Sinclair Schuller over at SaaS Blogs poses an interesting question: Is it the right time for ISVs to enter the SaaS market in this economy? Will the economic turmoil provide an big opportunity for subscription software?

Sinclair argues that companies aren’t looking to cut monthly recurring expenses to reduce cost. Instead they’re looking to cut large expenditures or big ticket items that will make a significant dent on cost. Therefore Schuller argues that SaaS is, in a sense, is immune to corporate downsizing for the reasons above.

I’d like to add my thoughts to this discussion. First of all let’s assume that we’re talking about software that is business critical like CRM or ERP. As a SaaS provider, your product has to have some degree of importance for your customers’ day-to-day operation. Otherwise, it doesn’t matter economic crisis or not, you’ll be out of business sooner or later.

With this in mind, I would say that companies ARE NOT going to make an all-or-nothing decision. The CIO is not going to say “Should we completely scrap our Salesforce CRM to cut costs?” Instead, they will begin to throttle their consumption of these services to reduce their monthly costs. I mean isn’t this the value prop for SaaS? So instead of doing the right thing and buying a login for each employee. They’ll start doubling up or sharing logins. Or they’ll only provide logins for sales reps and not the marketing department. Or they’ll downgrade their version since they extra features aren’t always mission critical. Anyways you get the idea. Just think, when money is tight at home; you don’t stop eating you just eat less.

So I’d suggest to ISVs looking at getting into SaaS to pay close attention to the pricing model and make it recession proof. Just because you offer hosted services doesn’t mean people will flock to your company. This is not like the movie Field of Dreams with Kevin Costner where “if you build it, they will come”.

Take for example, Omniture. Their pricing is NOT based on per user. I can create as many users as I want because it’s based on the amount of data you send to their system. Basically, Omniture is BI system where marketers can embed code into their website to collect data and analyze visitor behaviour. In this case, you can’t really throttle the amount of money you spend on Omniture. What you pay is directly related to the amount of traffic on your site. And what are you going to do, tell people to stop visiting your site? Or will slowly stop implementing Omniture across your entire site? You could do that, but without the intelligence you wouldn’t be know how to enhance your site and generate more sales. So this doesn’t give customers a way to throttle their consumption but at the same time it provides a critical service for the company and thus cannot be axed altogether.

I think that’s the key. Figure out a subscription model that is well within your customer’s budget make it difficult to throttle. If you provide extreme value to your customers then it’s difficult to be on the cutting block. It’s best to nail this down before acquiring a single customer. The pricing model isn’t something that you can just change without pissing everybody off. Why else do you think Telcos charge per minute for your mobile, but charge a flat rate for the landline? I bet it even costs the Telcos less when you make a call on your cell phone than your home phone. But what’s done cannot be undone and if they all of a sudden started charging per minute at home, hell would break loose.

After catching a whiff of Ballmer’s hint, it looks like they’ve hired people to stand outside PDC with donuts trying to promote their Platform.

Frankly I think it’s kind of juvenile. Who are they going to convince by hiring some kids with rickshaws and Krispy Kreme?

Via Seattle Tech Report

The Salesforce.com bikes / Joseph Tartakoff

Is CRM becoming a commodity? It seems like anybody with a application that contains a Leads, Accounts, Contacts and Opportunities tab can be a good CRM. Which begs the question, are people paying a premium for Salesforce.com?

NetSuite is not the first company to aggressively target Salesforce.com customers. But they just announced their RenewForce program which allows current Salesforce.com customers to switch to NetSuite for half of what they pay to Salesforce.com. Apparently this also includes service and support which is a pretty tempting deal. I can tell you right now, most customers I worked with were left dumb founded after they bought Salesforce. Most people were puzzled because when they thought they bought into Software as a Service, they really got software but no service.

Offer expires at the end of the year. Click here for more information.

Thanks Wayne

The energy was definitely upbeat at the company meeting a few weeks ago. There are a lot of products in the pipeline that I’m very excited about. And I’m not talking about Windows 7.

Some think that Microsoft just doesn’t get software services. But maybe after next week, many will change their opinions.

PDC is from October 27th - 30th. I’ll try to update this blog with the latest announcements.

