Software Archives - Page 60 of 71

Enterprise SaaS Startups from an Investor’s Point of View

Posted on April 12, 2006 ·

(Updated)
“It takes 70% to 100% more capital to fund a SaaS company to break-even than a traditional perpetual license company. It also takes 2 to 3 times longer to get there.” said Michael Skok of North Bridge Venture Partners at a Mass Technology Leadership Council session yesterday. Don Dodge reports in a detailed post, which is well worth reading in full.

SaaS companies need an average of $35M in VC capital, versus $20M for a similar perpetual license company.
It takes 6 to 7 years to get to break even
Public equity markets pay a 10% to 20% premium for predictable revenue streams
SaaS companies move faster than big companies. They can introduce new features instantly versus waiting for the next major release. Think years.
SaaS requires an architecture that supports end user customization
Industry standards are critical for interoperability
Steady state business models require 15-18% for engineering and 30-35% for Sales and Marketing.

Obviously this comparison is about Enterprise Software, Consumer applications are faster to develop, startups often don’t even take VC investment and get to market or get acquired after limited Angel investment – if any at all.

The above points are fact-based, learned from NBVP’s investment in 8 SaaS companies. Yet I feel comparing enterprise software startups with the SaaS (Software as a Service) model vs. the traditional perpetual license model is an academic exercise, since it does not represent a real choice. I’m meeting VC Partners weekly at various SVASE and other events, and I’m hearing a consensus: no software VC in the Valley invest in the traditional enterprise license model.
There are estimates that about 10% of all software sold is SaaS today, but investors have look out years ahead, and the writing is clearly on the wall: only SaaS gets funded today.

Where to for SaaS acceptance?

Update (5/23): Hello “On Demand” hype machine by SiliconBeat’s Matt Marshall list some of the lates On-demand investments, at ever-increasing valuations.

Tags: SaaS, On-Demand, Enterprise Software, Venture Funding, VC funding, VC Investment, startup, startups, SVASE

Filed Under: Bay Area, Business, Enterprise Software, ERP / CRM, SaaS, Software, Startups ·

Online Backup and Desktop Search

Posted on April 12, 2006 ·

Friends Don’t Let Friends Lose Data says Chris, and I agree, so I followed his recommendation and signed up for the Mozy online backup service – now I can sleep at night. Previously I used FolderShare to sync data between my multiple PC’s, but now I am left with one laptop, so the free 2G storage and automated backup is now a real(data) life-saver.

However, I noticed it makes full backup every day, instead of doing it incrementally, as it’s supposed to, after the initial backup. Other users don’t seem to have this problem, which makes me look for the culprit elsewhere. I could not imagine (digital) life without Desktop Search anymore, and I tend to believe Copernic is by far better than any of the GoogleYahooMicrosoft products.

I wonder if Copernic Desktop Search causes files look “changed” during the reindex process – that would explain while they get backed up again. I am an early beta tester of their 2.0 release, so end up reindexing quite often.

This post is also an experiment in effectively using the “edge” – sure, I could go to Mozy’s site, register, describe the problem there, then go to Copernic and do the same, and probably play messenger-boy for a few rounds between the two companies – let’s see if they pick this up and find a resolution.

In the meantime I am patiently impatiently waiting for Box.net to add their long-awaited synchronization feature.

Tags: backup, data backup, online backup, data sync, data synhcronization, desktop search, copernic, copernic desktop search, cds, box.net, mozy

Filed Under: Blogging, Customer Service, Personal Productivity, Software, Technology ·

Using AdWords to “Badmouth” the Competition

Posted on April 11, 2006 ·

Espen talks about how Google’s AdWords is used against 24SevenOffice. Here’s one of the ads displayed for the keyword “24SevenOffice” :

24SevenOffice – Great system for doctors, quick service, low costs!

The only problem is, 24SevenOffice does not do any of it. It’s a CRM+ERP+Communication+ .. + SaaS provider.

Whoever put up the ad, will likely pay very little, as few who specifically search for the company will click through. They manage, however, to clobber their competitor’s image, confuse and drive away potential customers, or disappoint the few who actually might be looking for a doctors’s solution, click through and feel “bait and switched”.

(somewhat) related post:

Where Would We Be Without Google Adwords?

Filed Under: Business, ERP / CRM, Marketing / PR · Tagged: 24sevenoffice, advertising, Adwords, brand, competition, crm, erp, Google, Google Adwords, marketing, SaaS

Software 2006: Questioning the McKinsey Study

Posted on April 7, 2006 ·

(Updated)
McKinsey and Company in collaboration with the Sand Hill Group, organizer of the Software 2006 Conference released their Industry Study (pdf) that I have to take issue with. (yes, I know, who am I to disagree with McKinsey?)

