Peter Flynn

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  • www, ramp, entrep, saaspert, contact
  • BusinessOpinionedModels not ad revenue reliantEvangelist – entrepreneurs, investors and customers
  • a model of software deploymentprovider licenses an application to customers for use as a service on demand. How many of you use one of these:Basecamp?Google Office/Google Docs?Internet Banking?Web hosting?Consumers of SaaS as buying a subscription to a service, they are not buying software.
  • SaaS is good..To sellTo buyTo own
  • All software will ultimately be web-based
  • On PremisesBought Freehold House:Pay for house, pay for land, pay for repairs, pay for improvements, pay for electricity, pay for water, pay for rates(But its not like a house because you get no capital appreciation – there is no asset)Complexity, support, maintenance, DR is owner’s issueR 8 out of R 10 is “dead money”SaaSStay in a Hotel (multi-tenancy):A single fee for as many rooms as you needComplexity becomes the vendors issueClients focuses on their core competencies
  • On Premises:High upfront investmentInaccurate quotes, often underestimatedLong delivery cycleSaaS:Low (relative) upfront investmentComparatively accurate quotesFaster (relative) delivery
  • The use of the terms CAPEX and OPEX are contentious on this point and the real benefits around this are disputed. But in my experience, often a deal of lobbying is going on in any org. when trying to implement software. If the expenditure is going to have to go through CAPEX, its simply more difficult to get buy-in.http://www.cio.com/article/484429/Capex_vs._Opex_Most_People_Miss_the_Point_About_Cloud_Economicshttp://www.stratetect.com/2008/06/capex-vs-opex-what-is-the-difference/http://gevaperry.typepad.com/main/2009/01/accounting-for-clouds-stop-saying-capex-vs-opex.html
  • On PremisesSell software – BIG lock in; vendor must prove value at inception, but once the sale is made, lower onusSaaSSell subscription to a service – lower lock in; vendor needs to “retain the contract” monthly – onus to constantly prove value
  • “mobile/mobile enabled” – technically enabled to work from home/remotely
  • End of 200925% of the world’s working population will be mobile878 million mobile workers world wide99 million mobile workers in Europe70% of the total US workforce will be made up of mobile workersCorporate spending on mobile and wireless apps will grow between 10% & 20% p.a.
  • Top 5 countries:Demark Sweden Singapore Finland Switzerland Africa:South Africa (ranked 47th)Botswana (ranked 67th)Nigeria (ranked 88th) only African country that has moved upwards in rankings
  • “No upfront cost”“Free Trial”“No upgrade or downgrade cost”“No cancellation fee”“One fixed monthly fee”“based on your organizational profile”“core is free, pay for features”“Enable your mobile workforce”“Enable distributed teams”“Enable easier geographical expansion”“Centralize your reporting”“Leverages convergence potential on your access devices”“Service that grows with you”
  • According to the World Wide Worx Primary Research – cited on http://www.internetworldstats.com/20084,590,00010.5 %20053,600,0007.4 %
  • Facebook accounts? Trusted with private informationInternet banking? Trusted with security
  • October 2008 Gartner Report“Worldwide software-as-a-service (SaaS) revenue in the enterprise application markets* is on pace to surpass $6.4 billion in 2008, a 27 per cent increase from 2007 revenue of $5.1 billion, according to Gartner, Inc. The market is expected to more than double with SaaS revenue reaching $14.8 billion in 2012.” “Sales and market share of SAAS enterprise applications and cloud computing will continue to grow in the face of the recession.”
