Beyond the buzzword: SaaS and the "mid-tail"

I'm a firm believer that over time, software-as-a-service (SaaS) will appeal to companies of all sizes.

However, we are seeing, as are many of our SaaS brethren, that a good chunk of the early adopters for SaaS fall into the "mid-tail" of businesses. Mid-sized companies, with anywhere from a few hundred to a few thousand employees, seem to be in the perfect sweet spot for SaaS in general.

The Enterprise Strategy Group commissioned a survey on the subject:

The Milford, MA-based analyst firm polled 544 IT decision makers at midsize organizations with 100 to 999 employees, and in a companion survey, polled 234 North American IT channel partners. More than one-third of the respondents said they're making some production use of SaaS offerings. Another 28% of participants said they aren't currently using hosted services but are likely to implement them in the next 24 months.

Congratulations to Google on Chrome!

Kudos to Google for their innovation with Google Chrome, their new web browser that was just introduced in BETA.

Beyond having one of the most creative marketing campaigns I've seen in a while, Google introduced a great offering that should help individuals, businesses and companies trying to deliver software-as-a-service (SaaS). As the browser gets better, SaaS gets better too. And I'm personally excited to get rid of these annoying Firefox browser crashes when I have 25 tabs open. :)

More than compliance: Email archiving and employee turnover

Most companies typically think of email archiving solutions as helping to mitigate cost and risk - namely:

• Reduce compliance risk by automatically retaining emails for regulations, records management policies and/or legal holds
• Reduce e-Discovery cost by allowing legal staff to search, refine and review emails and attachments, eliminating the need for expensive backup and laptop restores, data processing services and attorney review time
• Reduce storage and backup time and cost by giving the user a scalable, Unlimited Mailbox without clogging up the primary email system

This post is the beginning of a series of blog entries on how email archiving "in the cloud" can allow companies to drive business value, not just reduce cost and risk.

As a CEO, I always think about cost and risk but frankly even higher up on my agenda are things like:

• Improving client satisfaction
• Driving sales growth
• Enhancing employee satisfaction and productivity

On that third point, most CEOs specifically struggle with questions like the following:

1. How do I retain my talented employees?
2. When employees leave (and some will), how do I retain their knowledge for the company?
3. How do I transition this knowledge to their replacements so I can on-board them quickly?

As we all know now, email has become our filing cabinet or, in more modern terms, our "data warehouse" for all of our unstructured information. As such, it is a curse (if not managed) or a blessing (if properly controlled) with respect to employee turnover.

The curse is the way things normally work:

• Employee leaves
• Employee takes PST/NSF (personal archive) files with all old email from company
• Employer loses intellectual property and knowledge
• If employee goes to competitor, things could be even worse
• New employee taking over job has to start from scratch
• What were our latest interactions with clients?
• What promises did we make internally?
• What did last year's proposal look like so I don't have to start over?
• Sales cycles slow, customer satisfaction is damaged and employees themselves struggle

With an email archive, companies can:

• Prevent employees from taking their email with them (by disabling the need for PST creation and giving employees an Unlimited Mailbox in corporate control, rather than islands of "underground archives" in the form of PST/NSF files)
• Preserve knowledge and IP in company control during inevitable employee turnover
• Transition the information to the new employee by giving him/her access to the archive (or a subset) from the employee whom she or he is replacing

Lawson CEO has head in the clouds

As anyone within a 100 mile radius of me knows, I'm a crazy NFL football fan.  As you know, the NFL, like all businesses, evolves.  Youngsters might look to recent progress like the popularity of the 3-4 defense or the Patriots' approach to player selection.  Folks of the previous generation recall the advent of Bill Walsh's West Coast offense.  True students of the game probably remember the changes that ensued with quarterback and receiver-friendly rule adjustments during the 1970s and 1980s.

But is there someone out there, perhaps beyond octogenerian status, who decries the pass-happy NFL of today and longs for the golden age of the 1920s, before the advent of the forward pass? If so, that person should meet Harry Debes, CEO of on-premise ERP software vendor Lawson Software. I think the two would get along fabulously.

