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| | Wed, 25 Jun 2008 22:03:29 -0500 | | Despite growing customer adoption of Software-as-a-Service (SaaS), many companies and conservative industry observers still believe that SaaS solutions are simply a skinnied-down version of traditional, on-premise applications that offer little value add other than quicker deployment times and lower upfront costs.
IT/business decision-makers need look no further than at how today's SaaS solutions are addressing age-old sales and marketing challenges to see that their capabilities go well beyond yesterday's legacy software.
For instance, LucidEra announced a new offering today, called Lead Insight, which enables companies to analyize how marketing programs impact sales productivity. The LucidEra Lead Insight on-demand service offers over 65 prebuilt templates which enable users to analyze the quality and performance of their marketing leads and how effectively the sales team is converting these leads into opportunities and closed deals.
LucidEra's new service enables companies to measure the cost effectiveness and return on investment (ROI) of their marketing programs. It also ensures a tighter bond between sales and marketing departments by tracking how well the sales team follows up on marketing leads. And, the service includes reporting capabilities which allows all the key stakeholders within the company--executives, salespeople and marketing folks--to track their performance over time and see how various tactics and strategies can impact sales success.
LucidEra has been a pioneer in the SaaS business intelligence sector and recognizes that sales intelligence is the area of greatest concern to most companies. Although its new service touches on measuring the performance of marketing programs as well, LucidEra recognizes that there are numerous SaaS solutions aimed at managing and analyzing the effectiveness of marketing programs. Therefore, it is positioning its solution as complementary to these.
One such company is called Printable, a provider of intelligent marketing solutions. Printable's SaaS solutions enable enterprise users and print service providers to manage their online and hardcopy collateral to permit personalized marketing campaigns. Built into Printable's solutions are extensive analytic and reporting tools that allow users to measure the effectiveness of their campaigns.
Another example is Clickability, a leading SaaS content management company, which has built analytics into its solutions that enable corporate, sales and marketing decision-makers to more effectively measure and manage their activities.
While ease of deployment/use and lower cost of ownership are important attributes of SaaS solutions, providing powerful and practical analytics is the key differentiating quality of today's leading SaaS companies.
Click here to find my blog about other key attributes of being 'saasy'. | |
| | Thu, 12 Jun 2008 07:26:52 -0500 | | I’ve just returned from my fourth trip to Las Vegas in four months where I spent three days attending my second annual Symantec Vision user conference and worldwide industry analyst briefing. The event offered a number of important insights regarding the state of the Software-as-a-Service (SaaS), as well as the managed services market.
I’ve stated in this blog numerous times, we are entering a pivotal new stage in the evolution of the SaaS market in which IT professionals are starting to view on-demand services as a powerful means of addressing many of their age-old management challenges, rather than a threat to their operations.
The Symantec executives who spoke at the conference and shared their candid views with me during the event confirmed my perspective by reporting that they are seeing rising receptivity toward SaaS ‘out-tasking’ alternatives to traditional management products among the company’s existing IT customers, as well as prospects of all sizes.
They suggested that this change in the IT department’s attitude is being driving by a number of trends, - Escalating complexity due to the proliferation of new technologies and business challenges.
- Ecological concerns, escalating energy costs, and ‘green’ initiatives.
- Consumerization of IT as the result of end-users introducing their own technology devices into the corporate environment.
Generational changes among new employees demanding a wide array of Web 2.0 and social networking tools to perform their jobs.
The latter two trends are blurring the lines between the corporate and consumer worlds. Symantec’s prominence and brand equity in both worlds gives it a competitive advantage addressing the convergence of these two IT environments.
Symantec first started to talk about its SaaS intentions in 2006 and rolled out its initial SaaS solution aimed at online backup and storage services under the Symantec Protection Network brand name in 2007. However, the company encountered a series of internal operational problems dealing with service provisioning issues and external challenges responding to channel conflict concerns that slowed the rollout process.
Despite the bumpy start, Symantec’s resolve to deliver a full portfolio of SaaS solutions was made clear throughout this week’s conference. The first indication was during the kickoff keynote address by John Thompson, Symantec’s Chairman/CEO, who alluded to the company’s SaaS initiatives in his opening remarks.
The seriousness of Symantec’s focus on SaaS was even more strongly stated during an analyst briefing by the company’s new Chief Strategy Officer, Greg Hughes. Hughes previously ran Symantec’s service business, including everything from support and professional services to SaaS and managed services.
Hughes admitted that his service background has shaped his views regarding Symantec’s future direction. As a result, he revealed that the company’s top three emerging market priorities and new incubator focus areas are SaaS, cloud computing and virtualization. The company views SaaS as business oriented on-demand solutions and cloud computing as its consumer oriented services. Although I see this as an artificial distinction, the heavy emphasis on the overall development of on-demand solutions is the most important message.
The SaaS theme even permeates Symantec’s virtualization strategy. An example is the company’s new SaaS oriented Veritas Storage and Availability Management Operations Service aimed at large-scale enterprises. This service automates numerous virtualization management tasks and provides a web-based repository of management best practices to service subscribers. Over 1000 customers have participated in the Beta version of the service, creating a massive ‘ecosystem effect’ via social networking model.
Symantec isn’t planning to abandon its traditional, packaged product business, but is beginning to formulate a strategy for building an integrated set of complementary on-premise and on-demand solutions across all of its IT management competency areas and product families to satisfy the diversity of customer needs.
Demonstrating this point, SaaS was a part of every presentation during the analyst briefing.
Enrique Salem, Symantec’s new Chief Operating Officer (COO), also referred to SaaS as a ‘game changing’ trend during his brief talk with the analysts. He said that one of his goals is to simplify Symantec’s product/service portfolio to make it easier for customers to identify the right solution to meet their IT/business and make it easier for Symantec and its channel partners to sell these solutions.
Part of this effort includes an internal reorganization to consolidate related products and services into integrated business units. For instance, the company has merged its NetBackup and Backup Exec product teams, and integrated their capabilities. Symantec has also aligned these product groups with the company’s SaaS Symantec Protection Network (SPN) SaaS platform.
Enrique also stated that Symantec is now measuring its success on three criteria, including Net Promoter Scorecards based on customer loyalty. This customer satisfaction metric is now a key variable in employee compensation and recognizes that offering SaaS solutions is essential to enhancing the customer experience and to Symantec’s long-term success.