  • Insists on having a reference – another adopter like him• Looking for a percentage improvement – only!• Insists on seeing competition in the market• Wants to buy from market leader• Evaluates and buys whole productsPragmatists insist on a referenceAnd no pragmatist would reference a visionaryRead “crossing the chasm” – Geoffrey A Moore 2002http://www.bootcamp.umd.edu/presentations/2008/Frels.pdf
  • CAC: <3 years = bad!!; >1 years = goodMedian: 0.57Churn: aim for less than 12% per annum and less than upsell.CLTV: make sure you make a profit on a customer over the life of their engagement with you
  • 1) Time limited (30 days free, then pay. This is the Salesforce model)Upside: Easy to do, low risk of cannibalization Downside: Many potential customers will be unwilling to commit enough to give the software a real test, since they know that if they don't pay they'll get no benefit after 30 days. 2) Feature limited (basic version free, more sophisticated version paid. This is the WordPress model)Upside: Best way to maximize reach. When customers convert to paid, they're doing it for the right reason (they understand the value of what they're paying for) and are likely to be more loyal and less price sensitive. Downside: Need to create two versions of the product. If you put too many features in the free version, not enough people will convert. If you put too few, not enough will use it long enough to convert.3) Seat limited (can be used by up to some number of people for free, but more than that is paid. This is the Intuit QuickBooks model)Upside: Easy to implement. Easy to understand Downside: Might cannibalize the low end of the market. 4) Customer type limited (small and young companies get it free, bigger and older companies pay. This is the model used by Microsoft's BizSpark, where companies less than 3 years old and under $1 million in revenues get Microsoft's business software free.)Upside: Charges companies according to their ability to pay. Get fast-growing companies early. Downside: Complicated and hard-to-police verification process.
  • Most business system needs are already met somehowIt’s costly to try something new (even if its free)Your service can’t afford to have only abstract benefitsFocus on what your client’s really value
  • Is your service affordable?Do your prospects perceive your service to be affordable?Will the client save or make more money than they will be paying me to use the service?
  • Self marketingAutomated sign up and paymentSelf provisioningSelf trainingSelf supportingSelf administering (invoicing etc.)Self terminating
  • Peter Flynn

    1. 1. SaaS Net Prophet 2009 By Peter Flynn Silver Sponsors
    2. 2. About Me  Cofounder and MD of White Wall Web  Entrepreneur (various businesses)  Author of http://saaspert.com  peter@whitewallweb.com  @pete_flynn
    3. 3. About My Bias  Services for businesses  An opinionated (researched) view  Strongly prefer models that don’t rely solely on Ad revenue  Evangelist for SaaS
    4. 4. Software as a Service Source: salesforce.com
    5. 5. Why am I talking about this?
    6. 6. Clients: Why is SaaS better?
    7. 7. Minimizes the cost of complexity On Premises SaaS  License  No onsite servers  Hardware (software/hardware)  Network  Try before you buy  Consultants  Fast & easy to implement  Maintenance  Painless upgrades  Dedicated staff  Lower TCO  Upgrades  Predictable  Many points of failure  Faster issue resolution
    8. 8. Single versus Multi-tenancy On Premises SaaS
    9. 9. Upfront Investment & Time to Delivery
    10. 10. Budget Allocation On Premises SaaS Capital Expenditure Operating Expenditure (CAPEX) or “large (OPEX) or expenditure” budget “smaller/recurring expenditure” budget
    11. 11. Release Frequency On Premises SaaS Infrequent (annual?) Frequent releases releases
    12. 12. Level of Lock In
    13. 13. Clients: Enables a Mobile Workforce
    14. 14. Mobile Workers 2007 - 20% of workers in leading South African companies were mobile enabled Thanks to Suzanne Du Toit from Nashua WC for supplying me with this research
    15. 15. Mobile Workers 2015 • 15-million mobile Internet users in South Africa. • Unique cellular users in South Africa: 42-million Thanks to Suzanne Du Toit from Nashua WC for supplying me with this research
    16. 16. Investors: “Convince me”
    17. 17. Great Sales Pitch
