This Week in SaaS #2

Events:

In keeping what I promised- only promoting events that directly benefit you, the members of this group (Linkedin SaaS group)- we’ve got a conference pass to give away to the World Cloud Computing Summit which takes place on December 2nd and 3rd in Israel. There are some really great people there- including Microsoft, Amazon and IBM, as well as Reuven Cohen, Bessemer and Dani Shomron (a member of this group). The agenda is here.

To get in the draw all you have to do is tweet: “@justinpirie I’d like to see xyz speak at #igt09 and I’d like to win a ticket. Thanks @igtcloud” – insert who you’d like to see speak instead of xyz!

Personally- I’d like to see Bessemer, although I do wonder how Reuven is CTO of a company and manages so many tweets and blog posts… Everyone who enters the draw will get a discount code in case you don’t win. If you don’t want to go- please thank @igtcloud for the pass and discount.

Back to TWIS:

It’s been a really busy week for SaaS, with Microsoft PDC and Salesforce Dreamforce competing for the headlines, or so I thought…. Virtually none of the news I’ve read has any real analysis on Azure, just that it’s going live Jan 1 in six countries and it’s going head to head with Google and Force. This should be massive news, but are we a little weary- especially as the SLA’s offered are so poor that we have little opportunity to go PaaS???

Yes Customer, we can give you 99.9% uptime… More on Azure next week I suspect.

Salesforce, is on the other hand going gangbusters on the PR- but a little background for you… Enterprise 2.0 (yes a catchy title) is starting to get interesting- Hutch Carpenter wrote a great piece over at cloudave earlier on the week which set’s the scene on E2.0:

“The integration of collaboration, increased findability, social networking and crowdsourcing into core enterprise activities requiring defined workflows, specific user sign-offs, results measurement and role-based access.”

E2.0 was the big news at Dreamforce- integrating social media into the Salesforce DNA, with twitter and facebook integration deep into the suite and a new social platform called chatter. Think tweet-to-case and you’ve got the idea.

Salesforce new social offerings

Chatter is like an internal version of twitter and facebook for your company which also integrates with facebook and twitter. Appriro covers it in detail if you’re interested here. I’ve been stewing on it for a day or two and haven’t really had a chance to form an opinion. What are your thoughts? As I was writing this- Mark Fidelman posted this about their problems selling social/E2.0 to enterprise. Maybe Salesforce will actually drive adoption, even if it is a me-too product?

There seems to be more and more momentum to integrating SaaS into cloud- so please don’t shoot me if you think I’m interchanging the between the two, too liberally. Bessemer overlaid the various cloud layers (SaaS, PaaS, IaaS) really beautifully in the laws last week but I thought that Appriro splits them really well as part of their “cloud ecosystem”, and how SaaS fits into it- as applications  (by @appirio_ryan and @troyangrignon)

Dilbert on Cloud Computing

I’ve used people’s twitter names where possible so you can get social (or just stalk them if you’re not down with the kids in the whole social networking thingy). Thinking about Social networking, my guest editor this week was Peter Cohen, and he was echoing Mark Fidelmans findings on social media in the enterprise- there’s a real lack of understanding (weariness?) out there. Peter’s got a great SaaS Marketing Blog BTW.

Peter also had some interesting observations from a panel discussion hosted by the Mass Tech Leadership Council on SaaS and Cloud. On the panel were CIO’s of very large corporates and what really struck me from his observations were these CIO’s were really pro SaaS. Yes- pro SaaS. Now, when a traditionally licensed app comes up for upgrade or renewal, their default choice is to move to SaaS, and only don’t move if it’s not worth the pain of migrating.

The second thing that struck me from his observations was how much importance the CIO’s place on the UI- yes the UI. They want a UI that is easy to use because it makes their users happier, more productive, plus training and support costs less. That to me reinforces how important Dave McClure’s AARRR metrics are for success- EVEN in the enterprise. More in last week’s TWIS.

