May 13th, 2008
CODA2Go and the economics of PaaS
I had the opportunity to talk money last week with Jeremy Roche, CEO of CODA, the venerable UK-based business software vendor that has become the poster child for Salesforce.com’s platform ambitions after the release at DreamForce Europe of its new on-demand financials application, built and delivered entirely on Force.com. Why does a company with a 30-year history of writing finance applications and 2,400 customers — including well-known brands such as Ikea, Avis, Unilever and HSBC — entrust its on-demand future to a new, untested platform? [Disclosure: Salesforce.com is a recent client].
Time-to-market was the crucial factor, Roche (pictured right) told me. Coda decided in 2007 that the time was right to prepare a SaaS offering. It looked at all the options, including “ASP-ing” an existing product. “But if we wanted to do a proper multitenant application that was scalable, we had no choice but to write it from the ground up,” he explained. The Force.com platform came with all that infrastructure ready-built, along with the functional capabilities and a sufficiently flexible development environment to meet Coda’s needs.
That time saved translates into millions saved on development costs. “We’ve saved at least two years in elapsed time and at least 25 man-years of development time,” he said. “That figure could be as high as 50,” he added, explaining that it’s difficult to quantify the exact figure with no direct experience of what it takes to develop an on-demand infrastructure. Either way, the savings are huge. At an average UK developer salary of £50k ($100k) per year, Coda has saved between $2.5 million and $5 million on the development cost.
I’d assumed that the quid pro quo for those savings would be a higher monthly subscription cost — after all, Salesforce.com presumably can charge a hefty premium for all that added value. But Roche surprised me. Read the rest of this entry »
May 9th, 2008
VCs put big sums into SaaS
Several SaaS vendors have announced some big funding rounds the past couple of weeks, which suggests that SaaS is still able to command strong VC support where vendors can show good traction for their offerings. The three rounds that caught my eye were:
- Rearden Commerce, $100 million. Announced Tuesday, this substantial investment (PDF release)
appears to have been led byfeatures an important new backer: credit card powerhouse Chase, part of the JP Morgan Chase empire (the guys who bought Bear Stearns). Rearden [a past client, see disclosure] automates booking of a wide range of travel and entertainment in a way that integrates with employee workflow at the same time as complying with corporate purchasing policies. It already snagged a £22.5 million investment from American Express eighteen months ago, and Amex has put money into this round too, along with Rearden’s previous VC backers. However it seems likely that the bulk of the money comes from Chase (PDF release), and if the Amex precedent is any guide, it’s a prelude to Chase rolling out the Rearden service to its corporate cardholders (and perhaps ultimately consumers too). Rearden has built a broad customer base of more than 1,700 — mostly since it signed the Amex deal — and according to Techcrunch it has close to $1 billion worth of transactions going through its system. - Xactly, $30 million. Last week, sales compensation management and analytics vendor Xactly announced a new round of $30 million in revolving credit and equity to finance further global expansion and product development. Earlier in the week, Xactly had announced an analytics product that builds on the data collected in the course of enabling its core sales compensation functionality, and it has ambitious plans for further product announcements based on this core information store. Meanwhile, customer growth continues strongly, with the average customer having around 250 subscribers.
- Intacct, $15 million (on top of $14 million secured last June). Recovering strongly from a period a couple of years ago when it lacked direction, venerable on-demand midmarket ERP vendor Intacct has seen something of a resurgence since Mike Braun took over as CEO. This is the second injection of finance negotiated by Braun and provides the fuel for some long-overdue expansion. Intacct is developing some interesting channel strategies, which I hope to discuss in a separate posting in the near future.
Of course, there is a school of thought that says that once a trend reaches the point where mainstream media (let alone bloggers) start to cite it, then you can probably bet that it’s over. So I’m interested in feedback from readers here. Is it still possible to secure VC funding for SaaS ventures or has the funding climate tightened significantly in the past few months? Please post your views to Talkback.
May 8th, 2008
SaaSplaza opens European SaaS marketplace
Europe’s first pureplay SaaS hosting venture opened its doors last month with a roster of 50 vendors and integration partners on board and an estimated 1 million end user subscribers. Based in the Netherlands but with a Europe-wide reach, SaaSplaza projects its platform will generate more than €100 million (around $150 million) in SaaS revenues for its partners this year.
