THINK IT Services

No, I haven’t gone over to the darkside and abandoned the Software-as-a-Service (SaaS) movement.

But, I just gave a keynote presentation regarding the state of the SaaS and cloud computing market at SoftLetter’s latest SaaS University in Chicago, where the challenges of developing and delivering successful SaaS solutions were once again brought home in the discussions among the software executives and SaaS professionals attending the event.

Despite it being scheduled on the last day of the quarter and first week of many people’s summer vacation, the event succeeded in attracting about 70 CXOs from a cross-section of established independent software vendors (ISVs) and SaaS start-ups seeking insights about how to succeed in this rapidly growing industry.

Like past SaaS University sessions, the attendees were treated to a variety of tutorials from industry practitioners with a minimum of self-promotion. And, this group of attendees distinguished themselves by asking very pointed questions from the opening bell about specific operational issues associated with the SaaS model.

But, it wasn’t until we got to the working lunch session on the second day of the two-day event that their anxieties came to head. It was during the session focused on the latest accounting rules governing revenue recognition in the SaaS model that frustrations among the established ISV executives began to boil over as they learned that:

• After making significant investments in (re)architecting their applications to be delivered as an ‘on-demand’ solutions,
• After building hosting facilities or selecting a hosting partner to deliver their services,
• After determining how to package, price and promote their solutions,
• After developing a service level agreement (SLA) or comparable legal agreement that clearly outlines the company’s contractual obligations,
• After convincing a committee of IT/business decision-makers to try their solution,
• After determining how much ‘customization’ they can do for specific customers without breaking the common SaaS application and underlying service delivery model,
• After accepting a fraction of the value of application in an initial subscription fee agreement,
• And, accepting all the responsibility for the availability, reliability, security and  performance of their SaaS solution…
• The aspiring SaaS vendors then discovered they would only be able to recognize their subscription revenues on a month-to-month basis, decimating their traditional software revenue recognition models.

This harsh reality is what has kept the CXOs of the legacy, on-premise ISVs up at night hoping that the SaaS and cloud computing movement would disappear or be derailed by a major outage that would send customers fleeing back to the comfort of their on-premises software and systems safely hidden behind the firewall. Of course, the opposite has been true and SaaS/cloud computing market growth is accelerating as a result.

No, from a vendor point of view, SaaS isn’t as easy as it looks.

It can be disruptive and painful. And, the rewards can take a while to be realized.

But, unless a major service disruption or ongoing service failures occur, the SaaS/cloud computing services market isn’t going to go away because it offers customers too many business benefits. And, ultimately it’s the customer point of view that really counts.

And, by the way, there are a growing number of SaaS vendors, and established ISVs as well, who are figuring out how to be successful in this deceptively difficult business.

THINKstrategies announced today that Manticore Technology has been named the latest winner of the Best of SaaS Showplace (BoSS) Awards program, which is aimed at promoting the measurable business benefits being delivered by today’s Software-as-a-Service (SaaS) solutions.

The BoSS Awards program was announced in January 2009 as the latest initiative by THINKstrategies to bring attention to SaaS and cloud computing companies which are producing tangible business benefits for specific user organizations. These benefits include increased sales, lower costs, higher customer satisfaction, faster operations, and greater profitability.

Manticore Technology is an on-demand, marketing automation solution  provider that enables marketers to effortlessly move sales prospects through the pipeline through demand generation, lead management, lead scoring, and lead nurturing, while feeding their sales team invaluable insight about the interests of each lead. As a result, Manticore Technology customers increase revenues, lower costs, and gain a competitive edge.

Click here to read more about the measurable business benefits Manticore Technology has delivered to its customers.

Click here to read more about or to apply for a BoSS Award.

This was the title of one of my first commentaries for ITworld’s old Utility Computing portal back on January 14, 2004. I had to laugh when I saw a blog post today with the same title on GigaOm’s site regarding a panel session about Private Clouds during this week’s Structure ‘09 conference.

My original commentary focused on the hesitancy among the major technology vendors to adopt a services-driven strategy that would capitalize on the rapidly evolving Software-as-a-Service (SaaS) and managed services capabilities which were emerging in 2004.

