freshbooks Archives - Zoli's Blog

The Cat is Out of the Bag (Again): The Not-So-Hidden Business Model in SaaS

Posted on June 1, 2009 ·

Forget software: it’s all about (your) data.

Hyper-growing Financial Management system provider and Quicken / MS Money challenger Mint recently raised eyebrows announcing their plan to sell anonymized aggregate customer data. Some reviewers were screaming, we saw bombastic titles like Personal Finance Startup Mint Wants To Sell Your Money Trail – but in reality the news wasn’t earth shattering. You don’t really believe your spending patterns are not dissected – aggregated – analyzed in every possible way and sold by your bank and credit card company, do you?

So nothing new – but a good opportunity to discuss the role of user data in SaaS business models – and there is more than outright sale of data.

Benchmarking the Benchmarkers

Posted on August 22, 2008 ·

I’ve repeatedly praised Web-based Invoicing service FreshBooks for being innovators, unveiling the hidden business model enabled by SaaS: benchmarking. But who’s benchmarking the benchmarkers?

Competitor Xero has just issued a call looking for benchmarking partners comparing metrics like:

Customer acquisition rates
Teaming model and allocation of spend
Sales and marketing spend
Sales quotas
Google spend
Pipeline conversion

CEO Rod Drury is looking for 5-10 partners, communicating either directly, or through a trusted third party. Either way, its quite a challenge, as unlike the aggregate anonymous data Freshbooks provides to their customers, this level of sharing requires quite a level of trust.

Interestingly I contemplated similar ideas just a few days ago when Zoho CEO Sridhar Vembu published his margin analysis of Google, SAP, Oracle, Microsoft and a few others. He drew a conclusion that since Google’s current revenue and profit per employee metrics were much higher than even the best players in the application space, Google has little incentive to move into this space forcefully. (He then followed up with a What’s in it for Zoho? post)

Specific conclusions aside, I thought it would really be interesting to expand this spreadsheet buy including Zoho and comparable companies as well as additional metrics. Needless to say I ran into a similar dilemma that Xero is facing now: these are private companies that don’t typically publish their financial results, to get them participate we would need a relatively larger sample and it would still require a leap of faith.

Rest assured I’ll be watching Xero’s experiment with great interest.

Filed Under: SaaS, Startups · Tagged: accounting, benchmarking, billing, freshbooks, Google, invoicing, SaaS, xero, zoho

Benchmarking: No Longer the Hidden Business Model in SaaS

Posted on April 9, 2008 ·

The cat is out of the bag – was my first reaction when FreshBooks announced the launch of their new benchmarking service in October 2006. Then, and later I called it the hidden business model in SaaS:

He basically announced the hidden value proposition enabled by SaaS: competitive benchmarking. All previous benchmarking efforts were hampered by the quality of source data, which, with all systems behind firewalls was at least questionable. SaaS providers will have access to the most authentic data ever, aggregation if which leads to the most reliable industry metrics and benchmarking.

With Google’s entry today, benchmarking is no longer the hidden business model: it has just gone mainstream. Potentially great value added service, a new revenue source for the provider, which may even allow them to give the core service away for free.

Give away? Do you think I’m smoking something? Read Jeremiah Owyang who predicted that storage companies will (?) eventually pay for your data.

TechCrunch Releases New Zoho Service: Invoice

Posted on March 27, 2008 ·

Yes, the title isn’t a mistake: TechCrunch is no longer just powerful media, Mike now can single-handedly release new products.. Today I spent several hours testing a pre-release product, Zoho Invoice, which was a few weeks from it’s planned launch, when TechCrunch accidentally posted the news. The Zoho Team decided to play along, and instead of disappointing TC readers with a broken link, opted to release the product immediately.

Not exactly an orderly Launch, but not the end of the world either, especially not for Zoho, which has a reputation of updating their web-based products frequently. In my early testing today I found Invoice easy to use, with a soothing, pleasant UI where all the icons are in the right place and support the right information flow. There are some features that were still under consideration as of this afternoon – so be it, this is a “forced” early release, updates and fixes will no doubt be coming soon (using the Feedback button at the top will help issues get fixed quickly).

