Amy Wohl's Opinions on SaaS

Reports of SaaS's Death are a Bit Premature

From time to time we have had a SaaS provider fail to provide his promised services.  Usually it's because of a server or software failure.  Occasinally it's because of an inability to handle increased volume (scale) or an act of nature (power outage).

Each time, naysayers use that as an occasion to say that SaaS can't work.  Perhaps it might be better to use it as a way to look into the failure and figure out a way to evoid it n the future.

SaaS Naysers will enjoy John Dvorak's article on the occasion of the failure of Microsoft's WGA Server, which provides authentication.   It took them most of a day to get back in business.  Personally, I wouldn't judge the SaaS business on Microsoft's performance -- they are scarcely a seasoned performer here.

But it is good advice to consider where your applications are running in the distant cloud and just how secure the system behind your delightful software might be.  Happily, the days when ASPs insisted on running their own (tiny) data centers is over and most SaaS ISVs take advantage of specialists who make sure that the services they provide can keep up and running even when a server goes down or a power outage requires transferring users to a server in another physical location.  If the application is criticl to you, asking who and how its infrastucture works is cheap insurance.

Bombarded by Innovation

Last year I attended two Office 2.0/Web 2.0 conferences and I left them feeling overwhelmed, humbled, and totally delighted.  For a technology junkie like me, there's nothing like spending a day or two being bombarded by technology and trying to sort it out on the fly.

You stand there in the aisle thinking:

• Is this really new and unique?
• Is it valuable? So valuable that everyone will want it?
• How does it fit into the way the market is evolving?Does using it demand rearranging all our ideas and plans?
• How much is it going to cost?
• Who are the people who are going to bring it to market?  (Tricky -- the people who invented it may have brought it to the conference in the hopes of finding a buyer or a marketing partner)
• And -- most important - would I kill to have one now right now?  (I remember feeling that way the first time I see the pre-alpha version of PowerPoint, back when we did slides by using an Orator Typeball on our selectric or paying a graphics artist to create the slides.)

So, once more into the fray I go at Office 2.0 in San Francisco (at the St. Regis Hotel, September 5-7).  They are expecting more than 50 of these goodies in two jam-packed days.  Since they will have multiple things going on at once (no fair:  I want to see it all), I will no doubt be zipping around like a maniac trying to be certain I haven't missed anything amazing.  If you want to join me, click here:  http://www.o2con.com/

And bring your roller skates.

Workday Challenges the ERP Market

Sitting in the SaaScon audience last April, listening to David Duffield of Workday speak about their ambitious plans to have not only an HR product, but a full business suite, including financial and customer resource management, we perched eagerly on the edge of our seat, watching the roadmap unfold.  We knew that Duffield and his PeopleSoft team had a great track record and had, in fact, brought the HR applications up and to the market very quickly, but it still sounded very ambitious.  Since then, we've been waiting for the other shoes to drop.

Today, Workday dropped the shoe.  They announced the beta of their financial software, inclulding both Business Measurement and Revenue Management.  The offerings start out as substantial but incomplete, when judged against offerings from major vendors, but the rest of each offering is on the roadmap, so beta users (none have been announced yet) can be reassured that they're coming. 

Who will these customers be?  Workday targets customers in the upper mid-market, from firms with $500 million to $2billion in revenue, especially in the services industries.  They're not targeting government, education, or manufacturing, all SAP territory, and they're staying away from large enterprises.  We'd expect initial customers to come from some of the 20 customers who are already using their HR software.

Workday intends to go to market with a direct salesforce, but notes that its had some difficiulty hiring -- we suspect that's because of it's aggressive pricing.  Workday expects to be able to provide its financial for $100,000 per year, a small fraction of what traditional financial software would cost.  Implementation costs for SaaS software are also usually much lower than the multi-million dollar cost of SAP implementations. 

Of course, the devil is in the details:

1. Can Workday finish its software offering on time?  (its track record suggests it can)
2. Will the functionality of its products be competitive?
3. Will it be able to integrate legacy applications into its SaaS model? 