Based on the summary in the GigaOm blog post, it appears that the Private Cloud panel focused on all the reasons why enterprise IT shops have been slow to fulfill their roles as internal service providers.

Of course, the irony is that many of the vendors represented on the panel have encouraged their IT customers to be more focused on managing technology than delivering quality services. That is because despite all the advancements in cloud-based technologies and the success of SaaS and other cloud-based services, the major players are still stymied by their own internal operating and cultural constraints from aggressively pursuing and promoting meaningful cloud computing solutions.

So, it is easy to blame the customer for being reluctant to move to the cloud when traditional vendors are afraid of the business implications and financial consequences of this migration process.

This doesn’t excuse the failure of IT organizations to change their approach to developing and delivering applications, or the way they acquire and utilize computing resources to support them.

It is time to carefully evaluate how today’s rapidly evolving cloud computing services and best practices can be applied to corporate IT operations and leveraged to achieve their corporate objectives.

LucidEra’s decision to close its doors this past Friday will spark a new round of debate regarding the viability of the Software-as-a-Service (SaaS) and cloud computing business models.

Some established vendors will use this event as further proof that the SaaS and cloud computing models are not sustainable. Conservative IT and business decision-makers within ‘user’ organizations will use it to justify their decisions to stay away from these ‘on-demand’ solutions.

Ironically, the Wall Street Journal published an article today highlighting the growing efforts of many of the largest software and systems vendors to get onboard the on-demand services bandwagon. The article points out that these vendors have been reluctant to adopt SaaS and cloud computing strategies and offer on-demand alternatives because they undercut the value and profit margins of their legacy products. But, their customers are moving in this direction and they must respond or continue to lose business to companies like Salesforce.com and SuccessFactors.

I’m saddened to see LucidEra fail because I’ve liked the company’s principals and value propositions since their inception. The company’s founder, Ken Rudin, has been an important evangelist for SaaS. And, the company had developed some interesting ways to demonstrate the value of its offerings beyond simple ‘try and buy’ promotions.

But, I’ve been predicting for months that today’s tough economic climate is going to claim many SaaS and cloud computing companies who don’t have sufficient resources, compelling value propositions or clear differentiating qualities to sustain themselves.

The proliferation of players, combined with incentives within companies of all sizes to delay purchase decisions, has extended the salescycles for almost every SaaS company.

This is hurting many of the SaaS 1.0 vendors in particular who had to make significant investments in their SaaS architectures and delivery capabilities before less expensive platforms and computing resources became available from companies like Salesforce.com and Amazon, for example.

Venture firms, who are facing severe pressures from their limited partners, have put much higher hurdles in place when considering new rounds of funding for their current portfolio companies, as well as prospective start-ups.

LucidEra found itself in this bind and wasn’t able to find a buyer to rescue it from an untimely death. Larger SaaS companies, as well as many legacy vendors, are also facing financial constraints which are precluding them from making acquisitions. Other prospective buyers are willing to cherry-pick the assets or personnel rather than purchase the entire enterprise.

Just as the demise of individual car companies or banks doesn’t spell the end of the automotive or financial services industries, the failure of LucidEra doesn’t represent the end of the SaaS era. It also doesn’t mean that SaaS-based business intelligence and analytics can’t succeed. Customer interest and adoption of SaaS-based BI/analytic solutions is growing. But, there isn’t enough demand to support the myriad of SaaS vendors competing in the market.

The demise of start-ups, like LucidEra, is a natural part of the evolution of any new marketplace. It should not be viewed as the beginning of the end of the SaaS or cloud computing industry.

But, it will make it more difficult for other small SaaS companies to convince IT/business decision-makers that they can survive in an increasingly tough economic and competitive environment.

The key will be for SaaS and cloud computing companies to clearly demonstrate the measurable business benefits they can generate to offset these concerns.

THINKstrategies announced today that Coupa Software has been named the latest winner of the Best of SaaS Showplace (BoSS) Awards program, which is aimed at promoting the measurable business benefits being delivered by today’s Software-as-a-Service (SaaS) solutions, such as increased sales, lower costs, higher customer satisfaction, faster operations, and greater profitability.

Coupa is a leading on-demand provider of solutions that control and streamline purchasing for organizations beyond the Fortune 500. Coupa e-Procurement delivers an easy to use, fast to deploy and affordable solution for requisitions, purchase orders, RFQs, inventory and invoicing, with no hardware to buy or software to license.