So what do we have here? Essentially a billing application, that allows the user to create /import Clients, define items (product/service), generate estimates, convert them to invoice and accept payment against it. The Home screen is a Dashboard, providing a quick financial overview:

Information flows easily from one document to another, and there are a number of predefined (customizable) templates that can generate notification emails to the Customer at any stage. Notice the icons change on these two bars:

The Estimate (emailed or snail-mailed to the Customer) can be converted to an Invoice, but when displaying an Invoice, there’s a new icon there to enable entering a payment received.

There are transactional detail, summary, aging ..etc reports to help keep tight control of your receivables.

Although Zoho is primarily known for being the best Web-based Office / Productivity Suite provider, they are not exactly new to transactional business systems: their longest standing product is Zoho CRM (which is an understated name for a mini-ERP), the recently announced Zoho People, and a more full-featured Accounting system is in the works, too. Talk about CRM, it already has some Invoice functionality, which will later be replaced by the new module, to be integrated with CRM. For now, Zoho Invoice is integrated with Projects.

The slideshow below explains the setup, various functions and the workflow between them (click the lower right corner to switch to full-screen):

The new billing application is free up to 5 invoices a months, and there is a pricing scale depending on the number of invoices per month, from $5 incl. 25 invoices to $35 up to 1500 invoices.

The two notable competitors are BlinkSale and FreshBooks. Zoho will no doubt build on the fact that Invoice is just one piece in the puzzle of 16 or so business applications it has to offer.

(Disclaimer: I am an Advisor to Zoho)

Related posts: Webware.com, Enterprise Alley, Venture Beat, Zoho Blogs,

Filed Under: SaaS, SMB / SME · Tagged: billing, blinksale, business software, crm, freshbooks, SaaS, smb, Web Applications, zoho, zoho crm, zoho invoice

SaaS Will Never Be the Same – Again

Posted on December 4, 2007 ·

The first time I said SaaS would never be the same was referring to Freshbook’s launch of their benchmarking service:

It’s *the* hidden business model enabled by SaaS. An opportunity not talked about, but so obvious it has to be on the back of all SaaS CEO’s mind. Benchmarking is a huge business, practiced by research firms like Forrester, Hoovers, Dunn and Bradstreet, as well as by specialized shops like the Hackett group – none of which are affordable to small businesses. More importantly, all previous benchmarking efforts were hampered by the quality of source data, which, with systems behind firewalls was at least questionable. SaaS providers will have access to the most authentic data ever, aggregation if which leads to the most reliable industry metrics and benchmarking.

Hosting customer data offers a lot more opportunities, beyond benchmarking. Tomorrow CRM provider Salesforce.com will launch a new service called Salesforce to Salesforce (S2S) that facilitates the sharing of data between customers -reports TechCrunch. I believe, just like Freshbook’s move, the ramifications of this new Salesforce service will go way beyond the immediate opportunities it brings to customers ( not that those are negligible: see first reaction by Echosign CEO Jason Lemkin, another business innovator in my book.)

This is a first step in a paradigm-shift: while current concerns about SaaS mostly focus on the security, privacy, and consequently isolation of business data, eventually a culture of controlled sharing for business benefits will develop. Forget CRM; think of more complete business suites, like NetSuite, or when it really kicks in, SAP’s Business ByDesign, the most comprehensive SaaS business suite ever. Procurement, manufacturing, inventory, resources…etc data – can you envision the improvements in Supply Chain visibility? SaaS will never be the same – again.

Update (12/5): Larry Dignan at Between the Lines sees the same opportunity:

Today, the service is predictably focused on sharing sales lead and CRM-type information. But as Salesforce.com grabs more large customers its possible that the latest service could be used to exchange supply chain information and link other business processes.

