proves that actions are better than words

I’ve just had the opportunity to catch up on the events of Dreamforce, I must say i am surprised about the lack of attention that their announcements are getting in the blogging community. I dent get it because all of their initiatives are at the forefront of cloud computing. They also have significant ramifications for their competitors. (incidentally who ARE their competitors is a interesting questions.

Lets quickly recap what was announced. Firstly a mashup with Facebook. Secondly integration with Amazon so that SF.DC becomes the orchestration layer to E2C. And the Google Apps integration.

What’s really important to understand her is the evolution of SFDC business model. The facebook ( & LinkedIN) tie up allows them to move from a B2B business to a B2C. They are effectively providing their infrastructure policy & orchestration layers to their customers. This does several things. It makes them very sticky. It drives enormous scale. It gives them access to the mother of all Identity stores. Most compelling is that the viral nature of the social web enables them to make you, the FB user their headhunter, lead finder or product evangelist. It makes them a huge transaction hub , and once you’re there you effectively cant be displaced. The reason for that is you become the centre of gravity (or you get to dictate terms!) check this out for much more detail.

The second powerful theme is the evolution of PaaS. This is a much more mature play in that it effectively leverages the AAA, policy , rules and control layers that SFDC invested in for their own platform, to provision services in other cloud platforms. This is clever for a number of reasons. Firstly the customer is owned by SFDC in so far as they are the primary provider. Secondly it effectively relegates and controls where the other cloud play. Thirdly they *could* become the default start position for cloud services as ubiquitous as ‘Google’ is when you think of search.

This is a massively powerful position that SFDC are aiming for. If they are fast (and this is a race strategy) and don’t scare partners too much with the degree of control then this is a ambitious and winning play unfolding…

SaaS is here to stay.

Ok, lately I’ve been grumpy, a curmudgeon by Smoothspan’s definition. Apologies, two kids under 3 can do that to you. So in a new vein, I wanted to point out a few things to the SaaS naysayers.

This 'thing’ isn’t a fly-by-night phenomenon. It is a trend that has been underway for nearly a decade. Take a look at the formation dates of, Netsuite etc. Same as Google near enough! No one’s saying search & online advertising are flights of fancy.

SaaS companies are making serious money these days. is the largest, right now they are a billion dollar company. That puts them inside the top 25 largest software companies in the world (interesting that SFDC doesn't show in that list). I’m guessing, but I would say at 43% they are the fastest growing of those 25 too…. By the way, just for those who think SAP is growing annually by the entire SaaS market. They are only 8 x bigger than & last I heard I struggling in these ‘tight’ financial times. The same times that grew by 43%.. . .

The market as a whole is going gangbusters. Growing at 20% CAGR according Gartner, and is currently a $6bn industry. An industry that big isn’t an ephemeral thing.  Size matters. Market penetration matters. This report shows just how much it matters in he US market.

Some key findings include SMBs spent USD 3.2 billion on SaaS applications in 2007, compared to USD 5.3 billion on packaged software; by the end of 2008, more than 55 percent of businesses based in North America will have deployed at least one SaaS application, with Europe close behind at more than 40 percent; and the SaaS market in Asia will reach USD 1.6 billion by 2010, with a CAGR of 66 percent.

Hype Cycles are often used against SaaS, “oh look, you are just on the peak of inflated expectations”. My answer, no… more like on the  slope of enlightenment. How? Well the much maligned (and deservedly so) first iteration of SaaS was the ASP play. Yip, that was the first crack at this market, and yes it did disappoint. BUT technology and business models have moved on, and are now at the point where the faults of the ASP model aren’t valid anymore. Some purists are likely to take issue with this whole statement, but think about it… it is the evolution of the business model.

Investment in SaaS is an indicator of its maturity. There are oddles of cash being thrown at the SaaS market. Even more compelling is the movement of incumbent software companies into the space (Microsoft, IBM, Siebel, SAP, Symantec, CA – all in that top 25 by the way). When these guys move you can assume that the market is mature and becoming mainstream.

Momentum is changing in the blogsphere too. I use Google Alerts as a tool to catch stuff I don’t normally subscribe too. I’m amazed how many posts I see defining or describing SaaS, trying to pin point why it’s a winning proposition, or what makes SaaS so different. Things that were going around 18 months ago are being re-litigated much to my  frustration. The imperturbable Ben Kepe ’s helped me to see that this was the journey, mainstream or even laggards catching up. Now these alerts say something different. To me they mean momentum, to me they mean mass acceptance, collective awareness of SaaS is happening.

