2020 Editors Note: Early summer, 2012, Facebook went through an IPO (Initial Public Stock Offering) and the stock failed to sell for the target price. At the time, Facebook hadn’t really hit upon a way to create regular ‘revenue’ and was mostly cat pictures and Candy Crush Saga games. In hindsight, we all know they finally figured it out – – but for a few weeks, everyone had a lot of fun at Facebook’s expense – which was more fun than the cat pictures anyway. As far as Cloud software, Salesforce was the first pure cloud play to really break the barriers. Another company financed by Larry Ellison, NetSuite, was just beginning to really move in the market as well. We were trying to lead our customers into cloud and going from the familiar cloud based Facebook to cloud based SFDC or NetSuite seemed like a good way to bridge the chasm. We don’t think this blogpost actually kicked off the NetSuite revolution, but hey, we tried.
Man: Did you see the disaster that Facebook IPO was?
Man: I knew this whole ‘internet’ thing was just a fad…
It’s really illustrative, in the land of hype and spin, how do you sort the bubbles from the trends? What’s the hot new thing – the next disruptive technology versus what’s the next big bubble waiting to pop?
I finished my MBA back in 2000 – we had the enviable position of being one of the first cohorts of business students as the internet came of age (1996). I had the Forrest Gump-type privilege of attending a business breakfast in Austin and listening to the VP of Marketing for Dell Computers talk about how they never expected to actually sell computers on the internet -but look at how letting customers configure their own machines on a website cut down on talk time in the phone room. Six months later they were doing a million a month online. Then a million a day. Later, it would be billions per second or whatever.
We also had the opportunity to consult with several dot-com businesses. One, in particular, NeoPlanet created ‘browser skins’ which allowed the user to make their Internet Explorer browser look like different, branded windows. NeoPlanet had wonderfully hip office space, hundreds of techie-child employees, (the retirement age there was apparently 29), untold millions in venture capital and….no idea how to ‘monetize’ the product. After spending 6 months consulting, the thrust of our master’s thesis was that NeoPlanet’s core competency and sole actual product was the ability to raise venture capital – they should stick to that and abandon the browser skin idea altogether. We made this sage pronouncement several months before NeoPlanet closed their doors forever – the only regret being that they didn’t invite us to the garage sale to cash in on some of the cool office fixtures.
Which brings us to SaaS – or Software as a Service – which is generally the idea that a software company sells a ‘subscription’ to use software – which is hosted in some type of remote server location and while the customer company doesn’t have the huge upfront costs of purchasing software, they will pay in perpetuity for the joy of using such software. More or less.
And for the last 15 or 20 years, SaaS has been the VP of Sales dreamland in nearly every major software company. I think the thinking goes something like – No more struggling to make sales numbers quarter after quarter, just this endless, ever growing stream of revenue. Only one problem. Customers don’t trust vital business products in the cloud. Or I should say customers haven’t in the past.
Having helped customers with IT projects for years, I’ve seen SaaS proposed time and time again – various price points, various methods, various software vendors – and it’s been very tough to convince risk-averse CFO’s to put the company books on someone else’s server, a server that can be accessed from anywhere (Russia, China, our competitor across the street).
And I’ve been quoted saying so, I’ve blogged about this before – I had thought on this site, but I don’t see it anywhere – but it’s out there a couple of places that I can remember, and so, like the Dell VP of Marketing sometime in 1997, it’s time to ‘update’ my prognostications.
We’re starting to see SaaS adoption on the actual streets, by real businesses (SMB), and it seems to be growing.
Nearly 30% of the last quarter’s business has been SaaS models of some type or another.
I think it interesting that the same risk-averse CFO’s who didn’t trust their company numbers on the cloud haven’t seemed to mind the Sales department’s critical info being cloud based for the last couple of years.
And today, we’re seeing supply chain software, some business intelligence, definitely order entry for both customers and remote sales going to the SaaS model.
We’re even seeing warehouse management and inventory control tools remotely deployed.
I’ve been pleasantly surprised – and I do mean surprised.
For years, we’ve seen chart after chart, projection after projection about how SaaS was going to be a $63b market by (whatever this year is + 2).
But it makes sense – why pay for software in year one, when you’re planning to use it for several years. Now until someone figures out how easy it is to switch software vendors when you’re only paying monthly fees….another blog post.
In the meantime – how do we get on the list for the Facebook garage sale?