    18. 18. Favorable SaaS Environment Bandwidth proliferation
    19. 19. Favorable SaaS Environment Internet as a platform  Conventions widely understood  Security trusted
    20. 20. Favorable SaaS Environment Tech advances  Cloud computing  H(ardware)aaS  P(latform)aaS  Virtualization
    21. 21. Favorable SaaS Environment Downturn  Drive to save costs  SaaS shares have been hurt less
    22. 22. Service Cash Generation
    23. 23. Technology Adoption Lifecycle
    24. 24. Success Stories  Founded: 1999  Type: Public  Current Size: 3,300 employees  Revenue: $ 1.077 billion 2008  Commitment: 55,440 customers  http://www.nyse.com/about/listed/crm.html
    25. 25. Success Stories  Founded: 1999  Type: Private  Current Size: 12 employees  Revenue: $ 8 million 2008?  Profits: $ 6 million in 2008?  http://blog.jedchristiansen.com/2008/02/25/37signals-is-one-h
    26. 26. Success Stories  Founded: 2004  Type: Private  Current Size: 120 employees  Funding: $ 104 million  Revenue: $ 9.5 million 2008?  Bookings: 200,000 active (1 million)?  http://www.businessinsider.com/ning-blowing-the-doo
    27. 27. Success Stories  Founded: 2007  Type: Private  Current Size: 48 employees  Funding: $ 25 million  Revenue: N/A  Users: nearly 2 million
    28. 28. Think About…
    29. 29. Investors: What to focus on
    30. 30. 5 C’s of Successful SaaS  CMRR – committed monthly recurring revenue  CAC – customer acquisition cost  CC – customer churn  CLTV – customer lifetime value  CG – cash generation Source: www.bvp.com
    31. 31. “Freemium” Revenue Models “Folks love freebies!”
    32. 32. “Freemium” Revenue Models  Time Limited SalesForce.com; 37Signals  Feature Limited WordPress.com  Seat Limited Intuit Quickbooks  Customer Type Limited Microsoft BizSpark Source: http://www.longtail.com/the_long_tail/2008/11/finding-a-freem.html
    33. 33. Freemium with Nerves Do you even need to know how you are going to monetize your product when you set out?
    34. 34. Investors: What does a good SaaS business look like?
    35. 35. SaaS = a volumes business  Freemium conversions:  2%-10% of your signups will eventually pay  Average is 4%  You need lots of signups… Source: http://dondodge.typepad.com/the_next_big_thing/2007/05/freemium_free_t.html
    36. 36. Compelling Need Met Save money. Make money.
    37. 37. Affordability & Value for Money “Save or make me more money than I am paying you. Prove it.”
    38. 38. Self EVERYTHING!  Self marketing  Automated sign up and payment  Self provisioning  Self training  Self supporting  Self administering (invoicing etc.)  Self terminating
    39. 39. Users who don’t need support  Target regular web users  If not, be aware of exponentially more support and false alarms  Cost this in!
    40. 40. Already a well serviced need?  CRM  ERP  SaaS for agencies (web, design, ad)
    41. 41. Why Now? Why South Africa?  For Development  Skills  English  Time-zone  Culture  For Sales  Bandwidth  Cost Sensitivity  Culture
    42. 42. NetProphecy | NetProverbs All software will ultimately be web-based
    43. 43. NetProphecy | NetProverbs SaaS in Africa has to include the mobile web
    44. 44. NetProphecy | NetProverbs Remember cultural nuances when internationalizing
    45. 45. NetProphecy | NetProverbs Leverage the programmable web
    46. 46. NetProphecy | NetProverbs Have one version of the code and data structure.  Say “no” to on-premise deployments  Say “no” to customer specific customizations – unless through an API
    47. 47. NetProphecy | NetProverbs Having a good service is just a health factor – commercialization is the real challenge.
    48. 48. NetProphecy | NetProverbs Sell directly for a long time before using channels. Have a dedicated, incentivized sales staff.
    49. 49. NetProphecy | NetProverbs Your clients are online. Use online advertising and marketing channels.
    50. 50. NetProphecy | NetProverbs Succeed in South Africa first. We are a microcosm of the world.
    51. 51. NetProphecy | NetProverbs Have enough capital for the long haul. Be thrifty.
    52. 52. NetProphecy | NetProverbs Get a working product out as early as possible. Get users. Get user feedback.
    53. 53. NetProphecy | NetProverbs Think bigger. Think all English geographies. Then think Mandarin.
    54. 54. Thanks. Questions? peter@whitewallweb.com http://saaspert.com @pete_flynn

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