Thinking about metrics from last week- I discovered this excellent post by Eric Rees on Vanity metrics:

“The only metrics that entrepreneurs should invest energy in collecting are those that help them make decisions. Unfortunately, the majority of data available in off-the-shelf analytics packages are what I call Vanity Metrics. They might make you feel good, but they don’t offer clear guidance for what to do.”

In other news:

@beaker wrote a thoughtful post on IaaS and PaaS- I think he’s totally right and the focus from IaaS providers need to be on systems and management. Silent Lucidity: IaaS — Already A Dinosaur? The Evolution of PaaSasaurus Rex… I guess if IBM are telling their customers to “Just do it” on IaaS then it’s time for the earlyvangelists to move on…

I’m sure Monday morning had many of the clouderati choking on the breakfast with the announcement that AT&T are getting into providing cloud services. (If you’ve never tried using AT&T then read this ) I guess that’s why one of their VP’s posted this article on use cases for cloud on Sunday.

Mike Dunham’s thoughts from last week’s discussion have stayed with me when looking at this post about Microsoft’s cloud offerings. Do you agree with this post that MS could be the GM of software?

Linkedin didn’t deliver all of last week’s TWIS- in case you missed it’s here. Because of that- our featured member of the week is Christina Pappas again- TWIS profile here. A new one next week :)

I hope you’ve enjoyed this week’s TWIS- it’s been hard this week to keep it to a sensible length- I’ve carried over a few things for next week and will sleep on a few other things- might even collect some thoughts for a blog post… If you want to catch me- I’ll be in London on Wednesday for the launch of Eurocloud – free ticket here. I’m looking forward to meeting Phil Waineright (@philww) in person after reading his blog for ages. Otherwise I’m @justinpirie on twitter or contact me via my blog.

Have a great weekend!

Update: Yes- Google Chrome OS has launched- video here.

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  • http://twitter.com/MichaelDunham MichaelDunham

    All the best in your new gig – Sounds like an exciting opportunity. Anything I can do t0 help I'm always available.

    When you up to talk about some of this on a podcast … :-)

  • http://www.justinpirie.com Justin Pirie

    Thanks mate- I was thinking about getting you on a podcast ;)

  • http://www.facebook.com/people/Sung-Jin-Kim/100000773058162 Sung-Jin Kim

    “The Moving Cloud: To surpass or To be followed?”

  • http://www.justinpirie.com Justin Pirie

    Sung-Jim: what do you mean?

  • http://www.facebook.com/samarpan Samarpan Dutta

    @justinpirie Great post! liked the way you put the #multitenancy debate to rest. See how #Cordys takes multitenacy seriously http://bit.ly/9mYXpk

  • http://www.justinpirie.com Justin Pirie
  • http://www.opteso.co.nz Pete Clouston

    Hi Justin,

    re: SaaS ROI -
    can you offer ideas as to potential methodologies for quantifying the return, objective and subjective?

    Thanks, Pete

  • http://twitter.com/janawiggins Jana Wiggins

    Priceless!

  • http://giffconstable.com giffc

    Thank you for the kind words Justin! You remind me I really need to go look at Meeker's latest deck. Hope you're having fun with the new gig

  • http://www.justinpirie.com Justin Pirie

    Hi Pete – I'll try and lay out some of the key ROI arguments out this afternoon.

    Best

    Justin

  • http://www.justinpirie.com Justin Pirie

    Thanks!

  • Aaron

    Interesting – especially the mobile SaaS predictions.

  • http://twitter.com/daveconcannon Dave Concannon

    Thanks for the mention Justin, glad you found it useful.

  • http://www.justinpirie.com Justin Pirie

    My pleasure Dave- great post- not often discussed!

