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Archive for the ‘saas’ Category

Authentication as a Service: Slow Progress, But Are We There Yet?

Posted by Bob Warfield on July 11, 2014

BankVaultSmallAuthentication as a Service solves a problem every Cloud Developer, mobile or desktop, has to solve.  As one player in the space, AuthRocket, puts it:

Do you really want to write code for users, forgotten passwords, permissions, and admin panels again?

To that I would add, “Do you really want to have to be a world class expert on that stuff to make sure you don’t leave some gaping security hole out of ignorance?”  I think the answer is a resounding, “NO!” to both questions.  Why do it in this world of Agile Development, Lean Startups, and Minimum Viable Products?  It’s one of those things everyone does (and should do) pretty much the same way from a user’s perspective, so there is no opportunity for differentiation.  You have to do it right because the downside of security problems is huge.  You have to do it right up front to protect your customer’s data and your investment (so nobody gets to use your products for free).  There’s basically very little upside to rolling your own (it’ll only slow you down) and tremendous downside.  Hence, you’d like to buy a service.

I keep going around this block for my own company’s (CNCCookbook) products, and I surely would like to get off that merry g0-round.  I wanted to buy this some time ago, and have written about it for quite a while.  For example, in an article I wrote 4 years ago on PaaS Strategy (Platform as a Service), I suggested login would be an ideal service for a pass to offer with these world:

Stuff like your login and authentication subsystem.  You’re not really going to try to build a better login and authentication system, are you?

I sound just like AuthRocket there, don’t I?  I’m sure that’s not the earliest mention I’ve made, because I’ve been looking for this stuff for a long time now.  As I say, I had to roll my own because I couldn’t find a good solution.  I would still like to replace the solution that CNCCookbook uses with a nice Third-Party service.  I only have few very generic requirements:

-  It has to offer what I need.  Basically that’s Email + Password login with all the account and forgotten password management interactions handled for me.  It would be very nice if they do Federated Login using the other popular web services like Amazon, Facebook, Twitter, Google, or whatever.  It would also be very nice if it could do 2 factor login.  The latter two are optional.

-  It has to work well.  I judge this by who has adopted it and how it is reviewed.

-  It has to be here for the long haul.  I’ll judge this by size of customer base and quality of backers.  AuthRocket, for example, is still at the invitation-only Beta stage.  That’s too early for me.  I have mature products and don’t want to have to change out this service too often.

-  It has to be easy for me to access the API’s.  I prefer a nice RESTful API, but I will take a platform-specific API for my chosen development platform: Adobe Flex.  And no, I don’t want to debate that platform, it has worked fabulously well for me, the products are mature, and I am not looking to switch.

-  It has to be easy to tie it back to securing my data in the Amazon Web Services Cloud.

-  Optional Bonus:  It helps me solve the problem of disconnected data access.  My apps are Adobe AIR apps.  You download and can run without a web connection for a period of time.  This is important to my audience, but means I’ve got to use data models that keep local copies and sync with the Cloud when they get connected.

While my apps are not yet available on iOS or Android, all of those things are almost exactly the same problems any Mobile App developer faces.  Therefore, this ought to be a hotbed of activity, and I guess it is, but so far, I still can never seem to find the right solution for me, and I don’t think I’m asking for anything all that crazy.  But, I have yet to find a solution.  Let me tell you a little bit about my 2 most recent near misses.

Amazon Cognito

I was very excited to read about Amazon’s new Cognito service.  At CNCCookbook we’re big Amazon believers, and use all sorts of their services.  Unfortunately, at least until Cognito, they didn’t really have a good service for solving CNCCookbook’s authentication problems.  They had IAM, which is a very complicated, very heavy-weight, very Big Corporate IT kind of solution.  It looked kind of like maybe you could do it if you had to, but you’d still wind up writing all the darned password management stuff and it looked like it was going to be a real ordeal.  Mostly, I think of IAM, as the tool used to define roles for how broad classes of users can access the various other Amazon offerings.  I wanted another service of some kind to be the sort of simpler, friendlier, front end to IAM.  Enter Cognito, and it sure sounded good:

Amazon Cognito lets you securely store, manage, and sync user identities and app data in the AWS Cloud, and manage and sync this data across multiple devices and OS platforms. You can do this with just a few lines of code, and your app can work the same, regardless of whether a user’s devices are online or offline.

You can use Amazon Cognito directly from your mobile app without building or maintaining any backend infrastructure. Amazon Cognito handles secure app data storage and sync, enabling you to focus on your app experiences, instead of the heavy lifting of creating and managing a user data sync solution.

A guy like me loves the part about, “You can do this with just a few lines of code” followed by “without building or maintaining any backend infrastructure.”  Now that’s what I’m talking about, I gotta get me some of this!

It’s nearly all there:

-  Amazon is an outfit that can be trusted for the long haul.

-  REST API’s are no problem, that’s how Amazon prefers to operate.

-  Tie back to other Amazon Web Services?  Puh-lease, who do you think you’re talking to, of course one Amazon Service talks to the others!

-  Sync?  Yeah, baby, that’s what Cognito is all about.  More potential time savings for yours truly.

Oops, just one little shortcoming:  it only does Federated Login via Amazon, Facebook, or Google.  That’s cool and all, but wheres my Email + Password login so I can seamlessly move customers over to it?  Maybe I missed it, maybe it’s coming, or maybe Amazon just doesn’t think it’s important.  Can I live with forcing my users to make sure they have either an Amazon, Facebook, or Google account?  Yeah, I guess maybe, but we sell a B2B app and it sure seems kind of unprofessional somehow.

Amazon, can you please fill this hole ASAP?

Firebase

I hear fabulous things about Firebase, I really do.  People seem to love it.  It’s chock full of great functionality, and on the surface of it, Firebase should fit my needs.  Yet, when I dig in deep, I find that the login piece is kind of a red-headed stepchild.  Yeah, they advertise Email + Password Login, and they even tell you how to do it.  But there’s no RESTful API available for it.  They list all the right operations:

-  Login, and returns a token
-  Create a new user account
-  Changing passwords
-  Password reset emails
-  Deleting accounts
etc.
However, it appears that those things are handled by a client library which is in a very dev platform specific format.  If you use one of their chosen platforms, it’s ok.  If not, you can only use their rest API’s for the Cloud Database–no login functionality.  That’s going nowhere for me.  It would’ve been so much nicer had they packaged what’s in the client library in their Cloud and provided RESTful API’s for the functions I’ve listed.  As I told them when I made the suggestion, that makes their offering accessible to virtually every language and platform with the least effort for them instead of just the few they support.
Conclusion:  Crowd Sourcing?
Hey, I’m open to suggestions and the Wisdom of the Crowd.  Maybe someone out there knows of a service that meets my requirements.  They seem pretty generic and I’m frankly surprised I still can’t find such a thing after all these years of building almost anything you can imagine as a service.  We’re not very far away from it.  Either Amazon or Firebase could add the functionality pretty easily.  I’m hoping maybe I’ll get lucky in the next 6 months or so.  If anyone knows the right people in those organizations (or their competition), pass this post along to them.

 

 

Posted in bootstrapping, business, cloud, mobile, platforms, saas, service, software development | Leave a Comment »

Don’t Bury the Map With the Treasure: Thin Clients Trump Apps in Walled Gardens

Posted by Bob Warfield on July 10, 2013

FeedlyBugOne of the questions every SaaS company will have to be able to answer for their customers is, “What happens if you go under?”  It’s actually a fascinating question, and one you have a chance as a vendor to think about and turn to your advantage.  For example, one of my SaaS ventures was Helpstream.  We had the unpleasant experience of being shut down by our VC’s shortly after the 2008 crash, but we tried to do well by our customers.  As it turned out, our architecture made it very straightforward for us to offer those folks the chance to host their own Helpstream instance and keep going rather than have to stop cold turkey.  There are still customers live on the software as a result.  I won’t go into all the details of how this was accomplished, but suffice it to say our architecture made us very nimble about being able to create multi-tenant apartment complexes that could house anywhere from 1 to a couple of thousand tenants on standard Amazon EC2 + S3 infrastructure.  Thus it was trivial for us to set up a customer as their own tenant in their own apartment house and hand them the keys.  This is not something you could say about something like, say, Salesforce.com, or many other SaaS offerings.  Building on a commodity cloud like Amazon can have its virtues.

