I’m at the Enterprise Software Summit in Sundance, Utah. When I was here two years ago, the talk was on Consolidation (with Siebel and Peoplesoft executives in attendance) and Business Models.
Today we heard from a successful SaaS vendor and a good discussion on open source business models.
The structure of the event is great. Sessions from 7-10am and 4-7pm. In between is open time, and while it is a ski resort, you can get work done. Sounds great in theory, and it is disarming and good for building relationships, but perhaps I’m just trying to one-up Scoble and Euan from their Swiss Chalet expo.
Jeff Nolan is taking far better notes than I, but I’ve included my chicken scratches on Greg Gianforte on SaaS and Matt Asay on Open Source Business in the extended post…
Greg Gianforte from RightNow:
http://www.rightnow.com/
CRM, hosted focus, 5k customers
Quality of Service is the only long term differentiation. They have >90% customer retention rate. Financial impact of retention on P&L, diff between 90% and 60% is 22 points of bottom line margin. In other words, its easier to get revenue out of an old customer than a new one.
Went from 50/50 5 years ago to 90% hosted. 5x lower TCO, 5x faster deployment. Costs less to do hosting than provide tech support for someone that deploys in house. Avg deployment takes 45 days. Focuses on a high value open wound deployment.
•Someone else says the gating factor is business analysis for onsite deployment
One size might fit all for SMBs, but not for large enterprises.
• deployment
• payment
• upgrades
• integration
• customization
Never seen hosted move to onsite, they see it the other way around. Onsite is essential for Financial and government vertical.
Dont mix up payment models and delivery methods
Every thing they sell is a license, not subscription accounting. They expense their selling expenses up front (having an asset on the balance sheet which is a pre-paid expense can bite you if growth slows). Salesforce does the opposite.
Their cost for people, bandwidth, datacenters, etc. is 6% of the top line.
5-6 year planning horizon would favor perpetual
Forced upgrades dont work. Must be multi-tenant and multi-version. Upgrade automation essential, self-service (because a forced blackout doesn’t work globally, and a decision should be by the customer for when to have the downtime and when to train people on new versions), makes a production copy for test and train and then it becomes the prodution. Let the client choose to upgrade. Fixes provide incentives to upgrade, nobody remains on 1.0. No incremental cost for running old versions. Has a sunset claus for two versions back.
Because they are based in Montana, they have half the attrition of the industry.
We don’t try to make IT look like idiots. More and more are getting it, they dont want to be in the business of swapping backup tapes, but as a strategic consultant to business units. Objections: security, audit turns out ours is better than theirs. two production datacenters and a hot spare with RT data mirroring.
Sales compensation is the same for hosted and on-prem. Pay on contract value
.
Having customers who only paid up front be offered a subscription model is very cannibalizing (e.g. Siebel)
Summary:
• Packaging: delivery and pricing options
• Architecture for hosted delivery in large enterprise: multi-tenant and multi-version and upgrade automation and ability to customize. Has seperate databases for each client.
There has never been a market leader that went to market initially without a direct selling strategy
Salesforce reliability problem drags the industry down. A big breach will bring the industry down.
People and process is the value they create, how they will compete against open source. But they are one of the biggest users of open source in the world (maybe greater that)
LAMP, 1B interactions since 03, more than 300M page tunrs per month, one of the largest MySQL, oracle-free, 99.98% uptime in 05, security and a CSO
Matt Asay, Open Source in Application Land
Code attributes: modularity for drive-by-development and bug fixes, great initial code base, degree of applicability (need a large user/developer population from which to draw)
Market attributes: consolidation around 2-3 gorillas, multibillion
Alfresco: OSS CMS. 11k downloads in first ~6 months. Great management team, Accel ventures funded, Mayfield series B.
• 5-10x over documentum, sharepoint
• best repository/document management available
• Ease of use: google-like search, simple workflow within a shared drive, easy ui
• 1/5 documentum, 1/3rd the cost of sharepoint
>60% of customers felt access to source code was critical (MS study), but 5% would look at it, and 1% would modify it
If you modify, it is at your own risk, violate support contract.
Why the interest in oss? cant do anything, dont have time. The point is trust and flexibility. Which is the currency of open source developers.
Vendor benefit: Global QA, leverage develop, lowered barriers to trying
Partners: ease of customization, enhancement. SugarCRM’s community is 80% partner-based (smaller SMEs, Technology Services Group, avg sale is $15k and going down, but implementation is flat)
Mozilla public License
or, ESME edition (adds security, permissions, roles, multiprocessor support, caching, failover, replication, etc.), $125 per month, 10 users, 1 year in advance, 20 cases per year, commercial use
or Enterprise Network at $625, no user limit, $7500 per year, 100 cases per year, commercial
use
Customers: Co-development, lower prices, improved product (performance, functionality)
Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.
He also writes Ross Mayfield’s Weblog which focuses on markets, technology and musings.
