January 30th, 2009

SaaS is surging in the downturn, says IDC

Posted by Phil Wainewright @ 1:51 am

Categories: Companies, Market research, Xactly

Tags: Software, Software-as-a-service, International Data Corp., Software As A Service (SaaS), Managed Hosting, Cloud Computing, Tools & Techniques, Emerging Technologies, Management, Phil Wainewright

Market researcher IDC has published an upward revision to its market size projections for SaaS in 2009. At a time when most industries and economies around the world are slashing their growth forecasts into single digits or even negative territory, IDC now expects SaaS growth to surge by more than 40 percent in the current year. That’s a significant move up from its previous forecast of 36% growth, published back in July when most economists were still trying to deny the onset of recession.

SaaS’s counter-cyclical boom is entirely due to the enhanced attractions of the model when times are bad, says IDC:

“… the harsh economic climate will actually accelerate the growth prospects for the software as a service (SaaS) model as vendors position offerings as right-sized, zero-CAPEX alternatives to on-premise applications. Buyers will opt for easy-to-use subscription services which meter current use, not future capacity, and vendors and partners will look for new products and recurring revenue streams.”

Don’t you just love that definition of SaaS? “Right-sized, zero-CAPEX alternatives to on-premise.” The report’s author, director of on-demand and SaaS research Robert Mahowald, adds an interesting observation that bears out the uprating:

“… several key vendors finished the year very strong, reporting stable financials and inroads into new customer-sets.”

From my own conversations with privately held SaaS players, I can certainly confirm that business seems to be expanding with continued momentum. Yesterday I was Read the rest of this entry »

January 23rd, 2009

Xactly buys rival Centive

Posted by Phil Wainewright @ 11:30 am

Categories: Xactly

Tags: Acquisition, Software-as-a-service, Centive, Xactly, Software As A Service (SaaS), Managed Hosting, Mergers & Acquisitions, Corporate Law, Cloud Computing, Emerging Technologies

Xactly last night announced it has completed the acquisition of Centive, its closest pureplay SaaS rival in the sales performance management sector. The all-stock deal almost doubles San Jose-based Xactly’s revenue and customer base, and had first been discussed by the two CEOs as much as a year and a half ago, Xactly’s CEO Chris Cabrera told me this morning. Having eliminated the distraction of competing with each other, the combined company will now be able to focus on winning market share from conventional and hybrid-SaaS competitors such as Callidus Software. “We think that by taking the only two 100-percent SaaS companies in the game and making them one, we make it easier for our customers to choose,” said Cabrera.

When asked whether current economic conditions had played a part in crystallizing the acquisition, Cabrera was at pains to assert that both companies had been doing well independently. “Both companies had a very good Q4 — our space is doing very well,” he said. “By combining these two companies together we come so much more of a strong competitor.” New Centive customers in 2008 included over 1000 seats at a division of Motorola, and several hundred seats each at Flowserve, Honeywell, Intergraph, Parametric and WebSense, while Xactly recorded notable wins at 3Com, NTT America, Omniture, PayPal, Rackspace, TIBCO and others. The combined company now has “well over 200 customers” said Cabrera.

“Size really matters in the SaaS world,” he added, noting that the acquisition will bring operational savings as back-office functions are merged, helping reduce costs as a proportion of revenue — although the company will retain a significant presence in New England, where Centive has its headquarters. “Doubling in size helps us get there much more quickly,” said Cabrera. “This really was a no-brainer from a financial point of view.”

Convergence of the two product sets won’t begin until the company has had time to evaluate how best to bring them together. Although there’s inevitably a great deal of overlap, there are areas of functionality that are unique to each and so it won’t be a case of completely eliminating one product, as has been seen in some other SaaS acquisitions recently. Xactly will also be seeking to preserve and build on Centive’s OEM partnership with ADP, which has brought in contracts ranging from 70 to 650 seats since it was announced in late 2007.

The combined company has significant venture capital backing. According to peHUB, Xactly has raised $60 million since 2005, while Centive has raised over $96 million in the past ten years, although MassHighTech notes that $80 million of that sum predates a recapitalization that took place in 2005, prior to Centive selling off its on-premise software business to private equity investors.

May 9th, 2008

VCs put big sums into SaaS

Posted by Phil Wainewright @ 3:16 pm

Categories: Intacct, Venture capital, Xactly

Tags: Software-as-a-service, Rearden Commerce, Analytics, Sales Compensation, Intacct, Software As A Service (SaaS), Sales Force Management, Sales Strategy, Emerging Technologies, Sales

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 by features 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.

