SaaS and the Shifting Software Business Model

Barely two years ago we debated whether little-known Zoho was worth paying attention to. The majority view was that their Office applications were weak contenders that would never challenge the Microsoft suite’s position. I think I was in the minority stating that I really did not need more than 10-20% of Word or Excel’s functionality, but online-anywhere access and collaboration made the switch worthwhile.

Today Robert Scoble reports he is seeing online applications wherever he turns:

Today I’d say the skill set is shifting once again. This time to something like Zoho Writer or Google’s Docs. Because if you visit Fast Company’s offices in New York, for instance, they want to work with you on your copy in live time. Fast Fast Fast is the word of the day. It’s in our title, after all. Now some people still use Word, but last time I was there one of the editors told me he was moving everything over to Google’s Docs because it let him work with his authors much more effectively.

These are no longer yesterday’s wannabe applications. Zoho Sheet recently added Macro and Pivot Table support , going way beyond the average user’s needs (and certainly exceeding my spreadsheet skills, which are stuck somewhere at the Lotus 1-2-3 level). Zoho Writer today added an equation editor and LaTex support. Heck, I don’t even know latex from silicone, what is it doing in my editor? smile_wink
As I found out it’s important for Zoho’s academic and student users, once again, going way beyond an average user’s needs. (the other update today is mass import from Google Docs: nice, special delivery for Dennis, but I still would like to see a list of all my online docs, be it Zoho or Google, open them, edit them, and save to whichever format (and storage) I want to.)

Online applications have arrived, they’ve become feature-rich, powerful, and are the way software will be consumed in the future. They also change the business landscape.

Software margins choked by the cloud? – asks Matt Assay at CNet, pointing out a shift in Microsoft’s tone about cloud computing, recognizing that in the future they will host apps for a majority of their customers, and that their margins will seriously decline:

There’s not a chance in Hades that Microsoft will be able to charge more for its cloud-based offerings–not when its competitors are using the cloud to pummel its desktop and server-based offerings. This is something that Microsoft (and everyone else) is simply going to have to get used to. The go-go days of outrageous software margins are over. Done.

Matt cites Nick Carr who in turn recently discussed

…the different economics of providing software as a Web service and the aggressive pricing strategies of cloud pioneers like Google, Zoho, and Amazon.

This is fellow Enterprise Irregular Larry Dignan’s key take-away from the Bill & Steve show, too:

Microsoft CEO Steve Ballmer acknowledged the fact that a lot of computing is happening in the browser and not in applications. He also said that the future of software will have “a much more balanced computational model” and that Microsoft will have to compromise.

Of course it isn’t just Office. The obvious business application is CRM, where pioneered the concept and delivered the first On-demand product. But now a funny thing is happening: the pioneer is increasingly being replaced by more inexpensive competitors, including my Client, Zoho. Yes, SaaS disrupts the traditional software market, but there’s another equally important trend happening: the commoditization of software.

Commoditization is beneficial to customers, but a death-spiral to (most) vendors. Except for the few that drive commoditization. Zoho makes no secret of doing exactly that.

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TechCrunch Releases New Zoho Service: Invoice

Yes, the title isn’t a mistake: TechCrunch is no longer just powerful media, Mike now can single-handedly release new products.smile_wink.    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:, Enterprise Alley, Venture BeatZoho Blogs,


Zoho People: Will it Disrupt or Fail?

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.


Zoho Enters Human Resources Market with Zoho People.

(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,


NetBooks: Integrated SaaS Suite for Very Small Businesses. Almost.

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, 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.


Zoho – the “Safer Office”

It’s somewhat ironic that in the very days I’ve just written about Duet, the joint SAP-Microsoft product, I am seriously thinking of escaping from Microsoft-prison, and switching to the most promising WebOffice (Office 2.0) suite. Perhaps I am part of the trend that prompted Vinnie to consider Duet a “nice-to-have” only, but generally too little, too late. (I actually disagree with him, Microsoft’s lock on corporate users is far heavier than on individuals or small businesses.. but that’s another discussion). Update: I’ve had this post half-written for a while, and now we’re getting warned left and right: “use Word in safe mode“, “don’t open Word attachments from Outlook” – the fix from Microsoft is not expected until mid-June. WTF? That’s three weeks away! I am sick of it, just as much as I am sick of Outlook forgetting where the address book is again, freezing on me frequently, and I am especially sick of MS crippling my computer via the automatic Windows updates. While I can’t get rid of Windows (just yet), I can certainly get rid of buggy unsafe Office. Office 2.0, here I come!

But what’s Office 2.0? First of all, terminology: some call it Office 2.0, others Web Office: the point is to have web-based applications that are accessible via a browser, without any download, that will store the data files on the web, too (sorry AjaxWrite, you are out), thus making all my stuff accessible from any computer, any time (as long as I have Internet access).