In the perpetual on-premises license days, we had source code escrows.  In the SaaS/Cloud era, it makes sense to codify what happens in the event of a dissolution of some sort.  As the Helpstream example shows, it’s possible to do something that makes enormous sense for customers and thereby give them a greater sense of security, something that the Cloud is not often known for.

Unfortunately, things also go on in the Cloud that have nothing to do with a particular vendor, but that actually make things much worse for customers.  I present the example of Feedly and the Apple App Store.

As most of you will know, Google discontinued Google Reader, forcing those of us who need such a thing to seek alternatives.  I looked at a good half dozen during the warning period and eventually settled on Feedly.  Let me be clear that this is still not a decision I regret, but I am forced to endure a not so pleasant aspect of the way Feedly works on my iPad.  There is a problem in that Feedly is set up to seamlessly transfer you from Google Reader to Feedly.  That part is good.  What is less good is that Google changed some aspects of the API and created a little problem for the Feedly app.  Feedly works great for me on my desktop, because I can access it via web browser as a thin client.  It is dead to me on my iPad because of this problem.  Feedly mistakenly thinks it is overloaded with users, a surprisingly plausible story in the wake of Google Reader shutting down.  In fact, this is not the case.  There is simply a bug that causes the iOS Feedly app to mistakenly report this problem.

Now here is the problem:

Since iOS is a walled garden, and Feedly has to wait until Apple approves a fixed version of the app, they are stuck.  It’s been 7 days and the app still doesn’t work and a fix has not been approved.  As my headline says, the map is buried with the treasure because Apple is presenting them from fixing a very obvious problem.  Feedly has no real answer for this, and Apple isn’t telling them an ETA on approval either.  It’s hard to be impressed with either Apple or Feedly based on how all of this is rolling out.  You’d think whatever process Apple uses would be aware of how many people use Feedly (it’s millions) and could find a way to expedite an obvious fix.  Apparently the Monarchy of Cupertino cannot be bothered with such mundane details as customer happiness.

Meanwhile, I have to ask myself, “Why can’t I run the Feedly thin client in the Safari browser on iOS?”  That would be so handy right about now.  Yet, they seem to have been at pains to ensure that if you are on an iPad, you surely must use their app and are to be prevented from accessing the thin client that works so well on my desktop and that would have prevented this nuisance.

Folks, the next time you’re using your tablet and you go to some website and it offers to download an app, skip it.  That app is not going to improve your user experience enough to be worth the trouble.  You are only going to encourage them not to keep their thin client working well on your platform.  And someday, you may wish the map hadn’t been buried with the treasure the way the Feedly guys did it.  Don’t frequent the Walled Garden.  Don’t encourage it at all unless you absolutely must.

This was all tragically avoidable, and I hope Feedly will take note and pave the way for their thin client to work on iOS so the next time they don’t have to wait on Apple.  Those of you at other companies, don’t let this happen to your customers!

Posted in apple, cloud, saas, service, strategy | 3 Comments »

Big Data is a Small Market Compared to Suburban Data

Posted by Bob Warfield on February 2, 2013

BurbsBig Data is all the rage, and seem to be one of the prime targets for new entrepreneurial ventures since VC-dom started to move from Consumer Internet to Enterprise recently.  Yet, I remain skeptical about Big Data for a variety of reasons.  As I’ve noted before, it seems to be a premature optimization for most companies.  That post angered the Digerati who are quite taken with their NoSQL shiny objects, but there have been others since who reach much the same conclusion.  The truth is, Moore’s Law scales faster than most organizations can scale their creation of data.  Yes, there are some few out of millions of companies that are large enough to really need Big Data and yes, it is so fashionable right now that many who don’t need it will be talking about it and using it just so they can be part of the new new thing.  But they’re risking the problems many have had when they adopt the new new thing for fashion rather than because it solves real problems they have.

This post is not really about Big Data, other than to point out that I think it is a relatively small market in the end.  It’ll go the way of Object Oriented Databases by launching some helpful new ideas, the best of which will be adopted by the entrenched vendors before the OODB companies can reach interesting scales.  So it will be with Hadoop, NoSQL, and the rest of the Big Data Mafia.  For those who want to get a head start on the next wave, and on a wave that is destined to be much more horizontal, much larger, and of much greater appeal, I offer the notion of Suburban Data.

While I shudder at the thought of any new buzzwords, Suburban Data is what I’ve come up with when thinking about the problem of massively parallel architectures that are so loosely coupled (or perhaps not coupled at all) that they don’t need to deal with many of the hard consistency problems of Big Data.  They don’t care because what they are is architectures optimized to create a Suburb of very loosely coordinated and relatively small collections of data.  Think of Big Data’s problems as being those of the inner city where there is tremendous congestion, real estate is extremely expensive, and it makes sense to build up, not out.  Think Manhattan.  It’s very sexy and a wonderful place to visit, but a lot of us wouldn’t want to live there.  Suburban Data, on the other hand, is all about the suburbs.  Instead of building giant apartment buildings where everyone is in very close proximity, Suburban Data is about maximizing the potential of detached single family dwellings.  It’s decentralized and there is no need for excruciatingly difficult parallel algorithms to ration scarce services and enforce consistency across terabytes.

Let’s consider a few Real World application examples.

WordPress.com is a great place to start.  It consists of many instances of WordPress blogs.  Anyone who likes can get one for free.  I have several, including this Smoothspan Blog.  Most of the functionality offered by wp.com does not have to coordinate between individual blogs.  Rather, it’s all about administering a very large number of blogs that individually have very modest requirements on the power of the underlying architecture.  Yes, there are some features that are coordinated, but the vast majority of functionality, and the functionality I tend to use, is not.  If you can see the WordPress.com example, web site hosting services are another obvious example.  They just want to give out instances as cheaply as possible.  Every blog or website is its own single family home.

There are a lot of examples along these lines in the Internet world.  Any offering where the need to communicate and coordinate between different tenants is minimized is a good candidate.  Another huge area of opportunity for Suburban Data are SaaS companies of all kinds.  Unless a SaaS company is exclusively focused on extremely large customers, the requirements of an average SaaS instance in the multi-tenant architecture are modest.  What customers want is precisely the detached single family dwelling, at least that’s what they want from a User Experience perspective.  Given that SaaS is the new way of the world, and even a solo bootstrapper can create a successful SaaS offering, this is truly a huge market.  The potential here is staggering, because this is the commodity market.

Look at the major paradigm shifts that have come before and most have amounted to a very similar (metaphorically) transition.  We went from huge centralized mainframes to mini-computers.  We went from mini-computers to PC’s.  Many argue we’re in the midst of going from PC’s to Mobile.  Suburban Data is all about how to create architectures that are optimal for creating Suburbs of users.

What might such architectures look like?

First, I think it is safe to say that while existing technologies such as virtualization and the increasing number of server hardware architectures being optimized for data center use (Facebook and Google have proprietary hardware architectures for their servers) are a start, there is a lot more that’s possible and the job has hardly begun.  To be the next Oracle in the space needs a completely clean sheet design from top to bottom.  I’m not going to map the architecture out in great detail because its early days and frankly I don’t know all the details.  But, let’s Blue Sky a bit.