  • http://www.growcomms.com/ Russell Palmer

    Justin,
    very thorough round up of the industry happenenings this week. I especially enjoyed the interview with Eric Domage on cloud security aspects. My eyes usually glaze over when the topic of security comes up because I find it very technical, but Eric put his points forward in a way that is easy to understand and make a lot of sense.

  • http://www.justinpirie.com Justin Pirie

    Eric is really good. Security for the rest of us in the real world!

  • Anonymous

    Interesting The examples show high CAC costs (referred to d.skoks) for an SaaS but what do you recommend doing if a startup’s CAC is high due to x reason a direct sales force for example? Aside from the above mentioned within the examples on how to drive CAC down or LTV upnnWhat would you or anyone following advise or strategically adjust to obtain the same objectives ( sales/rev etc) there needs to be some constructive comments around these half examples, for instance recommending not using a direct sales force is not really constructive because it might deter away from the sales/rev objectives, but a strategy, substitution to lower the CAC associated with the force could be something we could all discuss and benefit from

  • kennsaa

    Interesting The examples show high CAC costs (referred to d.skoks) for an SaaS but what do you recommend doing if a startup’s CAC is high due to x reason a direct sales force for example? Aside from the above mentioned within the examples on how to drive CAC down or LTV up

    What would you or anyone following advise or strategically adjust to obtain the same objectives ( sales/rev etc) there needs to be some constructive comments around these half examples, for instance recommending not using a direct sales force is not really constructive because it might deter away from the sales/rev objectives, but a strategy, substitution to lower the CAC associated with the force could be something we could all discuss and benefit from

  • http://www.justinpirie.com Justin Pirie

    Have you checked out TWIS#26?nn http://www.justinpirie.com/2010/05/twis26-this-could-change-your-life-understanding-sales-complexity-in-saas/ nnThe first question to ask- is there enough pain (value) to justify the high selling point of a direct sales force?nnIf there’s not- then you might need to reconsider… I’ve had this question posed so many times over the years- so I don’t wish to take assumptions based on your email- but they hint at the same underlying issues.nnSaaS is really an upside down business, distribution and user experience are much more important than the software. If you can’t nail those two- then you’re going to struggle to acquire customers…nnMarketing and Sales is almost more important than anything else

  • http://www.justinpirie.com Justin Pirie

    Have you checked out TWIS#26?

    http://www.justinpirie.com/2010/05/twis26-this-could-change-your-life-understanding-sales-complexity-in-saas/

    The first question to ask- is there enough pain (value) to justify the high selling point of a direct sales force?

    If there’s not- then you might need to reconsider… I’ve had this question posed so many times over the years- so I don’t wish to take assumptions based on your email- but they hint at the same underlying issues.

    SaaS is really an upside down business, distribution and user experience are much more important than the software. If you can’t nail those two- then you’re going to struggle to acquire customers…

    Marketing and Sales is almost more important than anything else

  • DCowan

    Excellent blog Justin, very insightful. I think your 10 point plan is exactly what Partners should be doing. The GB Olympic committee did something similar about 6 years ago, taking someone else’s model (business plan/services/product – it applies across the board I think), in this case Australia’s, and put their own spin on it to offer their athletes (customers) a better chance of succeeding, fast forward 4 years to Beijing 2008 and GB surged past Australia in the Gold Medals department and now they look to GB as a model to follow despite it being an upgraded version of their own idea!nPartners can certainly retain their clients with a smart implementation of some or all of your points……. as you say, it’s not all doom and gloom!

  • DCowan

    Excellent blog Justin, very insightful. I think your 10 point plan is exactly what Partners should be doing. The GB Olympic committee did something similar about 6 years ago, taking someone else’s model (business plan/services/product – it applies across the board I think), in this case Australia’s, and put their own spin on it to offer their athletes (customers) a better chance of succeeding, fast forward 4 years to Beijing 2008 and GB surged past Australia in the Gold Medals department and now they look to GB as a model to follow despite it being an upgraded version of their own idea!
    Partners can certainly retain their clients with a smart implementation of some or all of your points……. as you say, it’s not all doom and gloom!