The company is also making acquisitions to fortify its SaaS capabilities. It announced the acquisition of SwapDrive which gives it added storage service resources which have been used to power Dell’s storage services.
The company executives I met with on a one-on-one basis said they are not only gratified with the positive response their new SaaS solutions have received from customers, but are also pleased with the dramatic change in attitude among Symantec’s product management and sales teams toward the company’s SaaS strategies. They admitted that a year ago, these internal groups viewed Symantec’s SaaS initiatives as a cannibalistic threat to their traditional products and sales efforts. Today, they recognize that SaaS can produce net-new revenue opportunities and want to jump on board the bandwagon.
Symantec is not likely to be the first to market with its SaaS solutions because of the myriad of internal and external challenges it faces. However, it could become one of the most prominent players in the IT management segment of the SaaS market over the longhaul as customers seek strategic sources to meet their needs. Along the way Symantec will have to overcome the ‘me too’ look and feel of its SaaS solutions.
In addition to attacking the overt market opportunities in the consumer and corporate worlds, the executives I met with during this week’s conference also suggested a long-term vision of Symantec become a key SaaS platform supplier for a wide array of Internet service providers (ISPs), leading telecommunications carriers and business service vendors. For instance, the company is planning to rollout a new Symantec Secure Scalable Storage (S4) cloud-based platform later this year.
While all of these developments represent a strong endorsement of the SaaS movement, the user conference attendance was noticeably smaller than a year ago raising questions about Symantec’s overall standing in the market. The decline could be a reflection of the recessionary times. However, other analysts attending the conference reported that they had seen attendance growing at other vendor user conferences this year.
Nonetheless, Symantec’s SaaS strategies and solutions are an important indicator of the rapid evolution of the on-demand services market. | |
| | Mon, 02 Jun 2008 11:38:09 -0500 | | As the Software-as-a-Service (SaaS) “gold-rush” intensifies, industry consolidation is inevitable. The latest example of this consolidation process is today’s announcement by NetSuite that it intends to acquire OpenAir.
This announcement not only reaffirms the SaaS industry consolidation trend, but it also is the latest example of a company profiled by THINKstrategies being acquired shortly thereafter. Other examples include,
(Contact me if you'd like a copy of our Strategic Thinking profiles on these companies.) I had the privilege of talking with Zach Nelson, CEO of NetSuite, and Morris Panner, the CEO of OpenAir, moments before today’s announcement was made public. They indicated that the acquisition was based on a trend which THINKstrategies has seen coming for a few months now. Prospective SaaS users are not only seeking more industry-specific SaaS solutions, they are also looking for more strategic sources for these SaaS solutions. Instead of contracting for a series of SaaS point products from a wide array of vendors, corporate decision-makers, both business and IT, are taking a closer look at the SaaS vendors’ overall portfolios, platforms, partner ecosystems and financial viability so they can establish broader, long-term relationships with a fewer number of SaaS suppliers. While the OpenAir acquisition gives NetSuite a stronger foothold in the professional services market, I think the acquisition also gives NetSuite a stronger set of human resource management (HRM) capabilities in its horizontal portfolio of enterprise applications. Although the acquisition is another example of a Boston-based tech vendor being acquired by a west coast based company, the good news for OpenAir’s employees and the Boston area SaaS community is that NetSuite plans to use the acquisition as a beachhead for further investment aimed at establishing a greater east coast presence centered in the Hub. Interestingly, NetSuite refers to its OpenAir plans as based on Oracle’s acquisition model and plans to operate OpenAir as a stand-alone product group with tighter integration to NetSuite’s platform. This reference just reinforces market perceptions of the close alignment of NetSuite with Oracle, and keeps alive suspicions that NetSuite may be acquired by Oracle in the future. In the meantime, Zach Nelson and Morris Panner told me they will do all they can to maintain OpenAir’s relationship with Salesforce.com via the AppExchange, and build on their other third-party relationships, including their respective channel partners. Having gone through a number of unsuccessful acquisitions, I know first-hand about the various issues that can get in the way of these transactions achieving their business objectives. However, I think NetSuite and OpenAir have a very good chance of succeeding because they have the right combination of complementary executive personalities, solution capabilities, channel partners and geographic orientations. The next question is what this acquisition means for OpenAir's primary competitor, QuickArrow? My bet is that they will also be an acquisition target in the coming months. | |
| | Tue, 20 May 2008 19:40:13 -0500 | | THINKstrategies is pleased to announce the launch of its new "Market Leaders" webcast series which showcases companies who are delivering innovative, on-demand solutions to meet the rapidly changing needs of large-scale enterprises, as well as small- and mid-size businesses (SMBs).
Our webcasts differ from the traditional, structured webinar format by combining the candid, unscripted, conversational qualities of podcasts with the visual benefits of online presentations.
As the producer and host of the Market Leaders webcast series, my goal is to provide a more interesting and engaging discussion with senior executives of companies who are in the forefront of the on-demand market. The webcasts will be pre-recorded, archived and 20-30 minutes in length so you can view them whenever fits your busy schedule.
In our first webcast, we examine how the rapid growth of the on-demand market has created new operating challenges for entrepreneurs and established software vendors who must implement more robust systems to manage and track customer transactions from procurement to provisioning in a highly dynamic environment.
In this webcast, I talk with Steve Booth, VP of Business Development at Aria Systems, about how he sees this transaction management issue evolving, and the Monetization Maturity Model which Aria has developed to respond to this important challenge. Click here to view this webcast.
I hope you find this webcast valuable and welcome your feedback regarding our approach to this new series. You can also click here to read THINKstrategies' whitepaper about the transaction management challenges and opportunities in the on-demand services market.
Please contact me if you're interested in learning more about Aria Systems, THINKstrategies or this webcast series. | |
| | Mon, 19 May 2008 14:50:28 -0500 | | Last month, Bruce Richardson of AMR Research published a provocative commentary entitled, “SaaS and the Elusive Path to Profitability” that heightened the debate regarding the financial viability of the Software-as-a-Service (SaaS) model.
Bruce’s column elaborated on a presentation he gave at SaaScon 2008 entitled, “Balancing Customer Acquisition Costs and Elusive Profitability.” The talk was driven by a question which Bruce claims to ask numerous software and service companies on a regular basis: “Do you know how much it costs to win a dollar of new business?”