Imagine an architecture that puts at least 128 x86 compatible (we need a commodity instruction set for our Suburbs) cores along with all the RAM and Flash Disc storage they need onto the equivalent of a memory stick for today’s desktop PC’s.  Because power and cooling are two of the biggest challenges in modern data centers, the Core Stick will use the most miserly architectures possible–we want a lot of cores with reasonable but no extravagant clock speeds.  Think per-core power consumption suitable for Mobile Devices more than desktops.  For software, let’s imagine these cores run an OS Kernel that’s built around virtualization and the needs of Suburban Data from the ground up.  Further, there is a service layer running on top of the OS that’s also optimized for the Suburban Data world but has the basics all ready to go:  Apache Web Server and MySQL.  In short, you have 128 Amazon EC2 instances potent enough to run 90% of the web sites on the Internet.  Now let’s create backplanes that fit a typical 19″ rack set up with all the right UPS and DC power capabilities the big data centers already know how to do well.  The name of the game will be Core Density.  We get 128 on a memory stick, and let’s say 128 sticks in a 1U rack mount, so we can support 16K web instances in one of those rack mounts.

There will many valuable problems to solve with such architectures, and hence many opportunities for new players to make money.  Consider what has to be done to reinvent hierarchical storage manage for such architectures.  We’ve got a Flash local disc with each core, but it is probably relatively small.  Hence we need access to storage on a hierarchical basis so we can consume as much as we want and it seamlessly works.  Or, consider communicating with and managing the cores.  The only connections to the Core Stick should be very high speed Ethernet and power.  Perhaps we’ll want some out of band control signals for security’s sake as well.  Want to talk to one of these little gems, just fire up the browser and connect to its IP address.  BTW, we probably want full software net fabric capabilities on the stick.

It’ll take quite a while to design, build, and mature such architectures.  That’s fine, it’ll give us several more Moore cycles in which to cement the inevitability of these architectures.

You see what I mean when I say this is a whole new ballgame and a much bigger market than Big Data?  It goes much deeper and will wind up being the fabric of the Internet and Cloud of tomorrow.

Posted in business, cloud, data center, enterprise software, multicore, platforms, saas, service | 2 Comments »

Can We Ignore Churn Early On at a SaaS Company?

Posted by Bob Warfield on January 10, 2013

Jason Lemkin has my juices flowing again.  He’s published a blog post with the suggestion that you should ignore churn and length of sales cycle as key management metrics when a SaaS company is young.  I’m with him on the Sales Cycle–it’ll be all over the map in the early days.  But on churn?  Nope, I am diametrically opposed.  In fact, I am so opposed to the idea of ignoring Churn that I’m going to have to get downright Medieval on the idea.  It’s going to be a bit of rant:

Churn is good, churn is right, it clarifies and cuts through to the essence of the evolutionary spirit…

Oh wait, that’s Gordon Gecko talking about Greed.  Let’s get back to Churn and why I think it’s a huge mistake to ever ignore it for any stage SaaS company including the very earliest.  I will extend this to any company that sells subscriptions to anything, and not just SaaS software companies.

First thing I want to acknowledge is that Jason is very clearly speaking about SaaS companies that are similar to his Echosign experience.  He talks about things like 7 figure SaaS deals.  For companies like that, who regularly do 7 figure deals and who are VC-backed, he is closer to being right, but I still don’t believe it is good advice for those companies to ignore churn.  Here’s why:

You can sell software that isn’t good enough to get people to renew

Jason says, “Because SaaS done well, is sticky … and once you get a Great VP of Client Success, Your Churn Will Go Down.”

(The boldface is his.)

That argument became circular right at the point where we stipulated that “SaaS done well, is sticky.”  You won’t know if you did SaaS well if you ignore Churn because you can sell software that isn’t good enough to get people to renew.

Jason seems to use the ability to close the deal as the litmus that the software must be good enough to be likely to renew simply because it sold in the first place.  This only makes even a little sense for big ticket sales so this is where Jason raises the 7 figure note, but it is still a circular argument.  Yes, closure of the sale means the problem being solved is sufficient to warrant a 7 figure expenditure.  Yes, the Sales Cycle around a 7 figure expenditure means there was some diligence done on the software.  And yes, Jason’s experience was that his company and likely others he talked to had low churn without trying.

Unfortunately, there is a simple existence proof that this is not always the case–there is tons of Enterprise Shelfware out there.  Companies bought it and never installed it.  Or they bought it, intalled it, and nobody would use it.  It’s even more common for the more expensive software because some centralized decision making organization wants to impose a solution on the troops and the troops aren’t having any.  Or some change rendered the software moot.  There are companies who make their living coming in to find what you’re not using any more so you can quit paying for it.  Sure, you should know about this well before the renewal date comes up, and you should figure out how to get past it, but whose job is that in an early stage startup?  The Sales Guy is off closing the next deals and calling on all of his minions to help sell more ASAP.  If the CEO doesn’t call out Churn as a top priority, it won’t get done.

Come on, we’ve all bought a subscription to something we didn’t renew.  It’s one reason companies make it so hard to cancel–because it happens so often.

Before going on, every Exec Staff Meeting needs to do a Customer Success Review right after the Sales Pipeline Review every single week.  If you don’t have a VP of Customer Success, get your VP of Prof Svcs to do it.  You need to know the status of every customer in implementation (roughly corresponding to sales “prospects”), what the issues are, and when is the go-live (roughly corresponding to when sales will close the deal).  The review must also cover the status of everyone live including any problems being reported.  Do it every week just like the Sales Pipeline Review.

Now let’s consider a different kind of SaaS company.  Something more like an SEOMoz or perhaps a Marketo.  They don’t charge 7 figures.  SEOMoz doesn’t sell many seats into an org and the seats are cheap.  Marketing Automation companies have this problem that if they let customers pay for them monthly, the customers will turn the service on and off and only buy it when they need to refill the lead pipeline.  There is ample possibility in such lower price lower friction scenarios to sell a product where everything was hunky dory during the Sales Cycle, the deal closed, they went live, they even used it a bit, and then they decided it wasn’t helping.  And they didn’t renew.  And you got horrendous churn.

Jason somewhat acknowledges this when he says it is more important to consider Churn at Freemium startups.  That’s a conflation.  It is more important to consider Churn at startups with lower average deal sizes, whether or not they employ a Freemium model.  For the reasons I mention above and below, it is still important to consider even with large deal sizes.

Failing to make renewal the path of least resistance

I am a big believer in what I call the “Gas Pump Theory of UX Design”.  People take the path of least resistance.  At most gas stations in the US, people read left to right, so they put the most expensive grade of gas on the leftmost button.  Or they stick the cheapest grade in the middle, out of order.  If you’re not thinking about what you’re doing, you just bought their highest margin product.  So it is with renewal, especially on subscription products that are not absolutely mission critical.

Companies these days are reasonably focused on the Growth Hacking associated with web site conversions and landing pages.  It uses this path of least resistance a lot, and Growth Hacking gets the business.  But I wonder how many are focused on Growth Hacking to keep the business?  Since Saas compounds, this is very valuable Growth Hacking indeed.  Put another way, we often hear things like it costs 7X more to get a new customer than to get more revenue from an existing customer.  Note:

If your existing customer doesn’t renew they are no longer a customer.

If that happens, you just spent that 7x or some such to replace that revenue because you failed to make renewal the path of least resistance.  You just did the complete opposite of the compound growth SaaS is justifiably famous for.  You just invested the bulk of the expenses you will ever have around that customer while limiting the lifetime value of the customer to the lowest it can ever be because you weren’t worried enough about Churn.

Doing it right means worrying about Churn enough that a new Sales Cycle is to be spun up to ask for the renewal sale in time to get it done.  That Renewal Sales Cycle can mean anything from sending a Rolex-clad Scratch Golfer straightaway to Customer X’s Headquarters to meet with the CIO to starting a drip email campaign to having the product itself remind you the clock has started counting down.  It can mean having a “man overboard” promotion that fires up if the customer is more than X days late with the renewal.  You might choose to be proactive and offer the discount for early renewal.  If you plan to raise prices soon, something every young SaaS company should be looking at annually, time that so that it happens right after the quarter where the largest number of customers need to renew.  Then go talk to them before that happens and give them a sweetheart deal.  You’ve got the old Colombian lead (we’re raising prices) or silver (renew early and get a deal) working in your favor.

