If You Thought SaaS Was Annoying, The Cloud Babies Will Piss You Off!

I’ve been enjoying a spirited exchange with some of the Enteprise Irregulars around SaaS and Big Software for the Enterprise.  I won’t bore you with too many of the details, but we wound up in one of the classic cul de sacs these arguments often do.  Big Software was expressing their annoyance that once again incredible magic was being claimed, “Because it was SaaS.”  They were so annoyed at all the hype they percieved SaaS to be, and felt it was duping customers into believing too much in the name of SaaS.  If you read this blog at all (or have had a look at my resume), you will know I am an unabashed SaaS supporter, so when I hear someone shaking their head and bemoaning that SaaS is just a lot of hype, I spring into action.  Like any good evangelista, I launched into a long sermon about the many innovations SaaS has brought about that would be appropriate for any Enterprise (Big Software) Software to adopt regardless of whether they have a SaaS offering.

As it was happening, I was surprised myself at how it was coming out.  I’m not sure I ever heard anyone say SaaS had innovations that should be copied back into on-prem software before, but as I was waxing forth on the topic, I realized it was one of those things that had been germinating in the back of my mind for quite some while.  Let’s talk about that for a minute and then I’ll get into the whole Cloud Babies thing. 

What innovations has SaaS created that others would do well to adopt?  I’m talking about product architecture and functionality here.  Largely, it boils down to the idea of making software that is flexible without requiring expensive custom SI work.  Big ERP is legendary for the amount of expensive SI work that is required to install it.  The cost of such work is extraordinary, and the price tag when that work goes awry has created some legendary scandals in the Big ERP history books.  Getting away from all that is one of the promises of SaaS, and as I was quick to point out in that debate, it’s not just hype.  The economics of SaaS won’t support the expensive SI customization work. 

So how do SaaS vendors deal with the problem?  First, let me be the first to admit that a lot of them don’t.  They just restrict the scope of their offering and you live with that.  Sometimes that means the offering can only be successful for Small or Medium sized businesses and Big Enterprises can’t make use of it.  But that’s not the best answer.  The best answer is to find a way to deliver the flexibility in a way that doesn’t require expensive custom work.  There are two ways the SaaS world tackles this–for some problems metadata is the answer, and for other problems end user-approachable self-service customization works.  Let me give some examples of each.

Metadata is literally “data about data“.  As such, it is a beautiful thing.  Let’s consider the database.  It is very common for different organizations to want to be able to customize the database to their own purposes.  Let’s say you have a record that keeps information about your customers.  A lot of this information will be common, and could be standardized.  We all want the customer’s name, their address, phone number, and perhaps a few other things.  But then there will also be a lot of things that differ from one organization to the next.  Perhaps one wants to assign a specific sales person to each customer.  Another wants to record that customer’s birthday (obviously this is a much smaller organization than the first!).  And so on.  Without metadata, each database has to be customized and changed.  With metadata, rather than changing each database, you build the idea of custom fields in, and then you can just tell the database what the custom fields will be in each case but the structure needn’t change.  Metadata is not unique to SaaS, but it is an important part of the “multitenant” concept.  It makes it possible for all those tenants to live in the same database, but still get to have all their custom fields.

Metadata can also make it possible to enable that second method for flexibility.  Customizing a database without metadata is going to require someone to get into the database, modify the schema, make sure reports are modified to deal with the new schema, make sure the schema changes don’t break the product, and on and on.  Such work is definitely the province of expensive and highly technical experts.  However, once we have metadata, we can create a simple user interface that lets almost anyone add new fields, and that handles all the rest of it automatically.  Suddenly we have made what had been a difficult and expensive technical task approachable in a self-service way by non-technical customers.  Not only that, but they can make these changes quickly and easily, and they can even iterate on them until they get it just right.

Hopefully you can see why making expensive “flexibility customization” easy like this is essential to SaaS.  It makes no sense to sign up for cheap monthly Software as a Service and then have to spend millions to get it customized before you can use it.  Salesforce.com and others have done a fabulous job figuring out how to deliver this kind of thing.  There were a few non-SaaS companies doing this earlier, but nobody had made it an end-to-end requirement for the whole application install experience before the SaaS world came along and its economics made it imperative.  One example of a company that did this sort of thing to good effect was Business Objects.  It’s essential BI innovation was to make it possible to have the DB experts define the metadata needed to make querying the objects easy.  My old alma mater Callidus Software was another.  Our software computed Sales Compensation, which requires a lot of complex business logic.  Most of the players required expensive custom work to create comp plans, but we offered a product where business analysts could create the comp plans using formulas a lot like what you’d find in Excel.

