requires a lot of thought around how your customers are going to use your product, keeping everything simple and focusing on making sure customers are successful when they use your product.
Considering how have been wildly successful some of these companies have been in the consumer space – Facebook has 500M users, Zynga has over 200M monthly users and in the business application space firms like Yammer have over 1M users, 37signals has over 3M BaseCamp users, Freshbooks has over 2M users and Intuit has over 1M SaaS-based users of its products, and important lessons can be learned from how these companies are building their SaaS products for viral adoption.
By Kevin Dobbs
Montclair Advisors, LLC
According to Gartner, the Software-as-a-Service market is forecast to have a 15.3% compound annual growth rate through 2014 for the enterprise application markets, compared with total application market CAGR of 5.3%. It is this type of growth and adoption that is causing many traditional ISV’s to seriously consider transitioning their business models to SaaS.
This is obviously easier said, than done. According to our informal research, close to 50% of all ISV’s fail at least once before successfully rolling out a successful SaaS strategy. What is interesting is that 35% of all ISV’s are currently in the process of trying to move to SaaS according to Saugatuck Technologies. Because it is difficult, I am going to share my 12 best tips when transitioning to a SaaS business model over the next few Smart SaaS posts.
Tip #1: What Is Your SaaS End Game?
This sounds basic but it is amazing how many clients don’t really know how far they plan to go with SaaS. Will your company go all the way and convert 100% of your business to multi-tenant subscription solutions over time or will you continue to offer on premise software as well. This diagram is helpful with speaking with your team to determine where your company fits along our Software Continuum.
Depending on your strategy - traditional, hybrid, cross-over or SaaS, this should change your game plan. Keep in mind that a complete SaaS transition can take anywhere from 3-5 years to complete, so break your plan into 12 month phases. For a company just looking to launch a hybrid model, offering both deployment options, the timing for transition will be less than a company looking to do a full move to SaaS.
A new SaaS start-up takes about 5 years to break even and most venture capitalists are looking at 7 years before the company could possibly go public. On average most successful SaaS firms take about $35M in investment before they can reach an IPO stage, so you should be prepared to invest in your SaaS transition as you shift from a perpetual model to a subscription model.
SMB Financial Productivity Software
There is an increasing number of Software-as-a-Service (or SaaS) firms jumping into the smallest end of the Small and Medium-size Business (SMB) market, and they are offering a variety of financial productivity solutions. This is the fastest growing segment of the economy according to the Bureau of Labor Statistics there are up to 21 million self-employed consultants and small firms in the US.
This has traditionally been the sweet spot in the market for companies like Intuit. Although most customers are somewhat happy with their offerings, Intuit’s offerings tend to be cumbersome, packed with way too many features, hard to use and upgrade.
A new set of SaaS providers has emerged with products designed specifically for the small business owner. These packages are all delivered through the Internet as a service, so no more visits to Best Buy were required. Many of these new software services are very low cost and some were even free, and because of this, the adoption of these products has been rapid.
This Sector Report only covers the incumbent software provider and the promising new SaaS suppliers.
Financial Productivity Software Profiles
QuickBooks Free and $
The clear leader in providing Financial Productivity solutions for small businesses is Intuit. They have now also wrapped a set of small business services to help newly formed companies including payroll, website and logo development. Intuit is now offering a free single user version of QuickBooks, Intuit Online Payroll and Intuit Websites (from the Homestead acquisition) to encourage small businesses to use their financial and business productivity products.
Intuit has been trying to move more of their offerings to a subscription model for several years, without a lot of success. But they are continuing to push SaaS and you will see more SaaS offerings in 2009-2010 including QuickBooks Online.
Estimate millions of Quicken and QuickBooks users/customers.
Public company (NASDAQ: INTU)
New Alternatives
Online money management and budgeting software service. Free
This company has been adding 3,000 customers a month and have been a SaaS company to watch. Mint’s service is delivered through a subscription model but their software is free to use. To set up Mint’s money management service takes about 5 minutes, compare that to other industrial-strength solutions which require outside assistance and offer too much functionality for a small business.
Estimate 850,000 users/customers.
Private company based in California. 30 employees.
