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Company: Ariba
Started: 1996
Located: Sunnyvale, California
Geography: Global
Market: Collaborative business commerce solutions
Products: Ariba Commerce Cloud Buy, Sell and Manage Cash
Key Customers: Avaya, Clariant, Deloitte, Del Monte Foods, Ohio State Medical Center, OfficeMax, Saks and Staples
Website: Ariba
Blog: Ariba Exchange Blog
Twitter: @Ariba, @AribaExchange and @AribaContract
Recent News:
B&H Boosts Business through Ariba
Growing Enterprises Boost Profits and Performance with Ariba
Gasunie Fuels Better Commerce with Ariba
I asked Dan Ashton at Ariba a few questions about his company’s transition to a SaaS business model over the past few years, ideas around best practices and lessons they have learned.
Why did you launch a Software-as-a-Service business?
We started our transition to SaaS about 6 or 7 years ago. Our entire management team looked into the future and realized that this was the way the market was moving and they wanted to get in front of this growing trend.
When we looked at our installed base, we had mostly large, Fortune 100-type on-premise customers, who had all highly customized our solutions. We felt that heading down this path exclusively we were limiting our market to only the very largest companies and we saw the potential to embrace SaaS and how it could open up our opportunities to serve a broader section of the overall market.
What lessons have you learned in building your SaaS business?
In order to move to SaaS you need to really change your culture in order to successfully embrace the subscription business model. We had to understand and communicate inside of our organization, and focus our energies and talent on building out this new model. We didn’t want to just re-create our CD-based business in the Cloud, and it was important to convince everyone that this was the right thing to do for our company.
It required that we look at our entire business in a new way. For example, deploying our software through a self-service approach instead of always having to use a professional services team to implement out software. We also had to realize that our first SaaS product was not going to be perfect or functionally complete as compared to our existing on-premise product, but this was just a step in our transition to a subscription business model and that it was good enough to start with. Today our subscription products offer more and better functionality that their on-premise counterparts.
From a technology perspective we also had to rewrite our products on top of a new multi-tenant architecture because the old CD-based architecture was optimized for the scalability and flexibility requirements of our new SaaS business. So we made this investment in rewriting the products but we also invested in bringing new SaaS-experienced talent with specific skills into the organization to help in other areas of the business as well.
We didn’t want to alienate our existing customers, and realized that we couldn’t force them to move and told them they could do it in their own time. This meant that we had to continue to support our existing CD-based products.
For those customers that have highly customized solutions, it is not easy to migrate to SaaS and right now they don’t want to change. Our approach has been to provide additional Cloud-based value-added components like Procurement Catalog content or RFP Management Sourcing, to allow these customers to leverage their existing investments while being able to take advantage of our new SaaS-based solutions.
Product adoption and utilization are also very important. When a customer successfully adopts our products they are usually satisfied and will renew the service. When they don’t use the product fully, they can’t unlock the full value of our solutions, and then we might be at risk.
Ariba tracks all sorts of processes inside of our SaaS business including renewals and customer satisfaction. We send out surveys just after an implementation goes live, as well as throughout the subscription term because we don’t want any surprises. When issues come up, they are escalated all the way up to senior management, if necessary, because we really want happy customers. That is why our customer renewal rates are above 97%.
As part of the transition we created a customer success team that was focused on customer satisfaction, making sure they were utilizing our products to their maximum benefit, helping with product adoption and sharing best practices.
We also monitor when customers don’t put enough spend through our solutions, because when they buy our products they are anticipating a certain level of savings. Ariba is motivated to get our customers to put their spend through our system, because we sell our products based on value-based pricing model. So we are motivated for our customers not only to get value from our systems but we also get additional revenue, so it is a win-win. By putting more spend through our system customers can typically save between 5-15%, which for most customers can be a lot of money.
Another lesson learned was that we had to change to our financial model, especially the necessary shift from license to subscription revenues. This new cash flow model affected everything, and made us more conscious of how we were spending our money.
We also had to work hard to re-calibrate our story and with investors and the industry analysts. This was because our commitment to our SaaS strategy meant that if they didn’t really understand our plans, and the implications of our business changes, there was going to be a price to pay. This is why we carefully explained our roadmap to the financial community and that there were going to be decreased revenues and earnings over the near term but longer term we were really making an investment that would deliver increased stability and security for our company in the future.
