JT Pedersen » SaaS

How To: Get Your Sales Team Onboard with SaaS

JT — Fri, 20 Jan 2012 18:21:06 +0000

Your Sales team is where your company’s efforts meet the world. They’re where the rubber meets the road. Your organization’s efforts can live, or die, based on the performance of your Sales team. The happier they are, the more positive they feel, the more confident they are in your offerings, the better they sell. And the better revenue flows.

But what if the apple cart gets upset?

This is a challenge currently facing a lot of companies, particularly in the B2B (business-to-business) space. As SaaS offerings become more common-place, traditional software sales models are being upset.

Two things need to happen at the same time.

Compensation: How Sales teams are paid must change to reflect the new delivery mechanisms; and,
Education: Your sales teams (direct and in-direct) need to understand the benefits of moving from selling traditional licenses requiring on-site installation, to (typically) lower-cost web-based equivalents.

Fortunately, the transition has been under way for a while now. The initial transition took the form of moving from selling traditional licenses, upgraded annually, to selling Maintenance or Subscription contracts. In the following discussion, we’ll discuss Compensation first, Education second.

Compensation Concerns

While I have been in sales organizations, I have not led them. So I asked Ed Flaherty, President at Flaherty Advisory Services, if he cared to comment. Ed has been involved with SaaS for almost 10 years.

On compensation concerns, Ed notes:

…there are key components to balance the Company and sales team’s interests—there must be:

A reward for signing a contract upfront (although it can be small);
TCV (total contract value) must be considered in the compensation;
Commissions should be paid over the contract term based upon cash collected; and,
[consideration toward] paying a higher rate in year 1 vs. later years.

Other areas requiring careful consideration can include, "…rewarding new contracts more than renewals which is always a difficult conversation." Harder yet, Ed notes, "…is what structure to use for new contracts within the same corporation to different business units or divisions.

Ed described how one of their compensation experts compared licensed software sales vs. SaaS contract commission structures, to that of the insurance industry with life insurance contracts vs. automobile insurance contracts.

"The challenge is that most software sales team members have grown up selling traditional licenses making the discussion of commissions over time and more contract closes vs. less an "interesting" conversation."

My own experience with this migration occurred while at Autodesk. We migrated from selling purely perpetual (traditional) software licenses, to selling ‘maintenance’ or Subscription services. The transition was certainly awkward at first, and a number of iterations occurred, before the ‘change’ started to feel comfortable.

Maintenance (aka Subscription) deliverables became important for two reasons. First, they smoothed out annual cash flow. We became (over time) less dependent on ‘Big R’ annual releases causing most of our annual revenue to occur in a single quarter. Second, the new ‘term’ contracts let us engage our customers more persistently compared to simple one-time transactions.

And, today, given the very strong similarities between Subscription sales and SaaS, those are still very valid reasons why any company today might want to consider SaaS.

The SaaS delivery model smooths annual cash flow and changes customer revenue engagements from a one-time transaction to a recurring revenue model.

Education

Beyond compensation issues you still need to help your in-house sales teams, and your extended teams (e.g. VARS, Distributors) understand the changes. And, you need to do it in a way that motivates them.

Rather than write a book on the topic, I’ll skim the high points for your sales teams…

Channel

The first one, is touchy. Migrating from traditional (physical) products to SaaS will directly impact your distribution channels. These can include managing channel inventory, Cost of Goods, staffing levels, and perhaps even the very makeup of the channel itself. In my past, sales spent significant amounts of time simply managing the channel. Decreasing the amount of channel-focused effort may be motivating for your in-house staff.

Updates

SaaS updates are quicker, more frequent, and generally far less expensive than with on-site equivalents. This might not be exciting if a lot of your on-going revenue is derived from on-site maintenance.

On the other hand, being able to sell an Operational Expense item, rather than a major Capital Expense, might outright eliminate certain road blocks in your sales process.

Mobile

Business solutions are increasingly mobility oriented. Outline how your solution can do more, go more places—anywhere network connectivity is available. iPads, iPhones, and Android solutions get your customers excited—finally having an answer will likely get Sales excited too.

