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By Kevin Dobbs
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.
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.
Company: GoodData
Started: 2000
Located: San Francisco, California
Geography: Global
Market: Cloud Business Intelligence
Products: GoodData On-Demand Analytics
Key Customers: MarketMetrix, TriNet, Enterasys, Black Duck, and Gazelle
Website: GoodData
Blog: GoodData Blog
Twitter: @gooddata
Recent News:
GoodData Powers Reporting and Customer Analytics at Sinu
GoodData Powers Customer Analytics at Market Metrix
GoodData Deploys Talend for SaaS Data Integration
GoodData Helps TriNet Sharpen Focus on Customer Analytics
I asked Roman Stanek, GoodData’s President, CEO and Chairman a few questions about his business and his view of the SaaS market in 2010.
Did you start out as a Software-as-a-Service company?
We restarted the company in 2007 focusing exclusively on Cloud Business Intelligence. Based on my experience, until recently most SaaS BI was based on an older ASP rather than a true multi-tenant model. By 2007, there was a real opportunity to build elastic BI solutions on top of the Cloud especially with the emergence of companies like Amazon who launched EC2. The traditional way of delivering business intelligence was too expensive and not available to everyone who wanted access important business data. Often times a company’s BI solution was slow and expensive because of inconsistent data demands which are common, that creates spikes in usage.
GoodData spent two years thinking through this problem and building out our platform, which is built on top of Amazon’s Web Services infrastructure that provides a scalable way to build our business. Our team beta tested our solution and by late in 2009 we started selling our new products and re-launched our company.
Our collective experience over past last ten years has been in and around the SOA space, which is very closely aligned to the new Cloud Computing world. For me the inspiration for GoodData was when I really began to realize the possibilities and the disruptive properties of the Cloud. We just needed to find a big business problem, which led us to the world of BI.
It was clear that customers who have bought traditional Business Intelligence solutions from IBM/Cognos, SAP/BusinessObjects, SAS and others, faced the classic innovators dilemma when expecting these providers to deliver new, easy-to-use solutions. Then Salesforce.com came along and said you no longer had to buy software, you could rent it, and by having your software in the Cloud it would always be fresh. They really helped to validate our use of the SaaS business model.
Why do your customers buy from GoodData?
With our approach GoodData can now deliver Business Intelligence for the masses through our use of SaaS and the Cloud. Our customers buy from us because we are focused on creating a really positive product experience, which means that our customers can control and personalize their own user interface, dashboards, metrics, and reports.
Our solution was designed to be really easy-to-use because our customers would rather just turn it on and start using it, which makes their ‘out of the box’ adoption very rapid. We provide a nice set of business-oriented BI templates including pipeline management, marketing, customer services and customer lifecycle analytics all at a reasonable price.
GoodData’s focus is to have our customers up and running quickly. Today we concentrating on “Success in a Month” but over time we want to be continually improving so in the future we will be able to say to our customers GoodData will provide “Success in a Week”.
The most difficult part of building a fully functional BI solution is the intelligence part. GoodData understands that any BI deployment requires creating the model, loading data, integration, then producing metrics, reports and dashboards, we just want to make it really fast and easy.
For Trinet, one of our early customers, our solution is so easy they were able to get started with only one hour of training and most users actually have had no training at all. User adoption at TriNet has been fast because our solution is intuitive. GoodData believes that the analyst in the cube type of BI solution is a broken model because they rely on IT to get their SQL queries and it takes a lot of expertise to use that type of product. We believe that IT should be out of the report writing business and more focused on getting data into systems.
The use of marketing metrics typically get heard but not seen but with collaboration this type of campaign information can be shared in reports, dashboards and KPI’s. When you visit call centers, for example, they have all their metrics on the wall about sales regions, agents and then make decisions about this static information. With our model, we want employees to register and use our solution and we don’t charge for extra users. This model encourages adoption. We charge by the project and use a ‘land and expand’ sales approach. We evaluate our business not on the number of users we are charging for but more on the ‘data under management’ approach, which we think is a better way to approach BI.
