Office 2.0 Conference: Gadi Shamia's Office 2.0 Blog : 2008 : August

Gadi Shamia's Office 2.0 Blog

August 2008 Previous Next

"Tear down this wall" — the 2008 version

Posted by Gadi Shamia Aug 30, 2008

"Tear down this wall" was the famous challenge from United States President Ronald Reagan to Soviet leader Mikhail Gorbachev to destroy the Berlin Wall. (Source: Wikipedia)

The best thing to do when you have only one strategy for your company is to say there is only one strategy in the world. It makes you right automatically which is a great boost for anyone's ego. When Marc Benioff came with the famous no-software tagline, he was trying to make a point. As the only SaaS game in town, in a market dominated by Siebel, playing the no-software card helped Salesforce.com differentiate itself and win, leaving all its competitors far behind. I understand the marketing wisdom behind "no software" but I don't agree with this claim. It will be as reasonable for Toyota to declare the death of a non-hybrid cars.

But why do I even bring "no software" up? It is all because Lawson CEO predicted the death of SaaS and carefully explained that he has only one strategy too: YES software. I don't even want to get to the argument who is right: Benioff or Debes. Debes is entitled to have his own opinion even if I think he is terribly wrong. Nonetheless, most of the reasons he provided to support his point of view are either wrong, or bluntly anti-customer.

When I wrote the post titled Is SaaS for me? I realized that SaaS' strength stems from the fact it is a model where the vendor and the customer are fully aligned. The vendors need to work hard to earn their customers' business time and again. Just think about it: a SaaS company with as little as 1,000 customers will get 5 reminders per business day to keep working for its customers. Apparently, some of the on premise players do not subscribe to this idea. Judge for yourself:

Debes on the SaaS market:

SaaS is not God's gift to the software industry or customer community. The hype is based on one company in the software industry having modest success. Salesforce.com just has average to below-average profitability.

Look at Salesforce.com vs. Lawson performance in the last year. I think one chart is better than 1000 words... Lawson is in business for 33 long years and its net profit is lower than the 9 years old Salesforce.com. Debes also conveniently forgot WebEx that was sold to Cisco for $3B last year, and ignores the 100s of fantastic SaaS companies that generate billions in aggregated revenue, and can beat many on premise companies when it comes to customer satisfaction hands down.

Larry Ellison has the same perspective as I do. He accidentally funded the CRM product and NetSuite. He didn't really mean to. They've had small successes but, overall, they've been spectacularly unsuccessful.

Translation: The CRM product (AKA Salesforce.com) and Netsuite worth together almost $8B: 5.5 times more than Lawson. I am sure Larry Ellison wants to go back in time and put his money on Lawson instead of SF and Netsuite. After all, Lawson share price was cut in half between 2001 and today.

Debes on customers' wisdom:

People are stupid. History has shown it repeats itself, and people make the same mistakes.

Should I add anything?

Getting signed up as a SaaS customer is fast, but getting out is just as fast, whereas traditional software is like cocaine — you're hooked. It's too difficult and expensive to switch providers once you've invested in one.

I am sure even Lawson customers didn't expect this kind of honesty: Lawson adopted the East Germany cold war strategy: it was a horrible place to live in, but high walls and blood thirsty guards kept you in. No customer (and no German) wants high walls — they like flexibility. And it is not only about moving off a product — it is about adjusting the payment to the need. Case in point: you bought 1,000 seats of Lawson 2 years ago and now your company needs only 300 due to major downsizing: would anybody buy back those 700 extra seats you paid for only 2 years ago? A customer using SaaS will just pay for 300 the next time he is up for renewal, so cost can be adjusted to revenue. Think about that for a low wall.

As long as it's working, people are happy to stick with one product.

Where was innovation in the world if everyone thought that all you need is a product that works?

Debes on hype (and right for once):

People will realize the hype about SaaS companies has been overblown within the next two years.

To end with a positive note, I will give him that. SaaS is not a religion, nor a strategy. It is a delivery mechanism that in some cases is better, in others not. There are good SaaS companies and there are bad ones, but the bad ones don't last, since their customers don't let them to. This is the only reason why SaaS is not going anywhere.

I am sure we will all have lots of fun discussing this article during our 100% SaaS session next Friday.

Gadi Shamia

8 Comments 0 References Permalink Tags: 100%_saas, lawson, saas

Seven Things That SaaS Vendors Need To Do In Order To Increase Their Desirability

Posted by Gadi Shamia Aug 26, 2008

There is no doubt that SaaS and on demand are here to stay: if five years ago on-demand solutions looked like an Internet version of the mainframe days (strong central server, no logic in the terminal, bad user interface… sound familiar?), the SaaS applications of today look appealing and offer a good alternative to the on-premise world.

On the other hand, there is no doubt that SaaS vendors can do more to become desirable and get to the center of main street. Here are some of my thoughts around what's still missing.

Move from ease of use to speed of use—SaaS user interfaces are known to be simple. Flex and Ajax user interface technologies allowed SaaS players to add a second S and to appear “Sexy”. Nevertheless, the third S, speed of use, is still missing. If you are an experienced user of an ERP system, you will care less for simple and sexy and care more for speedy, meaning that you can enter your 200 orders into the system at the same rate you used to. Reminder: this is exactly what happened when the first Windows applications replaced DOS-based systems. The users revolted and asked to go back to DOS although the Windows-based applications were much easier to use.
Allow access to the customer data at all times—to gain better customer trust, allow each customer to download their key data into a local disk with some basic offline navigation options. It will help customers overcome the fear of losing access to their data if the Internet service is down.

