TWIS#14- This Week In SaaS- Videos and Decks from SaaS and the Cloud 2010

Last weeks Rackspace SaaS and the Cloud 2010 event went really well- my presentation is getting a great reaction online so I thought I’d share it with you.

For those of you that can’t be bothered to sit through half an hour of me… I’ve done a slideshare version with the key points extracted:

And if you prefer a high res PDF of the slides- they’re here.

I also thought the VC panel was excellent- thanks to Ivan Farneti for bringing them together. I thought there were some brilliant insights into SaaS- especially if you’re looking for funding!

In case you were interested- the rest of the day’s videos and slides are here.

Thanks to John Tridgell and Fabio Torlini for putting on a great day.

I’d been thinking about that presentation all week, and on Wednesday my thoughts came out quickly in Don’t Kid Yourself- SaaS is F***ing Hard! in which I said:

Too often SaaS is seen as a technical problem.

It isn’t.

In fact, the technical part is the easiest part of the equation to solve in SaaS as it’s the only part truly in your control.

Steve Blank said:

Markets with Invention Risk are those where it’s questionable whether the technology can ever be made to work – but if it does customers will beat a path to the company’s door.

Markets with Customer/Market Risk are those where the unknown is whether customers will adopt the product.

It’s critical to realise SaaS isn’t a technical problem- it’s a Marketing and Product problem. Once we get to grips with that as an industry, I think we’ll see big jumps forward in our ability to acquire customers and profitability as a result.

So the big news last week apart from SAP beheading, was Google Buzz. If you’ve read blogs this week- my apologies- but Buzz has created a furore on the blogosphere over privacy and usability. Mike Arrington covered it with the usual restraint in Google Buzz Warning – Force Feeding Users Can Result in Vomiting:

week ago Google launched Google Buzz. And Google’s 175 million or so wordwide Gmail users (Comscore) suddenly had this new and noisy addition to their beloved inbox.

It’s been a rough week since then. Both for the Google Buzz team, and those 175 million Gmail users.

Google continues to tweak the product almost daily to deal with the incredible backlash.

This is a brilliant opportunity for SaaS vendors to learn how not to introduce network effects- arguably the most important differentiator for SaaS from Legacy software.

Companies have done it right, like Freshbooks, Mint, Concur and Spiceworks, yet Google has done it completely wrong here. I think they should have made it much clearer to users what the implications were, before automatically adding people as connections. Perhaps a clever use of game mechanics to drive adoption, but certainly not the wholesale, automatic approach they took.

The question remains- does Google acutally understand enough about how people work in order to create a social graph? Facebook and Twitter seem to have it in their DNA, but that’s outside the scope of TWIS I think.

This week, the Mobile World Conference was held at Barcelona and there has been lots of mobile related news, such as Microsoft launching their new mobile OS, “Windows Phone“.

What’s more interesting to TWIS however, is the business opportunity for apps- Windows Phone Apps are going to be natively Silverlight- but there’s a bigger problem at play in the apps sector which Mark Suster highlights brilliantly:

I would argue that if Apple’s app model continues to succeed it is bad for your health.  You – being members of the technology community.  I know that I’m into FanBoy territory and am ready to be attacked.  Before you let me have it let me say I am a FanBoy of Apple products.  I am typing this on my brand new 15″ MacBook Pro.  I ran this morning with my iPod in tow.  I own an iPod Touch (not an iPhone – my house in Brentwood gets literally ZERO AT&T bars).  I buy all my music through iTunes and even buy some videos there.  I can’t be more of a FanBay of their products.  But I’m with Jason Calacanis.  I think Apple has become corrupted and its dominance in mobile is not good for the industry.

Which is why I think one of the most interesting announcements this week is from Adobe on AIR:

The bane of all mobile app developers is the need to rewrite the same app over and over again for different devices: the iPhone, Android, Blackberry, Palm Pre, Nokia, Windows Mobile. Adobe is positioning its Flash platform (which includes the Flash player, AIR, developer tools, and media servers) as the write-once, deploy-anywhere solution for both the mobile Web and apps. Today at the Mobile World Congress in Barcelona, Spain, it will announce plans to bring Adobe AIR to mobile devices, starting with Android and Blackberry phones.