The last is the most intriguing.  Workday is using an Object Management model rather than the SQL database model that other ERP packages rely on.  This, they claiim, makes it far more flexible in being able to offer infinite variations and in being able to integrate legacy software.  Still, they admit, the legacy software is the hardest part.

I'd recommend an excellent overview article in ZDNet and an excellent analysis by Phil Wainewright.

I'd also like to recommend that you check out the survey on Saas at SoftLetter, if you're an ISV and participate so you can share the results.  Click on http://www.softletter.com/survey/saas_2007.htm?sm=zokfa7246nv7oosNOtwl6w_3d_3d

And check out the seminar SoftLetter is holding on SaaS October 3-4 in Santa Clara, CA at http://www.softletter.com/pages/marketing_and_selling_SaaS_seminar.shtml

What Will a Microsoft Services Model Look Like?

Addressing their Partner conference in Denver yesterday, Steve Balmer of Microsoft walked a tightrope, trying to energize partners to continue to aggressively support sales of Vista and Office 2007, while offering glimpses into a more Web-centric future.

He has to do both.  No one can walk away from the billions of dollars of revenue Windows and Office generate without a strong, in-place, new plan, already successfully executing, to replace them.  Microsoft isn't ready for that.

On the other hand, partners are clearly concerned about making more investments in the current Microsoft model while they watch the new Web 2.0 model take root (and perhaps take over). 

So Balmer has promised them tools by year-end to permit them to build on top of a Microsoft Services model, based on .Net.  Not clear is just how much it will depend on Microsoft services based in the cloud and just how much desktop and server software will still be required.

A good overview of Balmer's speech is in Mary Jo Foley's blog at http://blogs.zdnet.com/microsoft/?p=567&tag=nl.e539.

More interesting is the hint that Microsoft is going to offer a web-based collaboration and communication service based on the custom application it created for Energizer, plus the notion that partners could create differentiated offerings of their own on top of Microsoft's offering.

Could Google Buy SalesForce.Com?

Phil Wainright has speculated on the delicious possibility of what could happen if Google bought SalelsForce.Com and used the merger to enter the business applications market.

This is one of those rumors that is so delicious it's hard to pass up, even though there are reasons it would be hard to pull off:

• It would be a high ticket merger and Google has just done that -- probably at least $10 billion.  Of course, with Google's huge market cap, anything is possible.
• Mark Benioff, SalesForce.com's colorful and forceful founder and CEO might not like the idea of working for someone else.  Phil suggests that he might accept if he was offered head of a well-funded business applications software division for Google (what he'd like SalesForce.com to grow into anyway) and the chance of running Google itself, in the long run.
• This would be a big step for Google, who is just figuring out how to provide business applications and support.  However, SalelsForce.Com has lots of experience here, so they might actually be able to help.

The question, of course, is what would happen in the overall market.  Let's speculate:

1. Software as a Service (SaaS) would immediately be enormously more important.   Companies like SAP who thought they had plenty of time to get to a full SaaS model may find that they are much more pressured.  Companies like Microsoft will need to rethink exactly how their hybrid (desktop plus Internet) model competes.
2. Google could help business applications penetrate lower in the SMB and SOHO markets using an advertising-supported model. 
3. Developers might feel compelled to develop for the Google/AppExchange platform because of its reach and economic strength.  This could overcome Microsoft's very strong hold on developers for the SMB market.
4. Enterprise customers might feel more comfortable with a much bigger company behind SalesForce.Com's applications and infrastructure, again expanding its reach.

It's fun to speculate.  Just don't assume anything will happen. 

Join me at SaaScon

I'm going to be speaking at the SaaScon Conference in Santa Clara, April 17-18 (I'm a program advisor) and the program looks great. 

If you read this blog and you'd like to join me, you can take $100 off your registration fee by going to www.saascon.com/register  to register and using the following code:  AWDEAL47.

I'd love to see you there.