Don’t lock in your customers—many of the SaaS vendors act like Erich Honecker, the leader of East Germany before the Glasnost: they build a big wall and put guards so there is only one way: in. The philosophical beauty of the SaaS model is that it offers better flexibility to the customer (like renting an apartment instead of buying one). No one will ever rent if they can’t get their stuff out when they want to… Offer your customers a “departure guarantee” that will include terms for business separation and a data migration program. Your customers will be happy and your employees will get a constant reminder that they need to earn the customers’ business every day.

Invest in security and redundancy—this one is simple. For years the SaaS vendor has claimed (and rightfully so) that it is safer to host your data on a secure remote site than on your local unsecured server. Every year that passes adds more businesses to the “believers” camp. All it takes is one or two major glitches to go back 2-3 years in customer acceptance. At this stage of the industry, one rotten apple can reflect on all the rest, so please—don’t let it happen…
Talk to each other—Theoretically SaaS applications require no IT, since they are managed elsewhere. Practically some need a lot of help since they don’t yet talk to other SaaS applications that well. Solutions like Cast Iron can help, but vendors need to invest much more in the technology needed and in the integration scenarios’ content, so they can start offering IaaS—Integration as a Service.

Balance software and service—While SaaS changed the way software is consumed and maintained, not much has changed in the service and implementation areas. Projects still take too long and cost an unbalanced amount compared to the lower, upfront software fees. Don’t wait for customers to revolt before you invest in better targeting and implementation technologies and methodologies.
Bring the web in—in my broken link post I complained about how little the resources available online as part of modern applications are used. I gave a simple example of using online traffic information to add “driving” slots into calendars and change them dynamically if the conditions are changed. There are a million others—this is the SaaS vendors’ opportunity to add value where on-premise applications can’t.

Published originally on a la 360

14 Comments 0 References Permalink Tags: 100%_saas, saas

IT can be a boring job (for some)

Posted by Gadi Shamia Aug 24, 2008

Office 2.0 is just around the corner, and I am preparing for my session (going 100% SaaS) by interacting with my panelists, and doing some thinking. My current thread is thinking about IT and its traditional role vs. its new role in the SaaS era. There were ups and downs in the way IT viewed SaaS and now it seems that IT professionals divide into two camps: the ones that strongly embrace SaaS, and the ones that wait for it to go away.

In general, the ones that want it to go away like control, like hands on approach, and rather do the tactical work as a way to keep their kingdom intact. If you work for a startup, you may not believe me, but in a big company your worth goes up with the number of people you manage, and you don't want to lose anyone you gained.

The ones who love SaaS understand that it is here to stay and while not perfect, it allows significant time saving since somebody else is doing the mundane work for you. There are people that get paid to perform upgrades for you, take care of security, make sure the servers are up and that response time is great. The SaaS providers are more efficient since one operations team is responsible for many thousands of users.

People need to realize that the only role of technology advancements is to save time and have intelligent people decide what to do with this extra time. All productivity enhancements happened exactly this way. With all the extra time that can be saved, IT can become more strategic to the organization (and have much more interesting jobs...), and focus on improving tools and services, talk with their internal clients, and find ways to make their lives better, and stop worrying about up time and power outages.

Not every organization can go 100% SaaS yet, and even for the ones that can there are many challenges in integration, many different parts that need to be glued together, and multiple ISVs to work with. But if SaaS is right for your organization, find a way for IT to participate and use wisely all the extra time they will have.

Doug Harr, CIO at Ingres, will represent this point of view in the going 100% SaaS session.

Gadi Shamia

3 Comments 0 References Permalink Tags: ingres, ingres, 100%_saas

Office 2.0 and Burning Man?

Posted by Gadi Shamia Aug 21, 2008

I was invited by my friend Ismael Ghalimi to host a panel during Office 2.0 about my favorite topic, SaaS. The session is about going 100% SaaS and what it means. My panelists are Dan Druker from Intacct, Doug Harr from Ingres, Rob Hull from Adaptive Planning, and Rene Lacerte from Bill.com. What’s great about this team is that they are all senior executives that pioneered SaaS either with their current company, or in previous lives: Dan was part of Postini (later sold to Google), Rene co-founded PayCycle, one of the best kept SaaS success secrets in the valley, Rob co-founded Adaptive Planning in 2003, when no one believed SaaS would ever happen, and Doug spent 5 years with Portal Software, that was acquired by Oracle. We would not be lacking perspective here…

In the next couple of weeks I will share my thoughts about the 100% SaaS goal as I progress in preparing for it. For now I wanted to go back to the title, and explain the interesting story behind Office 2.0 and its connection to the Burning Man festival. Every year toward the end of the summer, a city is built in the Nevada desert. The city is built by a small number of people and then for a week host some 30,000 visitors from all over the world that come to celebrate freedom, community and art. By the end of that week the city will vanish with no trails. The Valley was always a great feeder for the event (Google founders placed an “out of office” doodle on Google homepage when they left for Burning Man in 1998). Burning Man organizers only put the infrastructure in place and the visitors bring the rest (decorations, art, food, elements for trading and everything else needed to make Burning Man what it is.

Office 2.0 is about the same: Ismael and a small team of friends help to put it all together as a community event that is heavily relying on technology to automate mundane tasks, and people to generate content that other people will enjoy to listen to and learn from. The whole project starts and ends in 2 months or so and leave only electronic trails… Ismael is only the facilitator, and we, speakers, sponsors and audience are on our own, trying to make it a great event.

These two events even happen at the same time: Burning Man ends a couple of days before Office 2.0 starts, and they are both great examples for events that empower the community to create value with minimal facilitation. Isn’t it so much more fun to participate in those kind of events rather than going to yet another PR driven, marketing funded event?

Posted on my personal blog