Filed Under: Business, Enterprise Software, SaaS · Tagged: A1S, benchmarking, business bydesign, crm, data security, data sharing, freshbooks, netsuite, On-Demand, privacy, SaaS, salesforce.com, sap, sap bbd

Freshbooks Launches Benchmarking Service: SaaS Will Never Be the Same

Posted on April 16, 2007 ·

Way back at the Office 2.0 conference FreshBooks CEO Mike McDerment dropped a bomb in the last 20 seconds in his presentation: being software as as service, they can aggregate customers’ data, categorize it by industry, size ..etc, and once they do that, why not turn it into a service, providing customers with their own performance metrics as well as benchmarking them against their peers.

A few months later, the Small Business Report Card service will launch tomorrow at the Web 2.0 Expo as well as online. The service will be free to all Freshbooks customers, who will:

all receive their own performance metrics, and
if they select their peer group based on (currently) 80 types of business / professions, geography and several other business criteria, they will also receive their relative position, “score-card” within that group.

The sample below is a mock-up of the actual Report Card, but is shows the initial metrics reported. Clearly, as they further enhance the program, there will be more and more criteria, and FreshBooks customers will have a say in what performance metrics they find valuable.

Remember, FreshBooks’ customers are mostly small businesses who don’t have an army of MBA-types crunch the numbers and look for business (in)efficiencies. In fact it’s probably fair to say some would not even know how to interpret the numbers, until they are put in prospective – hence the value of relative benchmarking.

But why will SaaS never be the same? This isn’t just about FreshBooks and its customers.

It’s *the* hidden business model enabled by SaaS. An opportunity not talked about, but so obvious it has to be on the back of all SaaS CEO’s mind. Benchmarking is a huge business, practiced by research firms like Forrester, Hoovers, Dunn and Bradstreet, as well as by specialized shops like the Hackett group – none of which are affordable to small businesses. More importantly, all previous benchmarking efforts were hampered by the quality of source data, which, with systems behind firewalls was at least questionable. SaaS providers will have access to the most authentic data ever, aggregation if which leads to the most reliable industry metrics and benchmarking.

Being pioneers always carries a risk, and clearly, Freshbooks will have to keep an eye on their customers feedback. There may be a backlash due to data privacy/ownership concerns; some customers will not opt in, they may even lose some customers entirely. But I believe the majority will see the light and benefit from the service. If Mike’s blog post on the subject is any indication, the feedback there was overwhelmingly positive, with 13 comments for, 3 against.

I suspect a year or two from now benchmarking based on aggregate customer data will be standard industry practice, and little (?) FreshBooks will be looked upon as the pioneers who opened up the floodgate of opportunities.

Last, but not least a word on the creative launch – or a lesson on how to launch from a conference you don’t officially participate at:

Yugma is a web-conferencing company and an exhibitor at Web 2.0 Expo. What better way to demo a web-conferencing product than by showing real-live use… without Yugma having to move a finger to create content. They created Stage 2, a platform for companies to showcase their products remotely at the Yugma booth and simultaneously to the World through a Net broadcast. Both the presenters and Yugma win – congrat’s, and my personal Creativity Award to Yugma

Update (4/19): read Jeff Nolan’s comments.

Update (10/8/2008): Congrat’s to Freshbooks for getting on Fox Business.

Filed Under: Business, Collaboration, Personal Productivity, SaaS, SMB / SME, Software, Startups, Technology · Tagged: accounting, benchmarking, data aggregation, freshbooks, invoicing, On-Demand, performance metrics, productivity, report card, SaaS, score-card, small Business, smb, sme, video conferencing, web2expo, web2expo07, yugma

Radar Relay – What’s Happening in Office 2.0

Posted on March 7, 2007 ·

I might as well have titled this post Radar Delay – first it was due last Friday, as part of series of reviews leading up to the Under the Radar: Office 2.0 event, but then fellow Enterprise Irregular Rod Boothby posted an “extra” article the same day, so I decided to wait till Tuesday. Yes that was yesterday, the day when Comcast, my ISP ironically responded to my push for On-Demand with a service outage.

