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…

Android – people are missing the point

There has been a bunch of commentary about Google’s mobile platform Android. Most commentators seem to be banging on about how it is going after the Apple iPhone (R/WW  seems to be fixated on this aspect). This analysis misses the point. Of course Android will try to emulate the best in class product, there’s no point going out with something 2nd rate. But Android is much much more important to Google than just an iPhone competitor, Android is Google’s punt on protecting its advertising business (98% of Google’s revenue).

How? Well we are moving into a mobile device dominated world. This trend has been happening for awhile and is a function of scale and Moore’s law. (basically laptops have gotten cheaper, performance is better etc).  The PDA I have on my desk right now, clearly sits right between my desk phone and my notebook in terms of functions and performance.  When you factor in cloud computing benefits and Web apps (SaaS in some cases), PDAs aren’t that far away from replicating at least 80% traditional computing hardware functionality (and by association replacing those hardware units).

Xero believes this trend is happening and has come out with an iPhone supported version of its SaaS Accounting app to get into that space early.

The proof is there, check out some of the stats in this (surprisingly from R/WW) piece from Sarah Parez about how fast the mobile web is growing (and here from GigaOm).

 The implications of this are enormous. There is no dominant OS provider (why do you think MS has listed Mobile as one of its core strategies?). The other major player seeing this trend and having panic moments is Google. Think about it, if I use my mobile to browse the web more and more, then I logically would use it for search. That means Google becomes less relevant in advertising because (you try this) there are NO Adwords displayed in a Google mobile search. 

Connect those dots, growing mobile internet use, no Adwords….

So, if you are Google what do you do? Well you try to create a mobile platform that is hugely popular and ensure that in that OS is a browser (or some other special feature) that provides you with an avenue to protect your advertising revenue (or provides you with a new one). This platform must be hugely popular for two major reasons.

1) for your advertising revenues to stay the same you need ubiquity (similar to their 67% of US search type ubiquity)

2) without that kind of demand, no carrier will support Android mobiles.

GigaOm outlines a couple of reasons for that here, but more importantly Google hasn’t exactly made a whole bunch of friends in the carrier world with its stance around net neutrality and the San Francisco WiFi project.

I’ve blogged before that Google appear to be having their challenges, the shine is definitely coming off their share price.  There are other indications of a new commercial reality coming out of Google too. Check this out by Garett Rogers on the Google App Engine pricing…

 This surprises me because Google is the king at making things ridiculously cheap — not comparable.

 My read on this move, Google is under the cosh for profit growth to justify its PE ratio.

How much downtime would you put up with from your SaaS app?

I've said before that SaaS providers need to think more about the space between their datacentres and the end user. I summarised this post by saying..

To my mind a good SaaS provider should be interested in this additional real-estate. It represents a space that If MANAGED could be a point of differentiation. A way to get the mass of the adoption curve past their current hurdles and a way to provide businesses (who are putting up mission critical information into the cloud) some sort of SLA (and by association reassurance). It also represents the next evolution of maturity in the SaaS model, SLA’s.

To a SaaS provider, the end users service experience is everything. Service uptime being one of the most critical and basic elements of this experience. Unfortunately for SaaS providers, their end users aren't readily going to discriminate between faults that are within the SaaS providers responsibility or in the Telco's responsibility when making their decisions about the viability of continuing with the SaaS app. To them, the app will just be down.

I'm not alone in getting stuck into organisations who provide services over the web for their lack of up-time. Allan Leinwand at Gigaom is too, only he's found some empirical evidence .  (This is the actual service uptime, but as evidence it supports my claims that some of these web applications are too flaky to be considered as business applications)

I acknowledge that these aren't SaaS apps, but the impact can be measured. Look at that Twitter down time, basically one whole working week. Imagine you are the business owner and thats you're business critical app thats down. Imagine not being able to do business for a whole week, imagine paying staff for that week, imagine dealing with customers…. 

Untill SaaS companies get these type of impacts and address them, to me you are going to  have a lot of difficulty taking SaaS mainstream.


The continuing Saga of the music industry.


I wrote before about the music industry.  In this piece I said that the model is broken. Since this bit, both Nick Carr and Allan Leinwand at Gigaom have both written about it some more.

To me this one statement sums up the issue

Money needs to flow to artists for their creations in a legal manner.

The key word being ‘the Artist’. Isn’t it funny that the lobbying and noise is all coming from the record companies. .I would wager that they’ve wrapped up their actions in a nice bundle called ‘we are serving your best interests’ Mr or Mrs artist. But I think even a cursory examination of the wealth pools within this industry show that the artists get only a fraction of the benefit of their creativity. So in fact all this noise is entirely self serving,  and people know it.

I think most people would happily pay for content knowing that most of the wealth is going to the content creators. ( I accept there will be outliers who never will)

The internet as a distributor model makes the record companies somewhat redundant and that is the issue. The internet gives you reach, rating and social networks give you authority weight or cat through. Downloads removes the need for CD’s –So what is left?

The ability to get payment and restrict access to content exists. Why not sell music in the cloud… or MaaS . This way the content creators get paid, the middle man is cut, and the content is protected. Just an idea….

Actually the more i think about this the more i think that the artists would love this kind of disintermediation play to happen and should actively embrace the internet model