The time is ripe, I would argue, for Big Software to be examined for opportunities to apply the same lessons.  Much Big Sofware is a couple generations older than the SaaS products of our time, so it isn’t suprising there should be some innovations worth looking at.  And in fact, Big Software are no dummies either.  See for example this discussion with Henning Kagerman of SAP’s changes in thinking about how to customize business processes.  Their Business By Design offering is not only a SaaS offering, but also a new generation concept for On-premises, and it is ripe with these sorts of ideas.  SAP has long been one of the customization heavyweights, but the pendulum seems to be swinging to the idea that next generation architectures might need to find ways to maintain flexibility while reducing the cost of customization. 

Adoption of these new ideas by the mainstream even outside of SaaS will be a good thing for all concerned.  But such adoption usually signals the maturation of an area, and this triggered little warning bells in my head.  If Big Software is upset and annoyed at the SaaS upstarts, who will upset and annoy the SaaS guys?  Who will unleash not just all the hype and disruption, but like SaaS, a set of innovations that SaaS, Big Software, and others will want to adopt too.  We’ve got a billion dollar SaaS leader in Salesforce, a gaggle of successful SaaS public companies still growing rapidly, an economic climate set to magnify the SaaS advantage further, and a number of exciting SaaS startups such as my own Helpstream.  The other thing is I’ve noted that when bubbles burst and everyone is wringing their hands in anguish, just as the hype from the last binge is dying down and consolidation is setting in, that’s usually when the next cycle is being born.  You just have to look around for it and it’s probably right there in plain sight.  Enter the Cloud Babies.

I call them Cloud Babies not out of any desire to denegrate, but because the Cloud is still in its infancy.  I am intentionally distinguishing SaaS from the Cloud too.  I mean the Cloud in the sense of Amazon, and perhaps Force.com.  The Cloud as a platform and a datacenter that is not only not the customer’s datacenter, but not even the software vendor’s datacenter.  I mean utility computing and everything that implies.

The Cloud Babies will be just as annoying to those not yet on the Cloud as SaaS is for those not yet selling (or buying) SaaS.  It’s going to seem ridiculously over hyped.  It’s going to seem like it isn’t real, that it won’t last, and that it will only matter to certain market segments or to small businesses but never large enterprises.  In fact, you can already ready most of that out there.  But I have already seen enough of the Cloud (Helpstream moved to Amazon recently) to know that there is a lot more to it than that.  There is a kernel of hard reality to it.  The Cloud is disruptive.  It will lead to innovation.  It will lead to architecture changes that give fundamental advantages.  If you thought the Sequoia memo of doom about what startups should do in this economy was serious, they missed an important point.  Any startup running their own datacenter today is at a huge disadvantage to those who are already in the Cloud.

I saw on Twitter earlier today that Fred Wilson means to sell GOOG and AAPL tomorrow and buy AMZN.  I agree.  If the SaaS Guys were annoying, you ain’t seen nothing yet.  The Cloud Babies are really gonna piss you off!

Cloud Computing Keiretsu: VMWare + Elastra, Amazon + RightScale + EngineYard

A keiretsu (系列, keiretsu^? lit. system or series) is a set of companies with interlocking business relationships and shareholdings.   So says Wikipedia.

As the competitive landscape for the Cloud Computing World begins to take shape, forming Keiretsus is one of the most important things for the players to be doing at this time.  Most of them do not have enough technology they can call their own to create a total solution for their brand.  Even mighty Amazon, which comes closest, benefits from software like RightScale’s asset management suite (see my interview of RightScale’s CEO, Michael Crandell). 

As such, there will be a rush to round out complete suites in these early days through partnerships.  This is a normal business pattern and its good news for both the partners and customers.  It will lead to more complete solutions, better integration between the components, greater standardization, and it signals the legitimization of the market and the beginnings of a shift from early adopters to the mainstream.  In short, it is a sign of great health in momentum for Cloud Computing.

The latest news of the impending Keiretsu was the joint announcement that Elastra will partner with VMWare.  I saw that one on Twitter this morning, BTW.  It made me think of the various Keiretsu as revolving around 3 different major markets, each of which corresponds somewhat to an equivalent market in the conventional world:

The Pure Cloud is the Amazon-style market.  It offers generic Cloud Infrastructure to all comers.  It’s Cloud as a Service, and is analagous to the Software as a Service world.  This world keeps costs extremely low and relies mostly on Open Source software (e.g. Xen Hypervisor) and internally developed software (S3 or Elastic Block Store) to keep the costs low.  The model works great at delivering very low costs.  My company, Helpstream, saved a bundle recently by switching.

