SIIA & OPEXEngine: Let the Data Set You Free!


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Hear how Kelly Battles, CFO of Host Analytics, works with her finance team to track key financial and operating metrics data to drive performance and keep the company on track to deliver growth in 2011. In addition, Lauren Kelley, CEO of OPEXEngine will present key software industry benchmarks from OPEXEngine’s comprehensive financial and operating benchmarking report, developed in partnership with the SIIA. Join us for this informative webinar to learn more about how the benefits of metrics-driven, fact based decision making can help you drive better performance and efficiency within your own organization.

Lauren Kelley, CEO & Founder, OPEXEngine
Kelly Battles, CFO, Host Analytics

About the presenters:

Lauren Kelley is CEO and founder of OPEXEngine, the leading publisher of software financial and operating benchmarks. Ms. Kelley brings 25 years of successful experience in tech company management to OPEXEngine, as well as 6 years as an international economist at the US Department of Commerce’s Office of Computers early in her career, after entering Federal service through the prestigious Presidential Management Intern program. Prior to building OPEXEngine, she worked 2 years as an executive-in-residence at Grand Banks Capital, a venture fund focused on East Coast technology companies, evaluating potential investments. She has worked and lived extensively in Europe. She was previously Senior VP of WW Sales at ATG, including establishing field operations throughout Europe and Asia/Pacific, and was a General Manager for approximately 20 countries at Borland out of Paris in the early ’90s. Ms. Kelley also helped build Compaq’s Central and East European operations, based in Munich. Ms. Kelley is currently based in London, where she lives with her husband and two children.

Kelly Bodnar Battles is the CFO of Host Analytics, inc., the only provider of a CPM (Corporate Performance Management) suite of products delivered via software as a service.
Prior to Host Analytics, Kelly was VP, Finance at IronPort Systems where she was the first finance hire and was responsible for building and leading the finance, accounting, administrative and various operational functions during her six years there. During her tenure at IronPort, the company grew from $2M to $250M in annual bookings and was sold to Cisco Systems (NASDAQ: CSCO).
Before IronPort, Kelly was a Director in HP’s Strategy and Corporate Development group, a Strategy Consultant with McKinsey and Company, and a Corporate Finance Associate at J.P. Morgan. Kelly graduated with a B.S.E. from Princeton and M.B.A. from Harvard, both with honors. Kelly lives in the Bay Area with her husband, and their 2 children, labrador retriever and rescue cat.

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  • We benchmark contracted monthly revenues for our client companies at various revenue sizes, as well as customer acquisition costs, cash from operations, new customer growth rates, plus the cost both to acquire a new customer, and the cost to maintain each customer, both metrics which are required to track profitability of how you are adding customers. One of the metrics which is well discussed in SaaS circles is the “Magic Number”described by Josh James, CEO of Omniture at an industry summit to explain how Ominiture tracked their customer profitability and whether or not to add gas in Sales & Marketing, or not. Basically, you take a quarter’s incremental revenue growth, multiple by 4 to annualize, then divide by last quarter’s S&M marketing spend. According to James, anytime the magic number is .75 then you should spend more and put gas on your sales and marketing to bring in more customers. If your magic number is 0.5 or less, then there is something wrong with your model. One assumption in this model is that you have very low Churn rates, Omniture shoots for 95% renewals or better. The industry average is about 15% churn or less. We look at both customer renewal rates by number of customers renewing and by amount of dollars renewed. For example, if you had 100 customers up for renewal for contracts totalling $10M, and all 100 customers renew, you have a 100% renewal rate, but they renewed contracts now totalling only $8M, you have an 80% renewal rate by dollar value (or conversely, they renewed for a total value of $12M, yo u have a renewal rate of 120%.
  • This is the bridge … the cloud is the foundation. No free lunch … we don’t just pluck it out of the cloud… it is the very definition of the phrase necessary but not sufficient There are three kinds of product characteristics CFOs/Finance teams need and great companies must deliver on all three: (1) benefits companies almost always get by being in the cloud, (2) benefits coming from good company decisions which are easier if the product is in the cloud, and (3) benefits coming from good company decisions based on insight into customer needs and ability to deliver on those insights The cloud is not the panacea but it’s certainly a better way than on premise Leveraging your wonderful communities
  • SIIA & OPEXEngine: Let the Data Set You Free!