That's a bit tongue in cheek. In his interview attacking software-as-a-service (SaaS) on ZDNet, Debes makes some valid points including:

1. SaaS companies are less profitable than traditional licensed software companies: "Salesforce.com just has average to below-average profitability." He's totally right. The beautiful "old world" of licensed software allowed you to build software once and sell it over and over again with minimal marginal cost, giving companies like Microsoft crazy-high net profit margins. Customers were left with tons of shelfware, delayed projects and exploding budgets, but the vendors still collected their checks. In the SaaS world (like email archiving or hosted Exchange), we take the burden of running technology off customers' hands, so SaaS vendors get less short-term revenue and profit. This is pure economics. Markets evolve to drive down "above-normal" profit margins over time and shift more value to customers.
2. SaaS is hyped: "People will realize the hype about SaaS companies has been overblown within the next two years." Like any new industry, SaaS will go through its hype cycle. No doubt. But just because something is hyped (e.g., the Internet, mobile phones or Lost), doesn't mean it's not valuable.
3. On-premise solutions lock you in: "The cost of moving is too high. As long as it's working, people are happy to stick with one product." And yes, I think all of us in the SaaS world would agree that customers get locked-in to on-premise software (not sure if he's supporting his point here though :) )

And overall, I'm sure Debes is a very smart and capable guy. You couldn't get to be CEO of such a great and successful company without having a number of strong attributes. As a CEO of a much-smaller company, I'm sure there is a ton that I could learn from Debes.

However, the tone of his interview is that SaaS will never go anywhere and that's where a small army and I would probably beg to differ. In many ways, this is a perfect example of the concept popularized by the Clayton Christensen book The Innovator's Dilemma:

• Small but rapidly-growing market (SaaS)
• Less attractive to entrenched players (on-premise software vendors) than existing markets
• Written off as nothing (too small, not profitable)
• Becomes big over time (3-5 years from now)
• New generation of companies emerge (salesforce.com and ???)

It happened in hard disk drives (as the book discussed). It took place with the introduction of Personal Computers (my dad was a long-time executive at Digital Equipment Corporation, a company that missed this boat). We lived through it in the transition to digital music. And we're seeing it now with the emergence of SaaS.

The obvious disclaimer is that I am a self-admitted SaaS "fanboy" and have written many times on the virtues of SaaS.

As with most arguments in life, however, this is not a black-and-white discussion. To frame it as such makes this a false choice. It's not EITHER SaaS is dead OR on-premise is extinct. I think we're just witnessing the beginning of a mass transformation that will take many years to complete. Don't forget - physical travel agencies, in-person brokerage firms and Blockbuster Video still exist - they're just less relevant now after Orbitz, E*TRADE and Netflix.

For some time, many big companies will be too entrenched with internal biases or complex processes to adopt SaaS, so its initial value will come from serving the mid to long "tail" of customers who are more willing to embrace on-demand. So Debes is right that large enterprises aren't all running to SaaS any time soon. Luckily there are enough small-to-mid-sized organizations that have been unsatisfied by on-premise technology over the years that the market is very robust (robust enough to make us profitable for several years running, in fact).

Fundamentally, SaaS makes things possible that never were there before, including:

• Near-immediate time-to-value
• Pay-as-you-go with transparent cost of ownership
  
• Integrate in the cloud

So it's not just about attacking the on-premise market. Instead this is about something bigger - creating a new, broader and better market than the one that existed before. To me, that's the exciting part of my job - that we can create value for companies that never existed previously.

Apparently Debes has different aspirations for his company's value:

"Getting signed up as a SaaS customer is fast, but getting out is just as fast. Whereas traditional software is like cocaine--you're hooked. It's too difficult and expensive to switch providers once you've invested in one. If it were easier to jump ship, a lot of people would've hit the eject button on SAP a long time ago."

I don't know about you, but my mom didn't raise me to be no drug dealer. :) And I love it when my Pittsburgh Steelers throw downfield. I guess I'm just caught up in the hype.

Beyond the buzzword: SaaS and integration

I've written a great deal (as have others) about the benefits of SaaS in the email archiving and Microsoft Exchange hosting worlds in terms of usability (here and here), deployment times, storage management and innovation.

