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Zoho People: Will it Disrupt or Fail?

Posted on March 10, 2008 ·

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.

Filed Under: Business, Enterprise Software, SaaS, SMB / SME · Tagged: , , , , , , , , , , ,
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Zoho Enters Human Resources Market with Zoho People.

Posted on March 10, 2008 ·

(I broke up my originally long post into two pieces: this one about the product announcement, and the next one with the business analysis)

Zoho, best known for their Web-based Productivity (Office+) Suite today released Zoho People, a feature-rich On-Demand HRMS – Human Resources Management System.

Several modules support the work of managers, HR professionals:

  • Organization for defining corporate and departmental structure
  • Recruitment for managing recruitment processes and maintaining resume databases
  • Checklist for defining business processes and workflows in the organization
  • Forms for defining custom business forms using the integrated Zoho Creator
  • Dashboard to overview it all

All the setup, be it form changes, new forms or field, org chart changes ..etc happens via a friendly drag-and-drop interface.

While all the above is for Management, HR, perhaps Training, Travel professionals, most “regular” employees in a company would only access the Self Service Module, which is split to an Employee and a Manager Self-Service section. Requests can be sent to the HR department on job openings, employees can submit information like Expense Reports, Vacation, Training Requests to the relevant departments/managers as pre-defined in the workflow…etc.

For a detailed feature overview, watch this demo video.


Zoho People from Raju Vegesna on Vimeo.

The application is currently in Beta, and for the Beta period it will be free, independent of the number of users. After the Beta pricing will likely involve a dual scheme, with ad-hoc users (regular employee accessing Self Service) paying less than full users (typically HR professionals.) While no numbers have been announced, Zoho claims the blended price level will be disruptive – something to the scale of Zoho CRM, which is about 10% of the cost of it’s main competitor.

Talk about CRM, it’s worth mentioning that while Zoho’s fame comes from the Office Suite (or the extended suite of Productivity Apps), this is not their first foray into business applications. Zoho People joins Zoho CRM, Zoho Meeting, Zoho Projects and Zoho DB. Below is an overview of the entire Zoho Portfolio:

Please read my next post for a business analysis on what Zoho’s entry to the HCM space means.

(Disclaimer: I am an Advisor for Zoho.)

Related posts:  Between the Lines,  Zoho Blogs, Deal Architect, Centernetworks, Wired,

Filed Under: Enterprise Software, Personal Productivity, SaaS, SMB / SME · Tagged: , , , , , , , , ,
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NetBooks: Integrated SaaS Suite for Very Small Businesses. Almost.

Posted on February 19, 2008 ·

When I started this post 2 months ago, it had a more tongue-in-cheek working title: NetBooks – the Little Gem in Hiding – clearly a play on Dennis Howlett’s  post, NetBooks – a little gem.  That’s because despite Dennis’s positive review of this new SaaS solution for small businesses I found their website a major turn-off .   I did not find a feature-list, screen prints, demos: the closest they had was a contact form to request a scheduled demo.  Failure!  You can’t reach the “long tail” of the market via outbound sales; your site needs to be absolutely transparent, so potential customers can find all feature / price information at their fingertips, then just try-and-buy. 

But what a difference a few weeks make!  Having checked back, now NetBooks offers decent product information, online videos, in fact you can now set up a free trial account with sample data in minutes.  (While it looks like just another contact form, the process is automated, I received my email confirmation within a minute.) Self-navigation definitely beats just watching vid’s. Kudos to NetBooks for fixing a major shortcoming so fast!  (Note to self: don’t leave half-written posts, they may have a short shelf-life…)

Let’s look at the actual system now.  NetBooks aims to be an On-Demand integrated business management solution for small manufacturing businesses – in fact for other types of businesses, too, as long as they hold inventory and ship tangible products.  They cater for  what they call True Small Businesses (TSB), which I referred to as  VSB – very small businesses, the “S” in SMB / SME.  Typically companies with less then 25 employees, sometimes only 3-5, and, most importantly, without professional IT support, hence Software as a Service is a life-saver.

NetBooks tries to cover a complete business cycle, from opportunity through sales, manufacturing, inventory / warehouse management, shipping, billing, accounting – some with more success then others.  Manufacturing, Inventory, Shipping and their integration to Accounting appear to be a stronghold.  If you’re in sales, you’d like to see a Sales Catalog, if you’re in the warehouse, you want an Inventory List, and if you are in manufacturing, you need a Production Elements list: they are all one and the same, allowing you to define a product structure (Bill of Materials, BOM) with different physical characteristics, reorder points, pricing levels, warehousing requirements, marketing notes…etc.   In other words, different functions can update their own slice of the same information and it’s shared with others (of course in a small business several of these functions may very well be carried out by the same person.)

Not having any procurement / purchasing functions appears to be a glaring omission: after all, if you’re in manufacturing, you will likely need to buy some components / materials. 

Another function, nominally present, but rather weak is CRM.  I can set up a Revenue Opportunity list, track contacts, events, even financial terms per record, but what’s the point if I can’t turn these into a Quote, later a Sales Order?  In fact I have to start a sales order from scratch, and it does not update the opportunities: unless you close them out, they will show as prospects long after you shipped the order, invoiced the customer and received payment.