Both of them will discuss the following topics:

• Identify the right business goals and metrics to focus on
• Preserve cash flow while safeguarding growth
• Develop effective strategies for distribution and expansion

Webinar is on October 8th at 11 AM Pacific Time.

Click here for more information and to register.

In August, I packed up all my things and moved to Seattle. I’m actually now back at Microsoft working as a Program Manager in Windows Live. I’ve returned to the team where I did my internship and I’m loving it.

This doesn’t change the fact that I’m avid watcher of this space and a big believer in the SaaS model. I guess this is just how the cards were dealt. I plan on posting often and keeping this blog going. Hopefully it provides as much value to you guys as it does for me.

By now you have heard of Chrome, Google’s browser that is set to break JavaScript rendering speeds. There’s plenty of articles on the web about the good, the bad, and the ugly of Chrome; so I won’t get into that. However, Microsoft seems to have been shaken up slightly - in another area than browser wars.

This article from CNET called Chrome’s JavaScript challenge to Silverlight gives a quick insight into what Microsoft is thinking. Silverlight is Microsoft’s Flash “killer” and it has been gaining momentum in the past couple of years. One of the features that Chrome set out to do was to make JavaScript rendering faster than in other browsers (and in the process making all Google Apps faster). Here is some proof that Google is on its way to achieving that. Well, now that we have faster and faster JavaScript, what’s going to happen to Flash and Silverlight? If JavaScript is faster than Silverlight, maybe that will become the programming framework of choice. That is what Microsoft’s Silverlight team is getting anxious about.

Joel Spolsky had a good post (”Strategy Letter VI”) relating to this about half a year ago. In a section of his post he said, as time goes on, technology will only get better and faster. This is what I interpreted from it: JavaScript may be “slow” now, but that doesn’t mean you should limit yourself to technologies that are fast today. Build your software the way you WANT it to be, and the speed of the technology will catch up. By that time you will have developed your super-cool application, while everybody else will be re-coding their old applications to use the full capabilities of the new speeds.

And here we are. Chrome is out, setting new speeds for rendering AJAX; and Silverlight has met a new competitor.

Basically this is a guest article written by the maverick himself; Marc Benioff. Long story short:
Web 1.0 was about getting businesses and people online to ‘transact’ or lookup information. Web 2.0 was about getting users involved in the process. Getting users to blog, upload/tag pictures, Digg pages and contribute to wikis. Although each wave operates in an overlapping and simultaneous manner, Web 3.0 is emerging on the horizon.

Marc explains that Web 3.0 is about leveling the playing field for developers. Web 1.0 was the mainframe era and Web 2.0 was the PC era. Web 3.0 is going to be the era of cloud computing. We’re going to see much more non-technical people build and release ‘technology’. Since the underlying plumbing and infrastructure is being provided by services such as Force.com and Amazon, developers can now concentrate on business logic, usability and the ‘killer app’ (interesting, that’s what many people promised with J2EE). Not only will cloud computing enable more and more developers, it will also lower the barrier to entry for companies of all sizes. We’ll be able to find smaller more specialized ISV’s because anybody can develop on the cloud as long as they have a PC. I have even heard of a university student paying their way through school by providing customization services for Salesforce.com customers!

I really agree with Marc. I think if somebody wants to make it big in the next wave of the web it’s going to be about building apps on the cloud. I remember my economics prof Larry Smith once told us, “Go to the workplace, find some inefficiency that costs your company a lot of money but can be solved with software. Once you find it, quit and start a business around solving that inefficiency.” Today with the emergence of Platform as a Service, that door of opportunity could never be opened wider.

TechCrunchIT via SalesforceTimes

Both discussions were focused on the future of SaaS and where the industry is heading. The discussions surrounded the questions of “Why is SaaS having trouble entering the enterprise space?” and in particular, “Why hasn’t there been another breakthrough company like Salesforce.com who has penetration in the enterprise?”

For the first session,‘Will the Next Salesforce.com Please Stand Up?’; the panel consisted of execs from Lithium, Intel Capital, nGenera, Zuora & LiveOps. In an attempt to tackle the question of why there hasn’t been another big enterprise play in SaaS, CEO of nGenera Steve Papermaster puts it bluntly:


“First of all, there has been in large part a failure to innovate. In my view, there’s been a lot of me-too solutions moving to SaaS taking initiatives, point applications, similiar functionality and simply moving it to a SaaS environment. It changes the technology paradigm and billing cycle but it doesn’t change the game for the customer. And if you’re not changing the game for the customer then you’re not providing disruptive change in a positive sense. If they can find a way to run and lead their business very differently, then you’re really not providing breakthrough value for your customer than before.”

