SaaS Blogs

This is a very good podcast of Phil Wainewright from The Connected Web interviewing Rick Nucci, CTO of SaaS integration vendor Boomi on the impact of multi-tenant architecture on the operational cost of delivering software in a SaaS fashion.

Two choice excerpts:

“SuccessFactors recently gave a speech, [by CEO] Lars [Dalgaard], talking about their architecture and their approach. They have something like over a thousand customers per physical server when you net it all out and aggregate it. Andthat’s the marginal utility, that’s the scale that you need to get to — because you need that op-ex in your business as a SaaS ISV to be in the five percent type of range. And it’s not going to happen if you’re doing a per-customer expenditure.”

“And that’s the marginal utility, that’s the scale that you need to get to — because you need that op-ex in your business as a SaaS ISV to be in the five percent type of range. And it’s not going to happen if you’re doing a per-customer expenditure.”

Continue reading the transcript or listen to the podcast here.

Building a SaaS Business in 2010 - An Inside Look at the Business Model and Operations.

On Tuesday, February 2nd the authors of this blog and some of our business partners will be hosting a webinar to illuminate some of the key considerations and challenges ISV’s face when looking to bring a SaaS offering to market in 2010.  This session will include a deep dive into the SaaS business model as well as the operational side of the equation and feature key insights and lessons learned from the frontlines of managing SaaS businesses.

Although the content of the webinar is less technical than our typical fare here at SaaSBlogs, we think many of our readers will find it to be interesting and valuable material.

Additional information and registration: https://www2.gotomeeting.com/register/197663259

This is my first blog post for SaaSBlogs.  My name is Devon Watson and I am the Director of Business Development here at Apprenda.  I have worked with SaaS since 2002 when I founded one of the first companies to attempt to deliver Business Intelligence software in an on-demand fashion.  Being a bit ahead of the curve I found that the company struggled to reconcile our SaaS business model with the realities and limitations of the technology platforms available at the time.  After a good run and achieving paying beta customers we eventually had to close up shop as the dot-com hangover sent funding sources running for the hills.

After that I spent 5 years as a Venture Capitalist where I worked with many companies founded on SaaS business models, but with really what amounts to a glorified ASP (application service provider) infrastructure left over from 6-8 years ago.  I have come to view this non-alignment of business model, infrastructure and operating cost as a fairly standard refrain across the software industry.

Last night I gave a talk on SaaS to about 100 members of the  NY Entrepreneurs Business Network and the NY BizSpark Meetup group at Microsoft’s office in New York (thanks to NYEBN and MSFT ISV Evangelist Gunther Lenz for inviting me).  We had a very good discussion around the progression of the software industry from Client-Server to Web Applications and the ASP’s of the late 90’s on to the current SaaS paradigm.  The changes to the leaderboard of the software industry at each step in the evolution were obvious to the crowd – Mapics?  Gone when 3 tier web apps came out.  Siebel?  Eclipsed by SalesForce.com.

 
People quickly understood how SaaS finally realizes the economies of scale and consolidated operations needed to make on-demand delivery feasible form the ISV.  However, many of the budding software entrepreneurs in the room were surprised to learn that getting a SaaS company off the ground is actually more expensive than in yester years, despite the more desirable end-state.  Of the handful of SaaS companies to have gone public the average cost of capital to reach that state was $76M….$76M!  This is due to two factors – the delay in revenue recognition inherent to the SaaS business model and the longer (and more expensive) path to market due to the complex underpinnings of a good SaaS delivery foundation.

Luckily, you no longer have to reinvent the wheel the way my first startup did 8 years ago.

Mike Vizard over at IT Business Edge wrote a blog post a couple of days ago where he described SaaSGrid as potentially having “…the most impact…” on the Cloud market (using the word ‘market’ here very loosely) when compared to other cloud technologies like Force.com and Azure. I’m both flattered and clearly in agreement, but one subtle comment in his post caught my attention: “More targeted SaaS application environments will evolve…”

I entirely agree with Vizard’s sentiment, which prompts the next question: how will targeted SaaS application environments evolve and why will more crop of them crop up. I think the answer comes from understanding some of the history behind SaaS enablement technologies, what they mean to those who use them, and what the results of those who use them mean to the market in general.

Most good SaaS (and non-SaaS) enablement technologies crop up because of need, or what I’ll call negative pressure. For example, at Apprenda we built SaaSGrid because the founding team (myself included) had worked on a variety of SaaS projects in a “ground up”  fashion (I’ll write about the Apprenda founding story at some point). We found that an inordinate amount of time was spent on SaaS specifics, most of the bugs and maintenance problems came from the home-brewed SaaS stack, and most attention was deviated from the actual business problem the SaaS offering was trying to solve, leading to a gross loss of focus and an attempt to build a dual competency (building a SaaS stack plus building a domain specific business application).  The lack of a foundational SaaS stack created negative pressure (a vacuum, if you will), causing us to found Apprenda and build SaaSGrid, thereby filling that void for all others that were destined to take on the arduous “build” path. Our customer base includes companies that were “on the fence” with respect to building a SaaS business that decided to move forward because SaaSGrid reduced the hurdle of architecting a SaaS offering and building a SaaS business so significantly that they decided to move forward. In essence, technologies like SaaSGrid act as a catalyst.

(bigger)

From a macro-market perspective, enablement technologies focus on boosting product yield (essentially, SaaSGrid’s goal is to boost production efficiency and quality, thereby increasing production yield). This is what fulfills Vizard’s prediction of “More targeted SaaS application environments will evolve…” The catalysis of SaaS application development by application platforms like SaaSGrid boost yield, any success stories  reinforce  both the market story for SaaS and the enablement story, which will create positive pressure, or new enablement companies wanting to participate in or replicate the commercial success. The pressure isn’t void based, but in fact is rooted in the existence of success. This is a huge boon to ISVs with SaaS aspirations, because it means all eyes are focused on helping them achieve their goals.

Why is SaaSGrid so impactful compared to other technologies? Because we’re one of the few (and probably only from a technology perspective) that focus on bridging the gap of current technologies to a SaaS end-game, and not just on a generic “cloud” end game (i.e., we focus on the distribution model, not on the idea of ‘running code online,’ which is something very different). The idea of a “SaaS application server” is so fundamentally pure in its goals, that it resonates well with an ISVs aspirations and acts as that catalyst and foundation to success. Although this sounded like a big SaaSGrid plug, it’s truly rooted in my passion for this wonderful delivery model and the value we bring to other software companies.