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How to Optimize Your SaaS Revenue Streams - Rackspace SaaS & Cloud 2010
 

How to Optimize Your SaaS Revenue Streams - Rackspace SaaS & Cloud 2010

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Sixteen Ventures was represented by Justin Pirie at the 2010 Rackspace SaaS & Cloud event in London, England.

Sixteen Ventures was represented by Justin Pirie at the 2010 Rackspace SaaS & Cloud event in London, England.

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  • This is what he <br /> sold our customers
  • Why are we here?
  • So <br /> why does making money out of a SaaS business feel like an uphill climb with no end in sight?
  • IP- Secret Sauce- <br /> most of time and value in here <br /> <br /> <br /> <br /> Technology- infrastructure- small- internal focused <br /> <br /> <br /> <br /> Revenue model is completely disconnected from everything else- sell it however you want <br /> <br /> <br /> <br /> As is marketing
  • Loosely-coupled, at best
  • Loosely-coupled, at best
  • Loosely-coupled, at best
  • Loosely-coupled, at best
  • IP- Secret Sauce- <br /> most of time and value in here <br /> <br /> <br /> <br /> Technology- infrastructure- small- internal focused <br /> <br /> <br /> <br /> Revenue model is completely disconnected from everything else- sell it however you want <br /> <br /> <br /> <br /> As is marketing
  • Can&#x2019;t have silos <br /> <br /> <br /> <br /> Technology is more <br /> important- infrastructure, security, governance, compliance taken over for customers <br /> <br /> <br /> <br /> Marketing needs to be tied into the technology- self service, nurturing <br /> <br /> <br /> <br /> Revenue model needs to be built into the app. Must be aware of this early on. Support the right metrics and segmentation
  • Things that make up the revenue <br /> model of SaaS
  • Subscriptions = &#xA3;- this can be per use <br /> or <br /> per month- aligned with your market <br /> <br /> <br /> <br /> Ecosystem- Channel sales, <br /> affiliate, API monetisation, Apps. Everything Leveraged <br /> <br /> <br /> <br /> Network Effect- Monetising the data through use. Anonymous, Benchmark <br /> <br /> <br /> <br /> Ancillary- anything else! Float/discounts/affiliate sales/ setup fees. Get paid before paying etc.
  • Products- <br /> computers, appliances, anything physical <br /> <br /> <br /> <br /> Services- difficult to scale profitably. Onboarding- 80 / 20 rule- roll the 80% repeatable stuff into the app. Only deliver the 20% that is actually custom. Increased value and you can increase price, increase margin.
  • Advertising- Unless you&#x2019;re in the advertising business- it&#x2019;s hard. Inventory is finite and hard to execute well. Spiceworks have 125 customers which are advertisers and 800,000 users. Done properly advertising doesn&#x2019;t belong in this bubble.
  • Subscriptions = &#xA3;- this can be per use <br /> or <br /> per month- aligned with your market <br /> <br /> <br /> <br /> Ecosystem- Channel sales, <br /> affiliate, API monetisation, Apps. Everything Leveraged <br /> <br /> <br /> <br /> Network Effect- Monetising the data through use. Anonymous, Benchmark <br /> <br /> <br /> <br /> Ancillary- anything else! Float/discounts/affiliate sales/ setup fees. Get paid before paying etc.
  • Things that make up the revenue <br /> model of SaaS
  • Can&#x2019;t have silos <br /> <br /> <br /> <br /> Technology is more <br /> important- infrastructure, security, governance, compliance taken over for customers <br /> <br /> <br /> <br /> Marketing needs to be tied into the technology- self service, nurturing <br /> <br /> <br /> <br /> Revenue model needs to be built into the app. Must be aware of this early on. Support the right metrics and segmentation
  • Every business is different- I don&#x2019;t know <br /> the governance and compliance issues at play in your business
  • Network Effect!
  • Ecosystem!
  • Did we reach the goal?
  • Hi- <br /> My Name&#x2019;s Justin Pirie <br /> <br /> <br /> <br /> <br /> <br /> <br /> Alternative Photo: <br /> <br /> http://www.flickr.com/photos/piero/2204978222/

How to Optimize Your SaaS Revenue Streams - Rackspace SaaS & Cloud 2010 How to Optimize Your SaaS Revenue Streams - Rackspace SaaS & Cloud 2010 Presentation Transcript