  • http://www.justinpirie.com Justin Pirie

    That’s a really interesting perspective. I didn’t know about that parallel.

  • http://www.justinpirie.com Justin Pirie

    That’s a really interesting perspective. I didn’t know about that parallel.

  • http://www.commensus.com/Cloud-Services/Hosting-and-Virtualisation/Cloud-Hosting-Virtual-Server-Hosting Virtual Server Hosting

    They also need to marketing Cloud as an aid for business strategy rather than the strength of their services which are too difficult for a financial director to comprehend

  • http://www.commensus.com/Cloud-Services/Hosting-and-Virtualisation/Cloud-Hosting-Virtual-Server-Hosting Virtual Server Hosting

    They also need to marketing Cloud as an aid for business strategy rather than the strength of their services which are too difficult for a financial director to comprehend

  • http://www.justinpirie.com Justin Pirie

    Can you expand on that? What do you mean by “business strategy”?

  • http://www.justinpirie.com Justin Pirie

    Can you expand on that? What do you mean by “business strategy”?

  • http://bit.ly/1Gu8Ha Firas Raouf

    Justin, I think you’re on the right track… I recently wrote about this topic on my blog http://bit.ly/fAkVpf, Here’s the intro to that post:nnThe reseller channel generally does not work for SaaS companies, especially at the early stages (sub-$20M in revenue). This is driven by two things: n1. SaaS solutions generally don’t require an intermediary. They are easy to find (online), easy to deploy (nothing to deploy), and easy to use. This is obviously not the case with SaaS solutions that require a significant process change on the customer’s side, but more on that below.n2. SaaS license revenue stream in the first year (where the reseller needs to make the most of his money) is a fraction of what perpetual license products receive. So the reseller either has to settle for a fraction of the revenue he expects from his perpetual license vendors, or he needs to get a cut of subsequent year subscriptions (which would be a waste of your money).nnThe only way to engage an indirect channel in an SaaS delivery model is around the professional services that need to encompass your solution. In effect, the only indirect channel I’ve seen work for SaaS companies is the value-added service provider partner. This is where a partner delivers the business process re-engineering required to successfully implement your solution at a customer site. In that case, the service provider derives his revenue from the services billed directly to the customer… while deriving less revenue from the SaaS license margin you would provide on top of that.nn

  • http://bit.ly/1Gu8Ha Firas Raouf

    Justin, I think you’re on the right track… I recently wrote about this topic on my blog http://bit.ly/fAkVpf, Here’s the intro to that post:

    The reseller channel generally does not work for SaaS companies, especially at the early stages (sub-$20M in revenue). This is driven by two things:
    1. SaaS solutions generally don’t require an intermediary. They are easy to find (online), easy to deploy (nothing to deploy), and easy to use. This is obviously not the case with SaaS solutions that require a significant process change on the customer’s side, but more on that below.
    2. SaaS license revenue stream in the first year (where the reseller needs to make the most of his money) is a fraction of what perpetual license products receive. So the reseller either has to settle for a fraction of the revenue he expects from his perpetual license vendors, or he needs to get a cut of subsequent year subscriptions (which would be a waste of your money).

    The only way to engage an indirect channel in an SaaS delivery model is around the professional services that need to encompass your solution. In effect, the only indirect channel I’ve seen work for SaaS companies is the value-added service provider partner. This is where a partner delivers the business process re-engineering required to successfully implement your solution at a customer site. In that case, the service provider derives his revenue from the services billed directly to the customer… while deriving less revenue from the SaaS license margin you would provide on top of that.