Sales Order creation appears to be  a watershed event in NetBooks: that’s when the system comes alive, integration gets better from here, with information flowing through nicely.  Completing the order creates a shipping document, confirmation of the shipment creates a a billing request, invoice.  Even external services are integrated well, like UPS for Online Shipping and PayCycle for payroll .  There’s a complete “document trail”, you can start from the accounting side, too: from Accounts Payable (invoice) you can trace all actions back to the shipping doc, sales order…etc.

I understand why Dennis with his accounting background considered this system a gem:

As an accountant by training I often make the mistake of taking the number cruncher’s view. On this occasion I don’t have to. The way NetBooks is organized, you enter it according to the role you fulfill. That means you only ever need use the screens that are pertinent to you.

Real-world people record their real-world transactions: manufacturing, physical movement of goods, and the system records the facts in Accounting.  NetBooks  is an accounting system at it’s heart, but one without the need to deal with accounting screens.  This should not come as a surprise, given Founder Ridgley Evers’s own background: he was co-founder at QuickBooks, the de facto standard for small businesses.

Most of the sample data in the NetBooks trial system appear to have come from Evers’s real-life business: Davero Ingredienti, a purveyor of olive oil products, and I think this very well represents the type of small business NetBooks may be ideal for: relatively stable, has a good repeat customer base, receives a  lot of inbound orders and needs to execute on manufacturing and shipping to these customers.  It badly lacks stronger Sales features, and a more flow-oriented thinking to support aggressively growing businesses.

The User Interface is nothing to call home about. You certainly won’t find the lively charts and dashboards seen at Salesforce.com, NetSuite, SugarCRM, Zoho CRM …etc.  But having a simplistic UI is one thing, making it outright boring is another, and hard to use is a capital crime.  In NetBooks you basically navigate through small text lists, then double -click on an item to drill down to more details, wait long (the system, at least the trial one feels very slow) for several overlapping screens to pop up. You have to close or move around some of these pop-ups to see what’s underneath.  And whoever came up with the idea of clicking on those tiny arrows should be banned from web design for life.  

 

Seriously, this isn’t just the lack of rounded-corners-gradient-colors web 2.0 goodness: the poor UI, the microscopic arrows to click on render NetBooks a pain to use. 

Although I’ve been quite critical in this review, I still like the NetBooks concept: give very small businesses an integrated system they previously could not afford. NetBooks starts at $200/month for 5 users, additional users seats are $20.  That’s a fraction of the current “gold standard” in the space, NetSuite – although the step up to NetSuite also brings a wealth of new functionality.  Finally, SAP’s Business ByDesign is worth mentioning: when it becomes widely available, it will be the most function-rich SMB SaaS solution – but their entry point is about where NetBooks’s upper limit is.

Filed Under: ERP / CRM, SaaS, SMB / SME, Startups · Tagged: , , , , , , , , , , , , , , , , , , , , , ,
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Can the Software Sector be Resilient to Recession?

Posted on January 26, 2008 ·

I was very lucky in the early 90’s being in an industry that was not only shielded from recession, in fact it was thriving.  Corporate America was taught to fight their way out of the slump by Business Process Reengineering, and what better way to execute it than by implementing new integrated business information systems.  The slump for the rest of the country was a major boom for SAP, and the entire ERP industry born in their footsteps.

Today we’re amidst another technology change, one that may just ensure relatively smooth sailing through a recession for the Software sector – at least those who are on the right side of the change.smile_wink  The belts will be tightened, says the New York Times, but technology will still grow, just at a slower rate:

Overall growth in technology spending may fall from 7 percent last year to 4 percent or less this year, according to estimates by IDC, a research firm.

But that won’t be nice 4% growth for the entire industry; I strongly believe pioneers of Software as a Service (SaaS) will be amongst coming out of a slow-down as winners, leaving others in the dust. 

TechCrunch is optimistic for the entire Web 2.0 business:

All of those Enterprise 2.0 startups out there, or even Amazon trying to sell Web-based computing infrastructure, are actually at an advantage. Customers are more likely to try cheap cloud computing when they can no longer afford the alternatives.

ZDNet’s Dan Farber disagrees:

Most of the Web/Enterprise 2.0 startups can’t get a hearing with CIOs and tech buyers at corporations. While consumer applications are influencing corporate applications and coming in through the back door, Enterprise 2.0 apps (blogs, wikis, predictions markets, social networking, mashups, collaborative cloud-based apps and technologies such as RSS and tags) are just beginning to reach the radar of larger corporations, and they are not considered mission critical, which is where the money is funneled first

I think they are both right – and wrong.  I don’t agree that the entire Web 2.0 sector is immune to a down-turn: the advertising market will shrink,  the “lets-grow-insanely-who-needs-a-business-model” types will suffer. As Software VC Will Price says:

It may well be that Slide raising $55m from mutual fund companies at $500m+ pre-money will be the “what were we thinking” moment of the current cycle.