The VMWare/Elastra combination is also interesting.  In my (so far cloudy) framework of different Cloud models, I put VMWare in the same category as 3Tera (another great company I’ve interviewed).  These companies are charging for software that Amazon has built or Open Sourced (not precisely, but the software is analagous to Amazon’s Xen Hypervisor and the Elastic Block Store they built).  Presumably the customers for this type of Keiretsu will be hosting providers that want to play in the Cloud but do not have enough software development capability themselves to get there.  There is also a market for corporations that want to create private data centers that take advantage of Cloud technology, or that are Cloud compatible so they can build composite apps that span the Cloud and the private data center.  This is an interesting market, to be sure, it’s just different than the “mainstream” (if I can use that word this early in the Cloud cycle) Cloud Market that companies like Amazon or Google represent.  It most closely resembles the perpetual license software market, with its vendors selling licenses for infrastructure.  In fact it isn’t an exact analog because a lot of this stuff is services, but metaphorically, it’s pretty close. 

The last analagous market is what I call the Vertical Cloud.  Seems like there is always a vertical opportunity to be had in any megamarket, and this can be quite a lucrative field to play in.  In the Cloud world, the verticals are represented by Google and Intuit, who have created special-purpose cloud platforms that cater to particular desires.  One could even view things like Facebook applications as existing in the Vertical Cloud market.

Next we have the crossover players.  RightScale is both a useful component for the Amazon world, and the company is also offering to deliver their service on clouds more like the Infrastructure Sellers operate in.  There are many reasons why this is a valuable niche.  To learn more, check out my interview of RightScale CEO Michael Crandell.  Elastra is another product available now in two of the Cloud markets.  Shifting over to the other side we see Ruby On Rails as a specialized vertical being delivered on the Amazon Cloud by EngineYard and Heroku, hence they’re in the crossover space between the two types of markets. 

There are a lot of other players I”ve left off the diagram just to keep it clean and obvious at a glance what’s happening.  For example, Force.com is trying to be both a Vertical, where it is ideal for creating add-ons to the Salesforce ecosystem, and a true Cloud as a Service where any generic application could be built there.  To make it even more interesting, Force.com connects to both Amazon and Google.  This framework provides a way of thinking about possible future combinations or products.  What are other vertical crossover opportunities between the generic cloud and the verticals?  What will be the crossover opportunities between the infrastructure and vertical worlds?  Will there be more than just the 3 big markets, or are the analogs to conventional software markets convincing enough to tell us this is probably all there is?

It’ll be interesting to watch the Clouds continue to evolve and see what unfolds!

Interview with RightScale’s Michael Crandell

Few things are more fun for me than to hear a CEO speak passionately about their company.  For that reason, I love interviewing them for this blog.  I recently had the opportunity to interview Michael Crandell, CEO of RightScale.  RightScale is a fascinating company that has an automated Cloud Management Platform. 

We use it at my company, Helpstream, to help us manage our virtual cloud IT assets, and like the software.  Evidently we’re not the only ones because RightScale has grown rapidly.  The three founders (Michael, CTO Thorsten von Eicken, and VP of Engineering Rafael Saavedra) started with a seed round of $700K in September 2007.  They took their first full VC round of $4.5M from Benchmark in April 2008.  That was recently followed by a $13.5M round from Index and Benchmark.   It takes a lot of momentum to pry that much capital loose from VC’s in these times!

In terms of customers, they have just under 10,000 free customers and several hundred paid customers.  RightScale’s service is such that you can start out using the free version and getting great value and then graduate to the paid version.

Last part of the profile, Michael and Co. have the wonderful luxury of being based in Santa Barbara, which is a wonderful town to be in. 

With the background out of the way, let’s dive into the interview:

Michael, give me your company’s elevator pitch, what does RightScale do?

RightScale is an automated Cloud Management platform.  It’s a platform in the sense you can control manage and develop IT infrastructure in the Cloud.  It’s your window or portal to your virtual data center.

We offered it to provide 3 points of value:

1.       Automation.  Customers are very interested in making it easy to get on to the cloud.  We provide pre-packaged solutions for common tasks to create an easy on-ramp.  MySQL, Web Site front end, grid.  Also Automation of server admin.

2.       Multi-Cloud Support.  Companies don’t want to be locked in to a single cloud source.  We can provide some portability.

3.       Transparency.  You can get at any level of the stack on your servers, so it’s a true platform.

Why do your customers want to be in the Cloud and on Amazon?

There are two reasons, really:

1.       Cost Savings is compelling.  Driven by capex vs opex.  Variable vs fixed costs.  Pay as you go is less capital intensive.  Elasticity.

