I am a big fan of Software as a Service, but it frustrates the hell out of me to see industry pundits over-hype it without really understanding it.  Here are 3 killer (in the bad sense) half-truths about SaaS:

1 - SaaS is simpler, easier to implement than On-premise software (see update at the bottom)

2 - SaaS is for the SMB market

3 - SaaS is bought, not sold, it’s the end of Enterprise Sales

Let’s examine them in detail:
 

1 - SaaS is simpler, easier to implement than On-premise software.

The only part that’s absolutely true is the technical installation, which the customer no longer has to worry about with SaaS.  But we all know that this is a fraction of a typical implementation.  Implementations are all about business process and training, hence the difficulty / duration / cost of an implementation depends on the complexity of business and the size of the organization - these two tend to correlate with each other.

It just so happens that all SaaS solutions so far have started (and many stay) at the SMB level, so they are simpler not by virtue of being SaaS but by their target market’s needs. 

2 - SaaS is for the SMB market

Yes, traditionally all SaaS started with Small Businesses, but that does not mean it may not move upstream. Salesforce.com and several HCM applications have proven technical scalability, but they offer partial / departmental functionality. 
I am a strong believer that in 4-5 years most software developed will be SaaS, and that in 10 years it will be the predominant method of “consuming” software by large enterprises - but I can’t prove it.  There’s no empirical evidence, since there has not been any Integrated Enterprise SaaS available so far.  The closest to it is NetSuite today (but it’s still SMB focused), and SAP’s Business ByDesign tomorrow.  In fact despite SAP’s official positioning, driven by market focus and current limitations (functional and infrastructure), I believe that SAP will use BBD  to learn the SaaS game - i.e. BBD will be a test bed for a future Enterprise SaaS offering. But we’re not there yet.
(longer discussion here)

3 - SaaS is bought, not sold, it’s the end of Enterprise Sales

Hey, I’ve said this myself, so it must be true (?).  Well, it depends on the position of the sun, the constellation of the stars, and several other factors, but mostly the first two we’ve just covered.

SaaS for very small business: that’s the clear-cut lab case for the click-to buy pull model to work.  In fact in this respect (sales model) I believe the business size is the no.1 determinator.    Some solutions will have to be configured and may even require pre-sales business process consulting.  This inflexion point will clearly be higher for functionally simpler solutions, like CRM and lower for integrated business management systems, like NetSuite or SAP’s Business  ByDesign. 

Once you reach that inflexion point, you’re in a more interactive, lengthier sales process, and that’s typically face to face.  At least that’s what we’re conditioned to: but it does not have to be that way.  That will be the subject of another post - to come soon.

Update:  Ben Kepes challenged #1 on his blog, and to some extent I have to agree.  My post here is continuation of a discussion we started at the virtual SAP Marketing Community Meeting, and my mind-set was still business process software, e.g. CRM, ERP..etc, but I forgot to specify that.  Instead of replicating the argument, why don’t you read my response to his response at Ben’s place.

Tags: business bydesign, netsuite, On-Demand, pull-model, SaaS, sap, sap bbd, small business software, smb, sme, software sales

Zoho, best known for their Web-based Productivity (Office+) Suite today released Zoho People, a feature-rich On-Demand HRMS - Human Resources Management System. For the product introduction please read my previous post, while here I focus on business analysis, specifically on what this move means to software sales in general.

Today’s product announcement signifies a departure from what Zoho has been known for so far, in a number of ways. Their primary reputation is being the best Web-based Office / Productivity Suite provider - People is clearly a process-driven, transactional system with “enterprisey” features: organization levels, work-flow, permissions…etc.

It’s not an entirely new field for Zoho though, as their CRM solution has been gaining traction for years now - both in terms of new customers as well as converts from the market leader. (See chart with full list of Productivity and Business Apps). As a matter of fact, I’ve often stated calling it CRM is an understatement: with Sales Order Management, Procurement, Inventory Management, Invoicing it’s really more of a mini-ERP. Add to it Accounting and HCM and Zoho can come up with an unparalleled Small Business Suite, which includes the productivity suite (what we now consider the Office Suite) and all process-driven, transactional systems: something like NetSuite + Microsoft, targeted at SMB’s, perfectly rhyming with Zoho’s stated objective of becoming the outsourced IT for small businesses.