As I allude to above, the Channel has its own host of concerns. Here are a couple thoughts to get you started, some will vary by country of course:

SaaS frees up space previously set aside for inventory.
No annual property tax due for inventory maintained in stock.
SaaS offerings may make possible supporting ($$) more customers, with fewer staff.
Commissions (situation dependent of course) can be paid faster. No waiting for customers to register software, pass along payments, etc. It can be done in a more seamless, more easily accounted-for manner.

Sales/Partners will trade off some of their past points of friction. For instance, they will worry less about customer compute infrastructure. Instead, they’ll become acutely focused on things like network bandwidth, redundancy, and saturation. Prepared for the ‘new’ potential ‘gotchas,’ the issues will be largely disarmed when they occur.

These are some items I’ve been involved with in the past. The key is education, transparency in communication, and a modicum of hand-holding.

Bonus Point

SaaS let’s you see what your customers are truly doing with your product.

This gives both parties (sales, customer) strength in future negotiations. Every customer I’ve had, with more than a handful of licenses, was hard-pressed to accurately identify their usage. Oh, the time lost trying to validate licenses/use. Being able to do away with the ‘guesses,’ negotiating for a mutually acceptable number, and move to hard cold facts is really nice.

Special thanks to Ed Flaherty, President at Flaherty Advisory Services, for his contributions.

image credit:
Compensation, Tino Smith
Stick Figures, Arte Ram

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Innovation—Pre-Engineered Data Centers

JT — Mon, 31 Oct 2011 16:54:46 +0000

Funny, one of the things they don’t tell you as a Cloud service provider, is that the boundaries of the Cloud aren’t white, fluffy, and ambiguous. Quite the opposite as a matter of fact. They’re cold, rigid, and expansion can be expensive.

Certainly, from the consumers’ perspective, that’s exactly what the Cloud is. But use a leaf blower to clear away the puff ‘n fluff, and you’ll find there’s something rather solid inside. And, it costs money.

In a past role as a Software as a Service (SaaS) product manager, data center health, capacity, and durability were daily concerns. On a micro level, tactical activities, day-to-day, stood atop a three-legged tripod: RAM, CPU, and disk capacity.

The macro level, strategically, concern focused on the data centers housing my systems. The common chair legs here were Wattage (electrical service capacity consumed|available); HVAC (air conditioning capacity); physical space (can we add more servers and/or storage); and, backup generator/UPS capacity.

Eventually, we outgrew our own data center. We physically were out of space for new servers; backup systems were beyond capacity; and, our HVAC couldn’t handle the load in the middle of the summer.

Alarms tripped. Beepers buzzed. Staff scrambled. Ugly.

The potential solutions available were ugly as well. Most likely, we were going to undertake expansion of the data center; bumping-out into the rear parking lot; consume precious parking spaces; and with ugly cost. And, there was no guarantee by the time it was completed, that capacity would be on track with our needs.

Ever have to discuss with your CFO, why you had (unwittingly) over/underbuilt your $15M data center, that took 18-36 months to complete?

There’s a better way!
Pre-Engineered Data Centers

Not quite two years ago, I had a meeting with Steve Jacobs regarding a new idea in data center development. In short, deliver to the market a pre-engineered data center, that can be quickly deployed, cost effective, and support incremental growth.

Now, the idea is reality. Steve’s the CEO of Velocity Data Centers, anchored in the Chelsea/Ann Arbor area (Michigan, USA). He gave me a tour of their new prototype.

When I encountered Steve’s efforts, I immediately saw the value. HP and some others have some very specialized ‘shipping container’ type solutions, but they’re not the most attractive long term alternatives.

The basic description of the unit I’ve included pictures of, can be found here. He confirmed the unit is currently powered for 100kW, but can be easily bumped to 200kW if desired (in the power room, I saw there’s clearly room for a second set of Liebert units).

In the data package room, there are 2 AC units (cold aisle) already placed, with room for 5 cabinets per row as configured (20 racks total, this design).

