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.

Company:            Yammer

Started:                2007

Located:               San Francisco, California

Geography:          North America

Market:                Enterprise Microblogging Platform

Products:            Yammer Desktop, Yammer on your Mobile Device, and Yammer Plug-Ins

Key Customers:  Deloitte, AMD, AAA of Northern California, Nevada and Utah, SMG, Cargill, Thomson Reuters, Sungard, Hill & Knowlton and SunCorp.

Website:               Yammer

Blog:                    Yammer Blog

Twitter:                @Yammer

Recent News:

Yammer is Selected as an MIT Sloan CIO Symposium Innovation Showcase Finalist

Fortune 500 Companies Flock to Yammer

Yammer Secures $10 Million in Series B Funding from Emergence Capital and Previous Investors

I asked David Sacks, Yammer’s Founder, CEO and Chairman of the Board 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, we did start out as a SaaS company. Our company was incubated inside of Geni, which develops family tree software. I was also involved with the consumer Internet with my experience starting PayPal. As both companies scaled, I found it was hard to keep tabs on what everyone was doing, and Yammer was developed to address this challenge. We found that microblogging was a great way to keep current on the status of important projects, individual profiles and information feeds inside of an enterprise.

Then in 2008, we spun out Yammer and that same year won the TechCrunch 50’s Best in Show award.

Initially we were targeting small and medium sized businesses but we are now seeing that Yammer has strong appeal for large enterprises like AAA, AMD, Cargill, Cisco, Deloitte, and Thomson Reuters.

Yammer is very viral because it was very easy for anyone to sign-up, confirm their company’s email address and start using the system. You don’t need to wait for an IT administrator to set up Yammer and you can quickly invite your work colleagues, with the same company email domain, to join in and begin collaborating with you.

When a company wants to claim the network being used by it’s employees, they pay a nominal subscription fee, and then we provide a set of administrative tools that allow them to manage upgrades, security, compliance, deliver premium support, and customize their site.

Part of our initial business model was to base Yammer on the consumer model of software, but make it enterprise-class. We wanted to remove the traditional friction from our software sales process by making our product as easy to use as Facebook.

Why do your customers buy from Yammer?

Our customers never have to pay or upgrade our software unless their employees are using it. This is very attractive, when you compare it to the traditional software selection process where you have to vet vendors, choose one, negotiate the contract, implement the product, pay a lot of money and then no one uses it. Yammer is de-risking the traditional enterprise software value proposition. Employees are valuing it because they use it.

When large companies see thousands of employees using Yammer what do they do? They can do three things - wait and see what happens, shut it down or buy it and we are finding the vast majority of companies are buying Yammer because their employees are being productive and want to collaborate using the software.Our customers also really like our administrative tools for e-discovery, security, directory integration, and network administration.

“If Facebook and Twitter had a baby, it would be Yammer.”

We are like Twitter because we offer a real-time feed of information; you can follow any one, join groups and sort information feeds by hash tags. We are like Facebook because there is no 140-character limit, you can have attachments, threaded replies and we offer a variety of enterprise management tools.

Yammer is a like a virtual office where workers can feel more connected to each other, especially remote workers. We act like the traditional company water cooler for these distributed organizations. As workforces become more mobile, Yammer just make a lot of sense for enterprise collaboration. Today we only offer Yammer in English but we have noticed that there are an increasing number of new customers who are signing up outside of North America. In the near future we will be supporting multiple languages in addition to English.

Customers also like our value-based pricing model. We charge between $3 and $5 per seat per month, depending on the level of support and administrative tools. We also provide volume discounts for our larger customers. This is much more cost attractive than purchasing Chatter from Salesforce.com for $15 per seat, which is quite expensive and most employees don’t want to communicate through the company’s corporate CRM system. Our very fast viral Freemium approach appears to be working, because since we have been live for only the last 18 months we now have over 1 million seats today.

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

The first trend is the consumerization of enterprise software; Yammer is a great example of this trend. Real innovation in the technology space over the past 10 years has been on the consumer-side of the software market with products like Facebook and Twitter. At Yammer we want to take these learnings back into the enterprise software world. When I was at PayPal, we were very successful using the Freemium model to promote adoption. This type of approach to software can definitely result in the overall democratization of enterprise software. SaaS is the first step, when the delivery model changed, then there were no upfront costs and the risk is dramatically lower. Using techniques developed by consumer software firms, more and different kinds of buyers can now access enterprise-class software.

The second trend we see is that enterprise software products will be designed more for the end-user than power users or administrators. A good example is how Facebook and Twitter don’t do every possible feature or function and they don’t clutter the user’s screen. This simplified approach to software allow causal users to be more engaged with their products and other users. These types of causal use software products will also appeal to younger employees who have used Facebook and LinkedIn and expect their enterprise software products to be that easy to use.

Social Networking is also a major trend we are seeing. We started thinking about this over the last couple of years, since 2007. Now it seems so obvious, that social networking would grow into an unstoppable trend. The ability to connect workers, to leverage expertise and content all in real-time, which allows everyone to work smarter, just makes a lot of sense. I still think that there is confusion about Enterprise Social Networking, for instance Salesforce sees it as a CRM newsfeed, and we see it as enterprise real-time communication. Eventually we see Enterprise Social Networking replacing corporate email and instant messaging.

What is your outlook for 2010?

In January we raised $10M, led by Emergence, that  provided capital to allow us to expand our team. Our investors liked the fact that we have built a very cost effective business, based on our viral distribution model. Our Q1 sales were greater than all of our sales for last year combined.

The software industry is realizing that Enterprise Collaboration is going to be a huge space. Most software companies will want to get into this market because every company will want one of these collaboration platforms to deploy. The only problem is that most enterprise software firms looks at these types of tools backwards, because they already have multiple different product lines, then they will need to stuff it through their sales channel. At Yammer we have already solved this distribution channel problem and we can actually open up our channel to these companies as a Distribution as a Service model.

We continue to sign up a number of large customers, and this type of adoption makes other large companies comfortable using our technology. Things look great and our traction is accelerating.