Except… well, Zoho People is not a small business system. All you have to do is look at some of the organizational setup, or processes, like holiday, training, leave requests, company policies to realize that this system is ideally suitable for organizations with a few hundred employees and more. (The “M” in SMB, whereas most of Zoho’s focus has been on the “S” until now). So it’s a departure from Zoho’s traditional target market, and by its very nature it’s not a system individuals or small groups would just start to use in an ad-hoc manner. It’s a system to be introduced by HR for the entire company.

Bringing an enterprise system to the market typically requires a different approach, a coordinated marketing and sales effort, supplemented by consulting and support - i.e. all the extra weight that makes enterprise software “big and fat”. Yet Zoho just throws it out in the open, like they did with Writer, Sheet or any one of the dozen or so productivity tools. They have no clue how to market enterprise software! - one might say… and do they, really?

Simply announcing enterprise software without marketing and sales is certainly a risky proposition. Any startup that does with their main product is doomed to fail. Yet Zoho can afford an experiment. The new HCM system is just one product in their portfolio, in fact the entire Zoho portfolio is just a big experiment of the parent company, privately held and profitable Adventnet. CEO Sridhar Vembu repeatedly stated his mission is to commoditize software, delivering it to large masses at previously unseen prices.

There’s all this talk about how SaaS changes the economics of Software - pull vs push process, try-and-buy vs. the expensive enterprise sales process; but it mostly refers to the SMB space. The try-and-buy, self-serve model is almost unheard of amongst larger organizations and more complex software. It traditionally needs more cajoling and hand-holding. But why not break away from tradition? Why should all innovation stay on the product side? Zoho goes the extra mile to make the new system more “consumable”: screenshot tours, demo videos abound. Of course disruptive pricing does not hurt, either.

If Zoho People fails to gain traction, so be it: the company will likely focus on their main avenue of becoming the IT provider for SMB’s, integrate features from People into Zoho Business and CRM, and figure out how to crack the HCM market later. If, however it starts gaining traction, it’s a good signal to the entire SaaS industry: an indication that transparency, online information and help works, the try-and-buy model may just be feasible even with larger organizations, which, for the first time will buy Software as a Service instead of being sold to by pushy enterprise sales teams.

(Disclaimer: I am an Advisor for Zoho.)

Related posts: Between the Lines, Zoho Blogs, Deal Architect, Centernetworks, Wired, SmoothSpan Blog, GeekZone, Webware, Venturebeat, Web Worker Daily, TechCrunch, Business Two Zero, Irregular Enterprise.

Tags: Enterprise Software, hcm, hris, hrms, On-Demand, pull-model, SaaS, software sales, try-and-buy, zoho, zoho crm, zoho people

Atlassian, a fast-growing, successful enterprise software company is looking for a VP of Marketing. I don’t normally broadcast job searches here, but am breaking that rule now for I believe this is a truly exceptional opportunity with a truly exceptional company. (Disclaimer: I have no business affiliation with Atlassian, but admit to being positively biased, as the company exemplifies a lot that I stand for.)

They are best known for two products: Jira, the issue tracking & software project management application was their first hit, putting the company on the fast growth track and establishing a loyal fan-base in the IT community.  Their existing reputation in the IT community certainly helped the second product, Confluence, the enterprise wiki gain traction: it is now equally popular in the IT and business community.  Wikis in general  have become more commonly known in the past two years; once a tiny market niche, today a growing field where new entrants pop up left and right, claiming to be best in this and that….  But numbers talk, and the verdict is clear: Confluence is the undisputed enterprise wiki market leader. 
Atlassian is not sitting on their laurels: in the past year they diversified, acquiring several companies and launching new products on their own.  Frankly, I lost track, but I believe  their portfolio currently includes 8 products, all part of an “IT toolkit”, with the exception of Confluence, which is seeing fast adoption amongst business users, too.  

