TWIS#5 – This Week in SaaS #5

TWIS Events:

SaaS University Dallas Pass and Discount code

We’ve secured for TWIS readers a pass 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.

To enter- 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 – erm actually Last week in SaaS

Writing about the Telegraph Media Group in last week’s TWIS reminded me of this excellent post byAppirio which I think is worth revisiting- Do your most strategic apps belong in the cloud?

In the past, the only way for a company to maintain control of their business process was to completely own the technology supporting the process.  The rationale was that a company’s most strategic, differentiating processes are unique and therefore have to built by the company either from scratch or by heavily customizing packaged applications.  This also meant owning the entire technology stack supporting the process and the application.  So, while the intent was to create differentiated processes that were agile and differentiating, the reality has become that the technology stack is an albatross around the IT team’s neck that prevents them from moving as quickly and as efficiently as they would like to.

The result in terms of budget and activity was something like this:

Cloud computing changes the decision process completely.  No longer do companies face a choice between relinquishing all control of their business process for cost savings or dealing with the high costs and complexity of supporting an entire software stack.

Platforms like Force.com and Google App Engine give companies a way to control the parts of the stack that matter most, the application and business process layer and abstract away the management of the infrastructure.  This means that the IT team can focus their energies on driving innovation and supporting the business.

The potential result is something like this:

And that’s roughly what Paul Cheesbrough was saying- Now 50% of their budget is on innovation rather than just 5%. The cloud doesn’t just cost less- it enables us to focus on innovation and delivering competitive advantage rather than struggling to retain the status quo.

One of the Bessemer Laws authors, Philippe Botteri posted his presentation about SaaS metrics from Dreamforce to his blog in addition to an updated SaaS benchmarking study, both of which are worth a read. Thinking about revenue growth- group member Joel York wrote a nice post on SaaS Sales Acceleration: Seven Proven Strategies to Increase Sales Velocity:

Delivering on the promise of low total cost of ownership, the price of SaaS is often an order of magnitude lower than the price of licensed enterprise software. This low price point creates enormous pressure on volume. Reaching profitability may require a new customer every week, every day or even every minute! Increasing sales velocity is the essence of the SaaS business challenge.
At each stage of the buying process, your SaaS prospect will encounter adoption costs and risks that reduce your sales velocity. I like to compare this to scaling a cliff where adoption costs are measured by the height of the cliff and adoption risks are measured by the difficulty of the climb.

It’s all about Customer Acquisition Costs! If you’re thinking about reducing your Customer Acquisition Costs- then virality is essential. David Skok wrote an excellent post this week on Lessons Learned- Viral Marketing which is well worth a read and includes practical steps and downloadable spreadsheets to produce your own viral models.

I hope I didn’t jinx Reuven Cohen’s visit to the Cloud Conference in Israel- as the visit for him didn’t exactly go as planned…

Stepping off the airplane last Tuesday at Tel Aviv’s Ben Gurion Airport I knew I was in for a memorable business trip. As I left the airplane I was greeted by a young female Israeli government official who seemed to recognize me by sight. This was to be my first indication of what was to become a very interesting few days in Israel

The next part caught me by surprise, remember this is supposed to be a short (72hour) trip to Israel. A young woman tells me that as an Israeli citizen I have two conditions before I can leave: First I can’t leave the country without permission from the dept of Interior and must get an Israeli passport. When I asked how long she tells me several weeks. Then the best part, secondly I must report for my Israeli military service in a place called Tiberias not far from Jordan and Syria on western shore of the Sea of Galilee as soon as possible. When I said again that I was just visiting, the official indicated that I was now officially in the Israeli defense forces (IDF).

Nice!

Andrew Chen wrote a brilliant post this week for all you product people- introducing Minimum Desirable Product:

Minimum Desirable Product is the simplest experience necessary to prove out a high-value, satisfying product experience for users (independent of business viability)

I’ve always thought there was something missing from Eric Ries’s Minimum Viable Product for SaaS, as it didn’t seem to take into account the desirability needed to win and retain customers.

Andrew goes on to say:

This also relates very much to Marc Andreessen’s definition of product/market fit, which he defines in purely market “pull” terms and not based on business ideas or viability. You could view the the Minimum Desirable Product as the simplest product that has a credible shot at providing that product/market fit.

Examples of MVP versus MDP
Let me make some quick distinctions about sites that might be Minimum Viable Products, but perhaps not Minimum Desirable Products, and vice versa.