Amy Wohl

The Best Test of SaaS is Using It

For some time now I've been following the adventures of Xeequa, a new On-Demand CRM company, which reported its start-up activities in its CEO's blog.

He's on his way to speaking at a SaaS conference and he's published a longish report in that blog on how they run their own company almost -- but not entirely -- on SaaS.

He gives you a fairly complete explaination of what they picked and why.  Some of hie choices wouldn't work for a larger company (Quicken Online for ERP???) but it allowed them to come up fast and with a minimum of fuss and, of course, that's the point.

He already  notes some actual or potential correction points where if you change your mind you can just take your data elsewhere. 

They also back up and host everything on line.  Xeequa points outs that this may be safer than doing it internally since most data fraud problems are internally generated.  An interesting thought.

I'm not suggesting too many existing companies will rush right out and do the same.  We drag our legacies with us.  But we will consider SaaS appkications frequently for new applications and remote users -- and as replacements for existing applications that have become expensive but contribute nothing to the goals of the company that can't be achieved more easily and inexpensively via SaaS.

New companies like Xeequa -- and not just high tech start-ups -- will increasingly consider using as many SaaS applications as they can, cutting their IT costs -- or as Xeequa likes to say -- their Information Management costs -- to the bone.

A Note on Windows Live

These days its hard to decide where to post what, so you might like to look at my brief post on Windows Live and its reference to ZDNet's slide show on the subject.  Just click over to my other blog at http://amywohl.weblogger.com/ and read about it.

Will Google's Entry to Paid Software Change the Market?

I've got a dozen things I'd like to blog about, but they'll all have to wait because today Google finally announced (it had been rumored for weeks) that it was going into the corporate application software business with paid subscriptions version of its application suite.  Google Apps Premier Edition. 

Designed for business users of any size, from a single user to a company of thousands, Google expects many of these users to come from the SMB market, the "white space" where users have been underserved, required to invest in not just expensive desktop software, but also the hardware and infrastructure and the human resources to make it work.  But SaaS offerings attract whoever likes them and Premier Edition is already attracting a number ofo enterprise-size customers, less as a replaclement for their traditional Office solutions and more as a complement, serving a larger number of users.

Google hasn't changed the offering itself (yet!), it's the same portfolio os lightweight desktop apps for word processing,  spreadsheet, and document management, as well as email and calendaring, that were already offered for free.  An important part of the Google value proposition is that not only are the apps available anywhere with browser access, they offer collaborative features, permitting sharing among users, including users across companies or supply chains that can't easily access applications within a single company's firewall. 

Google has also added some new features to the subscription service, such as much more email storage (10 Mb instead of 2Mb per user) plus a 99.9% availability of service guarantee and 24/7 technical support.  All that for $50 per user per year is a pretty good deal.  Google Premier users will also be able to access their email accounts via Blackberry devices.

A Different Approach to Office Work

It's impiortant to think of this less as a competitor to Microsoft's Office Suite (or, for that matter, to new versions of Lotus Notes with their embedded lightweight editors), and more appropriately as a different approach to office worker support.  Consider this:

• The Google approach is entirely Internet-based and always was.  This means there's no need to try to incorporate previous non-Internet software approaches or to protect existing business models.  Google simply is a net-native, fully Internet-exploiting model. 
• Google isn't trying to replicate Microsoft's office software portfolio.  Their desktop applications (word processing and spreadsheets, for example) are lightweight, simpler versions which don't attempt to match the deep functionality of more mature products. 
• On the other hand, as Rajen Sheth, the Product Manager for Google Apps Premier Edition, stated, the Google portfolio will grow over time in both the functionality of individiual applications and the number of applications in the portfolio.  However, they are likely to continue to emphasize ease of use and collaboration and they may go in application directions that are quite different than those chosen by traditional office suite vendors.

Rajen went on to remark that with over half the workers in the US without email addresses, Google clearly clearly has lots of market opportunity.  He doesn't believe that the market for Google will be limited to small businesses and, in fact, several quite large companies are already testing the Premium Edition (Procter & Gamble and GE have been mentioned in every story). 