I also agree with Will, that a movie we’ve all seen will be playing again:

The last downturn saw the valley swing violently away from consumers to the enterprise – bastions of value, hard ROI, tangible value propositions, enterprise pain points and budgets, etc became the mainstay of investment decisions and the consumer, I kid you not, was literally a bad word…
The valley became all enterprise, all the time.

It will not be all, and not only Enterprise, but Business Software, whether for the Enterprise or small businesses will come back with a classic, “old-fashioned” business model of actually charging for value (product or service) delivered.  Of course there is still the dilemma of selling business software – much better if you don’t have to, it is getting bought instead. smile_shades  Yes, Dan is right, “Web/Enterprise 2.0 startups can’t get a hearing with CIOs and tech buyers at corporations” and their  apps are not considered mission critical, but the whole point is that a lot of these Enterprise 2.0 tools are not sold at the CIO level.

The after-bubble nuclear period of “no IT spending at all” found me at a startup. We did not exactly hit it big, but did not go under, either, and that’s because our model allowed us to get in the door way below the threshold that would have required higher authorization. Not classic SaaS, rather SES (Software Enabled Service), we were essentially data providers and often got into an “enterprise” account at $3k for the first month … ramping up to $60-$100K annually.   Anyone familiar with Enterprise Sales knows the term Economic Buyer:  typically getting involved later at the sales cycle, approving or nuking the deal.  Well, we saw no Economic Buyer: being under the threshold, we sold to the User directly.

As Zoho CEO Sridhar Vembu adds to the discussion:

It is useful to remember that both Salesforce & WebEx thrived during the last recession – in fact they were relatively unknown during the last boom. Cost was a major part of the reason they thrived in the bust.

Indeed. Software as a Service and the typically associated pay-as-you-go model allows businesses – enterprise and SMB – to use software without the typical upfront investment the traditional model would require, therefore SaaS providers have a good chance of withering a Recession.  Another noteworthy idea in Sridhar’s response is that they really don’t have to have a “massive win”, a total move from the desktop to the cloud: a “marginal” business  is good enough.

Of course this “marginal business” is not as attractive to many startup entrepreneurs as fast forwarding to the IPO, preferably over $1.5B. In fact it’s really boring… building a business gradually; no IPO thrill; serving millions of customers, helping them actually conduct business.  Oh, and making millions of dollars of real revenue in the process – not bad, if you ask me.  And it’s quite bubble-proof. smile_wink

Related posts: Vinnie Mirchandani –  Why it will be very different this time, Fred Wilson- This Time Will Be Different.

Update (1/28): Forrester Research predicts gains for Enterprise Web 2.0 apps in 2008.   Also read: Between the Lines, ReadWriteWeb.

Filed Under: Enterprise Software, SaaS, Startups · Tagged: , , , , , , , , , , , , ,
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SmartTurn: Inventory & Warehouse Management SaaS-style

Posted on January 23, 2008 ·

Here’s further proof that the Software as a Service (SaaS) model will not be limited to CRM and Accounting: SmartTurn, providers of the first On-Demand Inventory and Warehouse Management System (WMS) announced today its $5M Series A financing led by New Enterprise Associates (NEA) and Emergence Capital Partners.

I admit the announcement took me by surprise; I have not heard of the company before. A quick look at the Oakland address made me suspicious though, and yes, I was correct: this company is a spin-off of Navis, who are veterans of Warehouse Management systems, from the “old”, i.e. on-premise world. Old-world or not, the Navis team carries the SaaS DNA: a little-known fact is that their CEO, currently Chairman of SmartTurn John Dillon was CEO of Salesforce.com before Founder Marc Benioff took the reins back in 2001. The investors are not exactly new to SaaS either: Emergence Capital were early investors in Salesforce.com, and they specialize on SaaS and nothing else (I believe they are the first Valley VC firm to do so).

Warehouse Management is an awfully complex area (I know first hand, having lead SAP logistic projects in the 90s), so if SmartTurn is successful, it will truly be a validation of all aspects of “Enterprise Software” being eligible for the On-Demand model.

There are very few Enterprise SaaS players around, but SAP’s (SAP)new SaaS product, Business ByDesign for the SMB market and NetSuite (N) for small businesses are worth mentioning: they both offer complete, integrated systems, including Inventory and WMS. The opposite of the integrated systems is the best-of-breed approach, in which case one of the most difficult decisions in enterprise systems is where you draw your functional boundaries, and for companies implementing a multi-system scenario what functions are left in which systems, where to cut overlaps. Inventory Management is planning and accounting for your inventory levels; Warehouse Management is the extension of the concept down to physical locations (warehouses, buildings, down to bin levels). SmartTurn appears to support the Procurement and Order Fulfillment processes as well, which, from a logistics point of view are the inflows and outflows to/from your warehouse.

This is an area worth keeping an eye on and I expect to revisit it once I know more about the company and their customers.

On a lighter note… $5M to manage the inventory of major businesses vs. $50M to superpoke FaceBook users… am I the only one sensing imbalance here? smile_wink

Update: No, apparently I am not the only one… Will Price, Managing Partner at Hummer Winblad Venture Partners:

It way well be that Slide raising $55m from mutual fund companies at $500m+ pre-money will be the “what were we thinking” moment of the current cycle. I think, however, the investor who leads a $4 on $4m Series A in a company with a differentiated technology and a direct tie to hard ROI will feel calm in the storm.