Groundwork for the design (foundation, slab, etc.) is conventional. The building itself is a specially formulated 4-6” thick concrete. The structure even has a ballistics rating and can withstand a Category 5 hurricane!

If you are not responsible for data center operations or management, this may be so much ho-hum. If you are responsible for paying for one, here’s how it boils down…the business case.

At this point, I’d like to point out that I have no legal or monetary relationship to Velocity Data Centers. I simply believe in their approach, a lot, and am happy to evangelize.

Consider, building out a 10,000 square foot data center can range between $10-15,000,000 dollars, and take 18-36 months to complete. Depending on external developments along the way, you may find your needs have substantially changed.

Here’s what I really like about this solution:

Overall package (building and fenced area) foot print: 3,200 sq. feet.
Cost – Under $1,000,000 for a 100kW, 20 rack data center
Design—Everything pre-engineered as a package
Time—70 days for functional unit (this includes the learning curve for the prototype. It will be interesting to see how quickly production units can be deployed)
Placement—Can be deployed anywhere, parking lots or vacant property, with suitable services.
Investment—Sized to meet your needs. Add additional units (collocated or dispersed) to meet increased demand, or for Tier 1+ needs.
No disruption to current operations until you’re ready to ‘flip the switch.’ Though life’s rarely that simple.

At the end of the day, even though many may choose to transfer corporate services to the Cloud, somebody has to actually run the Cloud. If you’re somebody, where time, money, and availability are all pressing concerns, this is an innovative approach you owe it to yourself to take a look at.

Thank you to Steve Jacobs, Velocity Data Centers, for the tour.

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What Do You Mean, Non-Core Activities?

JT — Tue, 05 Apr 2011 11:49:39 +0000

Following the discussions in “Uncomfortable, Thinking About the Cloud” (Pt. 1, Pt. 2), I was asked what I viewed as ‘non-core’ activities. What type of services might a company outsource to a cloud-based service provider?

Core activities are those that define, are at the heart of a company. Common non-core activities are often viewed as functions like payroll, transaction processing, billing, and increasingly, records management.

For instance, a credit card company will often outsource the process of printing, mailing, receiving, and posting monthly bills. Their core skill is financial management, not running a mail room. (There’s a reason they tell you to NOT include correspondence with your payment. )

The same thing is typical of a health insurance company. Their core value is the ‘process’ of executing claims transactions. Once a claim has been processed, documentation supporting transactions (industry variable) may need to be archived for 3, 5, 7, or 30 years. Storing documents with a <1% retrieval rate after six months is non-core. It adds no value, worse it’s an expensive distraction, and as such they may decide to outsource the activity.

One last example. Stock brokerages may make available your past financial statements, 1099s, and the like, online. Odds are very good that, while it ‘looks’ like they are delivering the information to you, it is actually hosted, archived, and delivered to you seamlessly by a 3rd party service provider. It’s all done to look like it’s the company you’re dealing with. And, it should.

One thing to note, while you can outsource work to the cloud, you cannot outsource the responsibility that goes with it. Your medical provider, payer, and others in-between, cannot transfer their responsibility to whomever they pay to do the work for them.

Use of the cloud is already very pervasive. The term simply wasn’t popularized until relatively recently. What services have you, or your company, obtained through the cloud?

(photo credit: Viktors Kozers)

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(Part 2) Uncomfortable, Thinking About the Cloud?

JT — Mon, 04 Apr 2011 15:50:51 +0000

Part 1 of this series began a high-level, reader-friendly, discussion of concerns surrounding the ‘Cloud,’ what it is, and helping address concerns around its use. Here, in Part 2, the discussion continues further….

…For some consumers, and businesses too, there remain a number of additional concerns regarding the cloud. For instance, they may view the ‘cloud’ as fine for pictures, yet inappropriate or ‘unsafe’ for hosting financial, healthcare, or other sensitive data.

(Building on availability and SLA concerns discussed in part 1.) Consumers in particular tend to make broad assumptions about the services they’re using. For instance, not too long ago users of popular Flickr photo sharing service experienced problems. Reports indicated a number of accounts had been unrecoverably lost (along with their pictures). Users assumed Flickr would recover, restore their data, and they’d be back on their way. Not the case.

