TWIS #6- This Week in SaaS- Christmas Edition

TWIS #6

TWIS Events:

SaaS University Dallas Pass and Discount code

The pass for TWIS readers for the SaaS University taking place in Dallas/Ft. Worth January 26-28 2010 worth $995.00. The SaaS University is one of the only places to actually learn about the business of SaaS and there are some fantastic people presenting- so if you’re transitioning to SaaS, or just looking to grow your SaaS business, this is a must attend event and I’m delighted to be able to get a pass for you.

One of my favourite “SaaS people” Jim Geisman is presenting- he is “Mr Pricing” and if you’ve got a pricing quandary- he is your man. He emailed me this sage advice after reading TWIS #4:

I looked at a couple of the pricing posts you referenced in TWIS #4… One dealt with what we call “the jaggies” — the discontinuities that occur when you hit the boundary of a tier break in a tiered discount schedule. It illustrates what happens when you do a discount schedule without plotting how much money you actually make and what the average cost to the customer really is.

Of course the way to eliminate the jaggies has been well known to every taxing authority in the world… You pay what you owe at the end of one tier and pay the marginal price when you are within the next tier. The total payment is then the sum of the end-of-previous-tier cumulative amount plus the volume in the tier paid at the in-tier discounted price.

The second post dealt with the different types of billing engines out there and how some charge per customer and some charge per transaction. One makes sense relative to the other depending on the breakeven point… This is something everyone who buys a cell phone plan knows. If you use very few minutes, pay on a per-minute basis so you pay what you use. If you use a predictable number of minutes then it often makes sense to commit to a block of minutes and get a lower per-minute price. (You will pay more in total but less on a per-minute basis.)

Brilliant stuff. To enter and get access to some of the best SaaS knowledge- email me jp@justinpirie.com with the subject “SaaS U Dallas”. I’m going to draw the pass early in January and I’ll email everyone who enters the discount code. As normal- I’m going to give priority to people how can actually attend so please make that clear on your entry.

TWIS #6

There have only been 5 TWIS’s, but it feels like a long old year! This year has been more challenging for more people than I can ever remember- I was still in school in the last major recession… I sincerely hope that 2010 brings better fortune for you all, whether that be health, wealth or happiness.

I had intended for TWIS #6 to be like a normal TWIS, but after reading all the posts preparing for this week, there was nearly no news and everyone is writing lists and suchlike- so I thought I’d join in the festive fun with a little look back into 2009 and forward into 2010 in TWIS style.

Looking back- Appirio analysed their 2009 predictions coming up with a 7/10 for accuracy. Looking forward- I think Appirio’s 2010 predictions are worth pulling out in full:

“Customer success is the true measure of the cloud’s effectiveness,” said Ryan Nichols, head of cloudsourcing and cloud strategy for Appirio. “In 2009 we saw innovative enterprises such as Japan Post, Avon, and Starbucks demonstrate the business case for cloud computing. In 2010, that success will go mainstream.” Appirio’s 2010 predictions include:

1. Cloud developer community grows faster than open-source. Today’s vendor-specific developer communities will be complemented by a community dedicated to the general discipline of building applications on the cloud, disrupting existing on-premise developer communities. The combination will launch a new generation of ‘cloud developers.’
2. Cloud standards won’t (and shouldn’t) happen. The pace of innovation is so rapid in the cloud that the emergence of truly open cloud standards won’t yet be possible, except at the lowest levels of infrastructure. Traditional vendors will attempt to muddy the waters across layers and claim the ‘standards high ground’ with efforts like the Open Cloud Manifesto.
3. Cloud providers tackle lock-in. Platform lock-in remains one of the major concerns keeping CIOs from building applications on PaaS. In 2010 we expect to see major initiatives from cloud providers to overcome this objection, either revolutionary (e.g., Force.com supporting other languages) or evolutionary (e.g., application migration frameworks or platform ‘porting’ toolkits.)
4. Cloud integration will get an enterprise poster-child. Boomi and Cast Iron have had a fantastic 2009 and we expect one will land a major enterprise customer in 2010 that replaces on-premise integration technology with a cloud-based alternative.
5. Enterprise apps get Googled. Google’s investments in its cloud platform will transform Google Apps from a simple Exchange/Sharepoint replacement into a legitimate front end for enterprise applications (e.g., Google Web Toolkit, Secure Data Connector, and the Google Gadget Framework.)
6. Enterprise collaboration is a feature, not a business. Salesforce Chatter and Google Wave have shown the value of real-time collaboration that is seamlessly integrated with business applications. Standalone enterprise collaboration offerings will have difficulty competing.
7. Microsoft lets Azure cannibalize a global account. Microsoft has shown that it’s serious about Azure at this year’s Professional Developers Conference. We predict that Azure will cannibalize Microsoft’s on-premise footprint at a global account.
8. Cloud computing consolidation. With 2000+ providers, the cloud ecosystem is ripe for consolidation. Salesforce.com and Google are likely to continue with point acquisitions, but they won’t be alone. Having missed the first wave of innovation in cloud computing (and lacking any other on-premise technology to acquire) we expect Oracle to buy into the industry that Larry Ellison has dismissed as ‘water vapor.’ Maybe they’ll finally snap up NetSuite.
9. Global Systems Integrators will do nothing more than cloud marketing. The most innovative thing we expect from Accenture next year is a replacement for its Tiger Woods ad campaign.
10. The real innovation will be in the business of cloud computing, not the technology. Cloud providers will become dramatically easier to do business with (e.g., Amazon Spot Markets) and new business models will emerge to make the cloud more consumable (e.g., cloud insurance providers, cloud security auditors, cloud brokerages.)

