Customise the code or change your business?

 

There have been quite a few blogs ( Smoothspan, SaaSWeek and SaaSblogs comments ) over the weekend about just this topic and to me its fascinating topic. It seems to me that it shapes SaaS’s future. Let me explain.

Its my belief  (not experience) that one of the major drawbacks of on-premise software, especially in the ERP  / CRM market, is that the time to install massive. When I was dealing with SAP in the UK it was close to 2 years for many customers. And the reason for that is that ERP deals were more an exercise in business process modelling than software. That is, the customers would take the software and then force it to be tailored to their specific business after undertaking a large and expensive consulting exercise. This of course is closely followed by an ever costlier customisation and implementation exercise. The end result is that the customer usually got something fairly closely resembling what they wanted (sic) and effectively had THEIR version of the code, which of course THEY had to support and upgrade and basically…they could never leave because of the massive investments (both in money and customisation).

So we move to SaaS, in this instance the customisation can happen but all of the customisation tends to happen on the front end and the complexity is dealt with by the provider. They have to build a system that allows for customistation per customer while still operating on a single instance of the code. But by doing customisation, businesses do delay the time to benefit in a SaaS world. For example, we’re 9 months into a Salesforce.com rollout here!

So my question is, why don’t business’s just take the code vanilla? If you did a TCO on an on-prem software installation and compared the cost of customisation and lifetime cost of ownership with the cost of changing the way you do business to suite the code what would you find? If you took the SaaS vanilla wouldn’t that speed up your time to benefit? Wouldn’t it make the SaaS providers job easier and therefore the code service should be cheaper???

I know every business believes their unique, its a universal mantra, At a recent spat of focus groups I must have heard this 20 times …“my business is different”, “that might work for them but we do things different”. I think its wrong. And believe me, at the end of one very insightful group, the businesses there got that too….

So my question is….If you took you’re on-prem code vanilla, wouldn’t that attack one of the core value propositions of SaaS – speed to market and easy upgrades? I could finance all the bits and give you a monthly rental. I’m being provocative but am genuinely interested in the answer… please if you’re a lurker give me you’re comments.

SaaS, Opensource and Web 2.0

A fascinating debate is starting to unravel about SaaS and the Opensource movement. (Hat off to Ben Kepes for starting it, as a fellow Kiwi I love seeing this kind of leadership). I really like the analysis and framework used by Sinclair Schuller. I totally agree with his statement that SaaS and Opensource are not mutually exclusive. In fact I think that they are natural bedfellows.

If you buy into Will Price’s analysis, SaaS companies could fundamentally benefit from the support and passion of Opensource development.  If you could reduce the time frame to liquidity from the 1.6x inhouse timeframes by having more developers involved, if you could reduce the amount of capital required by using the Opensource community surely this would be a great thing?

Bob at Smoothspan mentions some questions that would need to be worked out like how do you stop competitors using your code and multi-tenancy / multi version issues.

Bob’s points are valid, but to my mind they represent a dichotomy that exists in the SaaS / web 2.0 world.

“How can operate in a collaborative open world and still make money”

SaaS purports itself to be new world, but it still retains some old world traits.

  • The "secret source is in the code",
  • customer lock in is important",
  • you can’t have unlimited choice.

And frankly all of these are solid business reasons.

But couldn’t it be that the secret source is the customers you have, their satisfaction levels and happiness and willingness to recommend the SaaS to other customers. A critical part of this happiness is them having the ability to take the code and make modifications to it. To my mind one of the benefits of SaaS is ease of customisation.

Not being funny, but if you could get your ERP, CRM or even email customised and running perfectly for your business in a SaaS model using this kind of customisation and the usual plethora of widgets and modules the Opensource community has, why would you want to upgrade? You have the flexibility to change it with your business.

To my mind the key thing for this to happen though is a service delivery platform.

This platform would server as an aggregation point for the Opensource and wider ISV community.