2.       Agility.  Get servers quickly, get projects up and running quickly.

<Aside:  I mentioned that Helpstream has saved about 60% of our datacenter costs by switching to Amazon and Michael said this was pretty typical among his customers.>

What’s the neatest thing you’ve seen your customers do with the Cloud?

Tough question.  One of the great aspects of my job is that it’s fun to see all the neat solutions.  Here are some examples:

-          Animoto:  A cool service that creates photo slide shows set to music.  <I agree and love Animoto!>

-          Playfish: British educational games.  They needed scalability and geographical distribution.  <Amazon has worldwide datacenters and makes it easy for small companies to deliver a service worldwide.>

-          TC3 Health:  Health insurance claim fraud analytics.  They use Rightscale to spin up 100’s or 1000’s of servers to go through millions of transactions in order to weed out the fraudulent ones.

-          A large pharma company:  Has a program where a drug researcher can spin up a grid for protein analysis.  <Protein analysis is very compute intensive!>

Why does RightScale support multiple clouds?  Why would a customer look at another cloud?

It’s all about avoiding lock-in.

For example, a big media company we’re working with <you’d recognize the name!> has an outbound media site and wanted to do fan profiles.  They wanted to do it in the cloud because traffic is unpredictable.  But, they have an internal policy that prohibits any single source solution.  So we worked with them to do a non-cloud solution (at the time that’s all that was available) so they could prove their solution wasn’t single sourced to Amazon.

Today we support Flexiscale and GoGrid.  We’re adding Rackspace in the future, as well as others. 

We also support Eucalyptus, which is an open source solution that lets you build an EC2 compliant cloud on your own hardware.

Don’t most customers use Amazon? 

This is more a matter of keeping the door open for the future.  Amazon has a big lead as a first mover.  They established the category by making it so easy to rent servers with a credit card in a way that’s no harder than buying a book.

<Translation:  RightScale gets more Amazon companies to buy their product as an insurance policy should they need or want to use other Cloud infrastructure.>

Tell us about the impact of the economy on Clouds, SaaS, and RightScale?

I’ve never seen anything like it.  We’re in unprecedented times.  It’s tough to predict, but we believe Cloud Computing is really strong in the downturn.  There’s tremendous demand for cost savings coupled with the benefits of outsourcing. 

People running datacenters in house often don’t look at fully burdened costs.  If you really look at it straight up, Amazon is a lot cheaper.  <I agree and have seen the numbers from Helpstream that leave no doubt. It’s funny, you constantly read people trying to do back of envelope math and concluding Amazon is expensive, but they aren’t adding up the full datacenter costs!>

That big pharma company I mentioned told me, “If we can avoid buying another blade server ever, we’re going to.”  There’s a lot of companies that feel that way.

It won’t be every workload and it won’t be tomorrow, but there is a lot of pent up demand for that.

How are you going about getting your leads in this market?

We have a particular market approach.  Our Benchmark Board Member, Kevin Harvey, calls it “advantaged customer acquisition.”  No advertising.  We grow via word of mouth and PR.  We also have a free edition that is an engine of growth from the start.  It will be permanently free and it has a lot of utility.  We do well with Webinars, including a series on best practices.  We try to deliver content.  If we provide value and information, the business will come.

We don’t argue or educate about the Cloud, it’s rather about how we can help.

Is there anything special about the Amazon ecosystem you can rely on to help?

Two answers.  Amazon has been a good partner since the beginning, but at arm’s length.  There are no special favors.  Within the limits of the fact that companies drive business to them.

Selfishly we’d like them to favor some of the larger players because we think that serves customers. 

We cooperate on specific tractionable engagements.  They refer customers to vendors who ask how to solve a problem to the right vendor to help.  Conversely, we help them with startup camp speakers and such.  We’re also on their developer advisory committee, so we give them a lot of feedback to help bring out new Amazon functionality.

Let’s talk about social media and community for RightScale.

We love that world.  It’s helped drive RightScale’s growth and success to date via our Advantaged Customer Acquisition.  It’s part of our plan to expand that to do an even better job to encourage a developer and ISV community.  We’d like to develop our own ecosystem.

It’s also a fact that there are a lot of Web 2.0 companies in our customer base.  We see more complex web sites with database backends==complex multi-tenant web scale operations.

<At this point I took the opportunity to point out that Helpstream has an integrated solution combining community and customer service that’s right up his alley.>

Conclusion

Great interview with Michael.  I learned a lot and had a lot of things I suspected about the Cloud world and marketing in this economy confirmed.  RightScale certainly has the numbers that show them gaining tremendous traction despite the tough times.  I love their approach to selling by using a content-rich and social outreach program.  Heavy on PR, light on advertising.  This is a lot like what the folks at Rally Development use too.