2009 feels like the year SaaS finally got over the hype cycle and into the mainstream conciousness- and rebranded as cloud for good measure… I think it feels somewhat more comfortable where it’s sitting in the cloud ecosystem- the largest, most mature, value adding and highest margin part of the Cloud ecosystem. Covered in detail is TWIS #3.

Thinking about the aforementioned hype cycle- the slope of Enlightenment was steep this year- particularly the updated Bessemer Laws are essential reading. One of my personal highlights of 2009 was discovering Jason Calacanis and his weekly podcast This Week in Startups- to which I am totally addicted.  If you’re interested in Tech and Startups- it’s a must listen podcast. 2009 was the year I discovered the teachings of Steve Blank, Eric Ries, Sean Ellis and Dave McClure which has dramatically shifted my perspective on how to create and sell SaaS. I’ve been talking to lots of SaaS companies recently and one of the common problems I’m seeing is that they focus on having a “complete product” rather than a “minimum viable product“.  This feature rich approach means they lack focus on usability and Customer Acquisition. I’ve covered it before, but VentureHacks wrote a brilliant article on Sometimes the Feature is the Product.

Investors often dismiss startups with the refrain, “That’s a feature, not a product.” I do the same. They usually mean that the feature, by itself, will not be adopted by consumers — the value proposition is too simple or narrow. But sometimes the feature is the product. Was Twitter a feature or a product? Google? PayPal? They’re obviously products now. But before they were adopted by millions. Feature or product? Isn’t Twitter “just” the status message feature from Facebook? Isn’t Google “just” the search feature from Yahoo?

Sometimes the feature is the product

Companies need to focus on the market risk side of SaaS much more closely in 2010 than they have 2009 and that means making software easier to use and customer acquisition baked in. Thinking about Customer Acquisition- Forget the Tipping Point. Focus on Joe the Plumber is a brilliant reminder about Customer Acquisition.

“Duncan Watts from Yahoo thinks trends are more like forest fires: There are thousands a year, but only a few become roaring monsters. That’s because in those rare situations, the landscape was ripe: sparse rain, dry woods, badly equipped fire departments. If these conditions exist, any old match will do. ‘And nobody,’ Watts says wryly, ‘will go around talking about the exceptional properties of the spark that started the fire.’”

Enter Joe the Plumber.

After working on numerous consumer web products and reviewing the data of hundreds of consumer web companies in my current role, I have come to appreciate Watts’ forest fire metaphor.  Most entrepreneurs are sure that they have the right idea and continue doing the same thing, sometimes for years, in the hope of hitting a tipping point.  ”Now that we have a product, we are raising capital for marketing,” is a refrain that I hear far too often. Most of today’s massive consumer web properties experienced exponential growth fairly shortly after launch.  A few thousand users over a few months is probably sufficient to find out it you have hit a nerve.  So forget the connectors.  Any average Joe will do once you find some dry timber.

So we need to Pivot, Pivot, Pivot until we find that right combination. The truth is not inside your building- it’s with your potential customers. They hold the key to your success in 2010. Remember when YouTube was a dating site? A great new Blog I’ve discovered recently is Giff Constable- his post on Validating your startup idea and initial customer development got me thinking again about Sean Ellis’s startup pyramid. I’ve been thinking and blogging that people don’t pay enough attention how they’re going to acquire customers so I propose an update to the pyramid: Include Customer Acquisition with Product / Market Fit:

I was wondering whether Economics need’s it’s own layer- I think it probably does- your thoughts please?

Giff also wrote a great post on What is your Customer Acquisition Strategy.

SaaS providers have a nasty habit of being secretive about their metrics- so I was delighted to see Neil Patel from Crazy Egg and KISSmetrics post about the effects of pricing on Crazy Egg.

In case you haven’t got to grips with Social Media yet- this was the best apology I’ve seen from a supplier all year.

About the only major news this week was Amazon’s Spot Pricing for EC2- you can now bid for resources in a Adwords style auction- the highest prices bid get the available resources until higher bids are received. This enables Amazon to increase the utilisation of their compute without compromising their core business. This is fantastic news for people who have batch processing needs and threatens to significantly reduce the cost of compute. I wonder if Amazon would open up a marketplace for compute- now that would be amazing!

In other news:

• Google is to acquire Docverse- the company that enables you to sync Microsoft Office to and from Google Docs.
• Wondering about Valuations- here are some metrics (from Oct 09)
• I don’t feel so bad about not having an MBA
• If you don’t get Marketing Automation- then this is a good primer
• Google Apps wins LA City- only 34,000 users….

This week has rather run away with me- I was intending to publish earlier this week and use Jan 1 to set the new TWIS time- but here it is

For those that celebrate Christmas- I wish you a very happy one and for those that don’t I wish you happy holidays!

Here’s to a fantastic 2010!

Justin

p.s. we went through 15,000 members this week!