Filed Under: Enterprise Software, ERP / CRM, SaaS, SMB / SME, Startups · Tagged: , , , , , , , , , , , , , , , , ,
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Morsels from the Crunchies, or Whatever Happened to Business Software?

Posted on January 21, 2008 ·

Now that The Crunchies, the Internet Startup world’s equivalent of the Oscars are over, the winners announced, a lot of champagne consumed, let me go back to a few thoughts that have been on my mind throughout the whole show.

First of all, it was nice to see so many startups recognized, meet familiar faces again, and I join the chorus in thanking TechCrunch, ReadWriteWeb, VentureBeat and GigaOm for putting the show together. Special kudos to Om Malik for coming only three weeks after his heart attack.

Second, I can’t help but think that some of the categories were .. well, almost deterministic, leaving zero chance of winning for the “little guys” lumped together with a giant. Right out of the gate, the first category, Best gadget/device: iPhone, Kindle, Ooma, Pleo, Wii. C’mon, did anyone doubt for a minute the iPhone would win? Or look at the Best mobile startup, where the finalist were AdMob, Fring, Loopt, Shozu, Twitter. Oh, please, 3 relatively unknown names against Twitter, a mega-phenomenon… smile_sarcastic

The other thought I’ve been pondering ever since the show is whatever happened to business software? The Crunchies were yet another proof that “enterprise isn’t sexy“: this was all about consumer-glitz, with a few startups who cater to businesses. That said, at least there was an Enterprise startup category, and I was really glad to see my friends at Zoho win it. Although I wholeheartedly believe they deserve it, this was by far not a slam-dunk category, with Zoho and 37signals, which has a religious cult-like fan-base being the two chief contestants.

Perhaps the Zoho team felt a bit of extra satisfaction, given that 37signals originally questioned their viability, and called them copycats rather than innovators. Well, the innovation debate definitely ended a few weeks ago, when PC World picked Zoho’s Notebook as one of the 25 Most Innovative Products of the Year. While the Crunchies were clearly a popularity contest (with over 100,000 votes) PC World’s list was compiled by professionals. This list was notably full of gadgets, and the only other software products preceding Zoho were Google Gears and the Facebook API.

Back to the Crunchies, Enterprise category, 37signals and Zoho are diametric opposites in many ways: 37signals product philosophy is all about simplicity, “products that do just what you need and nothing you don’t” while Zoho believes in functional richness, and their customer service attitude is quite different, too. Yet I believe they are both good companies, and there’s a clear demand for their products, which is well proven by the hundreds of thousands of loyal customers. Neither of them are really Enterprise software companies though. 37signals caters for what they call the “Fortune 5,000,000” and Zoho clearly stated their mission to be the “IT for Small Business” – not that a subset of their portfolio, the Office Suite could not become Enterprise-ready, but for now it’s not their primary focus. And focused they are …

I think the Crunchies used the term Enterprise quite liberally – I would have called this category Business Software. Now, if the names IBM, HP, SAP, Citigroup, Boeing, BMW, Shell, McDonalds, Pfizer sound familiarsmile_wink, I’m sure you agree that the company who claims these and others customers is truly an Enterprise Software company. Yet Atlassian ended up in the International category, to their bad luck, as they got paired up with Netvibes. The two are apples and oranges. Atlassian is a very successful company, but the people who buy enterprise software are not the types who hang out at the Web 2.0 tech blogs or vote for the Crunchies; Atlassian stood no chance against Netvibes, with their tens of millions of individual users, all potential voters in this popularity contest.

What do three so different companies, Atlassian, 37signals and Zoho have in common? All three are bootstrapped, fast growing, financially successful and follow the “old-fashioned” business model of making good products and charging for it. I could not help but think of these guys while listen to the announcement of the Best Bootstrapped startup category, decided between FriendFeed, PoliticalBase, ProductWiki, Techmeme, UpNext. Or while listening to the panel discussion moderated by Dan Farber, where Matt Marshall expressed his astonishment how far the ad-based business model propelled us, and was wondering if advertising as the only business model would work in the downturn (no R-word!). If we had to pick the survivors of a potential downturn, these three companies are certainly safe candidates. The good old business model of charging for your product, which, incidentally, your customers love works wonders. smile_regular

Of course there was a lot more to the Crunchies, but it’s been all more then adequately covered, and I wanted to focus on business software now. But…well, I am a guy and guys love cars… so I have to mention the Cleantech category, won by Tesla, makers of this beautiful electric sports car. The only problem is, the car does not exist yet, release date has been pushed out repeatedly, the company had to go back for repeat funding, just fired a bunch of people, including the VP Manufacturing, Lead Engineer if the motor team… but hey, why not give them the Award and keep on dreaming (about the car). smile_embaressed

Update:  Apparently I am not the only one questioning the rationale of some category assignments at the Crunchies; read CenterNetworks on user-generated content.