The Race for Internet Single Sign On

Single Sign On is a facility common in Enterprise Software that let’s you sign in once (or at least use the same userid and credentials) to gain access to every piece of software, even though they may come from many different vendors.  It’s a nice time saving convenience.  There is currently a big move afoot to provide SiSO (the usual abbreviation for Single Sign On) for the web itself.  Google has OpenID, Facebook has recently delivered Facebook Connect, and now there is MySpaceID.  

Who will be next?  The browser owners such as Mozilla?  SalesforceID?  Why not?  SFDC is cozying up to Google in various ways and it isn’t hard to implement SSO with the Salesforce platform.  My own company, Helpstream, supports Salesforce and OpenID (e.g. Google) SSO.  It’s a great convenience to our customers, and more importantly to our customers customer’s who use our application for Customer Service.  When it comes to security issues, why should credit card issuers or some such get into the fray?

In the end, I can’t think of a good reason for any of these to be the dominant winner in the near future, so application vendors should support as many of them as they can.  Eventually businesses will insist on SSO.  They already have it for on-premises applications.  Who knows, maybe business will insist on it for security reasons.  That’s another factor in Enterprise use where businesses want an API that lets them rapidly shut off all the accounts for a particular user, for example, a terminated employee.  None of the current Internet SSO options support that, but we saw such functionality added to the iPhone not long ago.

Dave Weiner, as channelled by Dare Obasanjo, says these standards are too complex and that points the way to a new generation.  I disagree.  It’s been easy to implement OpenID and Salesforce credentials at Helpstream, and we’re going to do Facebook next.  This is just wishful thinking from Weiner and Obasanjo who abhor the idea that SSO might be locked up by one of these big players.  The lockup isn’t going to happen precisely because it is pretty easy to support more than one.  Dare also points out some good examples where you may not want a single ID identifying who you are in every web situation lest things become embarrassingly co mingled.  OTOH, advertisers will love having yet another way to see whose footprints on various web pages are whose.

Keep watching the drama, and ask you software vendors to support the standards you want to use.  It’s all part of the growth and maturation process for Cloud Computing.  And be careful if you think your online presence is anonymous!

Related Articles

GigaOm:  MySpace launches MySpaceID

One Week Later on Amazon Web Services

Well it’s official.  My company, Helpstream, has now been running our application entirely on Amazon Web Services for a week and we’re very happy with the result–it’s better, faster, and cheaper.  We’ve gotten a more robust system for our multitenant SaaS application that’s actually cheaper and easier for us.  Customers are reporting that the application even seems faster than it had been.  The effort involved was not too bad, though we did go through a multi-stage process before committing everything to Amazon.  I’ve chronicled that process on our corporate blog if you’re interested in seeing how such transitions are done.

Meanwhile, I can’t imagine why startups are fooling around with their own data centers.  Easy for me to say, we were too just one short week ago!  But seriously folks, given the current economy and the fact that you can deliver a better service more easily and cheaply with Amazon, why wouldn’t you make that a high priority?

I remember sitting in our weekly staff meeting with my Products organization discussing how to phase the transition.  We’ve got quite a lot of business activity on the horizon, as well as over 120 customers using the service at present.  I was arguing for more baby steps and my fear that we might screw something up.  My Director of Operations made the statement that when he looked at Amazon versus the sort of datacenter a startup can run, he couldn’t understand how we could afford to wait any longer than we had to.   What he meant was that the capabilities of AWS were not something we could even begin to approach any time soon.  When we took a careful look at what we were afraid of happening in a move, it turned out there was a strategy to mitigate every single risk.  So, we put together our migration plan and got on with it.  Boy were we happy we did!

SaaSGrid: An Operating System for SaaS

Apprenda has announced that SaaSGrid has moved from closed Beta to public availability today.  I had the pleasure of interviewing Sinclair Schuller, Apprenda’s CEO to learn more about SaaSGrid recently.  It’s a fascinating offering, and I can definitely see how it makes it easier to create new SaaS applications.

Apprenda calls SaaSGrid a “Cloud Operating System.”  I don’t know if I would call it that or not, but at the very least it is a SaaS platform that offers a lot of benefits not unlike Force.com from Salesforce, but with some key differences.  First and foremost in my mind, is that there isn’t much of anything proprietary about SaaSGrid.  It’s a framework that makes it easy for .NET developers to move their applications to a SaaS Cloud-based delivery vehicle.  Looking at the services provided by the framework, it isn’t hard to see that Schuller & Co. have had experience building SaaS applications before (in fact quite a few of them), because it solves many of the SaaS-specific problems I’ve seen in my career as well.