BTW, customers don’t like it if you only call them when you want more money.

This Renewal Sales Cycle needs all the same Growth Hacking expertise your original sales need.  At Callidus, the Sales Rep that closed the deal originally was responsible for the Customer’s continued satisfaction.  Consider doing the same until you can afford to have a handoff Customer Success Rep.  Make it that person’s responsibility to secure the renewal and quota them on it.

Don’t wait for the all too common scenario where you get to your renewal anniversary for the original customers and golly, churn looks high.  But someone says, “Let’s wait a bit, those were some of the first customers, they’re not telling us much about why, and they probably just weren’t a good fit.”  So you wait another quarter or two and eventually get to the part of the cycle where a surprising number of customers didn’t renew and then you’ll wish you’d known why and fixed it a lot earlier.

Churn is a measure of Customer Satisfaction.  Every Churned Customer is a Bad Reference for your Company and Products.

One could argue Churn is the only Customer Sat Metric that really matters.  It’s the one where the customer is putting their money where their mouth is.  As an aside, there’s another good one where you call them up and tell them you need to raise your prices, but that’s another story.

A Churn Rate that’s too high means low customer satisfaction, and that ultimately goes directly to your ability to close new customers who try to speak to these old non-renewing customers or customers who barely got up the gumption to renew about your product.  The non-renewers are going to be the worst form of reference.  They’ll say things that are friendly and happy on the surface.  They won’t directly shoot you down in most cases.  They’ll just opine that, “Great product, but didn’t quite solve our problem.”  Like any reference call, there’ll be an undercurrent to the tone that makes your Spidey Senses tingle.

Worse, if you are not proactively all over Churn, you’ll inadvertently put prospects in touch with customers you thought were happy, but that are actually not going to be renewing.  They may not even realize it yet, but they won’t be able to articulate a strong enough case for the product because somewhere in their gut they know there are problems.

Everyone, including Jason, recommends you commit almost unnatural acts to ensure the success of your first reference customers.  If they don’t renew, they are not successful.  If you gave them the software or made it so ridiculously cheap, they didn’t really renew either.  Not in any meaningful way.

Every Churned Customer is a Bad Reference for your Company and Products.

Churn is at the Bad End of Compounding

One of the things we love about SaaS is that it compounds.  But Churn is at the Bad End of Compounding.  It cuts off the compounding and reduces it to linear growth at the absolute worst time–the latest possible time before the customer would’ve paid in more revenue.  That’s the point where the line on the revenue graph that represents compound growth is the furthest from the line that represents linear growth.  As I’ve already mentioned, it’s the point where you’ve invested the most in the Customer for the least return.

CEO’s, let’s be careful out there.  A customer is a terrible thing to waste.  Don’t let them Churn.  Renewals are not an entitlement, they are something you earn.

Posted in business, saas, saas business venture, strategy | 2 Comments »

Converting Content-Audience Fit to Product Traction

Posted by Bob Warfield on December 18, 2012

tractor-pullJason Lempkin has a new post out about gaining traction after your product ships.  He says it’s hard, much harder than building the 1.0 product which was already hard, and he makes some concrete suggestions on how to go about gaining traction:

-  Finish hiring your core team.  Presumably you’ve left the sales and marketing until post-1.0?

-  Get attention for your app:  “Whatever you can possible do.  Go to every conference.  Speak at any possible event you can, no matter how small.  Win every award. Try to get every blog to write about you.  Reach out to anyone and everyone in your space.  Be respectful, but totally, utterly, shameless here.  Do whatever you can possibly think of here.”

-  Hit the pavement and get early customers and partners

-  Lavish attention on every single customer and lead

-  Plan your next release carefully–it may be your last

Wow, put that way, the job seems really tough!

After reading the account, I do have memories of startups that had to solve the traction problem through brute force and shoe leather.  They were painful and very scary.

The thing is, success is about being prepared (with a healthy dose of luck, though chance does favor the prepared mind).  As I tell my kids, “It doesn’t matter how smart you are, if the other guy already did the homework and knows the answer while you’re still trying to figure it out, he looks smarter.”

So it is with achieving product traction.  This is why I wrote my earlier post about achieving what I call “Content-Audience Fit” to tell Founders it has to be their first priority, even ahead of building a product.  Possibly even ahead of knowing what product you will build.  I say this for two reasons.  First, if you don’t know your audience, you can’t build a great product anyway.  While you might think you know your audience, how can you be sure until you have Content-Audience Fit?

If you have Content-Audience Fit, the following things are true:

1.  There is a reasonably large audience that is steadily growing and is consuming your content.  They care about what you have to say in the market you’re interested in.  They are subscribing to your mailing list, following you on Twitter, liking you on Facebook, or whatever other Social Medium works for your market.  Consequently you know what Social means to your market.

2.  You are part of the Conversation taking place on the web for your chosen market.  You are posting in their online communities.  You’re on the blogs of the key influencers (you do know who they all are, don’t you?) commenting.

3.  You are so familiar with the commercial players in the market that you’ve helped the Market Audience understand some of them better.  You’re commenting on their blogs too.  That establishes you as an agnostic authority in the market.

4.  Because of your participation in all the right conversations, and because of the quality of the content you’re producing, Key Influencers will recognize your name.  You are beginning to get folks asking you unsolicited questions as a recognized Expert.

There is a not-so-subtle difference between this Content-Audience fit and “Get attention for your app”.  It’s because you’re getting attention for your content.  You’re establishing yourself as an expert, not a guy shilling your products and company.  Because your content is very high quality and it’s being given away freely, you’re invoking the principle of reciprocity, which is a powerful force when marketing and selling.  You’re laying the groundwork to present your selling proposition from a position of strength, after your prospects have already decided you’re the expert.

Imagine being able to validate your product vision, and eventually early versions of the product with that kind of Audience insight.  It’s invaluable.  It should be a requirement.  Yet so many companies build the product first and consult the Audience afterward.

Second, you need a strategy to make this business of gaining Product Traction easier.  I love the definition that strategy is what you do to make winning easier.  If you ever needed a strategy, it is when you launch your 1.0 product!

So how do we convert Content-Audience Fit to Product Traction?

Back up.  Let’s get the timing right first.  You don’t want to start trying to achieve Content-Audience fit after you’ve built Product 1.0.  That’s way too late.  Here’s a mini-case study:

I took Helpstream, a Social CRM startup, from being invisible to having a successful blog that had achieved Content-Audience fit in about six months.  At the end of the six months, the key influencers knew who we were and were starting to write about us.  For example, Paul Greenberg, the “Godfather of CRM”, wrote a short passage that perfectly signals good Content-Audience fit:

A few weeks ago, I had a discussion with fellow Enterprise Irregular Bob Warfield, who is the EVP of Products for a company called Helpstream. I have to admit, when I saw Bob’s rather cogent commentaries on the Enterprise Irregulars site, I became curious as to what he did and what the Helpstream company dealio was. I asked him and we set up a demo and a conversation between me, Bob, and Anthony Nemelka, the President and CEO of Helpstream and a long time industry veteran.

That second sentence telegraphs where we’re going and why Content-Audience fit is so critical to a product launch.  Because of my “cogent commentaries”, Paul asked us for a demo.  Imagine Content that is so good, the key influencers are coming to you, rather than you going to them hat in hand trying to get a meeting.  I would budget a minimum of 6 months and perhaps as long as 12 months to achieve your Content-Audience fit.  Sounds like you need to get started at the same time you start the Product, right?