The use of services like Flickr for photos, and professional Cloud services hosting healthcare, finance, and other more-critical content, should not be lumped together. There are distinct differences in the underlying offerings.

For instance, from the Yahoo! (owns Flickr) Terms of Service, we find: “You agree that Yahoo! has no responsibility or liability for the deletion or failure to store any messages and other communications or other Content maintained or transmitted by the Yahoo! Services.”

In short, yes, if Flickr’s users didn’t maintain their own backups of their content, independent of Flickr, then shame on them. I feel for them, but they defaulted on their own responsibility. Flickr, Yahoo!, never told them their content was safe. If anything, it said exactly the opposite.

Yes, I expect even services like Flickr maintain their own backups. But of what? Most likely they are keeping backups of—their system—and not user content. They want to be able to restore the infrastructure ASAP and then you get to reload your content (emphasis on Your).

This differs from offerings of professional cloud service providers, such as those handling healthcare, financial, and other security-conscious content.

Their customers, such as your healthcare payers (for example) make broad use of cloud offerings. While you, or your business might not do so, make no doubt about it—there is a LOT (e.g. multi-millions) of people’s content housed in the cloud.

What is the driver here? In many cases it is a matter of externalizing non-core activities. Their focus is paying your healthcare provider, not in long term document handling and archiving. That is what formal data repositories do best.

How you define ‘safer’ is important. There is much more involved than two individuals, doing point to point transfers using SSL enabled browsers, being worried about in-transit intercepts.

When dealing with health, financial, or other security conscious content, SSL, AES, and other encryption solutions are the norm. Cloud service providers typically operate high end data centers, with high availability hardware, on and off site backups, mirrored redundant remote sites, and the like. These service providers may also be doing other work for you, such as AP workflow or healthcare adjudication. In these cases it may be common for dozens of copies of your data to reside across their processes.

Where is your data safer? How many of us, as individual businesses, are going to invest in that level of data protection? The answer: very, very, very few. And if that’s the case, where is your data safest? Or on an external USB drive on the admin’s desk (yes, real-world example)?

The cloud is already very mature…and will continue to evolve. Today’s call to action, keep an open mind, comment on the brightest uses of the cloud you have seen.

Perhaps the cloud’s biggest benefits extend from what it can do in the context of mobility. That, suggests a future post.

(photo credit: Colin Broug)

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Uncomfortable, Thinking About the Cloud?

JT — Thu, 31 Mar 2011 18:34:11 +0000

At this point, most users of internet-oriented technologies have at least heard of the ‘cloud.’ Yet even though millions use tools existing only in the cloud (think gmail, hotmail, and salesforce.com), most lack a comfort level for what it is.

As business leaders, making decisions on the cloud’s use, this can be particularly discomforting. Proponents often use the ‘everyone is doing it’ (even your competitors) approach in promoting its adoption. Major benefits cited can include lower start up costs, minimal IT investment, and broad accessibility from your favorite coffee shops.

The most zealous make statements about the cloud having to be multi-tenancy, not single-tenancy. Others claim the cloud, aka Software as a Service (SaaS), is just the ASP (application service provider) model from the 90s reborn. And this isn’t even scratching the scratch on the surface of the debate.

Its no wonder so many are uncomfortable with their understanding of ‘the cloud.’

For the most part, the ‘cloud’ can simply be viewed as an internet-based service provided by a 3rd party (someone else) for your use. You do not know, care, or think about how it comes to be. Like household electricity, you simply use it.

Google’s gmail is a perfect consumer-oriented cloud example. Gmail is a complete email service (send, receive, store) hosted on Google’s own servers. You use your own computing device to access their service via the internet. Yet in no way does any part of the service reside inside your own home or office.

There is an ever-increasing array of services (aka solutions) becoming available in the cloud. Examples include accounting tools for accountants; tax preparation for individuals; data storage for individuals and major businesses; and so many many more.