SaaSGrid covers two bases.  First, it offers plumbing and delivery infrastructure services.  In my mind that’s the “Cloud Operating System” piece.  But, at least as interesting is their Business Engine, that helps simplify a lot of the operational aspects of SaaS.

Let’s describe the OS piece first.  Schuller says it is a “contextual execution environment.”  Think of that as a way to virtualize the multitenant aspect of SaaS so that the application developers don’t need to worry about it much.  It happens almost for free.  This makes a lot of sense if you think about it.  The app developer shouldn’t have to think about tenants any more than the tenants think about each other.  What happens is the developer deploys a single instance and SaaSGrid figures out how to extend that for many tenants.  In doing so it manages data isolation, execution isolation, tenant load balancing, scale out, and those sorts of problems. 

Now what about the Business Engine (or Business Services as they refer to them)?  I thought this part was really cool.  Basically, the Business Services provide a metering and security framework that’s tied to monetization management.  These are common problems for SaaS companies.  We certainly had to solve them for my own company, Helpstream.

To use the framework involves tagging certain features so that they can be recognized as such for security and for offering different levels to different customers.  For example a trial version, a basic version, and a professional version would be very straightforward.  After you tag these features for SaaSGrid, it can then literally structure a web menu that tells what features go in each version, deal with billing, centralize logging, provision, and do the million and one other tasks that plague SaaS developers around these issues today.

Got a request from marketing to refactor which features go into which versions?  No problem.  Need to add a new high end version that costs more?  No problem.  This sort of thing is exactly what SaaSGrid is set up for.

The lifecycle to use SaaSGrid is pretty straightforward.  Develop your .NET app as you’d expect.  The web services and DB layers are SaaSGrid, while the UI layer is your choice.  Bundle that lal up as a SaaSGrid archive, configure in SaaSGrid’s web application, publish it, and voila!  You have a SaaS app ready to be managed via their portal.  You get all kinds of nifty reports on billings, usage, and the like.  The UI from the demo was clean and easy to understand.  There is provision for lifecycle stages including Development, Test, Production, and Archived (old releases). 

The process of migrating folks to new releases can be particularly problematic for SaaS (where everyone runs the same release), but SaaSGrid works with you there too.  Later versions can either be patches with deltas, or completely new images.  The patches do schema migration via scripts you provide.  The last piece to be aware of is that SaaSGrid doesn’t own a data center (good call!).  Rather, they partner with various organizations. 

There’s a lot more to SaaSGrid, more than I can cover in a simple blog post, but it’s something to take a look at if you need help getting a SaaS application to market sooner.  I queried Schuller about the availability of Unix (versus the current .NET) versions and he mentioned their software is all Open Source and Linux under the covers, so that won’t be hard.  He just felt like the .NET community wasn’t getting enough attention yet in the Cloud.  I wouldn’t be surprised to see unix versions of the platform at some future point if there is demand for it.

Flixwagon: Instant Video News

There’s a lot being written these days about the potential for the web to overtake conventional news sources.  Most of it has to do with newspapers (like Fred Wilson’s blog post this morning), but television news is also vulnerable.  I interviewed Ken Zamkow, Flixwagon’s Executive Director of Marketing and Business Development to find out more about the emerging combination of web and video news.

I had been curious about Flixwagon since hearing about them via Robert Scoble (looks to me like they’ve fixed most of his gripes, BTW), who is always on about video and the web.  It had always seemed to me like video on the web could be the most difficult of propositions.  After all, doesn’t video require more production than any other form of media to be successful?  Little did I know that is actually far from the truth.

Of course Scoble himself has made a career out of video, even though he started more as a blogger.  The photo on his web site shows a video camera with tripod slung over one shoulder.  More recently he’s become a devotee of cell phone video, simply because you can shoot it in places that just aren’t possible with a full sized camera.  Whether that’s because you’re shooting from the tight confines of a Tesla electric sports car, or as a participant in the Davos World Economic Forums, the cell phone can go places that the big cameras can’t and with surprisingly good results.

But could this phenomenon actually he mainstream?  That’s what I wanted to find out from Ken.

As he puts it, Flixwagon started out with a technology and they didn’t know what they would do with it.  The company was founded a little over a year ago by three veterans.  It’s headquarters are in Boston, MA, with offices in New York (where Ken is) and Israel for R&D.  They’re funded by a group of individual investors.

Today, there are two main uses for the service:

1.       Consumer.  Individuals making videos and chatting with friends while doing that.  Sometimes private, sometimes public, and so on.

2.       Business:  More important to us.  MTV, Conde Nast, and others use this to broadcast live content. 

That second scenario, broadcasting live content for various media concerns, is the interesting piece.  They’ve been working with MTV, for example, for most of their history.  MTV sends its reporters into various events with just cell phones.  For Super Tuesday, they had 23 reporters canvassing the event with their phones capturing the video. 