Managing Director Lisa Lambert from Intel Capital believes broad acceptance of SaaS is still being validated. “To be honest, they haven’t overcome some of he issues around security, integration, customization or even around flexible pricing models.” Later on Lisa adds, “I think the real reason is fundamentally that the value proposition really appeals to small businesses. At the end of the day small businesses were excluded from enterprise software … fundamentally, SaaS answered that question. It made a lot more sense for small businesses to buy software as a service.”

During the other session (‘Will SaaS Disappear in the Cloud?’), execs had a different opinion of why the enterprise hasn’t fully embraced SaaS. Hewlett-Packard’s VP of Cloud Services, Russ Daniels believes that the enterprise is over-regulated and that the shear complexity of regulations and compliance is the true barrier to entry for SaaS. He explains, “You can look at an enterprise business and think they’re a dinosaur and think they’re slow. But what they’re in fact saying is hey look ‘I have to deal with regulatory compliance, I have to deal with data portability’. It’s nice if I can back out of a deal 3 months later. But I got 3 months in there and how do I get it out? And when I get it out, it’s in the form of the application. The second is process transparency, ‘How do I know how this stuff is working’. And finally, you’ll have all the fine grained data security. If I take an HP confidential powerpoint deck. and I put that on any free place to store it. I’m violating HP’s security policy and I could be fired.”

The general consensus was that SaaS is still a hard sell for the enterprise. It requires a longer and a more complex sales process and thus leads to higher customer acquisition costs. The companies that will really succeed are the ones that can provide value beyond what the SaaS delivery model already promises. So in a sense, lowering cost of ownership or automatic upgrades are just not compelling enough. It’s easy to convince a small company without any software to purchase a SaaS application. It’s a no-brainer decision of: “I don’t have a CRM, I need one.” In contrast, vendors face a tougher challenge in the enterprise because they have to convince their customer to replace an application that may already do the job reasonably well.

Drew Clark from IBM Venture Capital puts it succinctly, “What we’re talking about is fundamentally a service. It’s not software. What comes with a service is a set of characteristics; about the delivery, the performance and so our customers are going to hold us accountable for service level performance. They’re not looking at how many bugs are in the code. They’re going to look for performance against an SLA or the quality of service.”

Click here to watch ‘Will the Next Salesforce.com Please Stand Up?’

Click here to watch ‘Will SaaS Disappear in the Cloud?’

Other sessions worth watching:

The Two-Year Outlook for Tech M&A and IPO
Where are the Blue-Chip VCs Placing Their Bets?

1. eVapt’s Exceed Your Revenue Goals: 4 Actions for Unlocking Overlooked Sources of Revenue Inside Your SaaS Business

Phil Wainewright who has a popular SaaS blog on ZDNet will be moderating this webinar. Reuben Swartz, President of Mimiran and eVapt’s VP of Sales; Joe Tinnerello will presenting the following topics:

Learn how to generate significant marginal revenue by:

* Deploying existing, easy to access resources
* Model prospecting efforts on the most profitable existing relationships
* Better spend marketing dollars on the segments that drive revenue growth
* Development customer strategy that also integrates retention and price optimization
* Move your clients beyond product-focused cross-selling to predictable, long-term customer-centric growth strategies.

This session is indispensable to SaaS company executives who manage:

* Sales
* Marketing
* Customer Support
* Development / Engineering

Click here to register for eVapt’s Exceed Your Revenue Goals

2. Salesforce.com’s The Force.com Toolkit for Google Data APIs

This seminar is intended for developers who want to build Salesforce.com apps that directly integrate with Google Apps. Presenting are Ron Hess (Salesforce.com), Jason Ouellette (Appirio) and Ryan Boyd (Google).

During the free live webinar, you will:

* Learn about the Google Data APIs
* Explore the Toolkit functionality
* See a demonstration of an application that uses the Toolkit
* Get all you need to start using Google Data APIs in your own applications

Click here to register for Force.com Toolkit for Google Data APIs