Click here to read more about the measurable business benefits Coupa has delivered to its corporate customers.

Click here to read more about the BoSS Awards or to apply for an award.

THINKstrategies, Inc. and Renovatix Solutions, the leader in providing client branded marketplaces of name brand Software-as-a-Service (SaaS) applications to small and medium business (SMB) customers, today announced a strategic partnership to accelerate the growth of online SaaS marketplaces.

THINKstrategies’ mission in establishing the SaaS Showplace in 2006 was to make organizations aware of the rapidly growing array of SaaS solutions available to address their IT and business needs. By working with Renovatix, we are now making it easier for organizations to acquire and utilize a widening assortment of on-demand solutions as well.

Renovatix Solutions’ SaaS marketplaces are uniquely designed to enable third-party administrators, including enterprises and other service providers, to private-label their SaaS eCommerce sites and give users single sign-on access to all of their applications.

As part of this partnership agreement, THINKstrategies will,

• Connect its SaaS Showplace directory to Renovatix’s online SaaS marketplace, www.mysmbstore.com.
• Leverage Renovatix’s technology marketplace platform and will make the online marketplace available to SaaS Showplace visitors at no charge.
• Assist Renovatix in selecting future SaaS applications for inclusion in Renovatix’s managed marketplaces, and will identify additional partnership opportunities. 

Beginning today, visitors of the SaaS Showplace can obtain powerful SaaS applications from leader providers such as RatePoint, Google, Citrix, Six Apart, MediaWiki and dozens of others by going to www.mysmbstore.com/thinksaas.

Click here for more information regarding the THINKstrategies/Renovatix Solutions partnership, or visit the SaaS Showplace Marketplace.

Marketo is the latest winner of a Best of SaaS Showplace (BoSS) Award based on the measurable business benefits its Software-as-a-Service (SaaS) delivers to users.

The BoSS Awards program is an initiative by THINKstrategies which brings attention to SaaS and cloud computing companies which are producing tangible business benefits for specific user organizations. These benefits include increased sales, lower costs, higher customer satisfaction, faster operations, and greater profitability.

Marketo provides solutions for marketing and sales teams, enabling collaboration throughout the revenue cycle from the earliest stages of demand generation and lead management to the pursuit of revenue and customer loyalty.

Click here to read why Marketo was selected to receive a BoSS Award.

Click here to read more about the BoSS Award program or to submit an application for an award.

I had the privilege of attending a local forum at Bentley University hosted by Intuit this past week entitled “Startups and the Cloud: Entrepreneurship in the Age of Cloud Computing”. 

The size of the turnout for this event was another indication of the growing level of interest in Software-as-a-Service (SaaS) and the broader cloud computing phenomenon. It may also be an early indicator of the potential power of Intuit as a key player in this rapidly evolving marketplace.

In a previous blog post, I suggested that two of the most important competitive advantages which leading Platform-as-a-Service (PaaS) must display are,

• Sustainability in today’s tough economic climate to ensure they are viewed as solid, long-term suppliers of SaaS development and delivery capabilities.
• An attractive customer base which can make the PaaS vendor a viable channel to market for developers leveraging its toolkit.

Intuit easily qualifies as a potentially powerful PaaS candidate based on both of these criteria. It is a solid software vendor that has built an enormously strong base of small- and mid-size businesses (SMBs), as well as households who take advantage of its financial management applications.

More than two hundred current and aspiring software developers attended Intuit’s forum this week. They were interested in getting insight about the overall SaaS and cloud computing market from a combination venture capitalists and CEOs, including Scott Cook of Intuit who provided his perspectives about building a successful software business in today’s rapidly changing market. The attendees were also curious about Intuit’s PaaS capabilities.

The organizers took advantage of the opportunity to showcase Intuit’s rapidly evolving development platform which should appeal to many aspiring SaaS/cloud computing developers that wants to deliver B2B solutions aimed at SMBs, or even B2C solutions aimed at households using Intuit products.

Intuit’s recent acquisitions clearly demonstrate its determination to be a major player in the SaaS and cloud computing marketplace. And, the turnout at last week’s event illustrates that there are plenty of entrepreneurs and software developers who are interested in leveraging Intuit’s position in the market.