Their biggest success to date has been an MTV event covering the Jonas Brothers backstage at a concert.  They followed the group through Jones Beach, Long Island, and Madison Square Garden, backstage, on board helicopters and limos.  It’s unique footage and you can see again where it would’ve been hard to capture this sort of thing with a conventional video crew.  This footage all led to some of the biggest mobile video numbers ever recorded.  We’re talking streaming 6 million videos in 36 hours, live TV replays shown at a rate of 2 clips an hour, and over 90,000 blog comments left on the videos.  Those kind of numbers would get any media company interested!

Lest you think it’s just the edgy music crowd that would go for such a thing, they’ve also had good success covering fashion shows for Conde Nast property Brides.com.  Once again they’re sending reporters to do live coverage of fashion show for Brides.com’s blogs.

So Flixwagon are intent on establishing themselves as the new media platform for video.  I asked Ken to speculate on some of the factors that have made this format more acceptable.  From my own perspective, I think video like the Blair Witch Project got people used to the idea of consuming video with these sorts of production values.  The thing about this kind of video is not only can it be tremendously more candid, opening the door for more interesting kinds of content, but it is also connected with web communities, which also drives a more interesting experience than plain old video (remember when we called ordinary telephones Plain Old Telephone Service, or POTS?).

Ken’s comment was:

People are used to a more handmade production value.  They’re okay with content shot on a smaller camera.  Blair Witch opened that door.  The key is the informational value.  Is the content engaging and interesting.  People enjoy a broader diet of media.  They enjoy HiDef movies, but they now have more room in their entertainment diet for variety.  They snack on short form videos and consume a lot of other types throughout the day.

It really is about whether the content is engaging or interesting, isn’t it?  We’ve all seen shows with incredible production values that were duds because they weren’t engaging or interesting.

What’s the relationship of YouTube to services like Flixwagon?  Obviously YouTube is the Big Kahuna for video on the web, but there’s more to it than that.  First, there’s the cell phone angle, which opens up whole new avenues for content.  Then there are Flixwagons efforts to become a media platform.  For the commercial video producers, the MTV’s of the world, they don’t want to send their traffic out to YouTube, they want to keep that community for themselves.  Flixwagon facilitates that.

At a high level, Ken characterizes Flixwagon in this way:

We think this is a great technology because it makes things easier and simpler.  It costs a fraction of what a broadcast crew costs so it is a way to revolutionize broadcast content.  You can create a lot of engagement with much lower cost than ever before.  That’s what the web is all about.

Indeed, this sort of thing is exactly what the web does well.

Why Are iPhone Users So Much More Likely to Embrace Apps?

Compete recently ran a story in their blog that I thought was fascinating.  They’ve measured a dramatically higher uptake of applications among iPhone users versus other Smartphone users.  Here’s the graph they presented:

The bars represent number of apps on the phone.  As you can see, only 7% have no apps at all on the iPhone versus 34% on other Smartphones.

I have a theory about all this that’s resonated as I read various folks comparing various phones to the iPhone.  It seems to me that other smartphones trade principally on their keyboards as the advantage.  They appeal to people who are really tied in to email, or perhaps text messaging of various forms. 

The iPhone, by contrast, trades on its web browser.  That’s not to say the other capabilities aren’t excellent, but the web browser is what really makes the iPhone rock.  This was distinctly the flavor I got, for example, from Fred Wilson’s comparison of the G1 versus the iPhone.

That means that if you love the iPhone, you are somewhat predisposed to the notion of a mobile platform.  It’s pretty hard to view a keyboard for email or text messaging as a platform.  They’re just more of the same only you type instead of speaking.  But a web browser truly is a platform.

The other piece is just how easy Apple has made it to download the apps and run with them.  The user experience is completely seamless and straightforward enough that anyone can do it almost automatically. 

Lastly, application developers want to build for the iPhone.  They love it.  I know several different folks who are fighting through what I view as an extremely primitive development platform (Objective C?  Come on Apple, you and Adobe need to bury the hatchet and get a real interpreted language onto the iPhone!) to have a chance to do that.

BTW, the Compete blog is excellent.  I love the insights they pull out of the web using data mining.  Check it out.

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No sooner did I post this than Om Malik came out with a post confirming he thinks of the iPhone vs others in essentially the same way.

Why Do Platforms Bludgeon Their Partners?

I’m reading another story about Facebook building in functionality to their platform that used to be in the hands of partners, and killing the partner’s opportunity on the Facebook platform in the process.