But first things first: Web-based products received a surprise promotion from an unexpected source: Microsoft. As Phil Wainewright says on ZDNet:

“It’s astonishing that in the midst of a serious challenge from a new generation of Web-native office suites, Microsoft should give its rivals a helping hand by handicapping its own product so badly that it performs worse than an online product on a slow dial-up line.”

He is referring to the Outlook 2007 meltdown several users experienced:

“You’d think I had just sprayed the inside of my poor mega-laptop with saltwater to induce non-stop fritzing. I’ve learned to meditate while Outlook ruminates over ten incoming POP messages of 69K. Perhaps it takes a few seconds over each incoming message or RSS feed to contribute to solving a Grand Challenge. Or it and Desktop Search have to play 333 iterations of rock-paper-scissors everytime a change has to be written“

You can hardly accuse the above user with anti-Microsoft bias, since he is none other than Mini-Microsoft, who is obsessed with fixing Microsoft, the company. The Guardian, Dennis Howlett, Jason Busch, Tim Anderson, Chris Pirillo, Dan Farber, Phil Wainewright had similar experiences. Phil asks:

“But is it an even better fix to abandon Outlook and Exchange altogether and switch to an on-demand alternative?

My answer is a loud YES, and I’m making my point in Desktop Software: A Failed Model. Of course glitches occur in the On-Demand world, too, as we just witnessed Google Apps collapse soon after the announcement. We’re not quite there yet, but I share Rod Boothby’s view that we have passed a tipping point: while 2 years ago the ideal mix would have been desktop computing with additional online access, now I feel as a user I am better off mostly working online, with occasional offline access.

A somewhat doubtful friend, who happens to be the CEO of a cool company making web-based products sent this question:

“Do you really think people will use Word processors (in any significant number) through their web browser? “

Yes, I really do think, but why believe me? Listen to a US Government Agency instead: FAA May Ditch Microsoft’s Windows Vista And Office For Google And Linux Combo.

Some of the Under the Radar “Graduate Circle” sponsors posted significant news recently:

Atlassian announced a WebDav plugin which allows users to seamlessly work with both MS Office documents and the Confluence, their market leading enterprise wiki. They also released a hosted version of Confluence – this is something I’ve been waiting for impatiently. This was followed by the announcement of Crowd, their single sign-on authentication software.
Zoho announced integrating Zoho Sheet to Omnidrive, updates to Zoho Projects and overall performance improvements. Web Host Industry Review reported that Zoho doubled customer count in 5 months, going from 100K to 200K.
EchoSign, an innovative solution provider that can proudly wear the SES badge, if we ever get tired of SaaS, has just announced their integration with Zoho Writer .
FreshBooks anounced integration to BaseCamp for easy invoicing. This “Graduate Circle” sponsor could also wear the SES label:-) It’s really promising to see more and more integration within the Office 2.0 ecosystem.

Talk about user base, Nielsen/NetRatings issued a press release claiming that Google Docs and Spreadsheets dominate web-based productivity tools since October, with a market share of 92 percent of unique visitors. Ismael Ghalimi did some research and proved them wrong concluding that Google’s market share may be closer to 50%. His take:

“It is actually quite amazing that companies like ThinkFree and Zoho, with their ridiculously small marketing budgets, can play in the same league as mighty Google.”

Ismael is the creator of last years successful Office 2.0 Conference, and he is already preparing for Office 2.0 2007. But that’s in September – first we’ll have an exciting full-day conference:

Under the Radar: Why Office 2.0 Matters on March 23rd, in Mountain View, CA. Here’s the updated agenda and a list of presenting companies:

The Conference is put up by DealMaker Media, which was until recently known as IBDNetwork. (Too bad I missed their Launch Party.)

Hope to see you there!

Update (3/09): Passing the baton to Stowe Boyd, here’s his Relay post.