Filed Under: Bay Area, Blogging, Software, Startups · Tagged: , , , , , , , , , , , , ,
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Will Google Enter the Business Applications Market?

Posted on December 13, 2007 ·

Google’s next killer app will be an accounting system, speculates Read/WriteWeb. While I am doubtful, I enthusiastically agree, it could be the next killer app; in fact don’t stop there, why not add CRM, Procurement, Inventory, HR?

The though of Google moving into business process / transactional system is not entirely new: early this year Nick Carr speculated that Google should buy Intuit, soon to be followed by Phil Wainewright and others: Perhaps Google will buy Salesforce.com after all. My take was that it made sense for Google to enter this space, but it did not need to buy an overpriced heavyweight, rather acquire a small company with a good all-in-one product:

Yet unlikely as it sounds the deal would make perfect sense. Google clearly aspires to be a significant player in the enterprise space, and the SMB market is a good stepping stone, in fact more than that, a lucrative market in itself. Bits and pieces in Google’s growing arsenal: Apps for Your Domain, JotSpot, Docs and Sheets …recently there was some speculation that Google might jump into another acquisition (ThinkFree? Zoho?) to be able to offer a more tightly integrated Office. Well, why stop at “Office”, why not go for a complete business solution, offering both the business/transactional system as well as an online office, complemented by a wiki? Such an offering combined with Google’s robust infrastructure could very well be the killer package for the SMB space catapulting Google to the position of dominant small business system provider.

This is probably a good time to disclose that I am an Advisor to a Google competitor, Zoho, yet I am cheering for Google to enter this market. More than a year ago I wrote a highly speculative piece: From Office Suite to Business Suite:

How about transactional business systems? Zoho has a CRM solution – big deal, one might say, the market is saturated with CRM solutions. However, what Zoho has here goes way beyond the scope of traditional CRM: they support Sales Order Management, Procurement, Inventory Management, Invoicing – to this ex-ERP guy it appears Zoho has the makings of a CRM+ERP solution, under the disguise of the CRM label.

Think about it. All they need is the addition Accounting, 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.

The difficulty for Zoho and other smaller players will be on the Marketing / Sales side. Many of us, SaaS-pundits believe the major shift SaaS brings about isn’t just in delivery/support, but in the way we can reach the “long tail of the market” cost-efficiently, via the Internet. The web-customer is informed, comes to you site, tries the products then buys – or leaves. There’s no room (or budget) for extended sales cycle, site visits, customer lunches, the typical dog-and-pony show. This pull-model seems to be working for smaller services, like Charlie Wood’s Spanning Sync:

So far the model looks to be working. We have yet to spend our first advertising dollar and yet we’re on track to have 10,000 paying subscribers by Thanksgiving.

It may also work for lightweight Enterprise Software:

It’s about customers wanting easy to use, practical, easy to install (or hosted) software that is far less expensive and that does not entail an arduous, painful purchasing process. It’s should be simple, straightforward and easy to buy.

The company, whose President I’ve just quoted, Atlassian, is the market leader in their space, listing the top Fortune 500 as their customers, yet they still have no sales force whatsoever.

However, when it comes to business process software, we’re just too damn conditioned to expect cajoling, hand-holding… the pull-model does not quite seem to work. Salesforce.com, the “granddaddy” of SaaS has a very traditional enterprise sales army, and even NetSuite, targeting the SMB market came to similar conclusions. Says CEO Zach Nelson:

NetSuite, which also offers free trials, takes, on average, 60 days to close a deal and might run three to five demonstrations of the program before customers are convinced.

European All-in-One SaaS provider 24SevenOffice, which caters for the VSB (Very Small Business) market also sees a hybrid model: automated web-sales for 1-5 employee businesses, but above that they often get involved in some pre-sales consulting, hand-holding. Of course I can quote the opposite: WinWeb’s service is bought, not sold, and so is Zoho CRM. But this model is far from universal.

What happens if Google enters this market? If anyone, they have the clout to create/expand market, change customer behavior. Critics of Google’s Enterprise plans cite their poor support level, and call on them to essentially change their DNA, or fail in the Enterprise market. Well, I say, Google, don’t try to change, take advantage of who you are, and cater for the right market. As consumers we all (?) use Google services – they are great, when they work, **** when they don’t. Service is non-existent – but we’re used to it. Google is a faceless algorithm, not people, and we know that – adjusted our expectations.

Whether it’s Search, Gmail, Docs, Spreadsheets, Wiki, Accounting, CRM, when it comes from Google, we’re conditioned to try-and-buy, without any babysitting. Small businesses don’t subscribe to Gartner, don’t hire Accenture for a feasibility study: their buying decision is very much a consumer-style process. Read a few reviews (ZDNet, not Gartner), test, decide and buy.

The way we’ll all consume software as a service some day.