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The benefits of this approach as I see it are:

  • You, as the SaaS company get the speed of development and liquidity benefits mentioned above
  • You, as the SaaS company also get a bunch of smart motivated people who are out there creating the perfect solution for specific verticals (multi-niching), thus making if fit for a much wider group of customers.
  • In some instances this could be the customer submitting their own version of the SaaS application optimised for their business. How powerful would that be? You could even attract SaaS customers into the ecosystem with the promise that if they do submit ‘their version’ they make some money on it.
  • You as the SaaS company get customers promoting the product on your behalf. If you follow the BT Tradespace model to its natural conclusion, you will have people within industry on a forum talking about your product! And this is really powerful as in my experience SMB’s normally don’t know what questions to ask, are under-informed about what the hooks are and completely overwhelmed by the amount of choice available.
  • The other benefits of forums, especially relevant for SMB’s is that they don’t have an IT department, and the way forums run down bugs or ‘how too’ is incredibly important to that segment.
  • If you did the rating thing for modifications or extensions in a Opensource way (check out Joomla.org), it helps when deciding on which  to install.

Force.com (Apex) is close to delivering this type of functionality, the missing bit is the open standards as far as I can tell.

This is all fairly new, I’m sure I’m missing some things out her but I can’t see too much downside

UPDATE: I thought about this more over lunch. If what i say above is true, the downside would be that the current prevailing SaaS model is wrong. The model above is more akin to software virtualisation in its delivery than the one big customised software platform… or am i wrong? 

Platforms, the multipurpose marketing vehicle?

Platform. This has to be the most confusing word used in the whole SaaS ecosystem at the moment. I don’t think I am alone in being a little confused by this, here’s why.

Force.com is a platform (apex and previously appexchange). There's a fair bit of noise about this one currently

Marc Andreesen did this piece on platforms, with the definitionA "platform" is a system that can be programmed and therefore customized by outside developers — users — and in that way, adapted to countless needs and niches that the platform's original developers could not have possibly contemplated, much less had time to accommodate.” And a more simple version

“If you can program it, then it's a platform. If you can't, then it's not.”

Richard MacManus alludes to the entire web being a platform, especially for web 2.0.

Bob at smoothspan has had at least three goes at platform plays (here, here, and one I quite like here). Bob suggests thinking about platforms like this.

A platform provides a framework on which applications written by others can be run.”

Sinclair Schuller at Saasblogs  even does a taxonomy and does a great job of describing the salesforce.com evolution with this statement “Initially, the platform was a robust API that allowed other vendors to tap into Salesforce.com’s powerful application model and build added functionality into it. Later, Salesforce.com moved away from this and created something known as the AppExchange, which became an ecosystem for CRM-aligned SaaS applications built on their platform. Recently, Salesforce announced a new, more powerful platform named Apex that supersedes all previous notions. Notice anything? They called each one of these a platform,
and to some level, rightfully so.”

The problem is, there's not a bunch of consistency in any of these definitions.

So, in the interests of firing up some debate I’ll have a go.

A platform to me is more than a a thing for programming so I don’t really like Marc’s definition, to me, that would be a programming language.

I think platforms do break down, but I think the break down into usage types

I think there are service delivery platforms. The little I know about Apprenda, would indicate that this is an example.

The next type are platforms that provide facilitation. A billing platform would be a good example, especially if this is plugged into another platform. Maestro or paypal are examples.

I think there are development platforms, Facebook and Force.com are these. They provide a ready made ecosystem for app developers. Recent moves by Microsoft would suggest they are heading this way too. Given they’re history with the SDK this is a very real platform

I think Force.com is a special case because it transcends my next category, integration platforms. By creating a platform that makes application integration easy you break down a major headache for customers and hopefully (in Salesforce.com's case) your core product.

I also think that there are single service or core product platforms. One of the most developed of these is voice (POTS). When you think of SaaS and success you really should factor in analogue voice into that. Other examples are the Galileo system.

Finally, I think platforms can be aggregators. Could you call Google a platform? Well kinda, maybe soon.  

The thing is, even this taxonomy don’t really work. What about communications, routing, hardware, storage, mobile device, operating systems….

Perhaps we should try to be a bit more granular, maybe we should step away from the cliché? I don’t know. I do however agree with Sinclair. I think ‘creative marketing’ has meant the term is overused, and that creates confusion.  I’d argue that confusion shouldn’t be the aim if you got something solid to say….

