In this swirling world of the digerati, we tend to encourage others to “drink of the kool aid” in the way that we are. What I mean is that we push our more mainstream brethren to partake in all the things we are – twitter, plurk, identi.ca, blogging, social media etc etc.
I’ve often felt this is a dangerous thing to push people into – us bleeding-edgers can cope with a service going down, or even entering the deadpool, oh we’ll moan about it ad nauseum, but deep down it’s kind of what we expect with a lot of these things. In the same way that its a pretty cool thing for VCs to be able to say they were in at the ground floor on the next Google, it’s pretty cool for the digerati to say they were one of the first to use the 2.0 offering du jour once it achieves critical mass.
One of the most even-keeled posts I’ve read lately about uptake for later adopters is from Steve Borsch. Steve gives sage advice when he says, in relation to one of his corporate clients question about whether Twitter should be one of their marketing platforms, that;
[you should] begin to participate, watch it (especially for brand mentions), but make it very peripheral to the rest of [your] strategies since the service simply isn’t reliable
I agree wholeheartedly with Steve but would extend his comments beyond merely reliability – to include viability, business-sustainability and the other due-diligence measures that somehow seem to have been forgotten in this mad dash to the kool aid fountain
I recently had an interesting debate with someone about ‘customer ownership’ and how this plays out in a SaaS world. It’s perplexing because my verbal sparring partner has some great points, but the root of my unease with the whole debate was based on uncertainty about if "ownership" even matters anymore?
Let’s look at the evolving SaaS reseller and integrator market. A bunch of companies have made money through selling, installing, integrating and managing on-premise software, but have now have seen the writing on the wall and are looking at morphing their business models to support SaaS. In this case they still sell, but their services are significantly different. They configure, train and provide "2nd level" support.
The issue is that in the first instance, the customer was ‘theirs’. They held the core engagement and their walk away position was strong. But in a SaaS world (Salesforce.com, or even Microsoft’s hosted exchange product), the SaaS provider holds the customer, they are no longer "owned" by the integrators. So the integrator can do the up-front work, but can easily be disintermediated in the medium to long term. Imagine if Salesforce.com or Xero or another SaaS player decided to increase revenue by building a consulting and training practice…what then for their channel partners?
My counter argument was that in a SaaS world you are on the line every day for great delivery. This includes the channel partner – if you don’t deliver then of course you can lose the customer. There is also a lot of relationship and customer knowledge that comes with the deal AND if you are dumb enough to be a one track pony then of course you are under more risk. What I mean is, if all you do is sell Xero or Salesforce.com and you haven’t thought about expanding your engagement with that customer with other services like change management etc then you created a high-risk situation yourself.
What do you all think?
Is customer ownership still relevant? If so how does it work in a SaaS world? Where do you stand on this? I think its important because a good channel model is going to be increasingly important to SaaS to counter the stagnant growth perceptions that exist.
I posted the other day about the concerns I have for the multitude of Web 2,0 businesses that have no real clue about how, when or from whom they’ll monetise their product.
Mike commented astutely saying that (edited for brevity);
…surely you know that “free” isn’t “free”…When I take SME’s through a “free” service I am very honest that it’s NOT “free”. It’s paid for by advertising which in turn they contribute to by paying for it with their “data” and “attention”.
I think “free” is different to how software/computer stuff has normally been moved around (as a product, like shoes, cars and other physical stuff) but the alternative ways of making $$$ are also occurring. It’s not one or the other, it’s a world of every which way
The trick is to be very clear HOW the money is coming and not be sucked into some sort of hippy concept of “free”
And Mike of course is 100% correct. Sort of…
Third part paid software
Google Apps (for example) IS a monetised service. The fact that the monetisation comes from third party advertiser and not directly from the user does nothing to diminish the fact that it’s a paid for service. Advertisers pay Google in return for the attention of the users of the applications.
So where’s the problem with that? Simple really, the jury is very much out on whether or not online advertising of this kind is in fact effective. Sure there are staggering amounts of money to be made from online advertising, but just imagine what would happen if it was discovered that no one actually looks at online adds. There endeth the viability of Google apps (hell most of Google for that matter) as we know it.
I wonder if users (myself included) really consider this risk when launching into “free software”?
Vaporware
My definition of vaporware is software with no clear monetisation path, that is created on the expectation that major uptake will create significant value and monetisation opportunities for the product. There are two classes of vaporware, both equally invalid;
the “we’ll charge once people have got used to using it” model
the “but we’ve got 100 million eyeballs – that must be worth something” model
Subverting the free model
I know all about freemium. I know all about up-sell. I know all about creating stickiness. Notwithstanding any of that it is very very difficult to change users attitudes once they are used to a free product. Charging for something that was formerly free is a staggeringly hard change to make. Period.