This is an insight that is missing from many startups.  In fact, many want to do a stealth launch and keep everything secretive.  Feel free to keep your product aspirations a secret, but you’re nuts if you’re not belting out super high quality content for your audience from Day 1.  That means as you sit around the table with your fellow Founders, and you ask the question, “Who is spearheading our drive for Content-Audience Fit and who is writing all that content?”, there had better be a good answer.  That marketing guy you partnered with who has never actually done a blog, he has just simply hired people who did blogs?  We might be past the evolution in how marketing is done for that to be a good idea.  First question I ask any marketing candidate at any level is, “Show me your blog?”  If the response is, “Huh?”, the interview is not going to go well.  It’s no different than asking any question about marketing deliverables.  Would you hire someone who had never had any contact with advertising of any kind?  Content marketing is so critical to small companies, how can it be an afterthought?

As an aside, I recently came across a bootstrap business called, The Wirecutter.  The Founder achieved Content-Audience fit before they ever started this little company by writing for Gizmodo, Wired, GadgetLab, and MaximumPC.  How about grabbing one of the big name bloggers in your space as a co-Founder?  How about at least as an advisor to help you get to Content-Audience Fit?  Have them brutally critique your content until you get it right.

BTW, people like Paul Greenberg have extremely high standards.  There is a reason they get nicknames like the “Godfather of CRM”.  They are trusted and they didn’t get there by being dummies or shills.  If your content doesn’t have something really meaningful to say, you’ll get nowhere with this strategy.  But if you get the meeting because your PR firm pounded hard enough on doors, and then in the meeting you still have nothing to say, you’re going nowhere anyway.  So:

It is critically important to do the work of achieving Content Audience Fit!

That’s it.  Full Stop.  End of Sermon.  Don’t.Mess.It.Up!!!

Okay, now imagine you’ve got that fit, as defined by the 1,2,3,4 list above.  Let’s use it to produce traction.  This is done in the following ways:

The Audience that’s ready to Jump Now is ready.  Invite them in.

There are always those influencers who get an edge by working harder to learn than the others.  Always those prospects who are ready to buy now and want the new new thing.  If you have achieved Content-Audience Fit, all you need do is announce the availability of a product and any of these people in your audience will be likely to check in.  Start with  your Beta Test.  You can keep it as controlled as you like, but put the announcement out through your content channel and be sure to communicate at least your value proposition well enough so people will want to jump in.  If you don’t have a big enough audience yet that having 5% of them answer your invitation, you don’t have Content-Audience Fit.

Give the Early Adopters an Amazing Deal and Make Them Heroes

You don’t need revenue yet, you need credibility.  You put out the call to action, and the right people have self-selected by coming forward.  They like you or else they wouldn’t have come forward.  They’re active in the online world or else they’d have no idea you existed.  They’re raising their hands to tell you they care.  Make it easy for them to feel like that was the best decision they ever made.  Focus your spotlight of attention entirely on them.  Save your bandwidth so you can give them completely unreasonable amounts of it.  Make them heroes and they will make you a star.

You need to charge them a little bit or it isn’t a real transaction.  Give them the best deal you will ever offer in your corporate history and make sure they know that in the nicest possible way.  Give them attention and services that will never be available to others in even a year’s time.  Plug every member of your team into the success of these early customers.

When that fire has caught, you can ask them for a favor.  You can ask them to help you get the word out.  At the very least, you need them to be a willing and able reference.  Next step up, you need them to be a case study.  Grand Prize:  you need them to be a source of referrals.  Try to discreetly make sure when you sign them up that they’ll be able to do some of this, at least serve as references.  You can’t ask for that favor up front, but you can find out if they’ve ever been involved with early software, done references, yada, yada.

Earn the Right to Raise Your Price and Sell Bigger Deals

The company I mentioned earlier, Helpstream, had nearly every marketing automation company as customers for our Customer Service Social CRM product.  I remember calling each of these CEO’s, who were all entrepreneurs like myself, and asking them what Helpstream could and should do going forward.  Phil Fernandez, CEO of Marketo, shocked me by telling me, “Bob, I don’t know if I should be saying this, but you should raise your prices.”  Even more shocking was that Phil wasn’t the only one to tell me that.  So we did, after carefully making sure to grandfather existing customers with appropriate agreements so that they were taken care of.  There was virtually no pushback whatsoever, and it helped the business tremendously.

What had happened is we had earned the right to raise our prices by delivering on our promises and raising our credibility.

The ability to price higher comes most from credibility.  Sure, you might have the world’s greatest product, but nobody knows that if you don’t have the credibility.  Can you see where having good Content-Audience Fit is the first step on the credibility journey?  Beyond that first step, it is your conduit for telling your customer’s stories and continuing to build that credibility.

The next step is being able to tell your Early Adopter’s stories.  In terms of closing business, there is nothing like being able to have a prospect talk to a customer that gushes about your product.  At Callidus Software we used to invite prospects to our User Conferences precisely to maximize the exposure to that kind of sentiment.

Startups are enaged in earning the right to raise prices and to sell bigger deals throughout their history.  Successfully getting your first 5-10 reference accounts is just the first rung on that ladder.  Each company you sell to would like to know that they’re not the largest deal you’ve ever sold.  Raising the size of your largest deal earns you the right to sell even larger deals.  Accumulating this asset of referencibility is your primary deal closing accelerant until you’re large enough to point to being the market leader or perhaps to being a public company.  Gordon Moore’s Chasm Crossing can largely be seen as the process of establishing the credibility needed before those who are not Early Adopters will buy.

All along your journey, your Content continues to establish your company’s expertise in its chosen field.  You never walk away from that–you just keep building on it.  If your references are your Sales Accelerant, your successful Content is your lead generation accelerant.  Establish your web properties as the go-to spots to learn about what your customers care about.  All the best marketing startups like Hubspot, SEOMoz, Marketo, and Eloqua are working this way.  Maybe that’s a clue for the non-marketing startups that this is how marketing is done these days?

Lead With Content for Competitive Skirmishes and Insights

Competitors are great for startups.  If you’re the only one in a market, you have to undertake to grow that market all by yourself.  With competition, the cost is shared and the market can grow much more quickly.  In addition, picking a fight is a sure way to add passion to your content and help drive more traffic.  You can’t agree with everybody, but you need to agree with the position your key audience want you to stake out.

Take advantage of that with your Content strategy.  See which conversations your competition are dominating and wade into those conversations with your own viewpoint.  That viewpoint has to carry substance, but when it does, if you win the audience’s hearts and minds who are watching the conversation, they will come your way.  You can’t win them all, but this is where you start stacking up the different value propositions.  This is where you carve up the market into micro-niches that are looking at things each a little differently.  Here’s where you find out which micro-niches matter, and which ones are dead ends best left to the competition.

Passive sonar gained by just passively consuming the content from your space is great, but so much more can be learned through active pinging of the landscape.  See how they respond to your messaging, analysis, and insights.

Conclusion

There’s a lot of work required to achieve traction.  But, if you subscribe to my Content-Audience Fit idea, you’ll begin that work Day 1 at your company.  When you’re ready to enter Beta Test, you’ll have a lot more going for you than your sales guy’s contact lists and willingness to burn through shoe leather.  You’ll have an audience that wants to come to you, embrace your product, and help you spread the word.  FWIW, Helpstream wasn’t my first or last experience with Content-Marketing Fit.  My bootstrap company, CNCCookbook, thrives on the notion today.

Posted in bootstrapping, business, Marketing, saas, strategy, venture | 2 Comments »

Gaining the Wisdom of Crowds in a Bootstrapped SaaS Company

Posted by Bob Warfield on November 19, 2012

Beta Survey FormWhen you’re bootstrapping a small company, sometimes it’s hard to do the things larger organizations take for granted, like making sure you’re listening well enough to your customers.  On the other hand, you can take advantage of your nimble nature and the availability of some great technology to do some things that even a lot of larger organizations don’t manage to pull off.  At CNCCookbook, my small Manufacturing Software company, I’ve had to think long and hard about how to register the wisdom of my Crowds to make sure the company is on the right track with its products.  Lest you think small companies with fewer employees than you can count on one hand don’t have Crowds to learn from, CNCCookbook gets over 1 million visitors to its site every year and we’ve had over 15,000 machinists use the software to date.  We count some of the world’s largest manufacturers on our Customer List as well.  In short, there’s plenty of Wisdom to be had from our Crowds, it’s a matter of finding the right ways to capture it and put it to use.