During the SaaS transition our management team really had to make changes at all levels of the company. They had to communicate the message and sell the model both internally and externally. It is a hard transition and unfortunately not everyone can make the transition, we just found that some people just can’t do it. Our management stayed focused on customer satisfaction because they knew that a key part of the SaaS model was keeping our customers happy.
Why was moving to SaaS important?
One reason is that it really expanded our addressable market by being able to offer a more affordable, flexible SaaS product. Customers could start with our Sourcing or Contract solutions by doing a free trail and then license the products for as little at $100/month per seat versus having to pay millions of dollars using the old model. This just opened up the broader market for us.
Moving to SaaS has also forever changed our culture at Ariba. We have become a more vibrant and energetic organization that is focused on customer satisfaction. Our employees are excited about working for our company because we are a product innovator and a leader in our market.
At the beginning we felt like we were playing catch up all the time but once we reached product parity, we started to operate a different release cadence, which was really important to our overall business agility. This allowed us to break out different solutions and we no longer had to manage one large monolithic solution that just seemed to slow us down. Now we release a product every quarter.
Market analysts now look to Ariba when they are thinking about where the market is headed around Spend Management. We have even created a new market space and called it the Ariba Commerce Cloud, where we not only connect buyers and sellers but also help our customers manage their cash. The Commerce Cloud is also about how we can help customers collaborate with their sellers, using a very innovative approach. At Ariba Live, our annual user meeting, in the past would only attract a few suppliers to this event but now nearly 40% of the attendees are suppliers and they are very bought into our
SaaS products and our vision for the future.
Company: InsideView
Started: 2005
Located: San Francisco, California
Geography: North America
Market: Sales 2.0
Products: SalesView
Key Customers: Ariba, Borland, IBM, Omniture, Serena Software, SuccessFactors and Synq.
Website: InsideView
Blog: InsideView Blog
Recent News:
INSIDEVIEW NAMED TO JMP SECURITIES’ HOT 100: BEST PRIVATELY HELD SOFTWARE COMPANIES LIST
INSIDEVIEW HARNESSES TWITTER TO POWER SALES
I asked Umberto Milletti, InsideView’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. Since the most complete and valuable business intelligence is available in the cloud, SaaS delivery has been built into our business model from day one. Also, since SaaS has become the delivery model of choice to our target audience – sales and marketing professionals - it was essential that we bring them the intelligence they need in their preferred model.
Why do your customers buy from InsideView?
Our customers come to us because they need to improve sales productivity and accelerate deal velocity. SalesView delivers just that: It maximizes sales team productivity by delivering a one-stop shop for prospecting needs and accelerates the sales cycle by enabling sales people to call the right prospects at the right time. And it does so by aggregating intelligence from thousands of sources, both traditional and social, to ensure accuracy, timeliness, and mostly importantly, relevance.
While having an efficient sales and marketing engine has always been essential, the economic downturn has pushed the need to “do more with less” to priority #1 for most sales organizations. That’s a big reason for the success we’ve enjoyed in the last two+ quarters – the brutal economic environment has actually accelerated the need for and adoption of Sales 2.0 technologies like SalesView.
What do you see as the key trend emerging in the SaaS industry?
With Cloud computing platforms becoming more mature, it’s becoming easier and easier to develop SaaS applications. That’s good news for customers, since as choices multiply, prices diminish. And with the base infrastructure in place, customers can focus on sales and marketing productivity applications, like ours, that sit on top of the Cloud and deliver relevant intelligence to the employee, at the right time and place.
SaaS and Cloud computing are allowing Enterprises to give their employees the same quality of applications and information that have become the norm for Internet users/consumers. Enterprise 2.0/3.0 is happening.
What is your outlook for 2009?
The tight economic environment will continue to force companies to focus on their core assets and competencies. Usually that means revenue generation and IP development. Anything that is not directly contributing to revenue or core company competencies is going to be under great budget pressure. Anything that drives efficiencies in revenue generation or IP development is going to get a lot of attention (we saw this earlier this decade with the explosion of technologies like web conferencing and SaaS).
Thank you to Umberto Milletti, Marc Perramond, Rand Schulman and Raksha Varma for contributing to this profile.
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