How can you create Blue Oceans with SaaS

Blue Oceans

 

There’s been a couple of interesting posts lately on SaaS, how they can bring down their sales and marketing costs (a really interesting take by Sinclair at SaaSblogs) and a taxonomy of what a SaaS companies value (by Ben Kepes) is. 
To me both posts point to a clear need to differentiate yourself, or to use the parlance of Blue Ocean Strategy, play in the blue ocean (underserved by current market offerings) rather than the red ocean (where you compete on price and bleed).

Sinclair and Ben both point to SaaS offerings that are basically doing the same as existing offerings (SaaS/s , ROF or my preferred version SoSaaS according to Phil Wainwright)

The simple fact is that none of these SaaS plays are doing anything new. They should have a large sales and marketing budget, they are undifferentiated and quite frankly are fighting an uphill battle (I suspect on the back of SaaS business model hype).

So what constitutes a good SaaS play in terms of a startup, investment or a good company to join.

Well here are my 3 cents

1)      The service delivered does something that doesn’t already exist (Sinclair’s swarm based marketing in his post is a great example)

2)      Its something you can sell to an individual and have them make the purchasing decision, not a committee

3)      The implementation isn’t disruptive – no data to move around, nothing to install ideally

4)      Not tied to a geography, can be consumed anywhere there is a network. This is often missed by north American companies but boy do kiwi companies get it

5)      It works well with entrenched software investments

6)      Customers can configure it to their needs

I’d be interested if others think there are more. But to me if you pull this off, you are definitely playing in the blue ocean. Then if you are successful you will get copied  and have to do it all over  again.

Platforms

My punt, platforms are the really exciting part of the SaaS revolution going on. There has been a number of recent articals regarding this and it is to me just another sign of the shift in focus.

Why? My guess is that many would be SaaS application providers have a lot on their plate as it is and have only just realised that SaaS is soooo much more than just a app in the cloud.

I really enjoyed the links off Sinclair Schullers    last post on Saasblogs.  Quite a lot of harmony with some of the challenges we are currently going through, have been through or are deciding to go through.

This i guess is one of the best part of the blogsphere, the coalesence of similar thoughts and collectively crystalising them.   Nice work

What is the difference between a platform and hosting provider?

An interesting counter question was posed to me by Sinclair on SaasBlogs about the difference between a hosting 2.0 provider and a platform provider. Certainly got me thinking, on a number of fronts

  1. Why is the term hosting 2.0 negative? I’m not challenging Sinclair on that interpretation, that was my intent when in my first response. It’s just that the web.20 is positive and exciting. Enterprise 2.0 was too (for a while). Why not hosting? Isn’t a platform a logical evolution of hosting? It’s (potentially)  disruptive and it uses many of the same thought patterns around facilitation and user based configuration?
  2. What IS the difference between a platform and a hosting 2.0 provider? In the link above I think its intent. But it’s more than that too. Platform providers have something more valuable than hosting providers. Hosting providers (as good as they may be) are quite literally 1.0. They may have made incremental enhancements but it’s built to service an older world. Where’s collaborative dynamic interaction? Whereas a Platform provider (if they’re worth their salt) has coalesced a bunch learning’s to deliver something better. I posted some time ago about the potential benefits of collaboration on development. A platform is the epitome of this. They’ve done the hard yards, been through the pitfalls and have come out the other side with the (astute) realisation that they now have something infinitely more valuable than an optimised hosting solution, they have knowledge and experience. (By the way, its astute because they commercialised it)
  3. Platforms also come with a bunch more functionality. The multi-tenant nirvana that many service providers have been trying to develop in a box. With all of the plugs, webservices and Service levels expected. Nice work.
  4.  
    Platforms ARE there to facilitate. When you put you app in a platform if forms part of the solution. The collective outcome is something entirely different from hosting. Hosting is static, siloed, old school.

 
Again, i’m guessing but it’s an interesting (potentially semantic) discussion that could be applied to a much wider context (like the whole 2.0 movement)

 

Posted by Paul