Having come from a Social CRM background at Helpstream, the value of harnessing the Wisdom was not lost on me.  It was something that had worked well for me throughout my career and something I very much wanted to do well with at CNCCookbook.  Here is a brief history of how I went about it and which tools, techniques, and technologies were put to work to do so.

Phase 1:  Forums and Web Analytics

Right from the very start I deployed a set of User Forums which I called the “G-Wizard User Club” (CNCCookbook is our company and web site, G-Wizard is the software brand that labels our products).  Much as I miss the sophisticated capabilities we had at Helpstream (they haven’t been rivaled by any product since), I had to make do with what was available and what fit my budget.  I knew I wanted a SaaS-based service.  However easy it might be for me to install and administer phpBB or some other Open Source bulletin board, it would be one more thing for me to do.  As the sole person working in the company at this time, I made the decision to focus as much of my time as possible on things that were uniquely differentiated for our company.  Deploying phpBB wouldn’t even come close, so I went with an alternative that was both a SaaS service and ad-supported called ProBoards.

It has worked reasonably well, and served its purpose.  I moderated membership and got a lot of mileage out of the boards.  They continue to be popular to this day, and we have not quite 2000 members there today.  To make sure every User was aware, I also instituted an in-app button to take open the browser and take them to the User’s Club.

You can see there’s more than just the User’s Club there on that Login Bar, but it started with just the User’s Club and grew to encompass a number of resources every User needs to be aware of.  While our app doesn’t run in a browser (it’s an Adobe AIR app as disconnected running is often important to our audience), it behaves in every other way like a browser-based SaaS app and we have embraced a lot of the design concepts for such apps, such as seamless access to the important parts of our web presence and incorporating that presence as a first class citizen of our navigation structure.

Another critical source of the Wisdom of Crowds is your Web Analytics.  We use Google Analytics, and there is a wealth of information to be gleaned.  For example, our User Guides are entirely online and we can see from the Web Analytics which parts of the product are more interesting than others just by watching the traffic patterns.  As we do each new release we write a blog post that discusses the new functionality in the release and again this provides a framework for using Web Analytics to understand what’s going on with the product.

In app access to Getting Started Resources, our Support Portal, and the User’s Club Forums…

Phase 2:  Blog Comments, Social, and Surveys on the Web Site

CNCCookbook started as a plain old web site and went for quite a while like that.  We had an area where articles were presented in a quasi-blog format, but it wasn’t really a blog.  It didn’t take long before we’d outgrown that format and it was time to add a real blog based on WordPress.  If I had it to do over again, I would recommend that every company simply start with WordPress and eschew the plain old web site phase.  It’s a fantastic content management system that has a rich ecosystem supporting it.  In keeping with my SaaS philosophy (why would I spend my scarce time maintaining a commodity like WordPress instead of focusing on what makes our company different?), we signed up with page.ly to host WordPress for us.  We spliced the blog into our plain old web site using DNS Made Easy, a SaaS DNS service that’s been excellent.

This transition marked a big step up for us in a whole lot of ways.  There were obvious SEO advantages that were very visible in the Google Analytics reports.  It became much easier to manage our content and we did a major upgrade to the site’s look and feel (it’s getting close to time to do another, I think).  Best of all, we now had comments on every post and could deploy a host of social widgets to help harvest as much feedback from our audience as possible.  One of the first things I did once WordPress was up and running was to go out and survey key sites to see what sorts of plugins they were using with WordPress.  My approach was to use a variation of a Blackjack card counting strategy I had perfected to decide my Social Widget strategy.  I’ll say more about the Blackjack in a future post, but suffice to say I analyzed the widgets used by a number of top marketing blogs on the theory that these people should know.  I went to companies that clearly had lots of experience with conversion and A/B testing like Unbounce.  I went to specific marketing gurus like Neil Patel’s Quick Sprout blog.  It was an excellent way to focus my efforts and populate the CNCCookbook blog with what I think are an excellent set of Social plug-ins to maximize engagement.

Having done that, I turned to Surveys.  While it was kind of an expensive luxury, I bought two different tools.  I wanted a survey tool that would be innocuous and unobtrusive.  I hate visiting a site and getting hammered with a full stop “please answer our survey” ten seconds after I get there.  At that point, I have formed no opinion but a negative one about the damned survey.  At the time, KissMetrics had an awesome tool called KissInsights that would slide up from the bottom of screen in a very low key way.  That tool is now sold by Qualaroo and works great.  It’s biggest issue, and the reason I don’t use it for all my surveys, is it is limited to simple surveys.  So, I also subscribed to SurveyMonkey.

I use the Qualaroo tool to derive a Net Promoter-style feedback score on the overall product (ours is very high) and I use the Survey Monkey to do more detailed surveys aimed at understand the details of my audience.  For example, I have done surveys of which CAM software they use or which CNC control is on their machines.  Not only is this invaluable data (sort of like surveying which PC, OS, or browser a PC software audience uses), but it makes great content to publish on the blog.  Some of my all-time best traffic articles are just the results of such surveys.  Apparently others also want to understand the Wisdom of Crowds.

Phase 3:  Ideation and CRM

For Phase 3, I wanted some Social and Conventional CRM.  It was time to get a Trouble Ticketing system going.  I chose a vendor called UserVoice for several reasons.  First, it comes with a very nice Ideation App.  Ideation gives my audience the ability to suggest new features and vote on them, like Dell’s Ideastorm.  This is an extremely powerful capability for a small organization to use to focus scarce development resources.  The results will often surprise you.  Ideation is one aspect of what we had at Helpstream, so it was nice to get some of that back.  Second, it’s SaaS.  And third, I got a great deal on it via AppSumo.  BTW, AppSumo has yielded several good deals for my bootstrap venture.  I’ll warn you in advance, they’re very spammy in their email and you really have to know what you’re looking at when you consider the products they push, but if you are patient about wading through some spam and have a clear idea what your business needs, you’ll find some great deals to keep the overhead down.

One of our products, G-Wizard Calculator, is much more mature than our later products because it has a 2 year head start on them.  While I still have a lot of ideas about where I want to take that product, it has a solid conceptual foundation.  What I mean by that is that it is ready to be steered to a much greater extent by customers.  Ideation tools are a great way to do this as they force customers to ration their votes.  On our site, they get to use 10 votes, and can vote no more than 3 votes on any given idea.  Submitting a new idea uses up a vote.  Once the votes are used, they have to wait until the fait of an idea is decided, they are either implemented or rejected, at which time they get the votes back, or they can redeploy the votes.  This scarcity of votes gives a clearer signal of what really matters to your tribe.  Any time I am preparing to do a new release of the Calculator, I always start with our Customer Support Portal and look over the Ideation results.

Phase 4:  In-app Feedback and ET Phone Home Telemetry

This brings me to our current stage of evolution–In-application Feedback and Telemetry.  In keeping with our theme of making the product behave like a web application, we added a Beta Survey popup such as you see above.  This has been a very useful way to monitor our progress from Beta to release-ready.  After spending 10 days focusing development entirely on issues raised in the Beta Survey, we’ve been able to move to 81% of respondents scoring the app during the last week as either “3 – I could use this” or “4 – GWE rocks!”  For the period older than 1 week, the score was only 47%.  Clearly, users were able to tell us what they needed that was missing from the app.  We intend to continue for a while longer until we see a point of diminishing returns and then we’ll declare the Beta done.