There are already over 100,000 users of the free version of Google Apps (plus a large community of university users).  Google has no intention of discontinuing of limiting this version.  Premier will be differentiated by extra features and technical support.   Microsoft has about 250,000 users of its Office Live service, an on-line service for the small business market, designed to be used with Office on the desktop (Microsoft calls this an "attached service" model).  We'd guess that with its installed base of free users at about the 150,000 mark, Google will have more than 250,000 users by the end of the day tomorrow! 

Realistically, Google is likely to attract a large audience for its paid product.  The product is so simple to try out -- a company can enroll any number of users and immediately begin using the service with no internal support.  In fact, we'd guess that there will be some self-selection in the beginning, with some users simply trying out the service on their own or in small groups and then going to the company to sell their success as a reason for expansion.  In other cases, we suspect companies will use Google's new paid service for groups of users it cannot well serve with its current strategies, such as remote users (whether they are individuals such as salesmen or remote locations), teams which include non-employees, and ad hoc activities where it wouldn't be practical to set up a group of users quickly.

Look at it this way;  We are at some kind of crossroads, albeit one with very fuzzy edges.  In the past is the old kind of PC desktop productivity applications and the old kind of office automation or groupware which required significant resources for impolementation and management.  In the future llies the idea of a vast variety of user-oriented services, situated in the Internet cloud, and easily selected and "implemented" (selection is almost the whole task) by the users themselves.  We are somewhere in the middle.  Exacty which approach will succeed -- all Internet, a hybrid, the traditional model, or someothing as yet undiscovered is not yet known. 

We're sufficiently intrigued that we're doing a bit of research around this topic (some things, like your roots, you can never quite get away from) and we'll tell you about what we discover as we continue down that path,

 

A SaaS Solution to a Cyclical Clash

I read Peter Coffee's column on what might happen if the Microsoft CES anouncement to put computer systems in Ford cars comes to pass with some interest.  He notes that we buy cars on increasingly lengthy cycles -- I tend to keep mine for 10 years or so unless something intervenes like an accident or a very expensive repair in an aging vehicle.  But we tend to trade in our computers a lot more often.

Car manufacturers have looked longingly at consumer products like cell phones which tend to get traded in every 18 months.  They're not likely to get  multiple like that, but they'd settle for the somewhat faster cycle of PC's.

But what if we say, "No." and refuse to change our car buying habits.  After all, as Peter points out cars are safer and relatively cheaper these days.  We don't have any reason to trade them in every three or four years.

He suggests we could have a standard piece of hardware for cars, to make it easy to upgrade by swapping up and out.  He also points out that consumer grade products are not nearly so robust or secure as enterprise ones.

We can, of course, solve all these problems at once. by having only the interfaces to information in our portable devices (including cars), plus some storage to permit off-line usage, and let bullet-proof infrastructure providers, Software as a Service that is, offer the rest.  That way, we won't have the upgrade our car electronics nearly as often (modern browsers run even on quite old computers, you may notice) and we can still have very high levels of security and data integrity.

It reminds me of aonother cyclical clash I wrote about over 20 years ago.  Do you remember the battle of the titans when AT&T bought NCR and IBM retaliated by buying its own telco, Rolm.  (circa 1990-91).   I remember noting that the problem would be there was no common decision maker - computers were bought in the IT department and telephony equipment by a totally different (and generally less prestigious) group.  Also, mainframes were bought on seven year cycles, minis on five and PC's on three, but telephony systems were bought only when a new company was formed, a company moved to a new location, or when the company had to either buy a new system or cease to operate -- typically every 15 to 20 years.  The chance of those cycles coinciding and allowing the decisions to be coordinated (to take advantage of a computer-telephony company) was pretty slim.

I have a feeling that the chance of youir need for a car and your need for a new wireless, handheld coinciding is going to be pretty slim, too.  A car synching station which sends the data back and forth to an SaaS operators' data cloud?  That I can easily understand.