Update: As an aside, the Read/WriteWeb article that inspired this post demonstrates the “enterprise software sexiness” issue, which was started by Robert Scoble and became a Firestorm, per Nick Carr. I really think it’s a very thoughtful post, which, quite unusually for Read/WriteWeb sat alone at the bottom of TechMeme, then dropped off quickly. Now, has this not been about Accounting (yeah, I know, boring) software by Google, but, say adding colors to Gmail labels, in the next half an hour all the usual suspects would have piled on, and this would have taken up the top half of TechMeme. smile_sarcastic

Filed Under: Enterprise Software, Personal Productivity, SaaS, SMB / SME · Tagged: , , , , , , , , , , , , , , , , , , , , ,
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Enterprise Bloggers, Openness and a Thriving Ecosystem

Posted on October 21, 2007 ·

I started this post a week ago, than canned it, not wanting to be part of the “storm in a teacup“, created by Oracle’s announcement that they would open up their annual OpenWorld conference to bloggers for the first time. The software giant also actively reached out to 30 or so bloggers, including several of my fellow Enterprise Irregulars.

It appears that most EI’s will not attend, partly since Oracle does not pay for expenses, partly because there is no word about access to Executives. More important than the expense issue was the reasoning:

“We’re not picking up travel costs or expenses, sorry. This will keep you impartial. If you see me, I’ll give you a pat on the back, how’s that instead?

Ahhh…the enterprise bloggers must be a bunch of prima donnas, used to getting their full expenses paid at SAP’s annual conference and other events.. SAP “bought them” and they are biased, right? Wrong.

The reality is that unlike the press and analysts, the group bloggers are often lumped into, may of us are independents or are in small businesses, don’t have corporate expense accounts to lean on, and simply can’t afford to travel to conferences on our own. Even on a fully reimbursed trip, taking 3-4 days off business is a significant sacrifice. Of course that’s the bloggers’ side, why should Oracle care? Whose loss is it anyway?

What does SAP get for the not-so-negligible travel budget they spend on enterprise bloggers? The one thing they don’t get is bias, “loyal”, positive reviews.
Fellow irregular and ex-Gartner Vinnie Mirchandani can hardly get more critical, regularly beating up SAP on issues like pricing, maintenance, innovation (or lack of) – yet he is invited back to all SAP events. Fund Manager, former SAP investor and blogger Jason Wood is also a regular at SAP events, which certainly does not prevent him from expressing his doubts / concerns. Dennis Howlett is no exception, and the list could go on.
SAP’s recent announcement of their new hosted SMB solution, Business ByDesign is another good example. While most of the media reprinted SAP’s press release, you won’t find it anywhere in the “enterprisey” blogs: what you will find instead is independent thinking, analysis (right or wrong) and dialogue. The bloggers’ verdict was generally positive, mostly about the feature set/ technology, but several of us expressed doubt regarding execution: SAP’s market segmentation, potential self-cannibalization, ability to create mobilize a new, agile ecosystem capable to profitably execute in the new high volume/low price model, and help SAP reach their market goals.

Not exactly paid-off, loyal PR if you ask me… could it be that SAP knows something about the value of dialogue, in fact outright debate? They go the extra mile to provide bloggers with information, engage them actively. Round-table discussions with Hasso Plattner, Henning Kagermann, Leo Apotheker, Peter Zencke (did it all start with Niel’s chance encounter with SAP’s CEO?) and several other executives are highly appreciated, and believe me, it’s not one way PR-style briefing either. James ‘Redmonk” Governor says it best:

“As I have said before, you can buy my thinking, but you can’t buy my opinion.””

At SAP’s Teched 07 Conference James publicly disagreed with Peter Zencke about market segmentation, and the world did not come to an end; in fact the SAP Board Member happily continued the debate at the bloggers chat afterwards. Two weeks after the “incident” James moderated several sessions at Teched Europe, on SAP’s invitation. Don’t we all know companies where such behavior is the sure way to lose access and get yourself uninvited forever?

Bloggers are critical, opinionated, sometimes right, sometimes wrong, but never dull. But there’s a bigger picture here, other than external communication. I believe it’s not coincidental that the company that understands the power of dialogue has the most thriving online community I’ve seen in enterprise software.

Two years ago, when the external “Bloggers Corner” program started the SAP Developer Network (SDN) counted close to 600K members – today it’s 900K. It’s younger sibling, the Business Process Expert (BPX) network counts 200 thousand members. Between the two, discounting overlaps, it’s fair to say 1 million members participate in SAP’s online communities. This includes blogs, forums, wikis, videos..etc. SDN+BPX is a thriving support system: over 5,500 issues are posted daily, and the average response time is 20 minutes.

I think SAP has discovered something unique: they don’t have to give the code away yet they enjoy the benefits of “Open Source-like community“. The highest rated contributors don’t have to look for projects any more, they are in high demand. SAP Ecosystem Becomes a Booming Economy – declares research firm IDC.

The Ecosystem has become an organic part of how SAP conducts business, and there is no turning back. SAP Executives are quite aware that competitors comb through the SDN / BPX entries daily, and they certainly lose some competitive edge – but there is no other way to “run” the ecosystem. The Genie is out of the bottle, and they don’t want to send him back.

The role of the ecosystem will become even more important now that SAP is more aggressively pushing into the mid-market. This is a high-volume, low-margin market, sales, deployment, support all different from what SAP traditionally knows. Successful partnering will make or break it, and apparently SAP understands it.