As people increasingly make use of these web-based software services, a number of concerns start to be voiced. A sample includes:

Services that simply ‘go away,’ leaving users stranded
Performance, slow service costs time, costs money
Accessibility, how readily can employees or customers connect
What happens if ‘your’ service is acquired by another

Having been both consumer and provider of SaaS (cloud) services, I have experience with the concerns from both sides.

As a provider, delivering software as a service has some key benefits. I can update the service whenever necessary. This means I am free from having to wait for the next quarterly–or annual–software release. This also means, while I do have other operational costs, I can get around cost of goods, inventory and channel management, and all the related logistics. It is faster, more fluid, and more readily scalable.

As a business consumer, I benefit from the cloud’s economies of scale, peace of mind, and maintenance benefits. For instance, you have the benefits of scalability, scaling up or down as your business evolves over time. And, with someone else ‘minding the store,’ you may sleep better.

As a personal consumer, I find there are things I’m slowly doing more and more of ‘in the cloud.’ To the extent it makes sense, I prefer to maintain my own infrastructure (e.g. server, software, storage). But there are services for which it would make zero sense to contemplate doing myself.

But let’s look at the concerns noted above, which we can lump together as general service availability and performance. Cloud service providers will always (yes, I’m sure there’s an exception out there…) tell you what level of service they are willing to commit to. This ‘commitment’ is typically referred to as a SLA ,or service level agreement.

For individuals, consumers in particular, we tend to overlook the contents of an SLA–if we even read it. If we can’t access email, or pictures, for a few hours, we simply wait. If the service completely crashes, its up to us as individuals to re-upload our stuff. However, for a business, even a few minutes of downtime can translate into major problems–ultimately measured as $$.

The SLA clearly spells out the service being guaranteed, maintenance windows, how peak (burst) loads may be handled, and the like. If you’re entering into a periodic agreement (monthly, annual, or multi-year), the SLA may also define conditions by which you can terminate the service w/o penalty (e.g. what if it’s offline 10 minutes, 1 day, 2+ days).

This leads to another, unstated, consideration: content portability. This is no different than when you decide to change major software applications you may use. How big a concern this is, depends on the size of your business and the complexity of your data. Ask if the service provider has a process for returning your content to you. Do they charge for it? Is it in a usable form, by your, or your new provider? Walk through the process with them if necessary/appropriate. Do not assume anything.

One of the remaining, considerations for SaaS is broadband ubiquity, accessibility. It is surprising at times how many people still use dial-up to connect to the internet. If you’re a SaaS-based provider, or consumer, how you’re connecting in the ‘last mile’ will directly impact the cloud’s usefulness.

This is a ‘big’ topic. We’re not even talking about data security, recovery, and business continuity. What if your business is gutted by fire? Do you maintain current digital backups off-site, really? Can you be back up and running before the fire’s been put out? This is another area where SaaS ‘can’ be invaluable.

Share your thoughts…

Part 2, in the next few business days…

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Is Multi-Tenancy Critical to Cloud Computing for Enterprise Customers?

JT — Wed, 15 Dec 2010 19:50:10 +0000

This question comes up from time to time. It is akin to asking moto-enthusiasts what type of ‘oil’ you should use in your engine. The result often leads to a very long, endless debate, until folks just get tired of it:).

Is multi-tenancy (MT) essential to Cloud, aka SaaS, computing? No. The topic of single- or multi-tenancy is largely an economic consideration for companies providing their software’s services over the web. That said, the decision to build a SaaS offering is also going to be dependent, at least in part, on the specific service offering.

My own experience is as a SaaS product manager with both single and multi-tenant solutions. The single-tenant solution was essentially a duplicate of the multi-tenant offering due to a very large customer’s requirements (load, SLA, etc.)

Having delivered SaaS solutions to a number of enterprise customers (in healthcare, finance, manufacturing, and other industries) MT was never an issue. If the topic was even raised (e.g. RFPs), it was often little more than a checklist item. Key concerns are typically accessibility, bandwidth requirements, security, SLA, and scalability.

Multi-tenancy is generally more scalable at lower price points. And, again, depending on the solution in question, customization was not meaningfully constrained simply because our platform was MT.

