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.

Going Cloud for the Enterprise is all about identity

Discussion topics on engaging enterprise companies are often a daily task for me these days. As the economy climate start to settle, many ISV’s face great opportunities and requests from larger organisations, and consuming cloud applications is on many CIO’s and CTO’s strategy plans the next couple of years.

Previously I have discussed a opinion of mine, that Identity is the tipping point for the cloud. I would like to connect this back to the CIOs, CTSs and IT business decision makers in modern companies. Selecting a vendor, provider or hosted that cannot help you establish single sign-on and enterprise identity life-cycle management (EILM) will not bring success to any cloud enablement. Also for ISV’s – if you do not offer, and I repeat, do not offer and identity solution to bridge internal identities with your application, your application will never be consumed in an enterprise state.

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Cloud Paradigm on Technology: Earning while boosting your investment

It a known paradigm for many Independent Software Vendors (ISVs) and cloud computing businesses: get a capital investor to bridge your existing business model with the future of software distribution – or, try to build a new business model, whilst preserving the old revenue streams – becoming a FUSE-CO (future-service-company). It is doable. It is risky. If you pull it off – and you have the right solution, your private beach is already reserved.

If you need the muscle and in loss of time: get that capital investor, your still get a private beach (just a small one).

Microsoft recently held a conference for Microsoft BizSpark participant’s dating their ISV partners with the venture market. A great way to build an eco-system of add-value for being a Microsoft Partner; and a great quick entry for an V.C., to spot groups of ISVs in a little time – with a high investment opportunity. I had the opportunity to speak with some of the participant in BizSpark recently, and it became apparent to me that tomorrows business service companies face a set of challenges that we, as an industry, adopted upon them. Continue reading