Tech Industry – Page 24

SaaS-ing A Recession

December 8, 2007 Leave a Comment

I came across this interesting article a few days ago talking about how SaaS companies might be vulnerable in a recession. This was timely as yesterday I was having conversations with some entrepreneurs on a similar topic. These were all early stage startups and I was curious what their thoughts were about the current economic situation in the US and abroad.

This group didn’t have much though about the the current economy (Are we in a recession? Are we heading toward one? Are we coming out of one?). Largely, this is because in an early stage startup, all your energy is focused on just getting stuff done. Recession or not, it’s still a struggle for a startup to close those first few customers, build that buzz. One interesting bit that came out of the question was a sense that the cost of outsourcing will continue to go up over the next year. There are indications that outsourcing to Eastern European locations will catch up to the cost of outsourcing to India within a year. A rising tide raises all boats…eventually.

I find it interesting that this article focuses primarily on SaaS for the enterprise. If/When there is a recession, SaaS offerings for consumers would be the first ones to be hit. If a consumer is spending $25/month or $150/year for a SaaS service, they may start asking themselves if they really need it. And that is the beauty of it, if they don’t or can’t afford it anymore, cancel it.

The really interesting question is will consumers do that?

As the economy shifts, you will start to see the true management abilties of the leaders behind all SaaS offerings. How efficient is their operation? Do they have a cash cushion to weather the storm? What will they do during that storm? There was an interesting interview with the CEO of SaaS provider Zoho who boot strapped his company and continues to do so. I found an interesting correlary to the previous questions and how AdventNet (who own’s Zoho) weather a few previous storms in their past. I find it interesting how they used downturns in their market and economy to spin up other SaaS based offerings. I also found the comment about the number of Engineers at SalesForce very interesting.

SaaS will be an interesting area to watch in the next 9-18 months.

Beyond the Software Consolidations

October 22, 2007 Leave a Comment

Today I came across an interesting posting from Chris Schneider, CEO of MomentumSI, about Consolidations in the Software Industry. He makes some interesting observations about recent consolidations in the technology industry amongst the “next 40” (the largest 40 software/services companies after Microsoft). He also points out the next set of acquisition targets from that same set.

Predictions are always hard to make (and harder to look at years later). But out of Schneider’s next acquisitions, I have my own set of thoughts I wanted to share.

Sybase, Tibco, BMC and CA – I actually don’t see these companies being acquired. While there are some interesting technologies that they all own (BMC and CA have a diverse collection of tools…both old and new), at a cursory glance there is nothing immediately compelling within them to make them acquisition targets.
Cognos and Citrix – These could be acquisition targets from someone.
- Citrix has application virtualization and acceleration technology that might be interesting to someone; as long as their other applications are of interest or could be easily disposed of.
- Cognos is interesting to those who are looking to acquire customers in the BI space (maybe combining with Sybase?)
Red Hat and Adobe – I don’t see these two being acquired (or wanting to be)
- Red Hat – If Red Hat were to be acquired, I fear that the open source world might start to swing in a completely different direction. I don’t see Red Hat letting that happen.
- Adobe – They have an interesting mix of products that makes them much more unique than these other companies. Their combination of enterprise and end use solutions make them an interesting company to watch in the next few years.

Even more interesting than focusing on these acquisitions, is focusing on the companies that aren’t getting acquired. These are the companies that we don’t hear about that exist below the radar threshold. Small companies that are profitable, doing interesting if not exciting stuff in very focused or niche markets. I know of a number of companies like this that were boot strapped by their founders, grown to impressive revenue numbers, and still kept private and focused on providing value to their customers and their employees.

Some of these companies get acquired every now and then and pop up above the radar level. But the more interesting thing is how many stay down where they are. Perhaps this is part of the maturing of the High Tech industry that has been in process for a while. The development of High Tech business leaders that are in the business for something more than the quick buck or the big bang.

Whole Foods Teaches IT Customer Service

October 3, 2007 Leave a Comment

Lately, in my discussions with IT executives as well as small and medium sized technology company executives the topics of Open Source and Software as a Service (SaaS) customer services has been coming up. It seems that some Open Source ans SaaS providers have lost sight of the importance of the Customer. I have heard of SaaS providers that provide a level of self-support in the, now standard, form of Community Forums but fail to actively participate in the community themselves. I have also heard stories of Open Source users contacting the Open Source provider for support, even willing to pay for onsite consulting, but being ignored unless they purchase a multi-year support contract first.

It appears that the Technology business models may have changed, but many business are still operating the same. Regardless of their size or type, the executives behind these technology companies need to relearn a basic premise of business: you only exist for the customer; without the customer the business doesn’t make money and you don’t get paid. I might be a bit more sensitive to this than most due to my entrepreneurial spirit and constant contact with customers as part of a sales team. But some of the stories that I heard start to border on the level of astonishment in regards to how these companies have ignored their customers.

Maybe these software executives should take a lesson from Whole Foods.

Now before you think I’ve flipped, listen to this story of customer support that I experienced tonight. My wife was shopping at whole foods and when she got home realized that the checkout clerk had not given her the packages of meat that she purchased. When I ran back to the story to pick up the package at the Customer Service desk, the clerk who helped me was sincerely apologetic and also gave me a bag of chocolate chip cookies for my troubles.

When you look at this at the surface, you realize that this is the type of response one would expect from a business focused on keeping a loyal customer. All jokes about “Whole Paycheck” aside, I’m sure the clerk wasn’t even thinking about how much money we spend at Whole Foods regularly or about the $60 we spent there that day. She wasn’t thinking about the fact that the free bag of cookies (which costs $5.50) was almost 10% of the value of the groceries we bought that day. What she was thinking about was just keeping a customer happy and making amends when the business as a whole made a mistake.

Now translate that same thinking to the much more business savy technology industry. When an executive in an Open Source firm doesn’t want to send a consultant out to a user of that company’s Open Source software for a paid engagement (typical rates run between $2000 and $3500 per day) because the user doesn’t have a support contract (which typically runs between $20,000 and $40,000) who is the executive focusing on? Obviously not the best interests of their company.

Here is a chance to show a prospect the level of support you can provide…while getting paid for it…and earn the right to sell the customer a support contract. It’s earning 10% now in order to earn 100% later…who wouldn’t do that? It’s possible that there were absolutely no one available who could provide this consulting. Possible…but customer focused companies always seem to find someone who can wear multiple hats or be re-prioritized to earn a new customer. So, if the executive wasn’t focusing on what’s best for their company or what’s best for the customer…who or what were they focusing on?

Maybe some of the software executives behind some Open Source and SaaS companies should step out of their offices and into the real world once in a while. They could start out simple, lets say Business 101, by actually going out and visiting a customer and learning what’s it like in their customer’s environments. And if they really want to challenge themselves by taking Business 201, they could try working for a while at Whole Foods…