There is definitely revenue to be had doing this, Bebo started out exactly this way and at one time had 100 million users.  Even today, at least until now, they were making some $4 million a year off birthday cards and gifts.  Now Facebook wants that all for themselves.

Is it really worth $4M a year, or even $10-20M a year to destroy partner’s trust in you?  Why build for the Facebook platform if you know full well they plan to take the business away from you as soon as you prove it’s capable of growing to an interesting size?  And is this really the only way Facebook can grow their revenue?  Have they exhausted all the ideas to do something their partners aren’t?  It sure looks like it.

Here is another one I shake my head at.  Amid the flurry of very compromising emails (such as James Allchin saying the machines they were certifying wouldn’t work, it’s misleading, and retiring the day it shipped rather than deal with the fallout), we find HP deeply unhappy with Microsoft.  They had invested in creating a generation of PC’s that stepped up to the performance Vista requires and were shocked to see Microsoft’s decision to certify machines that basically would not run Vista.  Once again, a partner got bludgeoned, pehaps in the interest of placating other partners such as Intel.

With partnerships like these, who needs competitors?

Enterprise SaaS is Mainstream. Today.

It’s the High Holy Week for SaaS this week with the faithful attending Dreamforce.  While that event is focused on Salesforce.com and its ecosystem, most companies that have anything to do with SaaS or an interest in SaaS will at least peek in online to see what’s being announced there.  As Bernard Lunn puts it in his RWWeb post:

Enterprise SaaS is going mainstream, it is a big market to get into right now.

The italics are mine, but I think they’re important, because there is considerable SaaS and Cloud uptake today among Enterprises and not just small businesses.

We’ve all heard the list of objections about the cloud or SaaS many times.  Chief among those arguments are security, reliability, and portability.  And no sooner do you get past those with some technical stratagem or two than someone brings up regulatory issues, which only impact very narrow markets.

But here is a newsflash: the Enterprise is in the Clouds today and loving it.  How do I know this?  Let’s consider a couple of stories that recently popped up. 

First, was the story of GE launching Aravo, a SaaS Supply Chain solution.  I was surprised to see this one pass so quietly, because it is so symbolic of the uptake of SaaS among Big Enterprise.  There aren’t many companies who can serve as a better poster child for this than GE, for example.

Second, I was perusing the latest good quarter’s results from my old Alma mater Callidus, and chanced upon some fascinating figures for their SaaS business:

• 59 customers
• 73,000 seats
• $24.8M in annual recurring revenue

A quick look at the math reveals an average deal size of over 1200 seats.  Not only is that quite large by SaaS standards, but think about what it means.  Callidus is a sales compensation application, so the average SaaS customer has over 1200 sales people.  No small company that!

I called up Steve Apfelberg, SVP of Marketing at Callidus to ask about the numbers and got the following response:

“While our Callidus On-Demand solution has been critical to our growth in the mid-market, the demand for it has by no means been limited to that segment.  Many large, global enterprises prefer to manage the mission critical business processes of sales performance and incentive management in an on-demand environment.  Callidus Software’s almost 60 on-demand customers, with average annual revenues of greater than $1 billion, are a good proof point that large companies are adopting SaaS.” 

“We’re strong believers in the benefits that SaaS and PaaS bring to customers and are excited to showcase Callidus Plan Communicator, our first native Force.com application, at next week’s Dreamforce event in San Francisco.”

Well there you have it.  The average customer for Callidus’ SaaS solution is a company with over $1 billion in annual revenues.  Note that the data in the Callidus system is extremely sensitive–it tells you everything there is to know about the revenue side including best salespeople, best customers, pricing, best products, territories, etc., etc.  Callidus has gone to some extraordinary lengths to safeguard all this and as a result, they’re winning big enterprise deals. 

As I say, SaaS is mainstream in the Enterprise today.  Perhaps not for every enterprise, but there are enough out there that we’re way past establishing a beachhead and getting them to try it.  I suspect the current economic climate will accelerate the process further.  SaaS does nothing better than save costs and increase the likelihood projects will be successful.

Aside from the economy, it’s important to note that all the key players are anxious for a seat at the Cloud table before the incumbents gobble too much share.  Microsoft in particular is making some interesting moves.  Making large parts of their Azure Cloud API’s REST enabled will ease their connection to the non-Microsoft world and is a canny move.   Robert Scoble further underscores how effective Microsoft’s sales and evangelism can be in helping to spread the word.

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Vinnie Mirchandani boils it down to dollars and cents in a great post where he says:

A few years from now, I have a feeling I will be telling some other client “If you could be like GE…you could drop a billion to your bottom line through aggressive use of SaaS and clouds”.