  • http://www.justinpirie.com Justin Pirie

    Great post Firas! I really like your thinking on channels.nnAs a counterpoint to your blog post, I would argue there are some cases where building a channel early can benefit, where I work we have a very successful channel model that started way before your suggested revenue target- but then the channel wanted to sell our type of solution. So the only exception to your rule is if the channel are actively seeking that product to sell, then I think it would be foolish to turn them away.nnHowever, I don’t think that’s a normal use case… The majority of SaaS apps are disruptive and are taking complexity away from the end user, an as such don’t need as many services to install and maintain. Being disruptive isn’t always a good thing if you want to build a channel…nnBut in essence you’re right, if you want a channel, you need to create what I call “channel pull”. Essentially you have to create direct demand in the marketplace before channel will start selling. If you don’t do that, the channel won’t sell anything…nnAnd your remarks on what it takes to make a successful channel work are absolutely spot on. We have a dedicated channel team supporting them.nnIn essence- from a SaaS vendor perspective, building a channel is not something that should be taken lightly. For me- “we’ll create a channel” should go in the same bucket as “it’ll go viral”…

  • http://www.justinpirie.com Justin Pirie

    Great post Firas! I really like your thinking on channels.

    As a counterpoint to your blog post, I would argue there are some cases where building a channel early can benefit, where I work we have a very successful channel model that started way before your suggested revenue target- but then the channel wanted to sell our type of solution. So the only exception to your rule is if the channel are actively seeking that product to sell, then I think it would be foolish to turn them away.

    However, I don’t think that’s a normal use case… The majority of SaaS apps are disruptive and are taking complexity away from the end user, an as such don’t need as many services to install and maintain. Being disruptive isn’t always a good thing if you want to build a channel…

    But in essence you’re right, if you want a channel, you need to create what I call “channel pull”. Essentially you have to create direct demand in the marketplace before channel will start selling. If you don’t do that, the channel won’t sell anything…

    And your remarks on what it takes to make a successful channel work are absolutely spot on. We have a dedicated channel team supporting them.

    In essence- from a SaaS vendor perspective, building a channel is not something that should be taken lightly. For me- “we’ll create a channel” should go in the same bucket as “it’ll go viral”…

  • http://bit.ly/1Gu8Ha Firas Raouf

    Justin, I think you and I are on the exact same page. I would love to bring our combined thoughts together into an article that we can post on our community site http://www.OpenViewLabs.com We’re always looking for SaaS thought leaders to contribute.

  • http://bit.ly/1Gu8Ha Firas Raouf

    Justin, I think you and I are on the exact same page. I would love to bring our combined thoughts together into an article that we can post on our community site http://www.OpenViewLabs.com We’re always looking for SaaS thought leaders to contribute.

  • http://www.justinpirie.com Justin Pirie

    Thanks- that sounds great! I’ve got a call with Corey today- so I’ll mention it to her ;)nnJustin

  • http://www.justinpirie.com Justin Pirie

    Thanks- that sounds great! I’ve got a call with Corey today- so I’ll mention it to her ;)

    Justin

  • http://twitter.com/ITLab_JasonC Jason Currill

    Distribution is dead – data residency makes it breath again! discuss?

  • http://twitter.com/ITLab_JasonC Jason Currill

    Distribution is dead – data residency makes it breath again! discuss?

  • Robert

    Any update on this? u00a0Have OneLogin fixed your issues? u00a0

  • Robert

    Any update on this?  Have OneLogin fixed your issues?  

  • http://www.justinpirie.com Justin Pirie

    Hi RobertnnWhat issues are you referring to- the ones in the review?nnJP

  • http://www.justinpirie.com Justin Pirie

    Hi Robert

    What issues are you referring to- the ones in the review?

    JP

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  • msurkan

    I completely agree with Justin’s comment that “The good times, as we knew it in the IT channel are gone.” In fact, I would go so far as to say that the entire “channel” itself is in the process of becoming extinct. Most resellers were little more than order takers in the first place and in the world of SaaS there is little for them to do. The channel is just the latest link in the chain to be eliminated by the disintermediation of the Internet.