To be honest, whether your offering is ST or MT should not be a major consideration when selecting a service provider. Do you care if the train you’re on has one or two diesel engines way up front? No, you just want to get there in a manner that meets your expectations.

As noted in the article, the real issue comes down to the effort involved as ISVs take their desktop-based solutions into the web. Many of us can recall old "Win 3.1" apps migrated to NT (early predecessor to Windows 7) using the minimum effort required. Simply moving a desktop-oriented app to the web and calling it ‘SaaS’ is no different.

If you’re so inclined, see a related post, "SaaS Is Not Multitenancy."

(photo credit: Aceitera)

BONUS: Check out this video on ‘what’ the ‘cloud’ is. Short, simple, sweet (even if a bit idealized).

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Web Analytics. Why Should You Care?

JT — Fri, 01 Oct 2010 12:25:37 +0000

Casual browsing would seem to confirm that a majority of businesses do not use their web analytics. DUO Consulting, for instance, did their own survey an found, ‘…more than half of businesses and organizations are barely looking at, let alone really using, data from their websites.” Not surprising. The SaaS business I went to work for a few years ago, itself a web-based activity, made no use of web analytics at all.

My impression: “Analytics” is perceived as a kind of ugly, nasty, ‘black box’ topic.

As a result, many people, perhaps you, perceive web analytics as something, lumpy, bumpy, perhaps in the shadows and scary, belonging solely in the realm of the ‘IT people.’ If so, the smaller an organization (e.g. an SMB), the more likely you’re unwilling to invest the time in something you don’t understand.

With this in mind, I had the opportunity to speak with folks at the September gathering of WordPress Ann Arbor. With an audience spanning the entire spectrum from non-users (of analytics) to full-time developers, my goal was to break the black box open, and let some light in for all to see. After all, simply knowing something exists, is the first step to being able to take advantage of it.

The slides, with ‘some’ notes, is available below.

So let’s start letting in some light. ‘Analytics’ is simply the process of capturing, measuring, evaluating, and then reporting, on the wealth of information being passed through your website. Unbidden or not, there is a tremendous volume of stuff flowing through your website behind the prettily rendered pages.

So what is some of this ‘stuff?’ A quick list, hardly all inclusive, includes:

Screen Resolutions
Browsers
Countries
Users: New vs Return
Devices
Hot Articles
Dead Articles
Sources
Keywords

So: Why Should You Care?

Knowledge is power. And having knowledge gives you the ability to act on it, to make informed decisions.

For instance, using Google Analytics, you can easily track what the screen resolutions are for visitors to your site. Let’s say you’re designing a new user interface for your web site; a site heavily dependent on displaying tabular information. How you design your interface is going to be very dependent on available screen resolutions.

You might like to know that 76% of your customers use a screen resolution at least 1200 pixels wide. Even more important, it may also be critical to know that 24% (1/4 of your business) still use a screen resolution of only 800×600. If you roll out a new user interface (UI) without supporting 800×600 (‘assuming’ that resolution’s long gone, dead, and extinct), you would immediately disable a quarter of your visitors.

Not too many businesses would care to write off 24% of their revenue by accident due to ignorance. How painful it might be to learn you didn’t have to lose 24% of your revenue—especially when you had the information available to you to have avoided the problem in the first place.

Imagine: Throwing away 24% of your revenue due to ignorance—when you had the info all along.

Another real-world example might be knowing where your users come from.

Beyond simply being ‘pretty’ or nice to look at, analysis of where your site visitors, or customers, are coming from can help focus new efforts. Or, reinforce the need to continue current efforts.

For instance, in my own search for work, I conducted a direct mail campaign. In the prior 12 months, while I had visitors from ‘Colorado,’ none came specifically from Boulder, Colorado.

I sent 80 pieces to potential employers in Boulder. Over the course of the next 3-8 days, all of a sudden my site recorded about 40 visits from Boulder, specifically. What’s this tell me? A couple things. For one, it was nice confirmation that, yes, for all my effort, the mailing had made it through the U.S. Postal service:). Second, it told me my message was effective enough that 40 people thought there was enough value to warrant typing in my website address and visiting to learn more. How might this sort of feedback be useful for your marketing (email, direct, telemarketing, etc.) campaigns?