Although freshly launched, the venture has a pedigree going back more than ten years, being the brainchild of Siennax, a SaaS specialist that industry veterans will recall as a leading European light of the ASP era. The SaaSplaza venture has grown out of Siennax’ own SaaS hosting experience along with its early participation in Microsoft’s SaaS incubation program. As such, it has inherited Siennax’ existing SaaS hosting customers including those acquired through the Microsoft program. Customers can host on Microsoft or open source platforms, along with a range of service delivery management infrastructure assembled through Siennax’ long experience. SaaSplaza will support a range of architectures, ranging from ASP-style application hosting and virtualized single-tenant infrastructures to true multi-tenancy.
SaaSplaza sees its role as coaxing European ISVs and their channel partners into the SaaS model. Herb Prooy, who goes by the somewhat unorthodox job title of ‘Market Maker’ for SaaSplaza and is also CEO of Siennax, told me last week that the European market for SaaS is not as well developed in the US at present.
“The mentality here is lagging behind the US, but best-of-breed software suppliers are looking into the SaaS market — otherwise they [risk being] passed by other vendors,” he said. “We position SaaSplaza as a platform a software vendor can put their software on and offer to their channels. We really want to facilitate the value chain of software vendors and partners.”
For channel partners, one of the big selling points of SaaSplaza will be the ability to combine multiple SaaS offerings into Read the rest of this entry »
May 7th, 2008
Marc Benioff heralds Web 3.0 at DreamForce Europe
Salesforce.com has come to London today for its first DreamForce Europe event. There have been European customer and partner events in previous years, but this is the first event at true DreamForce scale — 2,500 attendees at the Barbican conference center in the heart of the City, London’s financial district. And it has one of Marc Benioff’s hallmark two-and-a-half-hour marathon keynotes, familiar to DreamForce regulars [disclosure: Salesforce.com is a recent client].
Benioff has chosen London to unveil a new definition of Web 3.0 (a favorite theme of my own) that ties it to Salesforce.com’s platform-as-a-service message.
Where Web 1.0 was about consumer applications that gave people access and Web 2.0 enabled people to publish their own user generated content, Web 3.0 is about empowering people to innovate using Web-hosted infrastructure, he explains.
“We think Web 3.0 is now upon us. It’s the era of platforms,” declares Benioff, citing his own company’s Force.com, along with Google App Engine, Amazon Web Services and Facebook as examples. “New platforms are coming right out of the cloud. It’s time to make a choice. You can continue to build your applications in the software model or you can move your applications to the new model of cloud computing. There is a new way to build your applications.”
One of the most striking aspects of Benioff’s new message is that it’s no longer about trying to get everyone using Salesforce.com’s platform. Showing a slide with logos from 21 different PaaS providers, he acknowledges the emerging diversity of the PaaS landscape: Read the rest of this entry »
May 6th, 2008
The four horsemen of SaaS
Taleo’s acquisition of Vurv, announced today, is a clear play by the SaaS vendor for breakout leadership of the people management sector — one of the hottest segments of the enterprise SaaS landscape, populated by fast-growing startups such as recent Nasdaq entrant SuccessFactors along with privately held Authoria, Cornerstone OnDemand, UK-based StepStone and others.
Once the deal closes in June or thereabouts, Taleo will become one of four vendors whose revenues and reach puts them head-and-shoulders above other publicly quoted pureplay SaaS vendors serving the enterprise software market. These four horsemen of SaaS are:
- Salesforce.com — the giant of the pack and runaway SaaS leader in CRM. Expects $1 billion revenues this financial year.
- Omniture — secured its leadership in enterprise web analytics after closing its acquisition of Visual Sciences (formerly WebSideStory) in January this year. Expects $295 to $300 millon revenues this year.
- Concur — consolidated its leadership in travel and expense management with its acquisition of smaller rival Gelco last year. Expects revenues of $211 million for the current financial year.