I’ve been using Writely for a while, so when I first found Zoho Writer, it was a non-event: both editors are equally good, convenience wins, no need to switch. Are any of these Microsoft Word killers? Scoble would laugh it off, they would not stand a feature-by-feature comparison. So what? I am part of the 90% crowd that barely uses 10% of Word’s functionality anyway. Then I found Thumbstack, a web-based “mini-powerpoint”, that allows me to share and collaborate on presentations easily. It does not do a lot of fancy things, amongst them the animated transitions – great, so now I can focus on substance in my presentations, rather than disruptive entertainment. What about a spreadsheet? Zoho Sheet is easy to use, and is aesthetically pleasing – a point so often missed. Is it as poweful as Excel? Of course not. But my Excel knowledge is probably on the level of Lotus 1-2-3 anyway, so for me, Zoho is the Excel-killer. I also have Stikipad, Calcoolate, … and a few others – all in my Firefox “Office 2.0” bookmark.

The only problem is, when I am not on my own PC, sometimes I forget what’s where… and of course my data files reside with the various service providers, and I am not completely at ease with my digital life being so fragmented. See where I am heading? This move to the Web is liberating, but the plethora of different services causes a bit of chaos. There are two basic concepts to deal with the chaos:

  • Some of the Web storage companies, like, Omnipage, Openomny ..etc .. offer their open API’s to application providers, or make one-to-one tight integration and propose that we store all our data centrally, no matter which application accesses them. This is definitely a step forward, in terms of data management, but I am still dealing with point applications, without any integration between them..
  • The second concept obviously is one-stop-shopping: is there one service that offers ALL the MS Office capabilities (with the common simplification we just discussed)? The answer is increasingly yes: Zoho is releasing new applications at an impressive speed, and they come with 1G of storage. While I would not have left Writely for the sake of Zoho writer only, the abililty to have everyting under one hood is just too damn tempting. I can have Writer, Sheet, Presenter (due out in the very near feature) all from the same source, my data is stored at the same place, and although currently these applications require individual registrations, in the near future they will be available with a single sign-on.

The Zoho guys also promise integration between these applications, and I have reason to believe they will be able to pull it off – after all, they already have the Zoho Virtual Office, which incorporates several of these offices in an integrated fashion. AdvantNet, a 500-person company (of which about a 100 work on Zoho) runs entirely on Zoho Virtual Office. Currently Virtual Office is a downloadable server-side product accessible via the Web, but Zoho will offer a Web-hosted version in the future. Without integration an Office 2.0 is not really Office 2.0, just a collection of online applications. (For those who may not remember, it took Microsoft long years to achieve some level of integration in their Office; for several years and throughout several releases “integration” was copy/paste, and quite painful as such.)

Zoho leverages a good deal between the different product offerings: some parts of Virtual Office make it into the individual applications, and vice versa, some of the standalone products become part of Virtual Office. For example 1G storage is now an implicit part of using the applications, but Zoho Drive will soon be available as a standalone service, too. Ah, and let’s not forget about Zoho Creator, which is exactly what the name suggests: an easy web-application creator. They even go beyond traditional Office functionality, into the transactional world buy providing Zoho CRM, a web based, or downloadable full-featured CRM system. Fully featured means supporting the full sales-related workflow, including vendors and purchase orders all the way to sales orders and invoicing… definitely more then just a “glorified contact manager” as the other guy is often referred to.

Listening and responding to customers is an area a lot of companies fail nowadays – Zoho seems to excel here, too. As part of research for this post I looked at earlier reviews, and several features reported “missing” from Writer are already included in the current product. There is a direct feedback link from the applications, and the longest response time I experienced was a few hours – sometimes it’s just minutes. In comparison, a question I posted on the Writely forum over two weeks ago is still unanswered – I guess those guys are busy finding their place in Google.

Summing it up: Zoho pumps out new applications at an amazing rate (check the site for a few more I haven’t even mentioned). While one by one most of their applications are comparable to at least another web-based application, I am not aware of any other company offering such a complete suite, with that level of support and the realistic prospect of integrating the applications soon. For me the choice is obvious: Zoho is my Office 2.0 Suite.

I’d like to touch on another issue, namely the value of being first, “original” vs. doing something better the second time – but for the sake of readability I’ll break it out to another post – soon.

Update (5/27): Assaf, who made blog conversations really trackable by bringing us co.mment read my post and gave the Zoho Virtual Office a try. His overall impression is positvie, but he also includes some criticism – just as he should. One thing I learned is that Zoho listens and moves fast. Another obeservation (of mine) is that they seem to move in iterations:

  • The downloadable Zoho Virtual Office has been around for a while (they run a 500-person company on it)
  • Now they are focusing on individual “Office” components making them available on the Web
  • Finally they will relase their own hosted version of Virtual Office probably incorporating may improvements they’ve made in the standalone products.

Update (6/6 -yes, the famous 666!): Google Spreadsheet is out, the blogosphere is abuzz, and I won’t have the time to write today, but at least I wanted to point to Ismael’s article, since he arrives to the same conclusions I did…