Not surprisingly, Bruce has found that most SaaS companies are losing money acquiring new business in hopes of gaining long-term profitability over the life of the customer relationship. This has always been the logic behind the ‘land and expand’ tactics which are at the heart of almost every SaaS company’s go-to-market strategy.
In order to make his case, Bruce referred to recent annual and quarterly financial reports from the major publicly traded SaaS companies—salesforce.com, RightNow Technologies, NetSuite, SuccessFactors, and Taleo. In every case except Taleo, Bruce found high sales and marketing, R&D and G&A costs resulting in low or negative GAAP operating income.
What his analysis fails to do is fully recognize the trends lines, acknowledge the growing success rates and admit that many of his points simply reflect the stage of life of the SaaS movement.
Ironically, he identifies numerous operating improvements that have been achieved by each of the publicly traded companies, but treats them like they are simply financial compromises rather than the gains which come from the fundamental economies of scale of the SaaS model in a rapidly growing market.
For instance, if you look at the financial results of each of the companies Bruce identified over the past year they are all showing reductions in their relative sales and marketing, R&D and G&A costs. This is leading to lower customer acquisition costs for each of the companies.
Like Bruce, I spend a lot of time talking with senior executives at SaaS companies. While they all admit that the SaaS business isn’t easy, they have also told the SaaS market is evolving more quickly than they expected.
This trend has been confirmed by a number of industry studies which have reinforced THINKstrategies’ research and consulting work over the last 3-4 years.
Not only are companies of all sizes increasingly interested in SaaS alternatives, but they are accelerating their customer decision-making processes and reducing the salescycles for SaaS vendors. They are also signing bigger deals which promise greater margins for the SaaS providers.
For instance, salesforce.com has seen a steady rise in its average contract size and recently won a 55,000-user deal with Misys, a financial software provider. And, this deal pales in comparison to Workday’s announcement last week of a 200,000-user deal with global electronic components manufacturer Flextronics.
I had the privilege of talking to Workday executives prior to the Flextronics announcement who admitted that they’ve been surprised with the level of interest in Workday’s SaaS solutions and the speed at which customers are willing to make a purchase decision.
RightNow even reported to Bruce that most of its customers will make 5-6 additional purchases and spend 8x their initial purchase value over a three-year period.
Ironically, the SaaS financial model is built on the same economic principles which have been at the heart of the IT market research business since the 1970s—the annuity of predictable subscription services.
If you look at the quarterly and annual financial reports of Gartner or Forrester, as well as those of the privately-held firms, you’ll find that their most important performance metric is their annual contract value (ACV). This is the same metric SaaS companies use to measure their performance.
In fairness, Bruce identifies Taleo as an example of the profit potential of the SaaS model. He credits the company’s targeted sales and marketing approach as the major reason for its jump from an operating loss in 2006 to a $3.7M profit last year. I’ve seen the same tactic used by privately-held SaaS companies, such as Intacct, to significantly impact their financial performance.
While disciplined management deserves some of the credit, I’m sure Taleo’s executives would also admit, as others have told me, that market momentum is also helping to produce greater profit margins for many SaaS companies.
For the past 5-10 years, salesforce.com, RightNow Technologies, NetSuite, SuccessFactors, and Taleo have been burdened with the responsibility of educating the market about the viability and business benefits of SaaS. This evangelistic work required a significant investment in sales and marketing, R&D and G&A costs.
SaaS is entering a new stage in which the same level of evangelism and market education is no longer necessary. Instead, as SaaS gains mainstream acceptance and experiences broad-based adoption, SaaS companies must content with escalating competitive pressures created by the ‘gold-rush’ effect overtaking the SaaS industry.
However, the SaaS executives I’m talking to prefer this problem and are pleased to report that their cost of customer acquisition is dropping and account penetration is rising along with their profitability. | |
| | Tue, 13 May 2008 19:40:53 -0500 | | HP's decision to acquire EDS cannot be faulted when measured against all the standard metrics for doing a mega-deal in the traditional technology world. It gives both companies greater scale and access to more corporate customers without a lot of overlap.
The problem is that we are in the midst of a fundamental change in the way customers acquire technology and the way they perceive their vendors. The HP/EDS combination doesn't fit this new world order.
There is no question that EDS strengthens HP's hand when it comes to building and managing complex enterprise data centers. The acquisition also gives EDS ready access to HP's installed base of customers.
Wherever there are big systems integration and ongoing management projects to be won, HP/EDS will be in a better position to compete with IBM and the off-shoring companies than they were a day ago as two separate companies.
However, many corporations are looking for new ways to leverage technology that permit them to be less dependent on traditional data centers. This no longer means simply outsourcing their data centers to the IBM's and EDS's of the world, but transforming where and how they obtain computing power.
Check the market stats of the leading research firms who follow the outsourcing business and you'll see the number and size of traditional IT outsourcing (ITO) deals has been declining for the past few years.
Corporations are fed up with the hassles of managing their own IT operations, but they are equally dissatisfied with the poor track record of traditional ITO deals.
The ineffectiveness of legacy systems and software combined with the inflexibility of traditional ITO arrangements has driven a growing number of companies of all sizes to evaluate and adopt a widening array of on-demand Software-as-a-Service (SaaS) and managed services.
This is a shift I first identified in 2006. Gartner finally recognized this trend two years later when it proclaimed in January,
"...the outsourcing market has reached a tipping point with regard to utility delivery models, and that change and innovation will take hold and accelerate in this area through 2008 and beyond. More providers are developing utility-based offerings across infrastructure, application and business process domains. The trend toward software-as-a-service (SaaS) is gaining the most traction..."
Unfortunately, EDS brings nothing to the table when it comes to SaaS, managed services or other utility-based offerings. Instead, it saddles HP with lots of aging people, facilities and business ideas that haven't kept pace with today's realities.
Since HP has also failed to establish any thought-leadership or demonstrate any market leading capabilities in the SaaS or managed services markets, it isn't likely that it will be a catalyst for change within EDS' calcified operations.
So, the question is how long will it take for the EDS acquisition to bring HP down or can the combined entities wake up in time to respond to the changing marketplace? | |
| | Thu, 08 May 2008 07:12:35 -0500 | | I've been telling people that the Software-as-a-Service (SaaS) movement will not only transform the software industry, but also dramatically impact the telecommunications and networking businesses as well. A recent company announcement which received limited press attention is another indication of the trend I see emerging.