- Taleo — acquiring Vurv will confirm its position as the leading talent management SaaS pureplay. Adding Vurv’s annual revenues of around $40 million to Taleo’s existing guidance brings its expected revenues for the current year to just under $200 million.
Taleo’s move on Vurv (previously known as Recruitmax) is an out-and-out expansion play: “It’s really about scale and positioning Taleo for the next stage of growth,” chief marketing officer Al Campa told me earlier today. Vurv brings no new products to Taleo’s portfolio, he admitted, and over the next eighteen months the Vurv product set Read the rest of this entry »
May 2nd, 2008
SAP’s SaaS pull-out will help rivals in Europe
The news that SAP has pushed back the roll-out of Business ByDesign by twelve to eighteen months should be music to the ears of its SaaS competitors, especially on SAP’s home turf in Europe. By announcing its own SaaS product for the midmarket late last year, SAP put its stamp of approval on the on-demand model. Now that it has said customers will have to wait another year or more before they can buy it (due to scaling problems, no less), the company has created the worst of all worlds: it has validated a market and then vacated it, giving competitors a free run. Even SAP can’t spin FUD (fear, uncertainty and doubt) for as long as 18 months — especially not in the on-demand market, where customers can be up-and-running within weeks of placing an order.
Whereas prospective customers and partners might have taken a wait-and-see approach if Business ByDesign were due later this year, delaying it until late 2009 or into 2010 will drive both camps into the arms of competitors (perhaps we should rename the product ‘Business ByTwoTen’). I suspect this will especially help smaller local players whose marketing and partnering efforts in the European market would previously have been overshadowed by SAP’s looming presence.
It’s certainly welcome news for UK-based CODA, which next week at Dreamforce Europe releases phase I of its on-demand CODA2go application, built on Salesforce’s Force.com platform. “Of course we’re not looking to deliver as broad a portfolio as SAP, but we have designed a truly international, sophisticated accounting system that will support not just small and mid-sized companies but also enterprises. That space is going to be a lot clearer without SAP in the market yet,” commented group marketing director David Turner by email yesterday.
Andre Kwakernaat, CEO of Netherlands-based Twinfield, probably Europe’s most established on-demand financials vendor, was more cautious, but saw SAP’s move as Read the rest of this entry »
April 30th, 2008
Microsoft preps pay-as-you-go Office for June launch
After more than seven years of lobbying by service providers, Microsoft is finally set to allow pay-as-you-go licensing for Microsoft Office and other products downloaded to PCs using streaming technologies, according to information the company recently made available to channel partners. Many observers will see the move as a new salvo in the Microsoft’s titanic struggle against Google Apps and other online challengers to its desktop application franchise. An early trial-run of the scheme saw Office offered for as little as $10 per month, with no contract commitment.
Expected on June 1st or shortly afterwards, the long-awaited change to terms in the Service Provider License Agreement (SPLA) will lift a longstanding ban on the use of technologies that stream the software code from the server to run locally on the client PC. Previously, the SPLA only allowed pay-as-you-go terms for desktop applications that run on the server and are accessed remotely using a Terminal Server client.
The change will make a huge difference to the appeal of hosted Office, according to Neil Gardner, VP of marketing for Endeavors Technologies, one of the vendors offering products that enable and manage the application streaming process. “It completely changes the model of offering Office applications to either the business or the end user,” he told me yesterday. “It becomes a true on-demand or pay-as-you-go model.”
Although a few providers have had some success with Office products delivered using Terminal Server, most have failed to gain significant market traction, in some cases suffering huge losses and embarrassing market retreats. The majority have chosen to concentrate on delivering Exchange and SharePoint as well as basic Microsoft web hosting, all of which are now available from Microsoft in multi-tenant versions designed explicitly for the service provider market — with Dynamics CRM soon to be added to the line-up. But many will see Office streamed to customer’s PCs as the icing on the cake, Gardner believes.
“Talking to service providers, this will make a huge change to them,” he said. “Many are holding back because they don’t think they will have a viable offering if they don’t offer the Microsoft applications. Office is the one everyone seems to be interested in.”
