Tag Archive for 'Unreasonablemen'

Some thoughts on SaaS acquisitions

Published by The Unreasonablemen on February 14, 2008 in SaaS. 0 Comments

Note: This is a mirror post from my unreasonablemen blog. Over on Smoothspan, Bob asks the question “when do the SaaS acquisition games begin?”. This got me thinking, about the why, who, how and impact of acquisition on SaaS.

Firstly, I agree with Bob, the market is young & fragmented. The impact of this on acquisition is quite profound. People will acquire for position rather than to consolidate because the market is still growing. In a new growing market there are only two strategy plays that really matter. A race strategy (get the most customers as fast as possible). Salesforce.com is doing this with its PaaS play. If you win the race you can turn the strategy into a position strategy (we dominate, have the most customers, are the most attractive to partners, new entrants, or have deep pockets for acquisition etc, have the most differentiation because of this & hence retain the position). Microsoft runs a position strategy for desktop apps.

Back to acquisition. If you are already in the SaaS game, you are probably in a race strategy. Therefore if you have achieved a lead (to some degree) you may be looking to acquire to get further in the lead. Effectively buying customers or technology that will give you more customers (has a wow factor or fills out your stack & removes an objection). SF.com buying Kieden is an example.

If you are a SaaS player & haven’t got a lead, then you should be looking to be bought or you need to think about specialisation. You are loosing the mass market horizontal race so stop trying.

If you aren’t in the SaaS game, otherwise known as ‘being disrupted’, then you are looking to acquire a horse already in the race. The rumoured Oracle SF.com tie up is a good example of this.

If you subscribe to my two strategic views above, none of the acquisition moves are surprising.

To me the most interesting part of the acquisition trend is what the acquirer does with the acquiree when they’ve got them. That is how well do they use the new asset to deliver on the strategy. Both have their challenges.

If you are a SaaS provider on your own infrastructure (platform) then you are going to be forced with the challenge of integration. This is different from ‘making them work together’ which should be fairly easy given that AJAX & webservices are cornerstones of SaaS & there are many instances of this around. But integrating two applications & databases onto the same platform is a big challenge to me. Identity management, billing, reporting, management , the DNA of the code itself make this a challenging task.

If you are a SaaS provider on a platform like Apprenda or SF.com then the integration task is easier, markedly easier. All (ok most) of those technical details go away because you are already integrated in the backend.These two plays also have the benefit of culturally being aligned behind SaaS, having a channel & billing model that is optimised for SaaS perhaps most importantly management. & remuneration models that support SaaS.

Legacy providers have a different set of challenges once they have acquired. Do they integrate it into the they’re legacy product like the S+S by Microsoft play? how do they run the business, how do they sell it , how do they manage the cannibalisation or disruption of the legacy business if they’ve bought an app in they’re existing space (Siebel & SF.com for instance). Perhaps even more importantly, how do they maintain focus on SaaS while running a legacy business.

Those who read my blog will know that I’m very hot on this. In my opinion if you don’t run the startup separate from the legacy, then the mothership will negativity impact the new entity.

Here is the analogy. Farming. Farmers know that the game is cyclical, that the tree’s that provide the most produce now are only good for a limited time and that they need continuously have new crops or replacement tree’s coming on board. Those tied to cash crops for survival understand that they are in big trouble. Over farming means that eventually the tree will wither. If you continue with this behaviour, you will turn your land into a dessert (the Sahara is an example). Continuing on with this analogy. Those farmers that do have replacement tree’s usually grow them in a separate paddock. They do this so that the new plants have the best chance to thrive. The seedlings get the appropriate attention and aren’t shaded by the large trees.

Not rocket science and yet business continuously fail to adhere to this most basic wisdom. They often throw their innovation centre in with the rest of the business and expect it to survive (read the innovators dilemma for examples). When the harvest comes due (i.e. reporting season), these companies run to the big revenue levers and neglect the startup, so it fails to hit its numbers and disappoints. Why? The people who know how to look after big tree’s often don’t know how to look after seedlings, or even worse see the seedling as a threat and actively work to stunt its growth.

All of this points to the obvious decision not to integrate the new SaaS acquisition into the legacy business. If the legacy business is serious about winning the race in the SaaS game, leave it alone. Let the SaaS business come to you with they’re requirements & give your legacy business targets & remuneration models that support this race.

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Anonymity. The web and SaaS.

Published by The Unreasonablemen on February 12, 2008 in IT, SaaS, Society and Web x.0. 7 Comments

Note: This is a mirror post from my unreasonablemen blog. Ben Kepes and I recently locked horns over this topic. As you can tell I like having anonymity on the web. There are various reasons for this, but my primary concern is security and keeping some clear demarcation between my private and business life. I don’t blog in the weekends or evenings, nor do I work unless absolutely essential. I made some lifestyle decisions a few years back & have never regretted them.

It is my assertion that in my private life I can be web 1.0 or even (gasp) bricks & mortar, while in my business life I can be 2.0 & think SaaS is the bees knees.

Ben conversely thought this paradox not only odd, but it represented a doomsday scenario for SaaS.

Let me start by pointing out various posts which hopefully will go some way to explaining my security fears. Steve Borsch does a great job of explaining the Google ‘threat’ and expands on this with some insights into data mining. Then there is the growing infringement of governments on ‘our’ data and viola, I feel vindicated. I know that the ability exists for people to piece it all together, but that doesn’t mean I have to make it easy for them. Shel at thinks this is being anonymous is lame, but I would suggest that anonymity is not only a right but a desired state for some (look at 2nd life).

So how does this affect SaaS? Well to me not at all. I am completely comfortable with cloud services in a work environment. I would love it if by some AJAX phenomenon someone matched my revenue with products that could aid me I or did something funky with my search patterns. I would love a tool that examined my calling patterns & suggested ways to save money. Or something that monitored where I & my Staff go on the internet to manage cyber-slacking etc……I just don’t want any of it in my personal life. I don’t want MS money analysing my spend patterns, knowing how much I earn & doing any product matching based on their knowledge of my search & surfing behaviour. That is too intrusive to me, that kind of scenario opens up the world painted by Fake Steve Job’s here.
“It will make the old Bell System crooks look like amateurs. The guys running the cloud will control everything: phone, data, video, television, movies, music.”
That’s ok in my business space which is open to compliance & monitoring & all those things. But in my world, it’s not ok in my personal life. And like I said, I think I can make these two work quite happily.

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