Ribbit - calling itself "Silicon Valley's first phone company" - announced earlier this week the general availability of Ribbit for Salesforce, the first enterprise application to link mobile voice communications and SaaS business workflow to allow users to configure their own communications services.
Ribbit's new offering is being characterized as a 'voice automation' solution which accelerates the deployment of communications and integrates them with customer relationship management (CRM) capabilities via salesforce.com.
This solution promises to eliminate the complexities of communications deployment and management projects, and improve worker productivity by tying their communications devices into their CRM systems.
Ribbit for Salesforce is built on the salesforce.com's Force.com Platform and was tested in a private beta program involving more than 70 businesses. It is now available to all U.S. customers of salesforce.com via the salesforce.com AppExchange.
It also creates new competitive challenges for traditional telephony vendors such as Alcatel-Lucent, Nortel and Siemens. It also creates new business challenges for traditional telecom resellers, as well as telecommunications carriers.
The self-provisioning capabilities and simplicity of administration offered by Ribbit's solution, undercuts the value of traditional reseller and carrier' consulting, integration and management services surrounding complex telephony equipment and services.
In case you think Ribbit's solution will only appeal to a small circle of Silicon Valley tech-heads, be aware that the company has a community of over 4,000 independent developers building applications on Ribbit's carrier-grade telephony-plus-software infrastructure platform. And, salesforce.com's CRM and AppExchange solutions are rapidly being adopted by organizations of all sizes across nearly every industry. | |
| | Mon, 05 May 2008 10:35:31 -0500 | | One of the benefits of being in the middle of the Software-as-a-Service (SaaS) market is getting exposed to a variety of interesting resources and research projects.
For instance, at last week's Software 2008 conference in Las Vegas I was able to attend the kickoff presentation by Abhijit Dubey of McKinsey & Company which summarized the firm's latest SaaS research regarding the evolution of on-demand platforms. Dubey and McKinsey have produced a series of research reports which have verified THINKstrategies' SaaS survey studies regarding the accelerated adoption of SaaS. Even more importantly, their research clearly shows the total cost of ownership (TCO) and return on investment (ROI) advantages of SaaS for enterprise customers and on-demand platforms for software vendors.
THINKstrategies' SaaS Showplace has also attracted plenty of attention as a resource for a variety of other research initiatives. For instance, THINKstrategies is supporting a financial benchmark study of the SaaS industry being conducted by OPEXEngine. OPEXEngine's benchmarking survey is aimed at B2B software companies with 2007 revenues between $10M-$250 million offering SaaS solutions. Participants in this study will receive a confidential Company Performance Report and a detailed Industry Report that will cover key financial performance metrics. Click here for more information. Tell them THINKstrategies and Jeff Kaplan referred you.
THINKstrategies is also happy to support the research efforts of Professor Stéphane Gagnon of the Department of Sciences Administratives at the Université du Québec en Outaouais in Gatineau, Québec, Canada. The purpose of his study is to identify factors explaining the relative success of software components commercialized as XML Web Services, a sub-category of the SaaS market. This survey contains 11 questions with 60 data items. All the survey participants' responses will remain confidential, and all data gathered will be published strictly in aggregate formats. The survey questions are available at http://www.gagnontech.com/saas.
And kudos to Peter Laird, an Architect at BEA/Oracle, who converted the contents of THINKstrategies' SaaS Showplace into a terrific visual map of the rapidly changing industry landscape. I highly encourage you to visit his blog and give him feedback regarding his visualization of the SaaS marketplace.
Contact me if you're conducting or have found interesting research or analysis of the SaaS (or managed services ) market. | |
| | Mon, 28 Apr 2008 07:34:02 -0500 | | As I've suggested multiple times, the major hardware and software vendors are aggressively pursuing the tremendous business opportunities in the managed services market.
Now, the key questions are how will they bring these offerings to market and what role will their channel partners play in provisioning these new services?
The two most recent examples are IBM's new Express Advantage security-as-a-service offerings and Dell's April 24 closing of its MessageOne acquisition.
IBM's security-as-a-service solutions are its first on-demand offerings based on its acquisition of Internet Security Systems in August 2006. The new solutions will primarily serve small and midsize businesses (SMBs). They include Express Penetration Testing Services; Express PCI Assessments; Express Multi-Function Security Bundle, which includes protection against worms, spyware, anti-virus and spam in a unified threat management offering; and Express Managed Protection Services for Servers.
These solutions have been historically been offered as on-premises offerings, but Peter Evans, director at IBM ISS, is quoted in eWeek as saying,
“Spending on security is rising 6 percent a year... But spending on the labor needed to manage that security is rising 11 percent a year; therefore we need to help SMBs remove some of the cost by offering solutions as fully managed services.”
IBM will sell these services to SMBs through its ISS channels, but you can bet it will also offer them directly to some of its larger, key accounts.
Meanwhile, in its announcement of the completion of its $155 million acquisition of MessageOne, the company said:
"With its acquisition of SilverBack Technologies, Inc., Everdream Corp., ASAP Software Express, Inc. and now MessageOne, Dell is architecting an integrated service delivery platform of SaaS applications that will enable it to remotely monitor, maintain, troubleshoot and address the majority of routine IT infrastructure issues that challenge businesses of all sizes. The company anticipates that services such as patch management, anti-virus, online backup and recovery, asset tracking, software license management and e-mail continuity delivered and managed over the Internet will reduce the cost of infrastructure management and free budget for the IT driven innovation that grows business."
This statement makes more explicit the strategic implications which I outlined earlier this year.
Dell's President of Global Services, Steve Schuckenbrock, goes on to say that Dell is "building a services supply chain" that will give customers greater flexibility regarding how they support their IT environments.
Again, Dell is offering these services to its growing array of channel partners but is also expecting to deliver these services directly to its key accounts.
So, channel organizations must determine how to fully leverage these offerings while at the same time effectively differentiating themselves from others, including the vendors, who will be offering the same managed services. | |
| | Wed, 23 Apr 2008 06:34:46 -0500 | | Microsoft is finally recognizing the fundamental ways in which people’s lives and work-styles are changing, and it as a company and its technologies must respond to these changes.
Welcome to the world of Software-as-a-Service (SaaS)!