“Business Model Discontinuity: Software as a Service (SaaS) and Open Source. Two major business models are vying for an growing share of software spend: Software as a Service and Open Source. …SaaS has already gained traction in number of application areas – such as payroll, human capital management, CRM, conferencing, procurement, logistics, information services, and e-commerce) – and should make gains across a much broader cross-section of applications over the next 3 years. Out of 34 application areas we have examined, only nine are unlikely to see some SaaS adoption over through 2008”

Apparently McKinsey tells us that Financial Applications are the back-office function most unlikely to see SaaS adoption for years to come. Hm … I know the trendy app now is CRM, but there were widely-used web-based packages long before CRM. Intuit, NetSuite (originally NetLedger), Intacct, 24SevenOffice, WinWeb ..just to name a few.

Perhaps these companies can jump in here, and tell us what they think of McKinsey’s prediction that SaaS will not take off for financial apps?

Update (4/7): Dennis Howlett has a really good point bringing up Document Management, the other “unlikely” area per McKinsey. As to confidentiality concerns: the numbers in the financial apps are the result of real business activity that may very well have been in other hosted systems, e.g. CRM, Procurement..etc. Document Management? Oh, well, our external interaction is often on hosted platforms (email), sales contracts are largely in hosted systems (CRM)… I could go on.
Interestingly enough businesses lost more confidential data stored “safely” inside the firewall due to disgruntled ex-employees than due to “exposure” to SaaS providers.

But the point I made about Accounting systems, that this isn’t subject to predictions, it’s already happening, or has happened largely: accounting was available On-Demand before CRM was “born”.

Update (5/31): New McKinsey paper bullish about SaaS model. (hat tip: Nick Carr. Free registration required to read).

Update (8/17): Dennis points us at Gartner’s Hype Cycle for Software as a Service.

“On-Demand Financial Management Applications and On-Demand Sales Force Automation are said to be at the peak.”

Interesting. McKinsey says it’s not coming for years, Gartner says it’s already at the peak. Go figure …

Filed Under: Business, Enterprise Software, ERP / CRM, SaaS, Software · Tagged: 24sevenoffice, accounting, crm, Enterprise Software, Financial Applications, intacct, intuit, McKinsey, netsuite, On-Demand, SaaS, software2006, winweb

Software 2006: Wikis Win

Posted on April 6, 2006 ·

(Updated)
Wikis and blogs -social software in general – were the “latent” subject at Software 2006, popping up at several sessions throughout the conference.

In his opening keynote Ray Lane talked about the inter-personal enterprise: collaboration, increased participation through friendlier, better user experience; the user as an individual, “consumer” has to like the software, then will use it, and usage spreads within the company: a pull process, rather than push – the traditional enterprise sales model. This is exactly the model wikis are “sold”, as we discussed earlier. Ray specifically mentioned how useful they found using a wiki at Kleiner Perkins.

Then during the last panel, Toby Redshaw, CIO of Motorola talked about how he installed wikis and blogs: turned it on, decidedly not telling anyone “above” or laterally until it was too late for anyone worried about “control” to interfere. People discovered the new tools, started to use them, and before he knew there were 1900 blogs and 2000 wikis used in Motorola. Grassroots action at it’s best, just like Ray explained. Joe (JotSpot) and Ross (SocialText) could not have asked for a better plug of wikis, just minutes prior to their software showcase.

On the way from this session to the showcase room Ross was showing me his latest baby, Miki, the mobile wiki. One of the conference attendees (Director at a major organization) walked alongside us, overheard the conversation, and jumped in: “where can I get it?” Wow, I think Ross just closed a 30–second sale

There is something funny about these product names, though. Ross just found out that Miki in Irish slang means male genitalia… hm… close .. here’s the Urban Dictionary definition. Never mind, it didn’t hurt Jobby, won’t hurt Miki either. Incidentally, Miki in Hungarian is nickname form for Nicholas, and in Japanese a female name meaning “flower stalk.” Not bad.

The Miki launch was the last announcement of the day, then we headed off for some “Open Source” cocktails and appetizers.

Related posts – Miki seems to enjoy a warm welcome:

Update (4/8): It was fun to see JotSpot and SocialText together – would have been even more fun to see the third (and by the number of enterprise customers definitely not last) product: Confluence by Atlassian.

Filed Under: Bay Area, Collaboration, Enterprise Software, Personal Productivity, SaaS, Social Networking, Software, Startups · Tagged: atlassian, confluence, Jotspot, miki, Social Software, socialtext, software2006, wiki, wikis

SaaS vs. Open Source for SMB’s – Part 2.

Posted on April 5, 2006 ·

Yet another “Pros and cons of Open source vis a vis SaaS for an SMB” post today. I feel this one barely scratches the surface, missing basic points like the availability or (mostly) lack of IT skills at a lot of SMB’s.

For reference on the subject I recommend Shop Talk: SaaS vs. open source – what SMBs should know by Paul Gillin and my own SaaS vs. Open Source for SMB’s? A No-Brainer.

