Courtesy of Salesforce’s monthly newsletter I came across this webinar entitled SaaS VC 101. It’s naturally got a Force.com angle to it but it’s got some points of interest for SaaS in general.
The webinar is presented by VC firm Emergence Capital who are 100% focused on SaaS and technology enabled services. They have $325 million under management and have invested in four companies distributing through Salesforce’s AppExchange.
Some of the characteristics they want in a good SaaS company:
People who are service focused, goal driven and innovative.
A business model that focuses on low friction for customers wanting to trial and setup and brings in subscription or transactional revenue.
Operating metrics showing growth in net monthly recurring revenue, upsell and cross sell opportunities, and conversions from website visit to closed customer.
Growing customer profitability. In the first year the customer acqusition cost will detract from initial subscription revenues but from year 2 onwards customer profitability should increase through upsell and cross sell.
For investment opportunities they look for:
The opportunity to be a leader in a market
Companies with domain experience in their market that understand the pain their customers face and how to fix it.
Validated customer proposition and demonstrated adoption.
The webinar goes on to explain some of the benefits of using the Force.com platform. Emergence Capital will be investing $1 million as part of the Salesforce Million Dollar Challenge.
Key points. SaaS is growing and VC investment in SaaS is growing with it. And the most important part of SaaS is service.
I love this - at the Salesforce.com mega conference in London, Marc Beniof stated that;
We think Web 3.0 is now upon us. It’s the era of platforms….New platforms are coming right out of the cloud. It’s time to make a choice. You can continue to build your applications in the software model or you can move your applications to the new model of cloud computing. There is a new way to build your applications.
Now I’m firmly in the camp that says it’s inconsequential (and a waste of time) spending time defining exactly what web 1.0 2.0 and 3.0 really are, but it’s interesting that Beniof believes PaaS to be quite so game changing. I have to say that salesforce’s own PaaS offering would be significantly more game changing if it was more economically proced but there yu have it.
An interesting development, and one covered more by Phil over here, is the opening up of the platforms. As Phil says;
One of the most striking aspects of Benioff’s new message is that it’s no longer about trying to get everyone using Salesforce.com’s platform. Showing a slide with logos from 21 different PaaS providers, he acknowledges the emerging diversity of the PaaS landscape: “The hallmark of all these platforms of a service is that different ones serve different markets and different developers.” Facebook serves the consumer, Amazon targets LAMP stack developers, Google App Engine is for Python developers, while Force.com serves the enterprise market, he explains.
This is a marked change from the old paradigm exemplified by Microsoft, whose success has been predicated on grabbing a near-monopoly with its Windows desktop platform. In stark contrast, as Benioff goes on to point out, on the Web it’s easy to combine platforms, for example mashing up Facebook and Force.com functionality. “Unlike the old platforms where you had to choose which one to get locked into, you have a lot more flexibiity and a lot more freedom,” he says.
A new McKinsey report just released documents the paradigm shift evident in corporate IT. The survey canvassed 850 corporate software buyers and shows just how much attention on-demand is gaining in their minds.
Key takeaways;
SaaS is rapidly becoming mainstream
75% are favourably disposed to utilising SaaS for development and deployment
around 20% of this years software budget to be spent on SaaS (higher % for smaller businesses and lower for larger as expected)
McKinsey says the move to web apps creates an ascendency of platforms and splits these platforms into three distinct categories;
development platforms (bungee labs, coghead etc etc)
delivery platforms (EC2, S3 etc)
app led platforms (force.com, intuit’s new offering)
Truth is that the survey doesn’t tell us anything new, corporate IT however is reluctant to jump into something without existing support and traction, this survey will ease their fears about SaaS/PaaS and most likely accelerate the trend.
In a show of hands, Out of 250 ISV’s attending the summit,only 2 were planning to use Force.com as their Dev Platform. (40 responded yes to building their own SaaS platform and 10 to a Software plus Services approach). Bob and Sinclair discuss their viewpoint on reasons why this was the case.
Some of these points included
1. Salesforce.com is not a neutral platform.
2. Its more of an “Extension platform” not a revolutionary one.
3. Bob adds that its too expensive an option.
So what is the sweetspot for Force.com? Bob rightly points out that it will appeal to Internal IT departments within Enterprise already using Salesforce.com as they are not as price sensitive. I agree with this as my experience at Dreamforce when Apex was first announced a couple of years ago, IT Department employees sitting at my dinner table were excited at the prospects of building their own modules, while the ISV’s sitting at the same table were lukewarm.
I believe Force.com will find its dominant niche in areas which are CRM related. So I actually think its sweetspot will be vertical offerings of CRM. http://www.verticalsondemand.com, a Pharma CRM system built on Force.com is a prime example of this.
The challenge of gaining a significant foothold into general SaaS platforms is a far greater one for Force.com. There are many SaaS solutions and ideas which are not customer centric at all. Maybe this is where Platform as a Service is heading? Specific Value Add platforms for specific business functions.
This was originally posted by the author, Troy Wing on his personal blog.
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