Live Mesh is Microsoft's attempt to catch up to the Web 2.0 movement which has quickly evolved into an Enterprise 2.0 migration process in which a rapidly growing number of companies of all sizes are shifting their IT strategies from on-premise products to on-demand services.
This trend is being led by Salesforce.com and Google, and being supported by hundreds of other start-ups and established vendors, including Cisco Systems, Dell and EMC.
Salesforce.com and Google's alliance which produced a new set of integrated services last week is the most recent challenge to Microsoft's dominance in the workplace.
Cisco Systems has been talking about the melding together of network-centric business processes for years, and has elevated its vision of the market to include new collaboration opportunities to showcase its WebEx acquisition.
Dell is seeking to redefine how companies will manage their servers, desktops and other devices by leveraging web-based managed services.
EMC is repackaging its storage systems into SaaS solutions, led by its Mozy acquisition.
By coincidence, I attended Salesforce.com's Tour de Force roadshow in Boston yesterday where Marc Benioff and a series of guest speakers spoke persuasively about the power of its Force.com platform. In order to make the point that its platform capabilities can appeal to any software developer in any type of business, the event speakers included:
- Cheryl O'Connor, Worldwide CRM strategy manager of Analog Devices.
- Narinder Singh, Co-Founder and CTO, Appirio
- Jeremy Roche, CEO, CODA
Microsoft is now trying to define this trend in its own terms. Conceptually, it is hard to argue with the company's view that the world is changing. Its latest initiative goes beyone the "Software Plus Services" ideas it has been promoting for the past two years. Practically speaking, it will be interesting to see how far Microsoft is willing to go to respond to these changes, and how successful it will be convincing corporate and consumer customers that it has the right portfolio of web-based services to satisfy their changing requirements and preferences. | |
| | Sun, 20 Apr 2008 19:21:38 -0500 | | In my last blog entry I listed a number of reasons "Why IT Now Sees SaaS As A Savior." Dan Druker of Intacct, has done a superb job embellishing and expanding upon my ideas on his own blog.
Here's another important reason why IT is embracing SaaS which I forgot to include in my last blog entry, but may supercede the other reasons I outlined long-term -- SaaS enables IT to fulfill its role as an internal service provider.
The idea of the IT department serving as an internal service provider to corporate end-users and strategic business units, as well as customers and partners, was first suggested during the late 1990s when an explosion of external service providers (xSPs) emerged in response to deregulation of the telecommunications industry.
While the idea had plenty of theoretical justification and support, most IT departments were unable to fulfill the promise of this concept because they lacked the service management tools and were constantly distracted by day-to-day 'firefights' just trying to keep their systems and software up and running.
SaaS, and the associated evolution of managed services, now permit IT professionals to achieve a more stable software and system environment. With the challenge of simply keeping these assets up and running becoming less of a concern, IT can now focus on more effectively delivering the functionality their end-users, business units, customers and partners need to achieve their corporate objectives.
SaaS service management solutions are also emerging to help IT departments become internal service providers. If these IT departments succeed in becoming true internal service providers, they will also finally become aligned with their end-users, business units, customers and partners. | |
| | Sun, 13 Apr 2008 13:14:26 -0500 | | I predicted in December that IT would become more comfortable with Software-as-a-Service (SaaS) in 2008, helping to accelerate its growth over the coming months.
Here are some clear indications that my prediction is coming true,
- SaaScon: CIOs from many big name companies, as well as smaller organizations, spoke about their positive experiences with SaaS and traded insights about how to take fuller advantage of SaaS to meet their end-user and IT management needs.
- SaaS for IT: A growing number of major hardware and software vendors are offering SaaS solutions specifically aimed at the IT department. Although many of these offerings could be sold direct by the vendors as managed service solutions, they are being pushed through the vendors' channel programs.
- Platforms: While the initial platform plays in the SaaS market were aimed at software vendors and developers, the more recent initiatives by Salesforce.com, Bungee Labs and Google have been designed to also appeal to IT professionals and software architects within enterprises as well.
- Compliance: Many of the CIOs at SaaScon and elsewhere have told me about how they are using SaaS to satisfy corporate, as well as government and industry, compliance requirements. Today's storage and back-up services give many IT organizations the archival and audit capabilities they've lacked until now.
You can add standardization to the list. Many of the CIOs who spoke at SaaScon admitted that they like the limitations which SaaS places on customization. They have always known that business unit demands for customized solutions were a major factor in the high costs and failure rate of legacy applications. CIOs are seeing SaaS as a way of reshaping the expectations of business end-users. The CIOs I've talked to recently also recognize the financial benefits of SaaS in today's recessionary climate. Its subscription pricing model permits companies to shift their software acquisition costs from tightening capital budgets to more flexible operating expenses. And speaking of the climate, many CIOs are viewing SaaS as a 'green' solution because it reduces their computing needs and 'carbon footprint'. | |
| | Tue, 01 Apr 2008 08:37:44 -0500 | | For years, I've been advocating that hardware and software vendors along with their channel partners and telecommunications carriers have the opportunity to leverage Software-as-a-Service (SaaS) solutions and managed services models to generate powerful benchmark statistics and produce valuable best practice studies that can enhance their customer relationships and strengthen their position in the market.
Today, TriActive and THINKstrategies published the first of a series of benchmark studies which clearly demonstrates this unique capability.
The study examines end-user software utilization patterns across over 125,000 endpoints in 460 companies managed by TriActive's Asset Management Suite™. The study found many companies where Microsoft Office installations are underutilized or not used at all. This means that many companies have more software licenses than necessary or have purchased higher than necessary versions of the software to meet their needs.
Based on this actual software utilization data, the study found that many companies can save 50% or more on their Microsoft Office software licensing costs by better matching their purchases to actual useage levels.
Ironically, many of the companies studied had deployed TriActive's Asset Management Suite via managed service providers (MSPs) and value-added resellers (VARs) because they were concerned that they may have illegal copies of Microsoft software in their businesses and expected to have to 'true-up' to ensure they were in compliance. Rather than pay more, many of these companies will actually experience significant cost-savings as a result of TriActive's Asset Management capabilities and findings of this study.
The TriActive-THINKstrategies study illustrates the power of today's SaaS-based managed services not just as a more economical method of managing IT operations and tracking real software utilization, but also as a means of delivering a new level of value to customers.
Having helped launch META Group's (remember them?) benchmarking practice in the 1990s, I've had first-hand experience grappling with the costs and complexities of traditional benchmark methodologies which too often failed to generate meaningful information or insight.