• If you build a really viral social network that is profitable but has terrible user churn – you have built an MVP but not an MDP.
• If your profitable dating site gets lots of users to buy subscriptions at $20/month, but none of them find hot dates they were promised, you have built an MVP but not a MDP.
• If you build a magic box that spits out money whenever you hit a button, that is certainly desirable but not viable at all.
• If you create an amazing board game that your friends and family love and are addicted to, but you can’t get a game company to distribute it, you have created an MDP but not an MVP.
• If you have created a website with 20M+ uniques/month where people can tell each other what kind of sandwich they are eating, that has probably passed the desirability test but not the viability test.

Food for thought methinks….

Sometimes in this industry- we can become fixated on something- like multi-tenancy for example. Phil Waineright wrote an excellent post reminding us that SaaS is so much more than just multi-tenancy:

When evaluating a cloud platform, rather than starting with multi-tenancy, I’d suggest buyers check through the following list of questions:

• Will it remain capable of sustaining high-bandwidth connectivity with all of your customers, suppliers, employees and other stakeholders, even at times of unexpected peak load?
• Will it stay up-to-date with every new technology development (opportunity or threat) that emerges in the global Web ecosystem over the next days, weeks, months and years — without ever making you wait for your own implementation to catch up with the state-of-the-art?
• Can you choose to participate in a community of other platform users, exchanging information and perhaps extensions and add-ons, all referencing — and ready to run on — the same shared infrastructure?
• Will it give you freedom to connect to the widest potential range of third-party services available in the global Web, and to connect to the most popular of them over a shared integration infrastructure instead of having to custom-build your own?
• Will you be able to access limitless capacity on-demand to meet all your computing needs and still only pay for what you use?
• Will your provider monitor usage in real-time and continuously tune platform performance to ensure the infrastructure remains as secure, responsive and cost-effective as possible?

Matt Brezina (co-founder xobni) wrote a great post and accompanying presentation this week- No one cares about your stupid little startup- 5 tips to make them care. My xobni install got updated a couple of days ago and it’s really nice to see xobni offering a clear revenue / upgrade model within the app. It’s just really annoying that I like and want the paid features…

There was an interesting discussion in the Group about identity management in the cloud and the seeming rise of Facebook, Twitter and Google as identity providers is validated by TechChrunch this week, as Facebook has 60 million people a month using it’s connect identity service.

More than 80,000 websites and devices (including iPhone and Xbox) have implemented Facebook Connect since it launched in December 2008, says Beard. And more than 60 million Facebook users use Facebook Connect each month. And it’s not just a lot of small sites using the product. Two-thirds of comScore’s US Top 100 websites and half of comScore’s Global Top 100 websites have implemented Facebook Connect. And some of these sites are even bigger than Facebook (perhaps not for long though).

None of those seem overly business oriented to me (unless you use Google Apps).

Salesforce.com continues to charge ahead in the Enterprise 2.0 collaboration space, this week with the acquisition of GroupSwim.  Ben Kepes had earlier written a nice review of GroupSwim here.

Social media was alive this week with ERP related news because of the various SAP conferences happening. My favourite (video) post was- “Is on-premise ERP obsolete?”.

Amazon this week launched a EC2 cost comparison spreadsheet just in case you need help comparing traditional computing to the Cloud.

Microsoft, although on the back foot at the moment in regards to Cloud Computing are starting to put some impetus behind their efforts- shown this week by the joining of the Windows Server and Azure teams.

This change reflects the alignment of our resources with our strategy, and represents a natural evolution for Microsoft as the Windows Azure business moves from an advanced development project to a mainstream business…

Google Docs is leading the way once again- by allowing users to download all their documents at once so users can get their data out, as well as in.

In the group- there have been some great discussions- I’m particularly please that people are using the search function to revive old topics. Activity has really picked up in the jobs section- do go and check it out if you’re looking for one

I hope you’re enjoying TWIS- I’ve had some great emails from readers this week but I’m still keen to hear your feedback- I’m always available jp@justinpirie.com

As we roll into Christmas- the last TWIS of the year is going to be next Monday, 21st December. I’m then going to have a week off and start the new year publishing on Friday mornings- as that was the most popular day from your feedback.

Have a great week.

Justin

p.s. Did you spot the album cover from Pink Floyd’s Obscured by Clouds