In addition to the Beta Survey, we also receive what I call, “ET Phone Home Telemetry.”  This is basic telemetry on which parts of the app are actually being used and how well they perform.  For example, the centerpiece of the application is a complex 3D graphics simulation that shows how the machine tool cutter will move as it executes the g-code program loaded into GW Editor.  We monitor and report back the longest runs so we can get an idea of how the system is performing and whether we need to do more work on performance.  We also track usage information like how many times the user has logged into the app.

The technology that makes the in-app telemetry and Beta Survey easy is something called “Mandrill” that is offered by the MailChimp people.  Rather than having to build back-end server infrastructure that loads all this data into some form of database using an API, the app simply emails it back to us with Mandrill.  The volumes are such that it is very straightforward to collate the information in Excel for analysis.  Building a full-on database application for a 2000 person Beta test would have been needless complexity and time taken away from our focus on doing what differentiates our software.  Mandrill is what MailChimp calls “transactional email”.  I take that to mean email generated by machines, rather than by people, and that’s exactly what we’re doing here.  MailChimp has a Freemium model, and at our level, Mandrill is essentially free.  Not only was it very easy to implement, but it doesn’t cost us anything.  For bootstrappers, that’s a hard combination to ignore.

Conclusion

Just because you’re bootstrapping and have minimal budget and resources is no reason to ignore the Wisdom of Crowds.  In fact, I’d argue that having the Wisdom of Crowds helps you to allocate your scarce resources where they will really matter.  Towards that end, what we do differently at CNCCookbook as bootstrappers is build as little software as possible.  We want to focus every line of code written on problems that you simply can’t get solutions for elsewhere.  Problems that are unique to our audience of CNC machinists.  The more of those problems we can solve, the more value we bring to our customers.  Everything else is just overhead.  Towards that end, we have relied heavily on SaaS, on the Amazon Cloud, and on our ingenuity to lash together the available off-the-shelf technologies to give us the ability to deliver an overall User Experience that is arguably better than almost everywhere I’ve ever worked.  This despite every where else having vastly more budget and resources at their disposal.

I’ll give one last plug to SaaS and the Wisdom of Crowds.  We do as much testing as possible, but again, as a bootstrapped organization, we don’t have large numbers of testers.  Our software quality is therefore a focus of three things.  First, unit testing is important.  Whenever complex new subsystems are added to the software, we make sure there are unit tests.  I personally believe in single stepping the debugger until I’ve seen all the lines of code executed and verified the intermediate results are good.  Unit Tests not only help tee up the execution of all the paths, they also ensure that down the road we can validate intermediate results as changes are made.  Second, we release often.  I don’t like to change too many things without doing a release.  This means that the amount of testing per release is relatively contained to new functionality and our scarce testing capabilities can be focused.

Lastly, we use what I call a “feathered” release methodology.  Each time we release, there is a 7 day cycle.  On each day, we expose an additional 1/7 of the user base to the availability of the release.  Customers that insist on having the latest and greatest can change a setting so they see every release immediately, but most stick to the default.  This ensures that if anything is too badly broken, we’ll hear about it before a very large fraction of the installed base is exposed to it.  In this way, we’re also using the Wisdom of Crowds to help safeguard the quality of our software, and it has worked extremely well to date.

So, whether you’re a bootstrapper or a big company, think about how you could take advantage of the Wisdom of Crowds.  Not only will it make a big difference for your software, but it’ll show your audience that you care and that they have a voice.

Posted in bootstrapping, business, customer service, saas, software development, strategy, user interface | 7 Comments »

Mobile First for SaaS? Desktop PC’s Dead? Nope.

Posted by Bob Warfield on October 15, 2012

laser keyboardJust reading another great Jason Lemkin post called, “Mobile First? The Desktop Still Has Three Good Years Left in It in SaaS“.  In it, Jason declares that he believes the Consumer Web mantra of “Mobile First”, but that SaaS still has three good years on the desktop.  He gives some very strong reasons why SaaS on the desktop isn’t dead yet:

-  SaaS is three years behind the Consumer Web.

-  SaaS is Enteprise, and therefore involves complexity Consumer Web doesn’t have to deal with.

-  Most SaaS users are still doing data entry.

The last one is the most important to me, and the one I believe will take a lot longer than 3 years to sort out.  We can tame complexity with better User Experience and smarter software.  A lot of Enterprise Complexity is self-inflicted gunshot wounds that could be avoided.  Workday is one company that took a look at first gen and decided they could do a lot better.  There’s still room after Workday for at least another generation that’s better than that at simplifying things.  That, all by itself, will take longer than 3 years.

But that pesky data entry issue is much harder to solve.  We’re seeing some nibbling around the edges at point-of-sale.  Seems like companies in that space, Square and the rest, are taking a good shot at making the data entry associated with making a retail sale very mobile friendly.  We also see it in the field.  Companies like UPS have had mobile devices for years that were essentially doing inventory tracking.  There are RFIDs, scan codes, and the like to automate tracking processes further.  That category has morphed into the Internet of Things in the current iteration of the Hype Cycle and brings active sensing to the game as well as passive identification and tracking.

Despite all that, anyone that spends even a little time in an Office is struck by a certain hardcore reality:  there are a lot of people working on computers at their desks.  Heck, forget visiting an Office, go to the local coffee hangout.  The people you see in these places  are typing as much as they’re using the mouse.  Take a closer look.  Are they relaxed, or are they squinting a little bit every so often and adjusting their glasses?  That’s telling you that even though they have a nice big keyboard and are able to use 10 fingers instead of 2 thumbs (sometimes my 10 are all thumbs, but I still type faster that way) and even though they have a decent sized screen instead of one the size of a deck of cards or less than an 81/2 by 11 sheet of paper, they are still doing work.  They do not have the luxury, for the most part, of being paid to simply lean back and consume information.  Even if their job does primarily involve consuming information, they will still have to add value to that information and communicate that value in some way.

Sales never were all that big on PC’s, but stroll through a marketing department.  Visit a design group working on new web designs.  Check out the SEO people, pouring over their spreadsheets.  See all those folks writing copy.  Can any of them get by very well on Mobile?  Do they even have a compelling need for Mobile, or is it a nice-to-have?  How about Finance and HR?  Can those guys even get a decent spreadsheet application on a mobile device?  Have you been in many interviews or performance reviews where a Mobile Device was doing the note taking?  I bring my iPad to interviews in Silicon Valley and I have yet to run into a counterpart that brought one.  That’s here in the Valley which is years beyond what happens most places on the Hype Cycle.  Software Development or any other kind of Engineering?  Fuhgeddaboutit.  We do start to see a greater preponderance of pads in weighty executive meetings at larger companies.  But let’s face it, these guys aren’t the future.  They’re the ones who not so many years ago declared the PC a non-starter because all the Cool Execs had people to type for them.

As for smaller, more nimble, more forward looking organizations, go visit a startup incubator some time.  I don’t mean a fund raising and entrepreneur-mentoring incubator.  I mean a real live physical space where startups are born.  It would be so much cheaper for a startup to buy each person a nice iPad, eschew the Office since we’re mobile after all, and cut everyone loose to go get things done.  Except, it wouldn’t be cheaper because they wouldn’t get anything done.  There is value in being connected while we’re mobile for the same reason that there is also great value in physical proximity–it enhances communication.  There is value in having essentially a general-purpose computer with us at all times, even in our pockets, for the same reason that there is value in having a particularly powerful machine at our disposal when we have to be as productive as possible–computers enhance our productivity.

Our industry loves to declare things “dead” as soon as the growth rate of another thing is higher than the first. 9 times out of 10, the old thing never really did die or even get particularly sick. It just hit a point of saturation and we were so busy chasing the hype cycle we forgot to check for the nuances.  Good old install-it-on-the-Home-Office-Server is still alive despite the best efforts of SaaS.  It’s not even clear it’s health is really all that ailing, though we could fairly say it is in it’s late 40’s and no longer in that vigorous under-30 year old age whose lucky denizens feel all but indestructable.  You couldn’t start a new on-premises Enterprise company in all likelihood, but the old ones plug right along.

