Apps, Cloud, Saas? But show me the money!

Let me state a fact: I have a lot of interesting discussions with independent software vendors (ISVs) every week. New, existing and competitive ones. I love it – it is the best part of my job, and has been the best part of the last 8 years of my carrier.

Over the years I build a competency of connecting ISV to new business models, transforming their business model and helping them focus on one thing: scale and superiority. Main goal for them all – are to make money whilst they sleep. Who wouldn’t? 🙂

However, there is one question constantly being open, and ISVs tend to be cautious about the new endeavors of the cloud – how do I make money? It is without any doubt a good question, and I am a strong believer of “seeing is believing” – “cash is king” and “build to scale”. Let me bring proof:

SAP Challenges Oracle With $3.4 Billion SuccessFactors Purchase

In 2001; a bright Dane – Lars Dalgaard moved his family to the US after acquiring a business going bad. Lars reinvented the business model and re-launched SuccessFactors. SuccessFactors was a small cloud/SaaS type solution targeting mid-market customers with a HR software solution. The idea behind the platform was simply to drive the HRM on a subscription base. Over the cause of 10 years, the platform grew from simple HR management to become a strong enterprise offering; now driving Business Execution Software in the cloud. And boy oh boy that was a strong move.

Cloud introduces a change in the adoption of software. With the outsourced software management, you also benefit of the change in buying persona. What SuccessFactors did as second to none, was to enter directly the CEO or Boards of Directors as the platform was considered a true business management tool. It was not an IT solution; nor a productivity tool as Word, Outlook or Excel. Simply put- Lars built the recipe for success embracing all aspects of the cloud.

So the money?

$3.4 Billon is a lot of money. The second conversation I always have with ISVs are; “how do I make millions of customers”, as the great long tail story is perceived as the only business model. You need to build Facebook all over – or do you? 3.500 customers were all it took. $0.97 million per customer account; but do not believe SAP bought SuccessFactors due to the customer base. I previously discussed reasons for acquisitions, and simply put – I believe SAP did the barging of the century.

And simply put – remember that SuccessFactors was listed on the New York stock exchange. In other words, Lars did the income model; TWICE.

SuccessFactors should us a lot of new faces in the cloud:

  • You do not have to build the business from 1 employee and up. Buying bad managed old school companies can be the footprint of your cloud enterprise.
  • Long tail is interesting, but not limited to the success of your SaaS company. If you earned $0.97 million per customer, consider your cost of acquisition per customer vs. income.
  • Changing the buying persona will accelerator the adoption of your software. My rule of thumb is to serve both trenches – IT and business at once!
  • Building a niece players, will leave our in any uncontested business space. Simply put – you will be setup for a lot of exit opportunities!

Closing off, I simply challenge you to take a review of your business and build the next SuccessFactors.

Cloud – A new way of working

Throughout the last years I have been working closely with corporations, suppliers and vendors on Software As A Service (SaaS red.) and cloud computing. As the IT industry often looks at the technology, I have experienced a radical changing behavior at the offices I visited. We are not only changing on the technology side – but also the way we work.

During the 1960s John Shiflett, had great momentum with his new “action office”, giving birth to the cubical office. For privacy, focus and productivity – employees were arranged in small enclosed one-man configurable cubicals. The mantra was, that employees became more productive, the less noise their experienced and the more you screened them in. Knowledge was shared by meetings and memos. The everyday work was to work, document and re-cap of the work done. Security, paper copies and memos was kept tight in cabinets in each cubical and a central archive. Continue reading

Microsoft is “leading with online” – should you?

This year, at Microsoft’s World-Wide Partner Conference in Washington (WPC), used any moment to tell its partners that they now are leading with online. But what does this mean? And why the sudden change towards online? Should you adopt the same strategy – and why should you?

First of all – Microsoft have done some big mistakes before. Focus on their Internet Explorer product, made them loose half a century to play catch-up with Netscape. Windows Phone is another great example on a loosing strategy for Microsoft. Half a decade lost here too. So is Microsoft misleading the ecosystem? I doubt not – I believe Microsoft already lost 2-3 years of great momentum – they just got better to spot their strategy mistakes. Reality is that Microsoft’s Hosting partners have been preaching the Software + Services business model for nearly 12 years now. Since Microsoft Exchange 2000 – and a bit before – Software + Services has been a part of Microsoft, but now – truly now – customers are in fact telling Microsoft they don’t want to:

  • Update any application anymore. Dealing with updates and redeployments are often 40-60% of time spend in the internal IT departments, and over 40% of the external consultant fees.
  • Stay up to date, with latest features and functions.
  • Pay for what they consume, and use. Customers want to have an easy opt-in options, and a structured and predicted opt-out.
  • Outsourced management of their infrastructure and applications, moving focus for the internal IT department to become internal business advisors in IT usage. Continue reading