Dollars in eyeballs
I’ve got a theory that the monetisation model based on potential future users is no different to the hysteria that pork belly trading caused. In effect businesses are borrowing against a possible future value of a business, with that future value wholly based on eyeballs.
This model clearly feeds back into the “third party paid software” model as detailed above – only it’s more risky. Not only does it rely on the shaky assumption that online advertising will continue to be worthwhile, lucrative and relevant. But it also tries to second guess the future value of that advertising.
Summary
It’s very simple – bake in a monetisation model with the business model. If there isn’t an obvious one then talk to someone who might be able to help you find one. If they can’t…. think again.
Apparently in a semi off-the-record interview with the New York Times, Apple CEO Steve Jobs disclosed that while he has some health concerns, they are not life threatening.
Then, as if to prove he’s pretty much on usual form, he’s quoted as saying;
This is Steve Jobs, you think I’m an arrogant [expletive] who thinks he’s above the law, and I think you’re a slime bucket who gets most of his facts wrong
David Risley posts about his feelings upon discovering that some of his readers are using ad blockers. David’s blog, PCMech, is a professional deal that costs significant amount of money to run, ads are the way he does this. David contends that by blocking those ads the user is in fact stealing.
I’m not so sure….
I read the local broadsheet most mornings, I also get a number of business magazines. All have advertising but I chose whether to partake of that advertising or not. Now no one would argue that by taking the classified section of the newspaper and binning it without opening it constitutes stealing – and this action isn’t entirely dissimilar to using an ad-blocker to avoid annoying adverts (that no one ever acts upon – but that’s for another post altogether).
Sure sites need to pay their costs – but if advertising provides a wholly unnatural, annoying and intrusive addition to their experience, surely they’re justified in finding ways to do without those very ads – just like my disposing of the classified section.
I can’t help but comment on the news today that FitchRatings has downgraded the rating of corporate financier Hanover Finance Limited to a "D" rating. So what’s wrong with that you ask?
Bear in mind that it’s a full five days since Hanover suspended repayments of existing deposits.
Am I misinformed or are credit rating services actually meant to give us relevant rating information before situations deteriorate for these companies? Aren’t they in existence purely for the reason of informing the investing public and institutions?
I wonder how much investors pay to obtain Fitch’s "subscriber only" analyses – my advice – you’re just throwing good money after bad.
I’ve posted often abut the difficulties traditional ISV’s face when moving to an on-demand delivery. The recent announcement by Microsoft of it’s latest tranche of software+services offerings has further caused fear and consternation among a number of traditional vendors.
It was interesting then to real Phil’s post about Synergation, a business that had, until now made it’s money creating and selling installed applications that integrated with Intuit’s QuickBooks accounting software. Readers will recall that Intuit recently launched a PaaS offering of the same ilk as Force.com.
Synergation got smart and realised that the software paradigm was changing and decided to introduce an on-demand solution. As luck would have it this decision coincided nicely with the release of the Intuit PaaS solution. As Synergation’s president said;
I see it being a mainline focus not only for our development but also a big chunk of our revenue stream, up until six months ago, all our development and sales efforts focused on our desktop product set. We see this as a transition stage for our company to move towards a SaaS organization
It’s a good case study for the traditional to on-demand shift – of course it was made easier by the fact that Intuit made the decision to launch the platform, Synergation get’s a whole lot of heavy lifting (marketing platform dev, platform support) done for it.
A more interesting comment from Synergation however focused on the user attitude towards a change in delivery method. Synergation commented on customers reluctance to moving data into the cloud;
The stereotypical QuickBooks user is not very tech-savvy, they know how to run QuickBooks, browse the Web and send emails. We know there is a real hole in the market for CRM and prospecting tools that really integrate with QuickBooks. We really see that as an opportunity, and it happened to coincide with the release of the new platform from Intuit
It’s a telling statement – Synergation see the tight integration with a desktop app as being one way to transition users into feeling comfortable about web apps. Whichever way we look at it there is no denying that there are concerns about the move to on-demand applications, Synergation’s approach is yet another way to ease the pain.
So new search upstart Cuil launched this week – with a search index currently at 120 billion pages (and growing).
They’ve got high-profile founders (a bunch of ex Googlers) and a heap of VC cash ($33 million).
So – only two questions
Quality of offering
Chance of success
How good is Cuil’s search?
Doing a side by side comparison with Google is unfair – Cuil launched yesterday while Google has had years to get it right. Regardless of how fair it was I thought I’d do the ultimate vanity-search acid test to check results.