Filed Under: Bay Area, Blogging, Business, Collaboration, Marketing / PR, SaaS, Social Networking, Software, Startups, Technology · Tagged: atlassian, confluence, DealMakerMedia, EchoSign, freshbooks, google apps, IBDNetwork, ITRedux, microsoft, Office20con, offiice 2.0, Omnidrive, On-Demand, Outlook, Radar Relay, SaaS, Under the Radar, vista, weboffice, zoho

The "Hidden" Business Model in SaaS: Benchmarking

Posted on December 14, 2006 ·

(Updated)

While we saw a lot of exciting products at the Office 2.0 Conference, the biggest “surprise” was not a product announcement, but FreshBooks CEO Mike McDerment letting the cat out of the bag:

“He basically announced the hidden value proposition enabled by SaaS: competitive benchmarking. All previous benchmarking efforts were hampered by the quality of source data, which, with all systems behind firewalls was at least questionable. SaaS providers will have access to the most authentic data ever, aggregation if which leads to the most reliable industry metrics and benchmarking. “

Two months later FreshBooks published the first set of raw data. It includes stats on payment methods, invoicing by email vs. regular mail, browser an operating system usage. It’s a rather limited set, and only covers two months, but it’s a start, certainly to be followed with more business-critical data. CEO Mike McDerment also takes a first cut at analyzing the data, for example:

“Browser Usage

– Internet Explorer 7 – October 5.02%, November 9.68%

– IE 6 – October 37.64%, November 36.77%

– Firefox 2.0 – October 6.61%, November 24.51%

– Firefox 1.5 – October 44.26%, November 22.07%

Analysis

Both IE and Firefox have new versions out. Clearly the Firefox community is quicker to switch to new versions. Remarkably quick in fact.”

I’m not sure I’d agree with the analysis: certainly Mike is right, the Firefox community appears to be quicker in switching to new versions, but aren’t we missing a bigger picture? I’ve dropped the data into Zoho Sheet, the web-base spreadsheet app which generated this chart:

The “bigger picture” is that IE gained market share vs. Firefox (something that as a FFox user I’m not happy with ). Clearly, the majority of new IE7 users are not IE6 upgraders, they came from the Firefox camp.

But I’m not here to discuss browser use, nor do I intend to ridicule Mike’s analysis. I picked this example to make a point: the same data set may carry different meaning to you and me. The art isn’t so much in the accumulation of data, but the proper aggregation and analysis allowing customers to benchmark themselves against industry peers – that’s where the real value is, not in raw data. So much so, that I probably wouldn’t entirely give it away; rather market it as a for-fee premium service.

SaaS providers may become the benchmark specialists themselves, but think about it: businesses will likely end up using a few systems from different providers, and if your purchasing, sales, invoicing, service ..etc data are all in different systems (and consequently aggregated by the different providers), wouldn’t you have a better competitive picture benchmarking yourself based on all those aspects? Does this mean we’ll have independent benchmarking consultants in the SaaS world? If so, will there be a secondary market for raw aggregate data?

But wait … whose data is it anyway? Trust in your data being secure, not lost, published, traded with is the cornerstone of the SaaS model’s viability. But we’re not talking about original customer data, rather its derivative – does that change the picture? There’s a potentially huge market opportunity here, yet SaaS veterans like Salesforce.com, NetSuite, RightNow …etc haven’t explored it yet. Why? I suspect for this very trust/ownership issue, which can be a potential mine-field. In the early days of SaaS it simply would not have been appropriate to address it, but now with mainstream SaaS acceptance (MicKinsey predicts 61% of $1B+ corporations will adopt one or more SaaS applications over the next year) it’s high time the industry starts addressing these issues.

Kudos to FreshBooks for being a pioneer in building the service as well as bringing a major industry dilemma to the forefront.