But all of those points above are very IT-centric, since on-premise software is inherently IT-centric.

What I've found is that senior business leadership at companies (e.g., how I think about my company) don't think in terms of technology or systems - they think about business problems they are trying to solve. One of the fundamental challenges for IT since the dawn of time (or at least the mainframe) has been to connect systems together so that technology aligns with business processes and business value.

The problem is that when your technologies are running on-premise, this is really difficult. Each technology has different architectures, interfaces, infrastructure and teams to manage it and customers end up deploying NEW systems (remember Enterprise Application Integration?) to connect those silos together. What a mess!

One of the benefits of software-as-a-service that's only getting attention recently is that customers running their applications "in the cloud" can also connect those applications together more easily to mirror their business processes.

Phil Wainewright at ZDNet has a great post on his SaaS blog about this trend in general ("SaaS mashups" as he describes them). In particular, he highlights an innovative vendor Xactly that recently announced a 5-way SaaS integration:

As a case in point, take Xactly's 5-way mashup, announced Monday (image courtesy of Xactly). Using Salesforce.com's Force.com platform as the foundation, the SaaS vendor has mashed up its own sales compensation application with Amazon.com's retail catalog, the Paypal payment system and an iGoogle gadget. The mashup creates an enterprise-class incentive rewards management and fulfilment application that at the same time is economical enough to be affordable for smaller businesses - subscriptions will be $10 per user per month, at the end of a 90-day free-of-charge launch window that ends December 1st.

So how could an email SaaS platform tie into the other SaaS business applications organizations are using like online CRM, HR and accounting packages?  More to come on that...

Email management workarounds: HitMeLater

Michael Arrington at TechCrunch profiled HitMeLater today.

Per Michael, it attempts to solve the email deluge problem many users face:

HitMeLater is simple. Forward any email to 24@hitmelater.com and it will send it back to you 24 hours later, putting it on the top of your inbox pile. You can change the number of hours to anything you like, up to 1,000 hours ahead (3@hitmelater.com sends it back three hours later). Alternatively, put in a day (Wednesday@hitmelater sends it back the next Wednesday). If you send it something it doesn't understand, HitMeLater sends back a polite email message saying "We're not sure what you want." 

While I understand that people (including me) are flooded with email, I don't quite get why they aren't able to use Outlook (if Outlook is their email platform) to manage it.  Outlook has had "follow-up" flags for years and has search folders which automatically let you see all messages across all folders with flags.  It seems like HitMeLater is trying to do the same thing?  Seems like overkill for a simple use case.

I have a unique email management style where I simply leave everything in my email inbox (I don't have to worry about quotas, since my email is automatically archived :) ). I use the read/unread flag as a mark for messages that I need to attend to.  If I view something and still have to process it, I re-mark it unread.  Then I use the Outlook search folder "unread" to see all unread messages.

I moved away from foldering a few years ago to save time (since I didn't have to worry about quotas) and decided that read/unread was the fastest method to process email in Outlook (you can toggle read/unread with hotkeys easily) and you can toggle read/unread from mobile devices as well.

I guess everyone has their own system, huh? :) 

Email archiving: A baby step into the cloud

Since I'm on the theme of Bill Murray movies, my mother-in-law's all-time favorite and one of my personal top picks as well is the 1991 classic What About Bob?

In the movie, where a supposedly-insane Bill Murray (Bob) drives his therapist (Richard Dreyfus) even crazier, Bob learns about a method of therapy involving taking "baby steps" toward challenges.

As you know, there is a ton of hype and some substance around the idea of cloud computing (or XaaS as CIO Insight put it, in a recent article) where companies leverage external infrastructure for applications, rather than building everything themselves.

In this vein, many companies are now looking at their email infrastructure and trying to decide whether to use a hosted service (e.g., Hosted Microsoft Exchange) or continue to run an email service on internal servers.

However, a few companies that I have spoken with struggle with whether they're ready to pull the trigger on outsourcing email altogether.  Some are aggressively moving forward - particularly if they have to upgrade their email infrastructure anyways (e.g., to Microsoft Exchange 2007).