Online invoicing, time tracking and expense management.
FreshBooks has had a lot of momentum coming out of 2008 and offers a subscription invoicing service that is designed exclusively for freelancers and small businesses. Their focus is to provide products that are very simple and easy to use as well as integration to other productivity tools like 37Signals Basecamp project management software. FreshBooks offers a free service for a single user and then an incremental pricing structure based on usage.
Estimate over 700,000 users/customers. 60% in the US and 14% in Canada.
Private company based in Toronto, Canada. 30 employees.
On-demand business management suite; marketing, sales, operations and finances.
NetBooks offers a one-stop location for a small SMB to get all of the necessary business services they need to run their company. Their offerings are similar to the breadth that Intuit’s QuickBooks is now offering. NetBooks offers its software on a subscription basis and targets very small SMB’s.
Private company based in California. 30 employees.
Online accounts payables and bill management.
Bill.com provides a simplified way for SMB’s to manage their payables using their SaaS based platform. The company appeals both to SMB’s but also to accounts who can use the Bill.com service to simplify their client’s payable processes.
Bill.com has just formed a partnership with Intacct and integration to QuickBooks.
Private company based in California.
Online account system; banking, invoicing, payables, expenses and contacts.
Xero’s core is a set of financial products with some added contact management and reporting capabilities. Definitely targeting the small business owner with a very simplified SaaS offering. Support for firms in UK and Asia-Pacific. Nice user experience and Mac-friendly.
Estimate over 4,000 customers. Signed up more than 1,000 during December ‘08 and January ‘09.
Private company based in New Zealand. 50 employees.
SaaS-based accounting software.
Kashflow has been in business since 2002 and offers a very simplified online global accounting service. Provides a 60 day free trial and then pricing is based on a per user per month model.
Private company based in the UK. 9 employees.
On-demand income management, expenses and taxes.
Outright used to be gobootstrap.com and targets its products to very small SMB’s by offering dead simple financial products. Outright is offering its products free of charge during its beta test phase. Has integration partnerships with FreshBooks and Shoeboxed.
Private company based in California. 5 employees.
Workday $$
On-demand financial management, expenses, procurement and ERP.
Workday provides a complete financial suite of SaaS-based products that scale for SMB’s and large enterprises. Their ERP suite also provides HR, payroll, benefits, procurement and expenses. Workday solutions require professional services support to install and configure. Dave Duffield, the founder of PeopleSoft is also the founder of Workday.
Private company based in California. 320 employees.
On-demand financial management and accounting software. $$
This product suite is designed for the small business that has outgrown QuickBooks. The suite includes general ledger, purchasing, order management, inventory, contract and revenue management. Intacct has available integration into Saleforce.com, OpenAir, QuickArrow and many industry-specific solutions.
Estimate over 2,500 customers.
Private company based in California. 100 employees.
On-demand corporate travel and expense management.
Although one of the original Software-as-a-Service companies, Concur is focused on the high-end of the SMB segment all the way up the Fortune 500. Deep functionality requires outside consulting assistance to set up. Pricing is a monthly subscription based on usage. Probably not a good fit for a small SMB company.
Estimate more than 6,000 customers.
Public company (NASDAQ: CNQR).
Netsuite Accounting and ERP Suite $$$
On-demand accounting, time and billing, order, purchasing and inventory management.
Netsuite is designed for the company who is looking for a modular on-demand ERP suite. The suite also includes Customer Relationship Management (CRM), eCommerce and Business Intelligence modules. All products are offered in a SaaS format. Company also offers a Platform-as-a-Service (PaaS) framework for Netsuite developers who want to build their own applications.
Estimate over 5,000 customers.
Public company (NYSE: N).
Given the current state of the economy, many individuals are now setting up their own businesses. Using these new subscription-based Office and Finance Productivity tools can not only be very affordable for start-up your businesses but also give the consultant or SMB many of the same capabilities they had at their larger firms.
The good news is that there is no shortage of SaaS-based Financial productivity products out there to choose from and this is just a top line summary of what is available. Many of these products are available at very attractive price points, including many who are free. Using or switching from older solutions not only can save a lot of money but also make SMB’s more competitive in this tough economic environment.
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