  • How to Optimise Your SaaS Revenue Streams Presented at Rackspace SaaS and the Cloud 2010 London, 12th February, 2010 Copyright© 2010 Sixteen Ventures. All rights reserved.
  • Aim of Today • To help you make better revenue decisions • How did we get here from legacy? • What are the key differences in SaaS? • Revenue Streams available in SaaS • Better Revenue = More Profit http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Photo via caveman_92223
  • Who am I? • Justin Pirie 1.Blogger- This Week in SaaS 2.Community- Run the biggest in SaaS 3.Social Media- #3 in SaaS influence 4.Consultant- Specialise in SaaS product and market strategy http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Why SaaS? • Richer user experience • Rapid implementation • Frequent cycles of innovation • Minimal upgrade hassles • Always on deployment • Subscription pricing • Scalability Ray “R” Wang http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • But there’s a catch • Beware of the Recurring Revenue Mirage • It’s easy when you’ve had $120m in funding... • It’s a lot harder to acquire customers that people often think • It becomes the classic- market risk as opposed to technical risk http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved Image copyright Dru!
  • Making money in Legacy • It was easy: 1. Hire Programmers 2. Price it 3. Market it 4. Sell it 5. Receive large payments from customers http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved jo'nas
  • Legacy Software Business Architecture Intellectual Marketing Property Revenue Technology Model http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Legacy Software Business Architecture • Is Disconnected • Everything Siloed creating Value Separately • Little or no outward facing technology http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Legacy Software Customer Ecosystem Customers Developers Channels http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Legacy Software Customer Ecosystem • Companies sold software primarily through traditional channels like Value Added Resellers (VAR’s) • VAR’s sold, installed and maintained the software for the end customer • Customers were disconnected from the Software Vendor http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved automatthias akakumo
  • SaaS Customer Ecosystem Customers Developers Channels? http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • SaaS Customer Ecosystem • The biggest change is that the web has become the de-facto delivery method for software • Channels haven’t gone- they’re just different • Key difference in SaaS is that Customers now produce data as well as consume it and developers produce software as well as consume customer data http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved bionicteaching
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved Bruce Tuten
  • SaaS Customer Ecosystem Customers, Developers, Channels, http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • SaaS Customer Ecosystem Customers, Developers, Network Effect Channels, http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Network Effect • Is the KEY DIFFERENTIATOR for SaaS • Not just the “obvious benefits” listed before by Ray Wang- they can’t overcome satisfactorily the security, reliability, compliance, ROI arguments • Network Effects drive the true ROI of SaaS http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Channels • Haven’t gone away completely- just are different • Value provided by traditional VAR’s is eroding • New type of Channel partner emerging who builds on the ecosystem, creating apps and widgets on your platform- Ecosystem http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved xetark
  • Legacy Software Business Architecture Intellectual Marketing Property Revenue Technology Model http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Legacy • Disconnected Business Architecture • Think Dilbert in Cubicles... http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • SaaS Business Architecture Intellectual Marketing Property Network Centricity Revenue Technology Model http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • SaaS Business Architecture • Is Connected • If it’s disconnected, it fails. • Marketing has to talk to Sales who has to talk to Engineering who has to talk to IT. • Failure to connect leads to very public issues • Customer Acquisition Cost is the key indicator http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • SaaS Revenue Model Intellectual Products Marketing Property Subscriptions Ecosystem Network Network Centricity Effect Services Advertising Revenue Technology Model Ancillary Revenue Model made up of Revenue Streams http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 7 SaaS Revenue Streams Products Subscriptions Ecosystem Network Effect Services Advertising Ancillary http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Scalable Revenue Streams Products Subscriptions Ecosystem Network Effect Services Advertising Ancillary http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Less Scalable Revenue Streams Products Subscriptions Ecosystem Network Effect Services Advertising Ancillary http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Products • Making Physical goods is hard... • You have to get every part of the process right! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved  jamesjyu
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved benchilada
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved mikebaird
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved mescon
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved kenjonbro
  • Example of Failure http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Services • E.g. Consulting, Professional Services • Easy to do in small numbers • Hard to Scale http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved Amit Gupta
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved CharlesFred
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved albany_tim
  • At Scale • Everybody hates you (like SAP) • You become expensive (at least 3x cost of each person) • Questionable value if you’re delivering repeatable work that could be automated • Doesn’t sit well with the SaaS proposition http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Advertising • Have you ever seen a beautiful SaaS app with great UX with Adwords? • Yes, Google Apps is cool • But Google has $25bn of revenue and $4bn of free cash flow a year, and they’re in the Advertising business- KEY DIFFERENCE http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • The idea that software on the Web is going to be largely funded by advertising is just so wrong-headed, I hardly know where to start. Phil Waineright http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Spiceworks • Is a great example of an Ad funded software company • They recognise what business they are in- Advertising • They have their own ad team and sell to their 125 customers- no adwords! • They have 850,000 users and have had $25m in Venture funding over last 5 years http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Scalable Revenue Streams Products Subscriptions Ecosystem Network Effect Services Advertising Ancillary http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Subscriptions • What can I say? The fundamental basis of SaaS • Truly Scalable Profitability http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • But Also Different • Recognise that there are also different types of subscription revenue: 1.Pay per use 2.Percentage • And others... The key is customers now transact through you- giving you opportunities to align payment and value http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Ecosystem • Ecosystem creates lock in for your brand 1.Apps for the Apple iPhone- most successful consumer ecosystem to date 2.AppExchange for Salesforce- pre built integrations making it the de-facto CRM http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Network Effect • The Key Differentiator between SaaS and legacy Software @ray - the aggregated data aspect is often underplayed.To me there is the potential for that to have more value than the application itself. Dennis Howlett http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved (c) computerworld
  • Ancillary • Don’t ignore other revenue opportunities 1.Setup Fees 2.Partnership Fees 3.Arbitrage opportunities http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 7 SaaS Revenue Streams Products Subscriptions Ecosystem Network Effect Services Advertising Ancillary http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • SaaS Business Architecture Intellectual Marketing Property Network Centricity Revenue Technology Model http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved katerha
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Multitenancy • A quick few thoughts • It’s not a technical argument • It’s a business architecture issue http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Multi-Tenancy in SaaS - Single Instance for all Customers Customer Customer Customer Customer Customer Customer Customer Customer Customer http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • Multi-Tenancy in SaaS - Its not just Customers! Customer Partner Developer Industry Customer Partner Customer Developer Customer http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved jo'nas
  • http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved Apple Photo via kylemay
  • SaaS Revenue Modeling & Business Architecture Lincoln Murphy, Managing Director Justin Pirie +1 (972) 200-9317 +44 (0)7799 625 787 lincoln@sixteenventures.com jp@justinpirie.com http://sixteenventures.com http://justinpirie.com @lincolnmurphy @justinpirie
  • Piero Sierra