Others are finding an interesting baby step: start by archiving your email to a hosted service provider to:

• Reduce your storage costs and backup windows for email.
• Give your users an Unlimited Mailbox without the need for quotas or PST files.
• Create a searchable repository for e-Discovery and other legal searches.

Archiving is a great way to start in the cloud since it's typically a new project, not core to most businesses, expensive to build internally and surprisingly-complex to run in-house.

Once a company has its email archived with a service provider, a few things happen:

• The company now has experience with the "cloud" and can determine whether to go deeper.
• The company also has its historical email hosted.  If its service provider also provides hosted messaging, a future migration to a fully-hosted email platform is much easier (since the biggest time in an email migration is in copying the data from the old email system to the new one).
  

Why SMBs need to think about e-Discovery too

George Crump posted a great writeup on InformationWeek's storage blog about how email archiving and e-Discovery are problems that affect all companies - big and small:

George lists three great reasons why small companies should be looking at this issue:

1. Has your business ever been sued? 95% of all discovery requests involve e-mail. 65% now ask for other forms of data (office productivity, CAD diagrams, etc). You must be able to not only deliver this information quickly after the request, but also at the request you need to know what you have and state what you are planning to deliver.

2. Have any employees? Ever have any leave because they weren't happy or you weren't happy with them? (if you answered no to question one and yes to this question, go back and change your first answer to yes.

3. Ever need to reference a previous piece of work as a starting point to save time or to upgrade or add on? Data retention is not just about being prepared for bad things, it is also about using your digital assets as... well... an asset, to help you save time on the next project, addition or redesign.

He also profiles LiveOffice Mail Archive as a possible solution for this need:

What makes LiveOffice interesting is how mature it is in the space, with more than 7,500 customers in eight years of business.

Google Apps downtime

As I've written before, I find it amusing how my brethren in Silicon Valley think Microsoft is dead and that Google will inevitably win in the business software world.  While I don't think you can ever underestimate Google, given the talent of the team that they've assembled (it truly is remarkable), I also don't think Microsoft will just go quietly into the night.

In particular, I think Google will end up having to learn how different the challenge is to sell paid software to businesses versus giving free (ad-supported) software to consumers.  While I have no doubt that they will figure it out, it will certainly take time.

Some of the recent outages Google Apps (Google's enterprise email/productivity offering) has had illustrate these growing pains.  As IDG pointed out in its article on the subject, the customer outrage was about the response and communication from Google as much as it was about the downtime itself:

In the main Google Apps Discussion Group thread devoted to this incident, administrators complained loudly about the length of the outage and the lack of status update details offered by Google officials ...

"Seriously... It has been two hours. Can you provide us with another update? For a company with your reputation, I'm absolutely shocked at the apparent absence of customer service," wrote a Google Apps administrator on the discussion forum on Wednesday. "This amount of down time is unacceptable."

Phil Wainewright wrote a great post on ZDNet questioning whether Google's corporate culture is conducive to building enterprise technology.  He quotes the resignation announcement of engineer Sergey Solyanik from Google, who talked about some of the challenges Google faces in the enterprise.

"[T]he culture at Google values "coolness" tremendously, and the quality of service not as much. At least in the places where I worked. Since I've been an infrastructure person for most of my life, I value reliability far, far more than "coolness", so I could never really learn to love the technical work I was doing at Google." 

Knowing many folks at Google myself, I think this characterization is unfair.  They value user experience as much as any company I've ever met.  However, I do think there are some unique aspects to the business technology world that Google is learning as it grows. 

Welcome Frank Sansone!

Today, we announced that Frank Sansone is joining our family at LiveOffice as Chief Financial Officer.

Frank was previously CFO at Guidance Software, a public software company and leader in e-Discovery.

We liked Frank for many reasons, but three really stood out:

1. e-Discovery is one of the main drivers for email archiving and Frank's experience at Guidance is very relevant for our business and for our clients.
2. Frank was at Guidance from its roots as a small private company to the public and rapidly growing firm it is today.  As such, Frank will help us scale our operations to meet our clients' needs.
3. Most importantly, Frank is a huge NFL fan, like most of us here.  Sadly, he roots for the Miami Dolphins, but hopefully I'll get him converted to my Steelers over time.

Welcome, Frank!