But the most compelling factor in this whole diatribe, the one irrefutable truth is that customers believe in SaaS and are voting with their dollars. The proposition may vary slightly, but the appeal of rapid deployment, low up front costs, and lower ongoing costs and for what you use is just too compelling.

So to the SaaS detractors, check the facts, you cannot argue with those. SaaS and on-prem will co-exist. I don’t believe that you will ever eradicate on prem software. But when you take emotion, job preservation and ‘doctrine’, SaaS is an easy choice for many applications. For that reason, SaaS here to stay….

Does brand matter?

This might seem like a silly question, most marketers (which I am) will crawl over broken glass to tell you that its everything And to some extent it is. (Seth Godin’s post on Hunger is brilliant at describing JUST how powerful). But picture this. In a SaaS framework, especially where you are taking a utility service, does the brand REALLY matter?

I was reading the comments on Mary-Jo Foley’s post about sharepoint in the cloud and was struck by the intensity of the brand dislike coming through. Classic anti-Microsoft vitriol. But if I wanted I could find the same on Google, opensource products etc.

Given that any decision to move to a SaaS application should include the ability to extricate yourself and your data from that provider, does the brand thing even matter? Consider email as the example. Most would agree its a utility application, valuable but utility. If you get antsy with what you get from Google, move to Zoho. You get Antsy with Microsoft move to Zimbra. You get the picture.

In that world, does the brand actually mean anything? Do you know what brand of road you use? What about the tap water?  Does the provider’s brand mean the utility provided is any different from their competitors? What about if you bring your historical perceptions to the table in a SaaS world, does it make a difference? Really make a difference?  Why would you pay differing amounts? Would you fall for the marketing?

SaaS in nappies


Think people, think…


Ben Kepes posted on about how both Salesboom and Netsuite are both aggressively targeting’s customer base. This is bad strategy people, you need to think this through. Here’s why.

Firstly, think about who your competitor is? SaaS accounts for only 14% of the total CRM market. To me that clearly states that the SaaS competitors are the on-premise crowd. The ones with 86% of the market…. or the other $9bn dollars.

Secondly, think about what you are doing to the collective profit pool. Both propositions are cost based. So not only are you not growing the total SaaS profit pool by growing the market, you are cutting your own throats in  a price war that doesn’t need to happen yet. There is enough growth potential left in SaaS CRM for you to happily maintain your margins! If you keep this up you are forever trashing the profit pool. 

Thirdly, think about the global economic climate. Think about the recent announcements from SAP and how they are hurting, think about how the SaaS market could benefit from this perfect storm (I said it, Gigaom said it, Zoli said it). You have a fantastic opportunity to win SaaS Greenfield customers here, don’t pass it up.

Business strategy is a lot more than figuring out what your customers want, especially in a growth market. Looking at your peer (as opposed to competitor) organisations pricing should be done, but not only with a view to competition. Also to a view as to what signals are they sending here. If they put out a price that is seems high, it can mean they are saying we reckon there is a load of profit here, lets keep it that way. 

To this end I am sometimes of the opinion that SaaS companies are in their infancy in terms of maturity of thinking, let alone market position. This just seems a like a beginners error to me…

Value is so multifaceted

I’ve been mulling on something for a while and it all boils down to value. Let me explain. I came to a bit of an epiphany when I realised that to me, Google Reader is now a very valuable business tool, yet I pay nothing for it.  I would, not a lot – perhaps $10 per year –  which is a lot more than Google currently gets from me. Obviously this is a massive opportunity lost, not just to Google but to all the other RSS aggregators out there.  I came to this realisation when I installed a new addon, called read it later. This is a feature I’ve wanted for a while, again I’d have happily paid for it. Again it was given to me free.

Who is it that decides what is free and what isn’t, and how are they making these decisions without understanding value.  It’s all distorted.  I’ve seen  what a CAL costs for MS exchange. Yet I don’t value exchange that much. I sure as hell notice it when it crashes, or is slow. But to me its infrastructure, same as the roads we drive down. Why do I pay for that and not the RSS bit which is more valuable? Because the software vendors don’t charge that way.

In a SaaS world, the opportunity exists to revisit this distortion in the value-payment continuum. How? Early on I heard the maxim used to describe SaaS vs on premise .

“On premise you use the software cos you paid for it, in a SaaS world you pay for the software cos you use it”

…. and that’s the crux.  If it’s valuable you will use it. If you can find out how much it’s valued, then that helps you set the price. I’m hopeful this will occur, unfortunately as the example above illustrates the industry has had a bit of a chequered start.  Perhaps the current financial crisis will drive a new reality?

What is clear to me, before long a lot more effort needs to be put in place to understand what applications and functions within applications are valuable and to who… there in lies your future pricing strategy