With our target market, firms with over $100M in revenues, it’s not about the software or tools, it is about getting the information to front office workers quickly, so they can make better decisions.
What do you see as the key trend emerging in the SaaS industry?
Over the past two years we have been very vocal about Cloud Computing and how it is becoming a credible infrastructure. We hope that there will be less focus on the differences between Public and Private Clouds because this is not really relevant to GoodData. We think the discussion in the future will be mostly focused on costs and pricing of the Cloud.
We have a partnership with Amazon AWS, which delivers a complex, sophisticated Cloud platform. What is great about working with them is that they introduce new services every month that we can leverage without additional investments in R&D. The industry is going to be a lot more price competitive going forward, just like Moore’s Law was for microprocessors, innovation in the Cloud continue to drive down costs. This Cloud innovation cycle will be a key factor in our ability to lowering our prices while improving our BI services.
Another trend is metrics- driven businesses. This has been driven by the web, which produces much more data and business are now beginning to rely more on data than instincts. With the emergence of great web-based tools, metrics are now more accessible and usable for business management.
Collaboration is one step away from metrics. The recent announcement of Salesforce Chatter is a great way for organizations to distribute metrics/dashboards and better understand what is going on in their business. Internal tools like Chatter will help deliver and notify line-employees and managers how to better run their businesses.
What is your outlook for 2010?
Since this is our first year of being a commercial company, as the founder and CEO I am keeping the company very focused on Delivering Success in a Month in a repeatable fashion. Because at this stage in our evolution it is all about execution and focus.
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Company: Cloud9 Analytics
Started: 2007
Located: Redwood City, California
Geography: Global
Market: On-Demand Performance Management Solutions for Sales
Products: Cloud9 Pipeline Accelerator Suite and Cloud9 Analyst Suite.
Key Customers: Aspect, Avaya, Beckman Coulter, Inc., Carestream Health, Inc., D&B, Jigsaw, MySpace, Rolls-Royce, Schneider Electric, Siemens Enterprise Communications, Splunk, Thermo Fisher Scientific, Thomson Reuters Healthcare
Website: Cloud9 Analytics
Community: Cloud9 User Community
Twitter: @Cloud9Analytics
Recent News:
Cloud9 Achieves Breakout Performance in 2009
Karen M. Steele Joins Cloud9 Analytics as Vice President, Marketing
Cloud9 Analytics Integrates Goals, Bookings and Sales Data For salesforce.com Customers
I asked Swayne Hill, Cloud9 Analytics CEO a few questions about his business and his view of the SaaS market in 2010.
Did you start out as a Software-as-a-Service company?
Yes, from its inception, Cloud9 has been a 100% multi-tenant platform for performance management applications like sales pipeline management and forecasting. The company is also SAS-70 certified.
Why do your customers buy from Cloud9?
Cloud9 Analytics provides SaaS performance management applications designed for customer-facing front office functions including sales, operations, marketing, services and support. Cloud9 solutions help companies optimize revenue by providing real-time visibility into what’s changed in key management processes such as managing the sales pipeline or managing the forecast. Cloud9 solutions deliver sales leaders and executives with actionable insight into the state of their business with a single, consistent and flexible view. Unlike other business intelligence tools designed for the IT department to build Ad Hoc reports, Cloud9 provides domain-specific analytic applications delivered through a software subscription, that are immediately relevant and consumable for line-of-business users. Using Cloud9 solutions, customers report increased win rates and forecast accuracy leading directly to increased revenue.
What do you see as the key trend emerging in the SaaS industry?
As Cloud Computing platforms such as Salesforce’s Force.com, Amazon AWS, Google’s App Engine, Intuit’s IPP and others emerge for Cloud Computing development, there will be greater opportunity for ISVs to provide solutions and broaden their reach.
What is your outlook for 2010?
Cloud9 sees continued rapid expansion of SaaS business analytics, driven by trends like:
Technology: Smarter automation support for key management processes that are currently bogged down by today’s disconnected manual approaches.
Data Transparency: Businesses need to stem the flow of disappearing data from transactional systems like CRM and put that data to work on the front lines.
