Enterprise SaaS is Mainstream. Today.
Posted by Bob Warfield on November 3, 2008
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.
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”.