Transparency In The Cloud, Part I: The End-User Transformation

Apr 6, 2011 by Matt Ammerman

In case you didn’t know, the days of business-to-business (B2B) software-as-a-service are upon us.  If you’re a software developer and you haven’t begun planning a SaaS offering, stop reading this article right now, go gather your team and get started.  Seriously, you’re already late.

Ok, now that they’re gone, this article is for the rest of us: the B2B software end-users.

I have it on good authority, that in the next couple of years most of us are going to throw away our piles of compact discs and DVDs and replace them with bandwidth.  We’re going to say goodbye to license fees and free-up some square footage by dismantling our servers.  We’re then going to embrace the technologies that give us access to always-on, internet-based services which we will access from our new server-rooms-turned-corner-offices.  The benefits are manifold:  accessing software typically costs less than owning it, online services are accessible from any location and on a plethora of devices, and we don’t have to worry about things like hard drive failures when our documents aren’t actually stored on our hard drives.

The unfortunate side-effect of our herd-like flocking to internet-based services is that, by forfeiting our ownership of the servers and software that fuel our businesses, we put our destinies in the hands of software companies that, put simply, are software companies.  They’ve spent many years honing algorithms and interfaces that made us want their software in the first place but unfortunately, those years were not spent learning how to offer that software, as a service.  After all, we bought the servers, we provided the power, often times we even installed the software ourselves. Believe it or not, sometimes we’re better at running software than the vendors who sold it to us.

Fortunately, some software companies are comprised of incredibly smart people who do amazing and innovative things. They also have amazing tools available to them to supplement what they lack in experience. I have every bit of faith (*cough* SaaSGrid) that with some hard work (*sniffle* SaaSGrid), and a bit of help (*yelling* SaaSGrid), our trusted software vendors will seamlessly make the transition from shrink-wrappers to world-class service providers, without us noticing as much as a blip on our B2B, software-consuming, radars.

As end-users, we have an obligation to ensure this whole thing goes smoothly. We need to hold our service providers accountable.  One way to do that is by relentlessly asking questions. Interestingly, no one is more qualified than us to ask the appropriate questions, because we’re the ones who’ve been running software on-premises for 20-years. We know the scenarios and situations to avoid, and most of these scenarios translate into very good questions that each and every service provider should be able to answer in a way that not only gives you the warm and fuzzies but also makes technical sense.  Remember, we’re banking our businesses on these companies’ ability to learn how to provide software-as-a-service. I’d at least like to know that they have a plan.

In part two of the Transparency In The Cloud series, we’ll start a list of questions that you should ask each and every SaaS vendor you approach.  The questions are designed to help us guide the B2B SaaS transformation by making us all knowledgeable and empowered SaaS end-users.

Stay tuned!

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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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Will SaaS Companies Benefit from a Virtuous Enablement Cycle?

Dec 24, 2009 by Sinclair Schuller

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.

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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.

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Sink or Swim: Transitioning your Software Business to SaaS

Mar 9, 2009 by Jesse Kliza

On March 19th at 12:00pm CST, Apprenda will be teaming up with Scio Consulting for a live webinar focused on SaaS transitions for ISVs. 

From questions like “Where do we start?” to “How will our operations be different?”, we’ll be providing clear answers and focusing on the choices and challenges ISVs face when migrating their existing applications to the SaaS delivery model.  If you’re an ISV considering a move to SaaS, you won’t want to miss this! 

Register here: 
https://www2.gotomeeting.com/register/697223607

We hope the SaaSBlogs community will come out and join us for this great event, and encourage your collegues to attend as well.  If you have questions prior to the webinar, you can post them here, or email me directly at: jkliza at apprenda.com 

Thanks all!

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Can ISVs Benefit by Moving to SaaS in a Bad Economy?

Nov 13, 2008 by Sinclair Schuller

It’s difficult to argue that current economic conditions have a silver lining or that somehow SaaS is immune to it. In fact, Trip Chowdhry recently remarked that 1st generation SaaS companies are hurting and have dim future prospects, with SaaS startups facing a bleak fate as well. That said, ISVs facing declining or stagnant revenue streams may be able to leverage the climate and start down the SaaS business model path with the intent of reversing the negative trends they were experiencing. Not possible? Not all of today’s big companies were started during boom times.

What we’re starting to see in a variety of sectors in today’s climate is a significant downturn in spending. Clearly, this affects everyone. Operationally, businesses are and will continue to look at spending patterns to determine where to cut expenses and reduce aggregate financial obligations. In the software space, it might mean significant decreases in support and license renewals, as well as decreases in spending toward new licenses for on-premise products. Generally speaking, if you’re an ISV and your customers revenue streams start to significantly shrink, your bound to get hit. Most companies look to cut out non-essentials, which may include license renewals. The interesting thing is that the yardstick customer’s use isn’t really based on cost benefit; trivially, they’ve already assumed the benefit of your software outweighs its cost because if they didn’t, they wouldn’t have bought it. Instead, they look for big ticket items that may not be core or critical, or for which a workaround or alternative exists. Many types of software fall in this category. From a SaaS perspective, if your customer is spending $200 a month paying for 4 seats of your service, odds are they won’t cut you out since the savings are negligible. This shows a certain price sensitivity property to this decision. If the price of your software goes up or the ability for one of your customers to meet a financial obligation for a license goes down, they’ll probably stop buying.

Being that economic issues at hand are widespread, it wouldn’t be terribly surprising to see revenue contraction. The reason I bring up SaaS is that one of the conversion problems with SaaS is revenue cannibalization. If your revenue streams are drying up, it might be wise to look at a SaaS model. There is an equilibrium point where the significantly less expensive SaaS model will slow or even stop customer attrition. Yes, your revenue stream might be smaller, but it won’t be disappearing and you still have active accounts. Leveraging this scenario to move to SaaS is very appealing to me because it helps solve an immediate problem within a couple of quarters (and significantly less if you’re leveraging a good PaaS) and positions you to look toward growth again by placing yourself in a price bracket that should be a little less prone to being cutout as an egregious expense. If I’m looking to save money at Apprenda, I wouldn’t normally look toward cancelling inexpensive recurring services like a few software packages I subscribe to, I’d try to identify big ticket items.

Do you feel that this might be an opportunity for some ISVs? Are there other product development strategies not involving SaaS that might be relevant and helpful? Share your thoughts!

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