In contrast, today's SaaS solutions permit service providers (xSPs) and channel companies to obtain actual useage statistics that can provide actionable data for individual companies and powerful perspective for a broader community of customers.
While I was running International Network Services' (INS) strategic marketing group in the late 1990s, we launched an industry research program which generating survey findings and gave us tremendous visibility in the market that catapulted INS to the top of Yankee Group and UpSide Magazine's leading IT consulting company list in 1999--above Anderson Consulting, CSC, EDS, HP and IBM. That designation led to INS being acquired by Lucent for 12 times revenues or $3.7 billion, the most ever paid for an IT services company and surpassing what IBM paid for PWC Consulting. (INS is still doing its industry surveys as a part of BT today.)
Innovative SaaS and managed service providers can achieve even greater thought-leadership and win greater mindshare today by capturing and compiling valuable activity data through their ongoing interaction with customers. They can utilize this data and analysis to better serve their customers and better position themselves in the market.
I look forward to working with more companies who recognize this exciting opportunity. Contact me if you want to discuss this opportunity further. | |
| | Thu, 27 Mar 2008 18:13:52 -0500 | | This week's third annual SaaScon was more than just another conference. It represented an historic breakthrough for the rapidly evolving SaaS industry.
What made the conference so signficant was the nature of the audience, and stature of the keynote speakers and many of the breakout session presenters. While the originators of SaaScon--including myself as an original member of the conference advisory board--always envisioned the event as an important user-oriented conference, we were unable to achieve this objective during the first two SaaScons. We couldn't find SaaS users willing to talk about their experiences and couldn't convince IT/business decision-makers to attend the show. As a consequence, SaaScon just became another place for software vendors, VCs and others to talk about the state of SaaS. This year's conference was a whole different story.
ComputerWorld's events team deserves a lot of the credit for overcoming these challenges. They tapped their vast reservoir of senior IT executive contacts to pull together an impressive array of keynote speakers and breakout session presenters. With these senior-level speakers in place, ComputerWorld was also able to convince other CIOs and IT managers to attend. In fact, when SaaScon opened its doors on Tuesday morning there were over 900 registrants, approximately three times last year's attendance.
Getting this many IT decision-makers to attend SaaScon clearly shows they no longer view SaaS as something they can ignore or try to avoid. In fact, each of the speakers, as well as those IT managers who I talked to, said they now view SaaS as a potential solution to many of their IT management needs rather than a threat to their jobs.
They like the pay-as-you-go model at a time of tightening budgets and deepening recession. They like the shorter deployment cycles and lower support requirements. They even like the limitations which SaaS places on customizing applications because they don't have to support needlessly complex operations when simpler solutions would suffice. Most importantly, they like the greater functionality and added value of many SaaS solutions.
The CIOs who spoke at SaaScon represented a major endorsement of the SaaS concept and the conference attendees proved that IT is getting onboard the SaaS bandwagon. This event confirmed my prediction in December that SaaS solutions aimed at IT departments will help to accelerate the overall growth of the SaaS market. | |
| | Tue, 25 Mar 2008 01:36:28 -0500 | | As the Software-as-a-Service (SaaS) movement gains momentum, it is experiencing a ‘gold-rush’ affect with software, systems and service companies of all shapes and sizes trying to win a share of this rapidly growing market.
The inevitable outcome of this proliferation of aspiring SaaS players is a bastardization of the SaaS term and escalating debate about what actually constitutes a valid SaaS company or offering.
Most analysts and commentators insist on a strict definition of SaaS that hinges on the vendor having a multi-tenant architecture. In their view, if the vendor’s offering isn’t built on this architecture, then it isn’t SaaS.
I've always been more lenient when it comes to this architectural issue. I believe the definition of SaaS is in the eye of the beholder, and the most important arbiter of what is SaaS is the customer. If the customer is happy with a single-instance, hosted solution or one that is streamed to their desktop rather than built on a more sophisticated multi-tenant platform, then so be it.
That is why I think multi-tenancy is less of a determinant of SaaS success than other factors. Here are the characteristics which really set a leading SaaS company apart from SaaS wannabes:
- Networked applications – One of the primary drivers of the SaaS movement is the need for increasingly mobile workers and geographically dispersed customers/partners to share information and collaborate with one another more effectively. Web-native applications which leverage wide-area networks (WAN) are better suited to fulfill this need than the highly centralized, on-premise applications of the past.
- Enhanced user experience – Another key driver of SaaS is user frustration with the cumbersome, inflexible nature of legacy applications. These on-premise apps were generally designed to accommodate the technical demands of data center systems and corporate databases rather than appeal to the real-world workflows of businesses and intuitive senses of end-users.
- Variable pricing – Corporate decision-makers are also fed up with the capital investments and significant risks associated with legacy apps. They no longer want to be locked into perpetual licenses and escalating maintenance agreements. Having the opportunity to try software solutions before they buy them, and then being able to use their operating budget to acquire the software functionality they need as they need it is especially appealing in today’s recessionary environment.
- Real-time analytics – Given the economic climate and intensifying competitive landscape, companies of all sizes need to generate greater intelligence from their applications. It is for this reason that analytics is becoming an increasingly important feature in nearly every type of enterprise SaaS application, rather than just an assortment of standalone business intelligence SaaS solutions.
- Continuous enhancements – We are also living in a time in which the rate of change is accelerating and customers expect their vendors to respond to their constantly changing needs. Therefore, leading SaaS solutions are those which rely on agile development techniques to incrementally improve their solutions on a continuous basis rather than depending on long development cycles to roll out disruptive ‘upgrades’ to their legacy applications.
- Self-provisioned, dynamic toolkits – Corporate end-users are also becoming more tech savvy and more willing to take advantage of a rapidly expanding reservoir of gadgets, widgets and other mash-up devices to solve business problems or achieve their corporate objectives without the help of internal developers or outside consultants.
- Aggregated data & benchmark studies – Smart SaaS companies are beginning to recognize that the SaaS model gives them unprecedented insight into their customers’ operations based on their SaaS usage patterns. These SaaS companies are accumulating activity data which can be converted into valuable benchmark statistics and best-practice studies. This puts the SaaS company in an advantageous position to provide a new level of value to their customers that gives them an opportunity to transform their user base into a powerful ‘club’ where users get insight in addition to software functionality.