For this current post, my interest is not in taking a deep dive into the wonderful world of analytics. Rather I want to ‘break the black box open’ for you. If a web site is important to your business, hopefully I’m giving you some new food for thought empowering you to at least dig a bit further.

To see a bit more info, along with a number of additional analytic screenshots, view Monday’s presentation here:

Introduction to Analytics for WordPress AA Users

View more presentations from JT Pedersen.

Parting thought: Everything shown in the slideshow, Google Analytics, and WordPress.com States, are free and can be set up by many end users self-hosting their own sites.

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Don’t Forget the USERS!

JT — Thu, 09 Sep 2010 20:11:31 +0000

The other day I happened across a discussion asking the question: “What are the most important things to consider before moving…to a cloud-based solution?”

Darned good question. The opening—very valid—questions included things like:

TCO (total cost of ownership);
Data security;
SLA (service level agreements);
ROI (Return on Investment);
Data backups, Disaster Recovery, & Business Continuity Planning (BCP)

These are very typical things to find in Requests For Information (RFI), Request for Proposal (RFP). They are very representative of what (CxO) executive management will want to know—particularly before signing off on expensive, far-reaching, solutions.

But! Do not forget the Users!

Put yourself in their shoes, or better yet, get users’ input directly. Perhaps the #1 question is, "Will they use it?"

I have seen more than one solution deployment fail and turn into a huge waste of capital, simply because no one would use it! Sometimes its as simple as the user interface is appalling. More often, it is because the new solution does not map well against their day-to-day processes.

Another component to consider is, "Who will own it?" Restated, Who will own the relationship with the vendor? Who will bear day-to-day responsibility for execution? Will these lay with ‘someone in IT’, with the CIO or another exec, or…? All too often an exec or other manager has a great idea and makes an assumption that ‘IT’ will take care of it. Quite often, that’s a poor assumption that leads to additional heartache downstream.

So, perhaps 6. should be, Have all the stakeholders been identified and provided(ing) input?

What other key items have you seen neglected in the race to adopt something new?

(photo credit: Sigurd Decroos)

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SaaS Is Not Multitenancy!

JT — Mon, 02 Aug 2010 20:25:11 +0000

For the past few days I’ve been watching a discussion over what SaaS (Software as a Service) is. The interactions seem to have broken down into two main camps.

On one side, there are those who feel SaaS is defined by it’s technology platform, particularly whether it is single or multi-tenancy*. If you’re not using a multitenancy* platform, you can’t be profitable and you’ll fail. Period.

Just because a service provider does not have MT does not doom them to failure. If you have a very large scale customer, particularly in relation to the rest of your customer base, it may make sense to stand up a separate environment just for them.

The discussions have reminded me, a lot, of the old UNIX versus Windows diatribes 15 years ago. They were something along the lines of: Only UNIX for ‘real’ work; Windows for the ‘little people.’

If another major customer came along that might represent a 30% revenue bump, it just might make sense standing up yet another MT as ST instance for them as well. Is my business doomed? No. Very happy actually. Whichever path chosen, it would be economically driven.

On the other side, there is the belief that SaaS, regardless of the underlying architecture, is a delivery and/or business model. In other words, you the customer are simply buying a service.

The customer does not care, should not need to care, what the technology platform under the hood may be. Sure, if they’re big enough, it may be part of due diligence (just as looking at financials may be). For most SMBs though, it simply does not matter.

The customer needs a car. What’s under the hood, Rayovac or Duracell? Don’t care. Does it do what I want?

SaaS offers two-sided benefits depending on your perspective. As a service provider, we now have technology that allows delivery of a service with significant economies of scale, very flexibly, in a manner appealing to your customers.

As a customer, you benefit from those same economies of scale, consuming software services more flexibly, more simply, and without the hassles of ownership, maintenance, and perpetuity.