Economic Turnaround: The economy will expand again and business will invest in technology that creates competitive advantage - SaaS will become the model of choice with minimal upfront costs and quick time-to-value.
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.
| Term | Definition |
| ACV | Annual Contract Value of a subscription software agreement. |
| API | Application Programming Interface. |
| ARR | Annual Recurring Revenue. |
| ASP | Application Service Provider. Typically associated with a hosted single tenant software solution. |
| CAC | Customer Acquisition Costs. A key -SaaS metric that measures sales effectiveness based on how long it takes to pay back Sales and Marketing investments. |
| Churn | A SaaS measure of customers who do not renew their annual or monthly subscription agreement. |
| Cloud Computing | A utility computing method that shares many types of computer resources through virtualization and delivers an elastic computing environment over the Internet. |
| CLTV | Customer Lifetime Value. A key SaaS metric that is used to measure customer value, usually over 3 to 5 years. |
| CMRR | Contracted Monthly Recurring Revenue. A key SaaS metric that is calculated for new customers, up-sells, cross-sells and removing churning customers. |
| CoLo | Co-Location facility. A term for leasing a third party’s physical data center infrastructure, which usually includes the building, power, Internet connectivity and security. |
| Cross-Sell | A key SaaS metric measuring new software functionality or modules added to an existing software subscription agreement. |
| Down-Sell | A key SaaS metric that measures when customers remove of functionality, users or capability that lowers the CMRR. |
| Freemium | A business model in which the SaaS or Cloud Computing provider offers basic features to users at no cost and charges a premium for supplemental or advanced features. |
| Hosted Software | Single tenant software that is delivered over the Internet from either the Software vendors own data center or through a third party hosting company. |
| IaaS | Infrastructure-as-a-Service refers to a combination of hosting, hardware, provisioning and basic services needed to run a SaaS or Cloud application that is delivered on a pay-as-you-go basis. |
| Mashup | It is a web application that combines data or functionality from two or more external sources to create a new service. The term implies easy, fast integration, frequently using open APIs and data sources to produce results that were not the original reason for producing the raw source data. |
| MRE | Monthly Recurring Expenses. |
| MRR | Monthly Recurring Revenues. |
| MSP | Managed Services Provider. Usually a hosting or CoLo provider who provides a higher level of application management services (App management, monitoring, reporting, billing and call center support). |
| Multi-tenancy | Refers to a software architecture where a single instance of the software runs on a server, serving multiple client organizations (tenants). Multi-tenancy is contrasted with a multi-instance architecture where separate software instances (or hardware systems) are set up for different client organizations. |
| On-Demand | Is often used as an interchangeable term along with SaaS. |
| On-Premise | Traditional method of installing and customizing software on the customer’s own computers that reside inside of their own data center. |
| Platform-as-a-Service (PaaS) | Platform-as-a-Service solutions are development platforms for which the development tool itself is hosted in the Cloud and accessed through a browser. With PaaS, developers can build web applications without installing any tools and then they can deploy their applications and services (reporting, integration, security) without any specialized systems administration skills. |
| Private Cloud | Employs Cloud Computing principles within a customer’s own internal networks. The term implies that the same virtualization and highly flexible and scalable methods used in huge Internet-based enterprise datacenters. |
| Public Cloud | Cloud Computing conducted using the public Internet outside of any enterprise firewall. |
| Renewal | Agreeing to extend an existing software subscription agreement beyond the initial term. |
| SLA | Service Level Agreement. The contractual terms of service associated with SaaS provider’s offerings. |
| SOA | Service Oriented Architecture. |
| SaaS | Software-as-a-Service refers to multi-tenant software delivered over the Internet and customers consume the product as a subscription service that is delivered on a pay-as-you-go basis. |
| Subscription | SaaS licensing method where customers rent their software from the provider usually over a 1-3 year period. |
| TCV | Total Contract Value. Total value of a transaction as measured over the term of the agreement. |
| Up-Sell | A key SaaS metric measuring additional software functionality, users, or capacity that is sold onto an existing software subscription agreement. |
| Virtualization | The creation of a virtual (rather than actual) version of an operating system, a server, a storage device or other network resources. |
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.
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