Companies that can deliver these benefits will be in a better position to survive and succeed in the SaaS market. | |
| | Mon, 17 Mar 2008 09:36:25 -0500 | | With the Software-as-a-Service (SaaS) event season in full throttle, I've found myself consulting with a new generation of aspiring SaaS players who are trying to learn about the fundamentals of this rapidly evolving marketplace quickly so they can respond to changing customer requirements and capitalize on new market opportunities.
Starting with SoftLetter's SaaS Sales and Marketing Seminar in Atlanta which has been upgraded to the SaaS University for Waltham, MA in June, and continuing with OpSource's SaaS Summit last month in San Francisco, a widening array of incumbent software vendors (ISVs) and old-line technology vendors have approached me seeking help in their efforts to join the SaaS movement.
Some of these companies have lived well for years in niche markets, others have enjoyed cashcow businesses at a mass market level with hardware-based solutions. Now they see a combination of market forces fundamentally changing their worlds and they are trying to transform their business models quickly to respond to a rapidly changing competitive landscape and customer preferences.
Although established SaaS companies clearly understand the differences between the old and new worlds of on-premise software products versus on-demand software services, these new arrivals are still learning about the challenges, as well as opportunities associated with SaaS.
What all of these companies have in common is that they can't afford to discard their legacy software business in order to capitalize on SaaS opportunities. Instead, they must adopt a hybrid strategy that can support the needs of their existing customers while satisfying the changing expectations of a new generation of software user, without ripping themselves apart in the process.
What these companies are learning is that living in a hybrid world requires two different approaches to software development and delivery, two different go-to-market strategies, two different sales and marketing methodologies, and two different types of personnel.
Agile development replaces the long upgrade cycles of the past. Hosting replaces packaging issues when it comes to software delivery. Online marketing and telesales are more important than direct sales or traditional resellers. And, business-oriented customer support becomes essential rather than tech support to ensure customer loyalty and reference-ability.
Underneath these tangible differences is the more fundamental and subtle differences in attitude between the on-premise and on-demand worlds. In the old world, making the software work was the customer's problem. The customer bought the software before they were sure it worked, hired the consultants and staff to get it up and running, bought the infrastructure to properly support it, and notified the vendor if something went wrong or they needed more help.
In the new world, making the software work is the SaaS provider's responsibility. The customer can try it before they subscribe to it. They don't have to hire additional staff or purchase more servers. They may still hire a few consultants to help with a smaller assortment of deployment issues, or to help with change management and training requirements. And, the customer expects the SaaS provider to keep the software service up and running, and continuously enhance it.
Can traditional software and technology vendors straddle these two worlds?
I think the answer for many of these vendors must be the same as the famous line in the movie Apollo Thirteen, "Failure is not an option."
The big ISVs--Microsoft, Oracle and SAP--have the deep pockets to finance this balancing act. Other ISVs like Business Objects and Callidus Software are also demonstrating that hybrid models can work.
The smaller firms will have to make sacrifices in order to traverse this transition process. Many are fortunate that they are privately-held companies that don't have to satisfy Wall Street's short-term time horizons, especially in today's frantic economic climate. Others are equally fortunate to have a loyal installed base of customers who will patiently work with them to ensure that the migration process is successful.
But, in each of these cases there will be plenty of potential landmines which will require careful planning and cautious execution. Thoroughly understanding these potential pitfalls will be essential if these new SaaS players are going to succeed in the on-demand marketplace. | |
| | Mon, 03 Mar 2008 09:58:30 -0600 | | Last week's OpSource SaaS Summit was a milestone event for the on-demand services market on a number of levels.
The first SaaS Summit in Silverado in 2006 was a gathering of industry pioneers to discuss the potential of the on-demand movement. Last year's Summit in Monterey was an opportunity to celebrate the growing success of the SaaS movement. This year's Summit offered a chance to take stock of what it will take to scale SaaS to meet the needs of the mainstream market. The theme was platforms and web services, but the event also raised other issues.
With over 600 registered attendees, this year's SaaS Summit was the largest vendor-oriented conference focused entirely on the rapidly growing Software-as-a-Service (SaaS) market to date. While Salesforce.com's Dreamforce user conference is still the biggest SaaS event of all, OpSource's SaaS Summit has represented the benchmark for vendor-oriented conferences since its inception in 2006.
This year's Summit marked the first time that many of the leading names were overshadowed by lesser known players with far more compelling messages.
Microsoft's General Manager of U.S. ISV and System Integrator Partner Businesses, Greg Urquhart, outlined the company's SaaS enablement capabilities but did little to convince the conference attendees that Microsoft is committed to quickly delivering its own SaaS solutions.
By the same token, Salesforce.com's President and Chief Customer Officer, Jim Steele, wasted an opportunity to convince the Summit attendees that Salesforce.com is a leader in the rapidly evolving cloud computing market by dwelling too long on the basic virtues of SaaS.
Everyone I spoke with at the Summit agreed that it was Josh James, Co-Founder and CEO of Omniture, who stole the show. James provided an engaging and enlightening presentation about the factors which have led to the phenomenal success of his company. James provided valuable information and insight, punctuated by a key takeaway that every successful company should have a 'number' that drives its growth. In the case of Omniture, it is a monthly statistic based on a formula calculating sales growth specifically for its web performance metrics business.
I was privileged to moderate a panel of journalists that concluded the Summit. The panel consisted of Eric Knorr, Editor - Infoworld, John Pallatto, West Coast News Editor - eWEEK.com, Ben Worthen, Staff Reporter - The Wall Street Journal, and Aaron Ricadela, Writer - BusinessWeek. These prominent business and tech industry writers offered their candid perspectives regarding the state of the SaaS market and the key obstacles that must be overcome in order for SaaS to become truly mainstream.
Ironically, Forrester Research issued a new report prior to the Summit suggesting that the SaaS market will cool off in the small- and mid-size market in 2008. A drop in the rate of growth is conceivable because of the law of big numbers, but is unlikely because there are so many vertical and horizontal market segments still to be addressed.
As is often the case, the real value of last week's SaaS Summit was the opportunity it gave attendees to network with their peers and get a reality check about industry best practices from informal discussions rather than formal presentations.
My guess is next year's SaaS Summit will be far bigger someplace in Vegas and we will be discussing an even broader array of business opportunities and challenges.