The customer list is impressive: IBM, HP, SAP, Citigroup, Boeing, BMW, Shell, McDonalds, Pfizer … just about all the Fortune 1000, as well as non-profits, Universities, Government Agencies, totaling over 9000 customers worldwide. (The chart is a bit misleading: Atlassian’s fiscal year starts in June, and the FY08 bar shows the current figure only, excluding projections.)

How did they achieve this?  They must have an excellent sales force.  Wrong! Atlassian has no sales force at all.  They don’t sell: customers simply buy their products on their own.   I often talk about  the pull-model that’s replacing the traditional, expensive enterprise sales process (6-9 months, high touch, flights, meetings, wine-and-dining, entertaining, in the end often nuked by politics) - but that’s typically in the context of Software as a Service, and in the SMB (small business) market.  Atlassian’s products are mostly on-premise (although they now have a hosted version of Confluence) and their primary market is the large Enterprise.  Yet they pulled off what amounts to a small miracle:  essentially took the download.com, tucows style model we all know as consumers, and ported it to the enterprise space. 

Of course having customers try-and-buy through the Internet is not as simple as firing your Sales team ( or not hiring one).  It’s not a matter of a decision: it’ s a consistently applied philosophy, that you have to implement in every aspect of your business.  The key components are:

• lightweight software
  • well-defined function set, meets specific user need, small user groups can get started
  • ease of use (both easy to learn and easy to use)
  • well documented, well supported
• transparency
  • features (what you’re getting, no surprises)
  • issues (Atlassian’s bug tracker is open to the public)
  • pricing (simple, upfront pricing, no fill-out-contact-form-wait-for-sales-to-call-back BS)
• low price (”expensable, not approvable” - to quote a former competitor)

The “pull-model” means customers will need to find you- which is why Marketing is a critical function.  With Sales gone, Marketing becomes sales (actually, Atlassian’s CEO proudly says everyone is in Sales, especially Support).  So if you are a marketing superstar,  or know one, want to be part of a successful team, work for celebrities , you owe it to yourself to apply.

Atlassian is not only about business - it’s about people.  I know, old cliche.. but here it works.  The unique culture this team maintained throughout their super-growth even now that they have 130 people is a large part of their success.

So what is this culture like?  Tough. When he doesn’t make his numbers, Atlassian President Jeffrey Walker is forced to make up for it as ticket-scalper on the street. OK, joke apart, this photo was shot last August, when the entire San Francisco office went to see a Giants game together. (Incidentally, just a day before Jeffrey became cancer dude). This wasn’t a rare occasion, either: both the San Francisco and the Sydney teams have a lot of fun together:  Cutlassian, Mission: Atlassian, theme-filled staff events, abound throughout the year.   Their new office  building in Sydney is right next to a pub (hint: when will you guys realize you’d be better off buying the entire pub?)  I wonder when the San Francisco office will move into a winery…  Perhaps you get the picture by now: Working for Atlassian isn’t just a job  - it’s a lifestyle.  But don’t for a minute think it’s a bunch of rowdy kids having fun only:  they bring in $30 million a year.  And if you don’t perform, this is what awaits you.

So that’s the magic formula: combine business success with a fun, team-focused culture and you’ve got the makings of the ultimate job.  (Are you still reading, or have you alerted your Marketing superstar friend yet?)

Now, if this is the ultimate job, there’s one question unanswered: How come it hasn’t been filled yet?  I wanted to hear the answer straight from the horse’s mouse so to speak, so I asked Atlassian President Jeffrey Walker, who responded below:

We were inundated with resumes, and found a few excellent capable candidates. Unfortunately, one of the growing pains of companies like ours is we were not quite ready for the right candidate. Incorporating someone of the caliber we need takes preparation. Our search began prematurely. Lesson learned. After the founders and I took another few ‘long walks’, we came out aligned and ready. This time I fully expect to complete the search. Just need the right remarkable individual.

Well, I did not walk with Jeffrey and the Founders, but I certainly hope they will not change a lot:.  I have a lot to say on the subject of hiring, but it’s not specific to Atlassian, so I’ll break it out to a separate post.  In the meantime, if you are that “remarkable individual”, what are you waiting for?

Tags: , atlassian, confluence, enterprise sales, entrepreneurship, jira, lightweight software, marketing, pull-model, startup hiring, Startups