Update (01/04): Jeremiah is thinking along the same lines, discussing how storage companies will (?) eventually pay for your data. Yes, he talks about storage while I talk about applications, he talks about advertising while I talk about benchmarking, but in the end it’s the same: user data being processed to deliever business services.

Update (9/28/2008): Here’s another showcase of benchmarking turned into action messages on CloudAve.

Filed Under: Business, Enterprise Software, ERP / CRM, SaaS, SMB / SME, Software, Technology · Tagged: accounting, benchmarking, crm, data aggregation, data mining, data security, Enterprise Software, erp, freshbooks, netsuite, Office20con, On-Demand, RightNow, SaaS, salesforce.com, small Business, smb, sme, zoho

Office 2.0: Additional Awards

Posted on October 16, 2006 ·

OK, unlike the real Awards, these are not “official” and in the lighter category. The “Awards” go to… (drumroll):

Kevin Warnock, CEO of gOffice for the most honest statement of all: “I warmly recommend everybody to use our competitors’ products, they are fare better than mine“. Kevin concluded his presentation by saying he wasn’t quite sure what to do with his company, and invited any advice …
Oh, and how could I forget: for offering the gOffice domain to Google for free.
Sridhar Vembu, CEO of Zoho/Advantnet, for coining the most origical term when the presenters experienced lousy connections: “office.slow“
Ivaylo Lenkov, CEO of SiteKreator, for giving all participants a free Business Account (now, I wonder if it is the 450 who actually were there, or the 4,600 who voted? If the latter, I understand why the site is down for now …)
Mike Cannon-Brookes, CEO of Atlassian, for hosting the Enterprise Irregulars + a few analysts + his competitors to a private dinner and not using the opportunity to pitch his business
Michael McDerment, CEO of FreshBooks, for letting the cat out of the bag.
[your nomination here] – really. please recommend more “candidates” and I’ll post them here.

Tags: office20con, office 2.0 conference, Office 2.0 Awards

Filed Under: Blogging, Business, Collaboration, Personal Productivity, SaaS, Software, Startups, Technology · Tagged: atlassian, freshbooks, Office 2.0 Awards, office 2.0 conference, Office20con, zoho

SaaS: The Cat is Out of the Bag

Posted on October 12, 2006 ·

I’m sitting at the Office 2.0 conference watching a barrage of 5-minute product demos. FreshBooks‘s CEO just dropped a bomb at the last 20 seconds in his presentation: being software as as service, they can aggregate customers’ data, categorize it by industry, size ..etc, and once they do that, why not turn it into a product?

Customers can receive generalized metrics as well as benchmark themselves against their peers.

Stop here. Think about it. This is big. It’s not about FreshBooks. It’s *the* hidden business model enabled by SaaS. It is so logical, we all had to know it would be coming – but carefully avoids talking about it. No wonder… SaaS adoption is growing but still at an early stage, and security, trust concerns are huge. The last thing software vendors want is to feed those concerns, i.e get their customers worried about the competition accessing their data.

The benefits are obvious: all previous benchmarking efforts were hampered by the quality of source data, which, with all systems behind firewalls was at least questionable. SaaS providers will have access to the most authentic data ever, aggregation if which leads to the most reliable industry metrics and benchmarking. Yet it raises a number of serious questions: How far can they go? What are the security / confidentiality / privacy implications? Are they reselling data that the customer owns in the first place? If the customer owned the core data, who owns the aggregate?

The business of metrics, benchmarking is potentially huge, but it can’t take off until the industry, along with customers, can answer these questions – and more.

Update (10/16): I’ve just checked who else talks about this Unheralded SaaS benefit, and voila! Two posts from fellow Enterprise Irregulars, ex-Gartner Vinnie Mirchandani and Yankee Group’s Jason Costello.

Update (10/30): Read Dennis on Valuing Data and on Freshbooks.

Filed Under: SaaS, SMB / SME · Tagged: benchmarking, business model, data security, Enterprise irregulars, freshbooks, industry metrics, office 2.0, Office20con, On-Demand Software, performance metrics, SaaS