A Blog About Software As A Service
This blog is all about software as a service (SaaS) for business. If it is in the cloud, you will find it here.
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Weathering the IT Budget Storm of 2009
Posted on June 1st, 2009 No commentsI believe this may be the understatement of the century, but hey, I’ll go for it anyway: IT Budgets are not increasing this year. Yup, I know. Really stepped out on a limb there and took a chance, now didn’t I? With budgets in nearly every business unit being cut, it is no surprise that companies are trying to cut back on any new spending - even when it comes to mission-critical IT expenditures. And with mid-market IT managers expected to perfiorm miracles daily in order to keep everything running smoothly, how are they expected to maintain the same level of awesomeness with a smaller budget? Well, here are a few ways for IT pros to maximize their current environment.
First, let me take a few steps away from conjecture. Rather than just taking my word for it, let’s look at some real numbers on IT Budgets. Just today, IDC put out a report that IT spending will decline by 1.8% in 2009. That’s the bad news. The good news is that:
Declining information technology (IT) spending by clients will bottom out in 2009 and will experience marginal growth in 2010, market research and advisory firm IDC has said. Global IT spending is expected to grow 2.9% in 2010 before nearly doubling to 5.7% in 2012.
Okay, so if IDC is right, 2009 will be a year of doing the most with what you’ve got, while 2002-2012 should be a lot better froim an IT Budgeting perspective. So what can you do to maximize your current environment? Well, I’m glad I pretended you asked.
1. Save Money On Network Storage- All right, that’s an easy one, right? No? In theory, it should be fairly simple to figure out how to save some valuable dough on network storage. Some ideas:
- Find Old Files- Find out which old files can be archived, moved or deleted and get them off your network
- Find Files That Shouldn’t Be There- You’ve probably got files on your network that shouldn’t be there in the first place. We’re talking about MP3s, Movies, Family Photos and more. Your users shouldn’t be using your expensive network storage as their own personal entertainment center/ photo album.
- Find Out What Users/Groups are taking up the most space- Understanding the owners of data can help you with chargebacks or at least it can help you find the right size for their needs.
2. Find Out What Others Are Doing- How does your IT spending compare with others in your industry? What’s your storage and management cost per GB, and how does it compare with companies of similar size with similar retention and archiving policies?
3. Take a Look At SaaS/Cloud Offerings- Sure, I’m a little bit biased here, but you owe it to yourself to see if there are SaaS-based solutions that can both save you money and alleviate some of the burden of your IT staff.
Well, that’s just a start. I’d love to hear you other suggestions on ways to keep costs low to keep within a declining budget.
Nathan Burke is the marketing manager at Aprigo, a Waltham, MA-based startup developing online data management tools for IT Managers. To learn more about the company, go to the Aprigo site, or to sign up to be notified when Aprigo launches, click here.
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From Daily IT: The Three Waves of SaaS
Posted on May 26th, 2009 No commentsJust caught this one in my RSS reader this morning: Daily IT News has an article this morning on the Three Waves of SaaS. From the article:
As SaaS matures, we’re seeing providers evolve through three "waves".
Wave 1: Replace mature, single tenant software applications – The early players in SaaS got started by finding applications ripe to be delivered as a turn-key business service in a multi-tenant environment. Most early success among SaaS providers was just that: Taking an existing piece of software and finding a better way to deliver it.
Wave 2: Apply SaaS model to solve new problems that were impractical for existing mature single tenant software applications — Once these firms created an initial foothold, many realized that the SaaS model itself had inherent advantages for solving problems that could not be tackled in a traditional software model. They leveraged a common, centrally hosted architecture to get multiple companies working together, often across the globe, to solve a common business process.
Wave 3: Leverage "by-products" of SaaS business to launch new, higher value services — Now SaaS companies are realizing their whole business model actually produces assets that are quite valuable. Providers have a clear picture of how their software is being used. Over time, they can aggregate data collected through these interactions and report back to customers, giving them unprecedented insights into their individual performance as well as industry-wide benchmarks.
I think that Wave 3 is the most important and most interesting, and not many articles about SaaS touch on it. In many cases, the "by-product" is a mass of aggregate community data that can provide an excellent comparison feature and can be sliced by any number of filters.