Sure, as a purist, I may like to argue in favor of MT as well. Guess I’m not all that pure;). What I do know, is most key decision makers are rarely technology purists. A sure fire way to stop a sales process in it’s tracks, is let it devolve into a discussion of ST vs MT and all the related minutiae.

From my perspective, keep it simple, it is: ‘Software’ ‘as a Service’

* Multitenancy is frequently used with or without a (-) hyhen, interchangeably.

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6 SaaS Myths

JT — Thu, 22 Jul 2010 20:03:52 +0000

We are still early in SaaS’ (Software as a Service) life cycle. It is not uncommon to come across open discussions as to the value of SaaS verses desktop offerings. Recently I happened across one such discussion from the perspective of a developer. Should they build new product/service offerings in SaaS and abandon desktop, client-side installations?

There are a number of myths that often come up in these discussions. Many are simply the result of people ‘wanting’ SaaS, the next new thing, to be more than it really is…too soon.

Consider:

Myth: “There are no up-front costs.”

Unless yours is a new business with no existing processes in place, you -will- have noticeable (direct and/or indirect) upfront costs when adopting new solutions, whether conventional or SaaS. At the most basic, there are real costs in converting your business (data migration, customization, staff training, …) from a legacy process to a new one. The larger your enterprise, the more integral your offering will be to the customer, the more likely there -will- be upfront costs.

Myth: “Scale your service usage up/down as your business needs change.”

Just how literally you take this statement depends on the agreement you have with your SaaS service provider. Many agreements, particularly at the larger, enterprise level, assume a certain minimal rate of usage. Penalties may apply if your actual usage falls below contractually obligated values. Agreements likely offer ‘motivation’ for you to consume more, not less. Assuming this myth is true may cause your business significant grief.

Myth: “Get up and running in a week or two…”

If you’re a small business, moving from using Outlook Business Contact Manager to Salesforce.com, this may well be true. But if you have larger concerns, large data volumes to consider, and need –any- customization or integration, or you’re adopting an entire AP solution, you may be happy to be up and running in a month or two.

Myth: “SaaS lets you realize an ROI in a few weeks, unlike desktop software that can be a year or two.”

Very few things if life are absolute, and this is one of them. ROI all depends on your cost to adopt a new solution compared with the value it returns to you. These sorts of statements, made without any sort of context, are simply unqualified. I have seen examples of service implementations where I questioned whether there would ever be a real return on the investment. In contrast, I’ve seen conventional desktop based solutions that offered very real ROIs in just a few months. Be careful with this one and make sure you understand the context. Don’t just swallow the bait:).

Myth: “Everybody has an internet connection now.”

It is easy to assume that ‘everybody’ has a good internet connection available to them. Just because ‘we’ may have good bandwidth doesn’t mean our customers do. Depending on where you are in the world costs can vary dramatically even today–if broadband always-on connectivity even exists.

For the foreseeable future, I believe connectivity will remain SaaS’ Achilles’ heel. Understanding the 3 underlying components, bandwidth, ubiquity, and availability, as they specifically apply to your intended offering and customers, will dictate which platform to choose (thick or thin).

A fourth dimension may also be the level of compute intensity required and where it may occur. For instance, video gamers playing online may require a hybrid approach (hence consoles). Connectivity lets them share data while high-quality graphics are generated in response and rendered locally. Other solutions may allow for raw input data to be uploaded, processed on SaaS servers, and retrieved later.

Myth: “… vendors earn their revenue monthly—they will do everything to please and retain their customers."

Whether conventional (increasingly relying on ‘subscription’) or SaaS, companies have a tendency to focus on the ‘new customer;’ winning their business; and, slowly paying less attention to ‘already won’ customers. It is human nature.

Worse, it is not uncommon for companies to become somewhat neglectful of existing customers because they’re viewed as ‘locked in.’ Part of this is supported by multi-year contracts that, barring blatant negligence, are unlikely to be broken.

You can be just as locked-in to a SaaS provider, just as dependent on them, as you can an installed suite of software. SaaS does not offer any special protection over this behavior.