First up the pretender;
Cuil found a heap of results. Most, other than a LinkedIn crawl, came from my previous blog which has been dead and buried for nearly a year (well it’s still there but no real traffic of note and no posting/comments.
And the current champ;
Google faired better. While the old blog came up in the results, the new one (diversity.net.nz) appears at spot three with my LinkedIn profile down to number five or so.
So overall it seems Cuil has done an initial scrape of the easily accessible information (LinkedIn is a lot of pages, pretty readily indexed)
What chance the pretender?
I’m fortunate that I wasn’t blogging back in Google’s early years – I’m sure I would have denied that they had any chance of beating the incumbents at the time – how wrong I would have been!
Having said that the Internet is a very different place now – Google has created themselves a pretty compelling argument around search – look at the number of toolbars out there all pushing out Google search – what would it take for a newcomer to beat the Plexers? It’s take a whole different level of search quality, but more importantly it would take a whole different level of compelling business model.
Cuil is pushing there new look search result display – this however is no killer feature. An interesting point of differentiation is that Cuil doesn’t retain users search data or surfing habits – possibly a bonus to the conspiracists out there but not enough to knock Google off any time soon.
Bottom line? – Cuil looks cool but don’t expect it to be a multi billion dollar company any time soon
I posted a little while ago about different pricing strategies for SaaS businesses. Briefly my view was that principally SaaS vendors should keep their SaaS pricing simple. After that Sinclair wrote an excellent post over on his blog that elicited some really useful comments. one of the comments came from Yves who basically said that, while a “pay for what you use” approach towards SaaS pricing may be best at a conceptual level in practice it has several shortcomings;
It makes it very difficult for potential users to perform comparisons with other offerings
It tends to be quite complex to calculate total cost – possibly creating a barrier to uptake
What Yves came up with however is absolutely the best solution. In his words;
So, I have abandoned the idea of applying the per use model to the pricing for now but not completely. My plan is to reintroduce it but not in the pricing page of the application but as a service to my customers. If I discover that certain customers could pay less changing their pricing model to a per use model, I will propose them the switch. It will makes less money at the end, but the benefit of having your users satisfied is priceless.
Yves should be congratulated – in my mind this solution is by far the best result and should really build a loyal following. It includes the best of both worlds in that it;
Allows users to make a very quick cost analysis and therefore competitor comparison and ultimately a buying decision
It allows users at the outset to see further options which could possibly reduce the costs even further (but not increase them – a ratchet clause working the right way for a change!)
It gives the vendor a reasonable degree of certainty around recurring revenue
It allows for easy and obvious modularisation – a theme which I believe we’ll see more and more of in the future
It’s fun being on the sidelines watching this one!
Steve Clayton from Microsoft was pretty chuffed to be able to blog about Apple’s MobileMe debacle. One could almost hear the glee in his words reporting that, for once something El Jobso touched didn’t turn to gold. He also got to take a broadside at the MobileMe "blog" (which he criticised for being one way with no comment functionality).
Commenters on Steve’s blog managed to get back though, pointing out both the fact of Hotmail’s outage earlier this year and the fact that this isn’t Apple’s first ever blog, and that yes there is the ability for users to question the MobileMe status.
Steve even got so excited as to tell the world that MobileMe engineer Thomas Han is following him on Twitter.
Oh how messy…
So here’s my take;
For Apple this is a class one cock-up. They’ve built a brand on excellent usability and reliability, And have excoriated Microsoft for their lack of same. The MobileMe rollout (regardless of the good reasons for the problems) has very much sullied Cupertino’s perfect(ish) record
Microsoft really shouldn’t be throwing glasses from within their stone house. Regardless of whether or not Mojave manages to convince the world that Vista is a good thing, no one within MS would deny that they haven’t had their share of problems over the years
More importantly than the name calling et al is the fact that this situation highlights once again the levelling that cloud computing is causing. When we see the likes of giants such as MS, Apple and the like have issues of the sort we’ve come to expect from Twitter, it’s a stark reminder that, as Steve puts it;
this cloud computing stuff is very, very hard – especially when you want to do it at scale and especially when you want to charge someone for it. Google do a great job with free services like GMail and we do pretty well too with Hotmail, Messenger and others. When the financial analysts asks why we’re sinking money in to online services and vast capital outlay in datacentres and their efficient operation, this is why
Of course he’s right – cloud computing takes a new level of resource, a new way of thinking and a new model of business. It’s by no way a given that the giants of yesteryear will do it right (but they’ll enjoy being nasty to each other in the attempt).
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