The Evolution of Software

Jan 14, 2010 by Devon Watson

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.

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Apprenda’s Exciting Future

Nov 9, 2009 by Sinclair Schuller

I wanted to share a quick note with all SaaSBlogs readers regarding Apprenda. You may have noticed that I haven’t been my prolific writing self as of late, but with good reason! Apprenda is a venture capital backed company, and I was very busy raising another round of funding which can definitely sap your time when it comes to fun stuff like blogging.

Well, it wasn’t all for naught!

I’m writing this post to announce a new round of funding with one of the industry’s leading venture capital firms, NEA. For anyone in the space, you may be well aware of NEA’s track record, and particularly its interest in backing infrastructure software plays like SaaSGrid. We’re thrilled to have them on board! In tough economic times, it’s even more exciting to get such a passionate vote of confidence in the team and product.

To date, we’ve been very successful at growing as a company, acquiring customers, and delivering our message but this round of funding adds the right amount of fuel to catapult Apprenda into a new phase of growth and success. Through this round, we will continue to revolutionize SaaS technology, work with new markets, and solve more problems than we ever have.

I want to thank all SaaSBlogs readers to date; my conversations on SaaSBlogs (and outside) play to my passion of SaaS, added motivation to our success so far, and will continue to be instrumental in the evolution of SaaSGrid and our market story.

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Should You Scale-proof SaaS Offerings Early?

Dec 7, 2007 by Sinclair Schuller

A SaaSBlogs reader recently sent me a link to an article by Dharmesh Shah over at OnStartups. In a nutshell, the post articulated that building a highly scalable architecture when creating a new application is premature and creates a large resource tax on a startup’s already limited resources. This led to a vibrant thread of comments with people arguing both sides, but one comment by Dharmesh really stood out (and surprisingly wasn’t even acknowledged in the remaining comments) was the following:

“One point I didn’t make in the article, but probably should have: When making tradeoffs regarding scalability, you are at some level incurring technology debt. Debt is not always a bad thing — it can often help you grow. The key is to make sure that the “interest rate” on the debt does not outweigh the benefit of the tradeoff. So, if making a scalability tradeoff will likely cause you to rewrite the entire system, it’s probably not worth it. But, if it’s simply a matter of “Pay X now or 1.2X later”, it might be better in some cases to just pay 1.2 X later”.”

This comment provides sound rationale to the “should I scale-proof my offering early” question. From the standpoint of an entrepreneur, don’t waste your resources if scaling is not your core business (because some products have that as a core function) or if the cost massively outweighs the benefit since your immediate goals should include getting your first (or fifth, or tenth) customer, not worrying about your one-thousandth. That said, if you can scale proof your application at a low cost and avoid incurring technology debt, it’s generally wise to do so. Looking at the boundary cases, it becomes obvious. I offer you two choices: you can engineer your application for a cost of x and not be able to handle reasonably large scale or spend 1.02x and be able to deal with really large scale if and when it comes. Generally, you’ll choose 1.02x since the cost is negligible and the risk mitigation is high (this is why we pay for health, auto or any other insurance). Conversely, if I told you that the cost was x but that engineering for scale would be 1.2x or worse (say even 2x) you would most likely opt out and rightly so. After all, imagine that auto insurance personally cost you the amount of a car each year, you’d likely do everything possible to avoid getting it (granted, there are intricacies such as personal injury, etc. but work with me here! These non-tangible intricacies even exist in software – it’s one thing if you’re app doesn’t scale and you can’t take on new customers, but what if it grinds operations to a halt long enough that you lose existing customers or reduces the stability of the application to zero)

The goal of SaaSGrid, aside from providing an execution runtime and business services for SaaS offerings, is to allow for scale-proofing a SaaS offering at a negligible cost, biasing the cost/benefit analysis highlighted by Dharmesh toward choosing to scale rather than opting to incur debt. We strive to push for that trivial case of making the choice “obvious.”

If you’ve participated in building a SaaS offering, did you deal with the scale question early or late and how did your experience turn out? Have you ever had a “windfall”, a rare but possible scenario where you don’t experience organic growth but rather experience a large fluctuation in customer traffic due to some event?

 

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The Pizza Box Metric

Sep 8, 2006 by Sinclair Schuller

A couple of years ago, I read an article about the origins of Yahoo! The article described the infamous Yahoo! trailer and the scene where Michael Moritz of Sequoia Capital first walked in and encountering a mess, complete with drawn shades and pizza boxes strewn across the room. The dwelling seemed fit for dogs, or people who had enough on their plate to worry about silly things such as cleanliness. Although Jerry Yang and Dave Filo popularized this notion of what an entreprenuers den looks like, they definitely are not alone. Many people I’ve talked to either told me “My office is a wreck” or “I know this gal who’s an entrepreneur, and her office is a mess!” At first, one might confuse this with being unorganized, but for a good entrepreneur, quite the contrary is true.

I recently had a friend come to my office, and the first thing he exclaimed was “Holy s***, this place is disgusting, and that’s coming from a messy guy!” I looked around and saw <gasp> …a pizza box! In the struck me; we really are knee deep. I’m normally quite clean, but once I’m in our office, my priorities change. I don’t really care about the junk that is around the room. What I care about is a.) am I on schedule, b.) am I on budget c.) are the tools and data I need organized and d.) do I have food delivery numbers nearby. So next time you walk in to an entrepreneurs office, count how many pizza/chinese food/subwrapper/bottle containers you find, and you’ll be able to gauge with atomic accuracy how busy, enthused, and involved they really are.

FYI: This friend made me help him clean the offfice, so I’m kind of starting from scratch. I’m now behind, making his move the equivalent of sending me directly to jail in Monopoly. Where’s my phone and Domino’s number…

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