April 24th, 2007

Xactly closes new round, Bezos buys Expensewatch

Posted by Phil Wainewright @ 10:26 am

Categories: Business applications, Venture capital, Xactly

Tags: Private Equity, Jeff Bezos, Xactly, Investment, Financial Services, Finance, Phil Wainewright

Some interesting funding news just in from a pair of successful SaaS vendors. Fast-growing sales incentive management vendor Xactly closed a $15 million series C round. As C rounds go, that’s quite a substantial figure. Even more out-of-the-ordinary is the news that expense and spend management vendor Expensewatch.com has been bought out in a private equity deal by Bezos Expeditions, the personal investment company of Amazon.com founder and CEO Jeff Bezos (pictured). I wrote about Xactly last month and referenced Expensewatch.com late last year.

The Expensewatch deal is the first example I’ve come across of a venture-funded company being bought out by private equity this early in its development. Private equity is more usually associated with buyouts of mature businesses (ERP roll-up Infor is private-equity funded and there have even been rumors of a private equity buyer wanting to buy up shares of SAP).

Of course this deal involves a special kind of private equity — effectively the personal fortune of Jeff Bezos, who already had a majority stake in the business. But it’s the first reported full buyout by Bezos’ firm, which holds stakes in a number of other well-known startups, including Basecamp developer and Ruby on Rails creator 37signals, and Second Life creator Linden Labs. In a press release, Bezos Expeditions’ chief investment officer Stephen Campbell said “we see significant opportunities for growth in this market,” but there was no further explanation of why the firm felt a complete buyout was preferable to a more conventional VC round. The value and terms of the deal were not disclosed.

Xactly’s C round is a more conventional affair, but still notable both for its size and also for the circumstances surrounding it. CEO Chris Cabrera told me last week that he had rapidly found himself in the enviable position of having five term sheets to choose from. The way he tells it, VCs were effectively lining up for the opportunity to invest in Xactly. That implies that the extra money has been raised with very little equity dilution, and puts Xactly on a firm footing to ride out whatever challenges it encounters as it embarks on a new phase of expansion. Cabrera said the round is twice what the company believes it needs to get to profitability.

In terms of customers, user numbers and growth rates, the two companies are a similar size and it will be interesting to compare their future development. Both deals are symptomatic of an eagerness to invest in successful SaaS vendors, which is heartening news for all of the industry’s entrepreneurs.

March 12th, 2007

Xactly stakes claim on emerging sales performance market

Posted by Phil Wainewright @ 4:58 pm

Categories: SFA, Xactly

Tags: Salesforce.com Inc., Sales Force, On-demand, Sales Performance, Xactly, Fulfilment, Sales Strategy, Sales Force Management, Managed Hosting, Cloud Computing

On-demand sales incentive management vendor Xactly is spreading its wings today and laying claim to the wider “sales performance” market which, citing market research from Ventana, the company claims is far bigger than salesforce automation alone. Does that mean Xactly aspires to become bigger than Salesforce.com, I asked Xactly’s CEO Chris Cabrera in a briefing call on Friday. Cabrera and his colleagues laughed off the suggestion, not least because Salesforce.com is itself a marquee customer for Xactly, as well as a major partner. Nevertheless this is a company that, like Salesforce.com before it, is punching above its weight for its size and has targeted a market that looks set to expand dramatically over the next few years.

One of the most impressive facets of Xactly’s strategy is that it’s defining its own market, rather than aiming to seize an existing application category from incumbents. After a period of intensive analysis of the market opportunity ahead of it, Xactly believes it can expand into a number of related application categories (see diagram) that are poorly served by current vendors — especially in the high end of the mid-market, which is the sweet spot for Xactly and its on-demand offerings.

“It is the high end of the mid-market that really is adopting on-demand because of the economics,” Cabrera told me. The appeal of Xactly, he added, is that it gives them the information and tools to get the best out of their salesforce. “They will absolutely sell more stuff, and they’ll sell more of the right stuff.”

Today’s announcements extend Xactly’s offerings in several directions: Read the rest of this entry »

April 4th, 2006

Callidus on demand? Not Xactly

Posted by Phil Wainewright @ 9:15 am

Categories: Business applications, Xactly

Tags: Enterprise Software, On-demand, Callidus Software Inc., Managed Hosting, Cloud Computing, Phil Wainewright

Callidus Software has teamed up with the new Sun Grid utility to become the latest enterprise software maker to bring the term ‘on demand’ into disrepute.

Callidus has slapped the ‘on demand’ label on a hosted version“Do not let the slick rhetoric of enterprise software dinosaurs fool you” of its application, which helps enterprises calculate how much bonus to pay their sales people every month. As one on-demand CEO memorably asserted in an InfoWorld cover feature last month, such offerings are “all crap and the customer will not receive any of the advertised benefits.”

At least vendors these days realize they have to make a bit of an effort to be buzzword-compliant. Just as SAP in February produced the absurd notion of ‘isolated tenancy’ to justify its lamentably SoSaaS hosted CRM architecture, so Callidus hopes that hosting with Sun Grid will lend an aura of on-demand respectability. Not in my book it doesn’t.

I could go on about how Callidus is yet more proof that There’s one born every minute, but I’d rather quote from an email I received last night from Chris Cabrera. Read the rest of this entry »