In the meantime, this month's SaaScon user-oriented event will be the next opportunity to gauge the state of the SaaS movement.
Until then, we should all be thanking OpSource for making the SaaS Summit possible and using it to help drive the success of the SaaS industry. | |
| | Mon, 25 Feb 2008 08:56:14 -0600 | | As the Software-as-a-Service (SaaS) market matures, it is becoming obvious to everyone involved in this market that selling SaaS solutions can be a complicated.
First, not every SaaS solution can be sold in a simple point-and-click fashion. Many enterprise applications need to be specifically configured to meet the needs of specific customers. A point-and-click procurement system may still be useful in these situations, but an additional configurator or on-line sales support capability may be necessary.
(Many SaaS vendors are discovering that building a cost-effective billing and procurement engine is also more complicated than they expected.)
Second, selling to many mid- and large-scale enterprises still requires face-to-face interaction. This is why Salesforce.com is aggressively recruiting experienced enterprise software salespeople, many of whom I had the privilege of presenting to in Las Vegas two weeks ago at their 2008 kickoff meeting.
Yet, selling a subscription service to mid- and large-scale enterprises doesn't necessarily produce the same big-ticket contracts and commission checks. Therefore, even a direct sales effort has to be adjusted to recognize the smaller transaction values of SaaS agreements.
That is why most SaaS vendors are building web-oriented, telesales teams that are designed for high volume, but lower value sales environments. These teams are dedicated to penetrating and growing accounts quickly rather than cultivating new customers over an extended period of time.
The good news is that a recent SoftLetter benchmark study found that SaaS salescycles are typically a third to a half the duration of traditional enterprise applications.
But, this requires a different breed of salesperson, different selling process and different compensation policies.
Generating more rapid sales also entails packaging, pricing and promoting the SaaS solution differently. In addition to offering free trials, creating more modular packaging and pricing options are essential to encourage customers to adopt SaaS solutions with minimum risk.
It is also important to recognize that the most successful SaaS vendors designed their solutions to appeal to the end-user rather than the IT decision-maker. They've also built their go-to-market sales strategies to target the end-user.
However, many of these end-user/business decision-makers have never heard of SaaS and aren't looking for a software solution to meet their needs. Instead, they are looking for a business service. So, SaaS vendors must sell the business benefits of their solutions rather than the technical features.
This point was brought home by someone I met at SoftLetter's SaaS Sales and Marketing seminar in Atlanta earlier this month. Here's part of the email he sent me last week,
We recently attended the NADA (National Automotive Dealers Association) Show in San Francisco attended by over 120,000 Dealers and Industry Professionals. Every OEM was there in full regalia with cars, trucks, concept vehicles, hydrogen powered cars...you name it, it was there.
In addition to breaking through all of that clutter, we had to compete with other software solutions at the show, like www.DealerTrack.com who hired NFL Hall of Fame Jerry Rice to pose for pictures with Dealers and www.Dealer.com who "engaged" PlayboyBunny Miss January 2008 for autographed pictures of a more revealing nature.
Yet, here we were in our tiny 10' x 10' trade show signing up dealers left and right by offering the simple benefits of SaaS. Free Trial. Low Entry Price. Pay As You Go. Not to mention, no hardware or software. Other vendors around us looked on with envy including Microsoft with their Dealer Management System that's been under development for 3 years and won't debut until 2010 with only 40 Dealers.
So here's the interesting part. When we were pitching these sophisticated multi-millionaire Car Dealers, we had to teach them about SaaS like they were kindergarten kids. They had never heard of "Software as a Service", let along the acronym of SaaS. In fact, they were still trapped into thinking that they had to own their entire IT infrastructure.
It just shows how much work needs to be done to inform business owners about the SaaS world. After all, these are the kinds of folks that are going to provide the fuel (i.e., $$$) to grow the SaaS ecosystem. So we've got to start getting the word out beyond the IT and VC communities.
As Charles Barkley says, "I could be wrong, but I doubt it." | |
| | Sun, 17 Feb 2008 08:57:41 -0600 | | Since Michael Dell returned to the helm of his company, he has been dramatically reshaping its channel and services strategies. He is also putting the IT industry on notice that the way hardware companies define and deliver services is changing.
The old guard of the IT industry recognized in the 1980s and 1990s that tech support, professional services and outsourcing could generate lucrative revenues and create greater lock-in opportunities in an increasingly commoditized hardware business. Lou Gerstner saved IBM by turning it into a services company.
Dell bucked this trend by investing in sophisticated supply-chain, fulfillment and customer service processes which enabled it to succeed as a low-cost, high-margin manufacturer.
HP stole a page from Dell's book and usurped its price advantage. Without a strong services story to serve as a safety-net, Dell was vulnerable to customer defections. It is now seeking to regain its competitive advantage by redefining how services are delivered. In the old world, services were a people-intensive business and highly customized. Dell plans to automate and simplify the way services are delivered.
After acquiring SilverBack Technologies and Everdream in 2007, Dell acquired MessageOne this past week. MessageOne is a leading provider of Software-as-a-Service (SaaS) enabled enterprise-class e-mail business continuity, compliance, archiving and disaster recovery services. MessageOne is in the same business as Postini, which Google acquired last year to fortify its Gmail capabilities and recently rolled out as an enterprise-class email archival service.
What makes Dell's acquisition intriguing is the fact that it doesn't offer an email service. But, that isn't stopping Dell from adding this functionality to its rapidly growing portfolio of SaaS capabilities that now include remote desktop, server, security and helpdesk management services.
Dell has promised to deliver these SaaS capabilities via its growing array of channel partners to support their managed service offerings, but has also admitted that it will utilize them to support some of its customers directly. This direct service capability and a history of ignoring resellers has led to rising concerns among channel companies that Dell is going to commoditize their traditional on-site support business.
Dell isn't just SaaSifying its services business.
Dell also unveiled this week a new Storage Simplification Assessment program which Dell promises will simplify the process of evaluating and selecting storage, backup, recovery and archiving solutions. Dell will offer these assessments directly and through its channel partners.
Dell has also restructured its customer support portfolio, consolidating its previous offerings into two simple options,
- ProSupport for IT
- ProSupport for End-Users
At Ziff-Davis' recent Channel Summit, Dell's channel czar in the Americas--Greg Davis--was asked if Dell intends to commoditize services the way it commoditized the hardware business. |
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managing editor