I’ve come a long way from the original issue of blogger participation at Oracle’s OpenWorld, and not without reason. This issue has sparked a debate, stirred up some emotions, and I don’t want people to think it’s all about greedy (or hungry) bloggers whining about not getting their expenses paid. Nor is it a SAP Good Guy, Oracle Bad Guy issue. Both companies have their own culture and will continue conducting business their own ways.

I believe Oracle’s first approach to bloggers (late or mistaken as it is) is a welcome move, and it’s good to see they are open to learn and improve:

“This is new territory for a lot of us, and personally, I’d like to hear a lot more opinions and suggestions before I support one path or another.”

Some people in Oracle had to fight for this and they should not be given a (verysmile_wink) hard time. I certainly hope the initiative will not get shut down due to the initial negative feedback. I also hope Oracle management will realize how one step leads to another and that openness actually improves business in the long run. I used SAP as the positive example, because that’s the best showcase I know, and they are pioneering in this field – but if you know any other examples for actively embracing community, please share it in comments below.

Oh, and if you happen to be in the San Francisco Bay Area, by all means, check out Lunch 2.0 @ Oracle tomorrow.

Update (10/24): …and not a happy update, for that matter. Just as I praised SAP for “getting” social media, here’s this disturbing post from Steve Mann, VP at SAP’s Global Marketing. Apparently SAP HR wants him to remove the link to his personal blog from his corporate signature. I guess I should correct my statement: SAP gets social media … just not everyone, all the time smile_sad

Filed Under: Blogging, Enterprise Software, ERP / CRM, Marketing / PR, Social Networking · Tagged: , , , , , , , , , , , , , , , ,
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Yes, the Enterprise Software World Changed Today

Posted on September 19, 2007 ·

Yesterday I went out on a limb predicting that SAP’s new On-Demand mid-market offering, codenamed A1S will be a game-changer. ZDNet quoted my conclusion:

My bet is on SAP: they may stumble a number of times, which will effect their quarterly numbers – but in the end, I believe they will succeed. They will become the dominant SaaS player in the mid-market, forcing smaller players like NetSuite down-market. In the next 2-3 years while SAP flexes their On-demand muscles, we’ll see just how pervasive SaaS proves in the large corporate market, and that will determine whether A1S remains a midmarket solution or becomes the foundation of SAP’s forey into that market – their natural home base.

This was the day before the announcement. This morning my fellow Enterprise Irregulars jokingly asked: “Has the world of Enterprise Software really changed?’ We did not know the answer than, but now we do: Yes. SAP Business ByDesign is really a game changer. Key reasons:

  • Breadth of functionality
  • Fixed, Trasnparent pricing (which, I might add will put the squeeze on Salesforce.com ad NetSuite)
  • All this coming from SAP, the recognized leaders in automating business processes.

I will soon have more details, but suffice to say the Enterprise Irregulars contingent here came to the same conclusions. Here are the initial reactions:

ZDnet/Software, Rough Type, Redmonk, Computerworld, WSJ.com, ZDNet/IT Project Failures, The Ponderings of Woodrow, ZDNet/Software as a Service, Between the Lines,

Photo: the Enterprise Irregulars with Henning Kagermann, SAP CEO. Credit: Prashanth Rai

Filed Under: Enterprise Software, ERP / CRM, SaaS · Tagged: , , , , , , , , , , , ,
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The World of Enterprise Software Will Change Tomorrow

Posted on September 18, 2007 ·

I really would have liked to be at TechCrunch40, temporary HQ of all-things-Web. Instead, I’m in New York, where the world of Enterprise Software will change tomorrow. That’s when SAP will unveil A1S, the new generation SaaS solution for the SMB market. Incidentally, this may be the last time we hear A1S, as SAP is expected to reveal a new name.

I suspect after Wednesday there will be a lot of talk about the new system’s features, but for now, very few people have actually seen it, and they are all under rock-solid NDA. So for now, just a few preliminary thoughts.

SaaS and Enterprise Software

I am a big fan of Software as a Service, have repeatedly written about it, but mostly in the context of the small business or consumers space. My own passion comes from the time when I switched from “sell side” in the SAP business to actually being a customer in a small business (Sales VP, NOT IT type!) and was shocked at the sorry state of infrastructure and systems (more lack of) available to most SMB’s. I became convinced that for small businesses that don’t have IT staff at all, On-Demand solutions are the only way to go.

Does this mean SaaS is for small businesses only? Not at all. While it’s easy to declare that for small businesses without their own IT resources there is no better option than SaaS, there is no clear “winner” for large corporations. There shouldn’t be. SaaS is not a religion; adopting it should be a business decisions that these organizations have to make individually.

SAP and SaaS

On-demand “purists” (the religious types;)) have long criticized SAP for being laggards, taking a half-hearted hybrid approach to SaaS – but why would they do anything else? After all, SaaS is still only 10% of all enterprise software sold, although growing fast. Even if we believe “the future is SaaS” (which is of course unproven, but I happen to believe in it), there is a lot of mileage left in the “old” Enterprise model, and market leaders like SAP have certainly no reason to turn their backs to their huge and profitable customer base. Protection of the legacy market is largely the reason behind the segmentation, i.e. A1S being strictly a small- and midmarket solution – but I don’t believe this segmentation is cast in stone.