Are we selling more mobile devices than Desktop PC’s?  Heck yeah!  Because they’re cheaper and because the PC industry quit giving us a reason to upgrade.  When the multicore crisis hit and computers quit getting radically faster every 18 months, what reason was left to upgrade?  Fashion.  Hello Apple, goodbye Dell.  If I’m going to have the same computer for four years, it had better be darned cool.  And meanwhile, I can satisfy my gadget fetish with Mobile goodies.  But, just as some VC’s have started to declare that mobile is HOT, HOT, HOTbecause for the first time there are so darned many devices out there ready to buy NOW, there sure are a lot of Desktop PC’s that are connected and waiting for the right must-have applications to be available.

If you want to see SaaS become a Mobile First industry, figure out a way to make Mobile SaaS more productive, not less productive than Desktop SaaS.  Because I’m not sure Fashion is going to work as well for SaaS as it did for Apple.  At least not without having Steve Jobs here to figure out how.

Posted in mobile, saas | 1 Comment »

SaaS Companies that Don’t Grow Pretty Quickly Have Something Bad Going On

Posted by Bob Warfield on October 11, 2012

Just read Jason Lemkin’s post on SaaS company growth.  He talks about two examples:

-  Workday, a $250M SaaS company growing at 90% a year

-  An unnamed smaller $40M SaaS company growing at 33% a year because, “growth is slowing, but we’re still doing great, because it’s all recurring revenue, and growing recurring revenue takes time.”

That bit about growing recurring revenue taking time, as if it is harder to grow recurring than big one-time license sales, is bunk.

Let’s do the math on two examples.  In the first, let’s assume a big one-time license sale company.  For the sake of simplicity, let’s say their average sale is (best Dr Evil impression):  ONE MILLION DOLLARS!

Further, let’s assume their marketing produces enough leads that they close 10 of these deals a year, and therefore have $10M a year in revenue.  Now they have to go on closing 10 deals a year, every year, just to stay flat.  No growth at all is implied in that scenario and that would be a very unhappy software company indeed.

Okay, now let’s consider the SaaS company, and let’s assume they’re in the same market.  So, they charge some fraction of the license company’s one million dollars.  Industry averages are anywhere from 2 1/2 to 4 years until the two breakeven.  Heck, let’s be bullish on things and make it 2 1/2 years.  Therefore they charge an annual subscription fee of $400K.

Now that’s less money, so presumably it’s an easier sale.  It certainly ought not be a harder sale.  And there should be all the normal advantages associated with SaaS.  Namely, it requires way less professional services to install it, the buyer doesn’t have a TCO that includes buying servers and paying more IT people to run them, yada, yada.

Let’s also stipulate our little SaaS company is running pretty near $10M a year in recurring revenue by selling 25 licenses a year.  Now here is where it gets interesting.  If we assume no churn, in other words, 100% renewals, we get the following over 5 years:

100%
Year New Licenses Sold Renewals Installed Base Revenue YOY Growth
1 25 0 25 10000000
2 25 25 50 20000000 100%
3 25 50 75 30000000 50%
4 25 75 100 40000000 33%
5 25 100 125 50000000 25%

Note that from the standpoint of conventional marketing and sales metrics, this company is flat.  If they didn’t have their renewals, they’d be in the same sad shape as our license company.  Instead, they are showing 100% growth after a year, and that declines slowly to 25% by the 5th year.

Folks, that is an amazing tail wind when you think about it.  If you’re going in front of a Board and shareholders to explain your numbers, wouldn’t you want to have a bunch of revenue from renewals automatically baked in every quarter?  I know I would.

So when I say, “SaaS companies that don’t grow pretty quickly have something bad going on,” we can now look at the definition of “bad”.

The first possibility, is that they haven’t seen any real growth in their lead funnel in a long time.  4 years to get to the 33% growth number Jason’s friend was quoting.  If you can’t figure out how to start growing again in 4 years, you’ll be just realizing the time to sell out was about 3 years back.  Bummer.

The next possibility is the lead funnel actual went away.  Here’s the same example where there are half as many new sales each year:

50% 100%
Year New Licenses Sold Renewals Installed Base Revenue YOY Growth
1 25 0 25 10000000
2 12.5 25 37.5 15000000 50%
3 6.25 37.5 43.75 17500000 17%
4 3.125 43.75 46.875 18750000 7%
5 1.5625 46.875 48.4375 19375000 3%

Interestingly, you still have time to react.  It isn’t until about year 3 that things turn really grim.  That’s a long time in the software business.  Did I mention I would rather face my Board and Shareholders as captain of a SaaS company than a perpetual license company?

Last possibility–there is something really wrong with your software, your customer experience, the competitive nature of your market, or even some paradigm shift that eliminates the need for your product that is causing renewal rates to tank.  If we cut that 100% pie-in-the-sky renewal rate to 50%, it turns out we get the same numbers we had when new leads got cut to 50%.  Again, you do have some time to react, but it is not a pretty thing.

Just for grins, let’s see what happens if you can grow your marketing lead funnel the way Old School Enterprise had to in order to get big.  Let’s say you double it every year:

200% 100%
Year New Licenses Sold Renewals Installed Base Revenue YOY Growth
1 25 0 25           10,000,000
2 50 25 75           30,000,000 200%
3 100 75 175           70,000,000 133%
4 200 175 375         150,000,000 114%
5 400 375 775         310,000,000 107%

Gee whiz, doesn’t that paint a nice picture?  And what did Jason start from?  Workday at $250M growing 90%?  Tracks the model pretty well.  I guess those Old School Enterprise guys running Workday know a thing or two about SaaS too, eh?

So keep an eye on your SaaS investments.  They have time to fix it if the growth rate slows–they’ll see it coming from the sales funnel.  And if they don’t manage to get it fixed before it manifests in the revenue, something very bad is probably happening there.

 

 

 

Posted in business, saas | Leave a Comment »

OMG: Skype Click to Call Breaks Excel so it can Only Paste Text?!??

Posted by Bob Warfield on March 24, 2012

This is an amazing bug that should be getting a lot more press.  I discovered it when I found that several Excel worksheets I regularly update were suddenly producing the wrong answers.  I went and looked and saw that instead of copying formulas when I cut and pasted, Excel was acting as if it was copying and pasting the text.  Essentially the formulas were lost.  When you think about all the things spreadsheets are used for, and how many of them are suddenly producing the wrong answers as a result of this problem, it’s scary.

Worse, I have no recollection of even being asked whether I wanted to install Skype Click to Call, it just happened.  It’s a browser add-in that is visible in IE and completely invisible in Chrome.  At least I couldn’t find it listed as an add-on yet I had to close all my Chrome windows to be able to uninstall it.

Skype has always been pretty sleazy and spammy–I hate a program where you can’t shut it down once it starts up unless you use the Task Manager or reboot–but this is ridiculous.

Help get the word out to uninstall Skype Click to Call ASAP if you use Excel at all.  You will not be happy to discover your spreadsheets are wrong!

Posted in saas | 6 Comments »

Machine Art Mouse and PC Case, Anyone?

Posted by Bob Warfield on January 21, 2012

This article originally appeared on my CNCCookbook blog, but it was so cool I thought I’d share it here too…

Industrial Design always fascinates me. My Apple laptop is machined out of a chunk of aluminum and the work is beautiful. There is an indicator on the front that is a bar-shaped LED that peeks through the aluminum via holes that are so small the openings are invisible unless the LED is lit. My guess is they’re created by a laser as it is hard to imagine doing the volume Apple needs with twist drills. I was pleased to come across this pair of cool PC-related projects created by a partnership of Thermaltake, Level 10, and BMW Design.

What a slick design. The second entry, is more of a teaser. Here is their design for a mouse:

BMW Level 10 Mouse…

Hard to really get a sense of how this thing looks…

That’s another one to whet the Machine Art appetite!

Posted in saas | 2 Comments »

 
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