Comments on: On The ISV Landscape & Transitioning to SaaS

By: Charlie Peppler

Charlie Peppler — Tue, 19 Aug 2008 12:42:40 +0000

For those in the Boston area, the Mass Technology Leadership Council has a SaaS group which is holding a series on this particular topic. There are two sessions, one about the transition of ISVs towards SaaS (September), and another about the issues facing enterprise customers evaluating the use of SaaS within the enterprise itself (October). For anyone interested in attending, please contact me at cpeppler@capnetix.com for details.

By: Abraham Sultan

Abraham Sultan — Wed, 30 Jul 2008 22:24:24 +0000

Hi Raam,

A while back we wrote two articles that address your questions,

The first one addresses the benefits, and the second one addresses the challenges.

As far as possible solutions you could consider a PaaS offering (Platform as a Service, or SaaS Platform) to aliviate most of them.

Cheers,
Abe

By: Raam

Raam — Wed, 30 Jul 2008 11:38:18 +0000

what is the actual benifits that customers getting?
what are the basic challenges while using ISVs?
what are the probable solutions for those challenges????

By: Sinclair Schuller

Sinclair Schuller — Thu, 10 Jul 2008 21:11:07 +0000

Justin, good points but they don’t address competitive issues. I agree entirely that execs see lots of risk and little reward if they are in a vacuum. Unfortunately, free market dynamics require that at some point they respond to smaller competitors who are taking advantage of the shift and chewing into their market.

Someone like Salesforce may be at 10x in market cap, but their revenue is very real and has grown to $750 mil in 8 or so years and they didn’t create new customers, but instead took someone else’s customers who felt SaaS was a fad and since their was no opportunity, ignored. IMHO, existing ISVs need to look at the defensive benefits of moving to the model.

By: Justin Benson

Justin Benson — Thu, 10 Jul 2008 19:29:21 +0000

Sinclair. You want to know why traditional ISV’s are resistant to change. Saas isn’t producing stellar growth rates or returns. When your largest player in the space, your benchmark, is on 10x revs, that’s fine, but not worth the headache of all the change that I outlined in my previous post.

Senior executives see a huge pile of risk and very little reward for 3+ years - apples or no apples.

By: Sinclair Schuller

Sinclair Schuller — Thu, 10 Jul 2008 19:19:39 +0000

I don’t think Larry Ellison’s comment matters or is too accurate. Salesforce, for example, brought in revenue figures of $750 million for FY2008, and has a market cap of $7 billion. There are also plenty of players in the $50 million to $500 million range.

Measure by revenue is not apples to apples with SaaS since there is a tradeoff; that sort of scale acheivement takes longer because of the incremental addition of revenue but at the benefit of a much more stable revenue stream.

By: Justin Benson

Justin Benson — Thu, 10 Jul 2008 19:13:38 +0000

Larry Ellison said it best when he recently highlighted still no $1 billion + players in the SaaS space?

As others have said. It’s a completely new technology model, support model, financial model, sales compensation model and pricing model.

Is that enough for you? :-)

By: Theodore Omtzigt

Theodore Omtzigt — Wed, 25 Jun 2008 21:32:11 +0000

As with all new technologies your TAM is quickly separated in innovators and early adopters versus the late adopters and laggards. Geoffrey Moore’s “Crossing the Chasm” is an absolute must read for technology innovators. It is my experience that if a potential customer’s first reaction is a reason why it doesn’t work they are not innovators in your space. Since if they were they would have already thought about it and would ask a question how to make it work. That is the big difference between innovators and followers. Don’t waste your time on customers that are not thinking WITH you on solving the problem: you could waste too much time or worse be directed into the wrong direction.

Do sample the responses and analyze them to formulate a possible state of the industry. From the responses of your potential customers will develop a story line that you will need to address up front in any of your sales material.

Your business plan should have the monetary benefit of your solution quantified and if your insights are true, folks that are looking for answers will find you and will recognize the value proposition. It is those customers you need to focus on as a tiny little start-up. You do not have the muscle, or time, to go up against vague opinion. It takes very deep pockets to steer the narrative and opinion.

By: raam

raam — Tue, 24 Jun 2008 09:14:45 +0000

Blogs were good ,i need how ISVs converted to SaaS model, conversion road map.thank you

By: paul

paul — Thu, 01 May 2008 02:06:51 +0000

Some good questions Sinclair,

I’d start by saying that this reluctance to move is both a good and bad thing. Its good if you are a start up because of MS or oracle could happily migrate…well they are helluva competitors aren’t they.

Its bad because when they do it half cocked (seibel, MS etc) they destroy the market reputation (the good work of SaaS vendors).

I think the reason they don’t move is multifaceted
1) can milk installed base
2) installed base (being milked) when asked, don’t want to move to SaaS
3) cultural - be step change
4) financial - hard to tank cashcows and get away with in on the ’street
5) distribution / sales channel. they aren’t set up for it. Siebel for instance are still leading with their on prem, if they loose they have a throw away line ‘we do it on demand
6) confusion about what SaaS is, how it works and how it makes money