The change will initially be for a 12-month pilot restricted to Read the rest of this entry »
April 29th, 2008
Micro-bambi meets Googol-zilla
My post early yesterday, Gillmor: Why Google should worry about Live Mesh, attracted a late flurry of Talkback comments last night. Probably the best I’ve read in a long while was this incisive analysis by Talkback poster utugau on why Google doesn’t have to worry about any threat from Microsoft:
What is a Microsoft? it that ’soft’ a new unit and microsoft is 1/1,000,000 of a soft?
Google comes from the term googool that is 1 followed by 100 zeros.
Why a company with 100 zeros to the right of the decimal point should be worried with a company with 6 zeros to the left of the decimal point?
It’s an interesting angle on the debate and one that certainly hadn’t struck me before (my emphasis added). It made me think of the celebrated 1969 cartoon, Bambi meets Godzilla, with Microsoft in the role of Bambi and Google as the giant Godzilla (click image below for a YouTube screening).
April 28th, 2008
Intuit enters the PaaS wars
The key to the success of a platform is establishing a virtuous circle of eager customers and willing developers. The technology is just the starting point. You need enough customers to create a market for the add-ons and applications developers create. It’s even more important to get developers enthused about developing for the platform so that when customers come looking for third-party add-ons and applications, the cupboard won’t be bare. For the past few years, we’ve watched as Salesforce.com slowly built out its AppExchange partner base, while hearing WebEx promise to do the same with its Connect ecosystem, but without so far delivering a production version [disclosure: both companies are clients]. At times, it’s been like watching paint dry.
In recent weeks, there’s been a sudden blaze of competition in the PaaS wars. Google has brought its developer ecosystem into the game, with both the launch of the (currently consumer-focused App Engine) and the unveiling of its enterprise-focused Solutions Marketplace. Smaller players are bubbling up too, including Coghead with the launch of its application Gallery and Bungee Labs [also see disclosure].
But all these efforts are overshadowed by Intuit’s launch of its QuickBase Developer Program. QuickBase, which I previously covered in February, is an on-demand database development platform with a pedigree that goes back almost ten years, but it’s only in the past year or two that Intuit has really started investing in the platform. The developer program, announced just in time for last week’s Web 2.0 Expo, is backed up by some serious technology assets, including a new Flex-based user interface, support for the Eclipse development environment and a ready-built connection to financial data stored in QuickBooks. It’s also been framed as a cloud service, offering utility pricing for developers, as well as a complete billing system that allows them to set their own customer pricing and manage the customer relationship — functionality that I’ve frequently criticized AppExchange for lacking.
What’s most impressive, though, is Intuit’s ready-made partner base of 75,000 QuickBooks developers, all of them not only experienced Read the rest of this entry »
April 28th, 2008
Gillmor: Why Google should worry about Live Mesh
Steve Gillmor has a great post up on TechCrunch that identifies why Google should be really worried about Microsoft’s Live Mesh. Most commentators have focused on the file synchronization capabilities but Steve puts his finger on why Mesh is so much more than that:
Looking at Mesh as a data synchronization transport ignores its abilities to virtualize identity, permissions, information aggregation, realtime feedback loops, and other SocMedBS attributes that define the substructure of, for example, a Twitter-Mesh-Silverlight gateway to compete with GTalk/Twitter etc.
Imagine (not for long will it be ephemeral) an information bus that orchestrates the signaling of text, rich media, calendar, communications, transaction, and group location status under a social graph umbrella based in part on user-controlled behavior aggregation (gestures). Now imagine what Google needs to do to match this architecture and its overwhelming lead in connectors to existing hardware via Windows.
Other commentators have dismissed Mesh as simply a mechanism to protect Microsoft’s desktop-bound assets, but Steve turns that around and points out that what Mesh is really about is connecting the desktop into the cloud (Meshing the desktop into the cloud, as I wrote last Thursday).
Call it self-serving if you like, but Microsoft needs a bridge that will carry its existing market presence over into the cloud and Mesh is that bridge. You could equally call it customer-friendly: Microsoft users will likely be pleased to have a mechanism that helps them make that transition without orphaning their desktop and on-premise IT assets.
Phil Wainewright is a commentator and strategist on emerging software industry trends. See his full profile and disclosure of his industry affiliations.
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