Anyone who saw one of Hasso Plattner’s numerous “new idea” presentations will have to realize he is talking about a lot more than just a new SMB product. Plattner “gets it” and if he does, so will SAP. Clearly, for now the product is slated for the SMB market – new product, new markets – but it also allows SAP to get their feet wet in SaaS, before fully plunging in.

This also explains what may appear as inconsistency at the low-end of the market (less than 50 employees) where SAP continues to offer Business One, their on-site solution. I fully agree with Dennis , for all the above reasons it’s exactly these businesses that would be better off with SaaS, so perhaps Busiess One should be replaced by A1S. But if SAP considers A1S as a test-bed, eyeing the Enterprise Market, they need a certain minimum organization size, and level of complexity. Complexity, after all, originates in the organization, not the software – but this brings us to the next point.

So why is it such a Big Deal?

Believers of the “SaaS Religion” should be happy when a behemoth like SAP throws in it’s weight – and the $400M it expects to spend on marketing A1S. But let’s dispel with a huge misunderstanding here. I literally go nuts when analists (even my fellow Enterprise Irregulars) mention SaaS players like Salesforce.com, Netsuite, Succesfactors, Constant Contact on the same page, as one category. For the purpose of a specific analysis, like Charles did, it makes sense, but please, please, let’s remember, the so-called SaaS market is an artificial aggregation that eventually will make very little sense.

Companies do not buy software just for the sake of having it: they buy it to solve problems. They need inventory management, order and billing systems.. etc – not simply SaaS, just like in the past they could not care less if their software was delivered on tape, CD or DVD. Yes, I know I am simplifying to a great degree, but remember, It’s all about the functionality, not the delivery method.

So labeling Salesforce.com the “market leader” is misleading – yes, they are the the largest pure-play SaaS player, but a relative point solution with a fraction of the functionality enterprises need – and the Appexcange / Force.com attempt to become a platform has not changed this picture.

There is no market leader in On-Demand, complete integrated solutions, because so far no company has offered anything comparable to SAP’s functionality. Granted, I have not seen the system yet, but when SAP puts three tousand developers to work for 3 years, you know you are getting something significant. (In comparison Salesforce.com has less than 200 engineers.)

It’s all about Execution

The SaaS model allows for largely simplified business execution: marketing, awareness, “pull model”: instead off direct sales, the customer comes to the vendor, buying solutions on the Net. Consulting, Support all happens online. The reality of this pull-model is still debated, but I think waht’s often forgotten in the debate is that the “pull-efect” really works is the “S” part of SMB, (in fact, VSB), which are typically green-field businesses, often first-timers to transactional business software, without their own processes carved in stone, so they can test, configure and use software “out-of-the-box”. As we discussed, with size comes complexity, and since SAP targets the high-end of SMB, they will face such complexity, and that requires a “hybrid” model.

So far their Go-to-market strategy appears to be largely based on telesales and leaving support to a network of partners. Where these partners come from: existing All-in-One or Business One partners, or new ones – and if the first, how they will not cannibalize their existing business is a huge question.

A1S is a big bet for SAP,” said Gartner analyst Dan Sholler. “This has to succeed or they will have a whole host of business challenges ahead of them. No one has ever proven they can sell this type of business technology this way. SAP is betting the profitability of the company that it will be able to do it.

My bet is on SAP: they may stumble a number of times, which will effect their quarterly numbers – but in the end, I believe they will succeed. They will become the dominant SaaS player in the mid-market, forcing smaller players like NetSuite down-market. In the next 2-3 years while SAP flexes their On-demand muscles, we’ll see just how pervasive SaaS proves in the large corporate market, and that will determine whether A1S remains a midmarket solution or becomes the foundation of SAP’s forey into that market – their natural home base.

SAP understands New Media

Last but not least, a word on how SAP “gets it”. Part of Hasso Plattner’s “new idea” sounds like a Web 2.0 pitch: he embraces social networking, wikis, videos. How much, if any of these have made it into the first incarnation of A1S remains to be seen.

But SAP as a company themselves actively embrace new media. They have the best bloggers’ program, originally started by Jeff Nolan and now enjoying continued support by Michael Prosceno. I’m heading to the Big Show on Wednesday, but first tonight I’ll be in a group of 8 bloggers to meet SAP CEO Henning Kagerman. Two weeks later I will attend SAP TechEd, which, for the first time includes a full Community Day – an event certainly to be popular by bloggers. Oh, and who is the first keynote speaker? Mr. Web 2.0 Tim O’Reilly himself.

Not exactly dinosaur-like behavor, if you ask me.;-)

Off now, time to play tourist in Manhattan. And, in the meantime, I’ll be kept more then up-to-date on TechCrunch40 thanks to fellow bloggers on the scene.:-)

Filed Under: Enterprise Software, ERP / CRM, SaaS, SMB / SME · Tagged: , , , , , , , , ,
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