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Results from the 2009 SaaS Marketing Survey
Posted on May 22nd, 2009 No commentsI’ve just recently started to read SaaS University, a site dedicated to SaaS business info, and today saw the results of the Softletter 2009 SaaS Marketing Survey. The survey covers the highest to lowest budgeted marketing programs at SaaS companies. Since I am a marketing guy at a SaaS company, these numbers were very interesting to me. So here goes.
Projected Marketing Budget Increases
Webinars took the top slot, as survey respondants also said they were the most effective marketing program. PPC campaigns took the second spot even though PPC efforts were rated last in effectiveness. SEO came in third, which makes sense as it has a high association with PPC campaigns.
Projected Decreases
Hmmm. I wonder why customer concern surveys are getting the axe. Are they just not producing results, or are they just easy to cut since they’re seen as a cost rather than a marketing tool. I’m really curious as to how many SaaS companies out there are really spending money on podcasts. Sure I’ve seen a few out there but not that many, and what are the costs? Additionally, what’s the cost of an official business blog? Unless these companies are associating a dollar figure with time spent by those producing the content, I’d be curious to see what they’re spending on.
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Clip: Why Do SaaS Companies Lose Money Hand Over Fist?
Posted on May 19th, 2009 No commentsJust saw this one in my RSS reader: there’s a blog from a stealth-mode SaaS company called Smoothspan, written by Robert W. Warfield that has a post today entitled "Why Do SaaS Companies Lose Money Hand Over Fist?"In the article, Warfield argues that SaaS companies spend far more on sales and marketing than their on-premise counterparts, and compares them in terms of how many sales and marketing cents are required for each company to earn a dollar in revenue. From the post:
Sales and Marketing
Let’s start here, because this is really the crux of the argument. It’s where SaaS companies spend the Lion’s share of their budgets, and where On-prem seemingly doesn’t spend much at all. Here’s what the numbers look like:t’s start here, because this is really the crux of the argument. It’s where SaaS companies spend the Lion’s share of their budgets, and where On-prem seemingly doesn’t spend much at all. Here’s what the numbers look like:
- SuccessFactors spends a ripping 56 cents for each dollar of revenue they bring in. Analysts expect about 85% growth in exchange.
- Salesforce is spending almost as much: 54 cents to bring in a dollar for which the analysts expect 44% growth.
- SAP has a much more frugal 29 cents per dollar brought in, but the analysts only expect them to grow 17.5% next year.
As a function of pure cost, SFDC and SFSF spend 2x what SAP does for an incremental dollar of revenue, which on the face of it looks highly inefficient. But, before we write the SaaS guys off, note that by spending so much, they manage to deliver 2.5X to nearly 5X the growth of SAP. Which one is more efficient? Not hard to make an argument for the SaaS guys when you look at S&M dollars as payment for growth.
He then goes into administrative costs:
General and Administrative
This is a category everyone loves to hate. It’s overhead that delivers no value. Surely the SaaS companies must be wasting a lot of money here? Large organizations benefit from economies of scale on G&A, don’t they?
- SFSF spends 21 cents on this for every $1 of revenue.
- CRM spends 16 cents for every $1.
- SAP spends 17 cents.
And R&D:
Research and Development
- SFSF spends 16%
- CRM spends just 10%
- SAP spends 21%
Finally, he tallies cost of revenue:
This is one of my favorites. Keeping the cost to deliver the service low is essential for SaaS companies. The fact SAP says they lose money on every sale of BBD is a direct reflection on this number. SaaS companies use a variety of technologies like multi-tenancy to keep costs lower, and it seems likely SAP has missed these tricks. We can’t get the numbers for BBD, but we can compare SAP’s cost to deliver software (largely cost to deliver maintenance, which is Tech Support) to the costs of a SaaS company:
- SFSF spends 24% to deliver their service.
- CRM spends just 13%
- SAP spends 22%
His conclusion is that SaaS companies could be just as profitable as SAP if they were to sacrifice growth for profit, but since SaaS as a delivery model is still young, companies are in the "land grab" process. They’re more interested in growth than profit in this stage, so it makes more sense to spend when spending equals growth.