Tags: SaaS, Open Source, SMB, SME, On-Demand

Filed Under: Enterprise Software, Open Source, SaaS, SMB / SME, Software ·

Software 2006: from 1.0 to 2.0

Posted on April 4, 2006 ·

In my previous post I complained about the lack of interaction at some of the Software 2006 sessions. Well, the last two sessions I attended (actually running back and forth between the two) were definitely more participatory.

The panel discussion on Blogs and Web 2.0 in Marketing Communications was lively, and finally (!!!) they took a lot of customer questions. There we go, participation!

Greg Gianforte’s presentation on “SaaS – successful go-to-market strategies” was more a traditional one, but there is something in his presence and style that made it very interesting. Of course it’s not just the presentation, but the success story behind it: while his company is not as super-hyped as Salesforce.com, RightNow is definitely a significant player, with Fortune 1000 customers and over $100M in revenue.

Some of Greg’s key points: One-size-fits-all is OK for the typical SMB customer, but large corporations will demand choice in a number of areas:

Deployment choice: on-premise and hosted. They have to offer both, even tough 90% of business is now SaaS. Often the large corporate customer insists on on-premise, but their own IT gives them 12 month timeline, so they go live with the hosted version “temporarily” – then they get a taste of it and never move on-premise.
Payment choice: a common misunderstanding is to equate On-demand to pay-as-you-go. Payment terms have nothing to do with deployment methods, so they offer monthly term, term net thirty, and perpetual licence+maintenance for both on-demand and on-premise. Interestingly enough, monthly payment (which comes at a premium) is often not chosen by small businesses, but large companies who want to “hide” the cost in the operating budget vs capital.
Upgrade choice: Forced upgrades are unacceptable, they have an automated system that allows customers to pick their upgrade schedule in a multi-tenant environment.
Integration choice: They’ve done hundreds of integrations, web services making it easier.
Customization choice: meeting 80% of the requirements is not enough. High configurability, customization for the rest. Need architecture that supports customization even in the multi-tenant architecture.

Summing it up, these two sessions were informative, lively – but I need to stop now, the wine I smuggled out of the reception area is starting …. to … take …… ef….f….e…c….t.

Enterprise Start-up Strategy by Will Price
SaaS Customization is Great. But at What Price?

Tags: software2006, RightNow, SaaS, On-Demand, Enterprise Software, CRM, blogs, blogging

Filed Under: Bay Area, Blogging, Business, Collaboration, Enterprise Software, ERP / CRM, SaaS, Software ·

Software 2006: “Tacit Interaction” is the New Buzzword

Posted on April 4, 2006 ·

I’m sitting (actually standing in front of a workstation typing this away…) at the Software 2006 Conference, which started off with a really good keynote. Before walking up to the workstation, I already knew I “lost the race”- having seen Ross sit close to a power outlet with his Mac in his lap, I knew everything that could be said is already said . Jeff also covered the Welcome Address in detail.

Real-time update: these guys are posting faster then I can read: full coverage of Ray Lane’s keynote by Jeff and Ross. Again, I can’t really add anything (other than congrat’s to Ross, Ray did a good plug for the wiki). Ray’s session was followed by Vanessa Colella from McKinsey, and I *swear* I heard the term Tacit Interactions more often then Web 2.0, SaaS, Ajax, Collaborative and Social all lumped together at a TechCrunch party. Too bad Tacit is a private company, I’d run to buy the stock before it gets hyped up. OK, I am not being fair, the fact is, it’s pretty hard to deliver a speech immediately after Ray Lane spoke.

Back with a cup of coffee now … oh, well, considering my poor typing skills, I’m actually glad these guys posted all the facts, so all that’s left to me are a few observations.

For all the “Web 2.0” talk I feel we’re sitting in a “1.0” type conference. Sitting, rather than participating. None of the speakers took any questions, and while it’s OK for the keynote, one would expect the Pundit Panel to end with a Q&A.

Never mind, off we go to the Software Showcase. Well, not much of a showcase, we’re getting Powerpoint-supported presentations of CollabNet, Compiere, Digium and Ingres. Again, no Q&A in the end. Finally, Zimbra saves the day, we’re actually getting an impressive live presentation, the audience wakes up, and in the end, we’re offered free beer. Free, as in Open Source. Opening the bottle is $1, as in support for Open Source. Beer or not, I can’t wait to get out of Microsoft-prison and start using Zimbra.

All in all, it’s a good conference, interesting topics, good networking, but it’s a bit “old-fashioned”: “They” present, “we” listen passively, missing all the “Tacit Interaction” we’ve just talked about. Perhaps I’ve attended too many “unconferences” recently, I can’t expect a regular corporate-type conference to be TechCrunch or Techdirt-style 🙂

Tags: software2006, web 2.0, tacit interactions, buzzword, Zimbra

Filed Under: Bay Area, Business, Collaboration, Enterprise Software, ERP / CRM, Open Source, SaaS, Software ·