Of course, Intuit will have to provide these developers with the right tools at the right price to fulfill its potential as a major PaaS player.

Last week, I had the privilege of attending and presenting at Internet Capital Group’s (ICG) 2009 Strategic Growth Conference in Philadelphia, and came away impressed with the company’s portfolio of web-oriented businesses and vision for the future.

ICG was one of the pioneers of web-based businesses during the late 1990s, and is one of the few survivors of the Dot.com bust. Like THINKstrategies, ICG believed after the demise of the Dot.com era that there were could still be tremendous opportunities via the Internet once the enabling technologies and business models matured to meet customers’ changing requirements.

Unlike other investment firms which might have a set of ‘theses’ for the types of companies they fund, ICG has attempted to build a portfolio of companies that can leverage their commonalities to create additional synergies.

Specifically, ICG’s core company portfolio of Channel Intelligence, Freeborders, ICG Commerce, Investor Force, Metastorm, StarCite, Vcommerce and WhiteFence each have powerful data collection capabilities which can be harnessed to produce additional value for their customers and create a competitive advantage for the firms.

This focus on the value of the company’s data generation capabilities is in keeping with the way THINKstrategies views the evolution of the SaaS market from software services to business services and ultimately information services.

ICG’s focus and perseverance is paying off. The company reported that its eight core portfolio companies grew 12% year-over-year in the first quarter of 2009 after registering a 23% jump in revenues in 2008, and their aggregate EBITDA (loss) for the quarter improved 70% in a tough economy.

Riding this momentum into last week’s event in Philadelphia, the theme of the ICG gathering was finding new ways to accelerate growth and streamline operations. Among the ideas discussed were the burgeoning array of economical development resources available worldwide via the web and new methods to create differentiation in an increasingly competitive marketplace.

I came away from last week’s event believing that ICG’s investment model and its portfolio companies’ data-driven, on-demand service strategies are well-positioned to capitalize on the rapidly changing business requirements in today’s tough economic climate.

SuccessFactors announced yesterday that Siemens AG has agreed to adopt its Software-as-a-Service (SaaS) based, on-demand performance and talent management solutions across its worldwide operations of approximately 420,000 users across 80 countries in 20 different languages.

This is the latest indication of the rapid adoption of SaaS-based solutions by companies of all sizes across nearly every industry and geography.

Specifically, this announcement is significant because,

1. It clearly illustrates that SaaS is well-suited for global enterprises, and further dispels the myth that it is just for small- and mid-size businesses (SMBs) that can’t afford the luxury of traditional, on-premise enterprise applications.
2. It also shows that European companies are becoming more comfortable adopting SaaS solutions despite past concerns about off-site and/or out-of-country hosting of corporate data.
3. It demonstrates the declining power of incumbent vendors within customer accounts, as SuccessFactors outmaneuvered SAP which already had its software installed at Siemens and shares the same country of origin.

Siemens contributed the following quotes from two senior level executives to SuccessFactors’ announcement reinforcing the significance of the importance which they give this selection,

• “We conducted an in-depth market evaluation of 30 leading vendors and seven system providers Siemens already had over five months, with our end-users stress testing the software quality, global scalability, and innovation potential. “
• “SuccessFactors will be instrumental in helping us achieve [our] core objectives by closing the gap between strategy and execution. It will also enable us to globalize onto a single platform…” 
• “The Enterprise Cloud Computing business model is a strategic direction for us. It not only lowers IT costs, and creates faster end to end processes, but can also grow with our requirements both globally and locally.”

Global 2000 companies, like Siemens AG, don’t have to publicize their vendor/solution selections, and certainly don’t have to contribute quotes to vendor press releases that are this emphatic.  Nonetheless, we saw GE make a similar move when they encouraged Aravo Solutions to publicize the deployment of their SaaS-based supplier information network within GE to catalogue and coordinate over 500,000 third-party suppliers.

Siemens’ decision to provide this type of quote not only illustrates the level of importance which they give this selection, but also shows how moving toward a SaaS and cloud computing approach is becoming viewed by senior executives as a corporate strategy which can win them additional points in the overall marketplace.