Now, obviously this post is basing its information on SaaS specifically on CRM SaaS products, but I wonder if the same strategy extends to all SaaS players vs. their on-premise counterparts.
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Is SaaS Consolidation Inevitable?
Posted on May 15th, 2009 No commentsSramana Mitra has an article on Forbes.com today predicting that SaaS consolidation is highly likely, and wonders whether that’s a good thing. From the post:
The global recession, which has forced companies to cut operating costs and streamline information technology operations, has been something of a boon for the software-as-a-service sector, with major companies turning to cloud computing. Thus, I expect to see acquisitions in the SaaS space this year. SaaS companies like NetSuite, SuccessFactors and Citrix, which all recently reported solid quarters, are likely targets. Let’s take a closer look.
and
My concern remains that we may be moving towards yet another "too big to fail" industry structure. If HP, IBM, Cisco, Microsoft and Oracle go around acquiring everybody and their mother, we’re in for stagnation in innovation, a precarious concentration of industry power and leverage at the very tip of the pyramid, and an overall undesirable structural evolution.
SaaS is an opportunity for smaller companies to accumulate their own muscle, roll up their own smaller kingdoms and create an alternative power structure. I would much rather see that happen, than an accumulation of everything that matters into one of the five largest players!
Interesting article, and I understand this is really an opinion piece. She would rather see smaller companies in the SaaS sector. I get it. But when it comes to consolidation, remember, it’s a choice. Small SaaS companies don’t have to agree to be acquired by the big dogs. While some companies will choose to sell to a bigger company, others out there will stick it out on their own. I agree with her outlook: with SaaS taking off, there will definitely be a wave of acquisitions. It just makes sense. But this, like any other trend in tech, will be a self-fulfilling cycle. People see that SaaS is hot right now and form a SaaS business. Bigger companies acknowledge that the trend is hot and start acquiring SaaS companies. Other people see that SaaS companies are being acquired and decide to start their own SaaS startup.
It reminds me of the time of internet company acquisitions when "we’ll build something, get users for free, then Google will buy us" was a viable business strategy. Seems like a crazy idea now, right? The reason people tried that strategy is that it was working for others. Bigger, more established companies were acquiring tiny startups just because they had users. This led to a new wave of companies that counted on the acquisition trend to keep on going. When it stopped, companies were faced with a difficult challenge: find a way to make money with all these users. Those that were able to find a way to do that survived. The rest vanished.
I think the same thing is going to happen in SaaS. There will be a wave of acquistion followed by a wave of new SaaS companies looking to be bought out simply because they’re SaaS based. The big guys will stop buying them out just on the basis of SaaS, and the small SaaS companies will have to figure out how to make it on their own.
But hey, I could be wrong. It happens.
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Clip: SaaS’s Spring Fling: Venture Community Bets Heavily on SaaS
Posted on May 14th, 2009 No commentsChristopher W. Cabrera, founder of Xactly has a post entitled "SaaS’s Spring Fling: Venture Community Bets Heavily on SaaS" which talks about the huge VC interest in SaaS vendors recently. From the post:
The latest cases in point are SaaS vendors Workday, which closed a $75 million venture round, and ExactTarget, which just last week attracted $70 million in venture funding. ExactTarget had to forgo an IPO late last year because of the economic downturn, but that hasn’t kept the VC community from regarding the company as a prime investment opportunity. Meanwhile, Workday has now raised a total of more than $150 million from investors who clearly believe in CEO (and PeopleSoft founder) David Duffield’s vision for SaaS.
My favorite part of the post, however, is in the beginning:
The SaaS battle continues to rage in some quarters, with traditional on-premise software vendors still fighting a vociferous rearguard action, even as some are slowly moving to test the SaaS waters for themselves.
Vociferous rearguard action? I love it.
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Welcome to BtoBSaaS.com
Posted on April 3rd, 2009 1 commentWelcome to BtoBSaaS.com, a site dedicated to Software as a Service providers with a business focus. This blog started in April of 2009 as a resource chronicling the various SaaS alternatives to installed software. The site is edited by Nathan Burke, Marketing Manager at Boston-area SaaS startup Aprigo.