Wrote Techcrunch. They went on:

AIR is currently used to create desktop applications, but it will soon be used to create Android and Blackberry apps as well. These mobile AIR apps will be able store data locally on the phone, access other data on the phones such as photos, and be distributed as regular apps in the Android and Blackberry app stores. Not only that, but the same apps created with Flash developer tools will be exportable as iPhone apps. Adobe wants developers to create their apps using its developer tools and then output them as AIR apps for Android and Blackberry phones, native iPhone apps, or Flash apps on the Web.

This is great news for SaaS- you won’t have to pick one or maintain many phone platforms, one app instead of many and get reach across many platforms. Imagine instant deployment and upgrades across all the mobile platforms! You could also reuse that same code to produce a RIA desktop client (like tweetdeck) without a major effort.

TechCrunch again:

Of course, the face-off with Apple continues over Flash on the iPhone, even though last December, 7 million iPhone users attempted to download the Flash player from adobe.com through their mobile browsers, up from 3 million requests in July, 2009. Apple might eventually have to cave if Flash becomes a standard feature of all other smartphones. Adobe execs cite numbers by Strategy Analytics which estimate more than half of all smartphones will support Flash by 2012.

I think this move by Adobe is going to be particularly good for consumers, as Apple’s seemingly unbreakable hold on apps can now be broken and other phone platforms have a chance of succeeding on merit- like WebOS, not on the app monopoly.

If you’re thinking of going mobile or RIA for SaaS- I think AIR is a very strong contender now.

Finally- as I know we’ve got many people who read this who are transitioning from legacy to SaaS, Phil Waignright’s post on his conversation with SAP’s CTO Vishal Sikka was interesting:

Two themes dominated the conversation, and together they embody the dilemma that SAP and every other established enterprise software vendor confronts today:

  • Cloud brings a disruptive opportunity to do things differently
  • Customers have massive investments in on-premise IT

SAP’s challenge is to embrace the first without trashing the second. And to do that even though customers are moving at an enormously diverse range of velocities, with some eager to embrace the leading edge of opportunity while others want to preserve their existing infrastructure and avoid unnecessary change for as long as possible. Accommodating those different rates of change across the installed base while still moving forwards is, concluded Sikka, “the biggest challenge we have.” Perhaps it was the need to better address that challenge that led to last week’s management shake-up. (Emphasis- Ed.)

At the core of the strategy, inevitably, is an assumption that cloud and on-premise will continue to co-exist. “The landscape of existing customers is still highly heterogenous,” said Sikka. Therefore the various on-demand offerings being developed under John Wookey’s direction, he explained, are “designed around this heterogeneity.” The key to co-existence of cloud services with each other and with on-premise assets, he went on, is to introduce some kind of hub or aggregation mechanism that lets customers run services in the cloud while still preserving the integrity of their master data. Determining which instance is the master in any transaction is a critical problem that needs to be addressed in the cloud environment, he said. It’s characteristic of SAP to focus on this issue — more than anything else, its reputation rests on helping customers assure the integrity of core transactional data. It’s right also to focus on this as a special challenge in the highly dispersed, location-independent environment of cloud computing. SAP will likely bring something to market to meet that challenge, said Sikka, without going into details, except to say that “in most cases, that aggregation mechanism is best run in the cloud.”

How public companies migrate without trashing their income is creating fantastic opportunities for pure-play SaaS companies to eat their lunch while they appease their various stakeholders at the detriment to their customers.

In other news:

  • Backupify launches their Backup of your online data- is this a solution to putting your data in the cloud and could this mark the end of cloud data worries?
  • Hubspot launches their Channel program- detailed coverage to come in the week (make sure you subscribe to this post).
  • Robert Johnson on what he learnt at SaaS University- pass won from TWIS- thanks to Rick Chapman for donating.
  • Reuven Cohen on why the local datacenter isn’t dead- if only they can organise themselves into a marketplace.
  • Hubspot does multi-times-a-day deployments- do you do continuous deployment yet?
  • No idea how to write a sales proposal? Nice SaaS app Proposable launches this week.
  • SaaS Accounting is the #3 desired app to be moved to the cloud, according to Goldman- proving how wrong listening to Analysts too closely can be…
  • PBworks launches conference calling within their collaboration app bringing voice into the equation. Nice- I hate waiting to dial in bridges that seemingly never work properly…

Don’t forget- if you’ve got any news, tips or anything else- don’t be afraid to share them with me- jp@justinpirie.com

Have a great weekend.

Justin

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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.