    1. 1. Let the Data Set You Free! Presenters: Lauren Kelley, CEO & Founder, OPEXEngine Kelly Battles, CFO, Host Analytics
    2. 2. How to ask questions <ul><li>Use the chat box </li></ul><ul><li>any time during the </li></ul><ul><li>webinar! </li></ul><ul><li>Later on during the </li></ul><ul><li>Q&A, dial 14 on your </li></ul><ul><li>dial pad to ask </li></ul><ul><li>questions via phone. </li></ul>
    3. 3. All About The Cloud May 24-26, 2011 The Palace Hotel, San Francisco Join us for our 6 th year at the world’s largest ISV cloud computing conference! For more information, contact Rhianna Collier (
    4. 4. <ul><li>Why Apply </li></ul><ul><ul><li>Increase Visibility before the Investment and Corporate Development Community  </li></ul></ul><ul><ul><li>Minority Interest Growth Capital </li></ul></ul><ul><ul><li>Strategic Partnerships </li></ul></ul><ul><ul><li>Strategic Acquisitions </li></ul></ul><ul><ul><li>New Distribution Partners & New Channels </li></ul></ul><ul><ul><li>Potential Merger Partners </li></ul></ul><ul><li>Deadlines </li></ul><ul><ul><li>Companies that submit their application before April 1, 2011 will be notified by April 15. </li></ul></ul><ul><ul><li>Companies that submit their application before May 1, 2011 will be notified by May 15. </li></ul></ul><ul><li>To apply, visit: </li></ul>
    5. 5. Upcoming Bay Area Meetings <ul><li>Marketing as a Revenue Engine w/ Brian Kardon, Eloqua </li></ul><ul><li>March 16th, 2011, 9 am - 11 am PT, San Francisco, CA </li></ul><ul><li>Register here: </li></ul><ul><li>The Venture Capital Fundraising Process w/ Paul Bartlett, Rho Ventures </li></ul><ul><li>March 22nd, 2011, 9 am - 11 am PT, Palo Alto, CA </li></ul><ul><li>Register here: </li></ul><ul><li>What has EITF 08-01 meant for your Revenue Recognition Processes w/ Sujan Jain, NetSuite </li></ul><ul><li>March 29th, 2011, 1 pm - 3 pm PT, San Francisco, CA </li></ul><ul><li>Register here: </li></ul>
    6. 6. 2011 Benchmarking Survey <ul><li>This year’s survey will begin in March. </li></ul><ul><li>To reserve your spot and sign up for your individual report, visit: </li></ul><ul><li> </li></ul><ul><li>Survey Pricing: </li></ul><ul><li>Free - SIIA Members under $10M in 2010 revenues </li></ul><ul><li>$999 - SIIA Members over $10M in 2010 revenues </li></ul><ul><li>$999 - Non-SIIA Members under $10M in 2010 revenues </li></ul><ul><li>$1995 - Non-SIIA Members over $10M in 2010 revenues </li></ul>
    7. 7. Performance thru Benchmarking Lauren Kelley
    8. 8. Your presenter Lauren Kelley: [email_address] Founder and CEO OPEXEngine <ul><li>Decades of senior management, sales, marketing and operating experience in US and Europe at Compaq Computer, Borland, Art Technology Group, Inc., etc. </li></ul><ul><li>Develop comprehensive operating and financial benchmarks – best data available for software industry for over 5 years </li></ul><ul><li>Deliver well defined industry comparables and analysis to senior executive teams and boards </li></ul>
    9. 9. Why Benchmark? <ul><li>Research shows the most successful companies use metrics and benchmarking as a key management process and information tool. </li></ul><ul><li>Leadership companies compare their performance with detailed benchmarks to highlight specific areas for improvement and target areas of excellence for continued support. </li></ul><ul><li>Benchmarks are used to help set internal targets and provide neutral data to set performance expectations among the executive team. </li></ul><ul><li>Benchmarking highlights the latest changes in business models and help companies track to industry leaders. </li></ul><ul><li>Benchmarks are also used for positioning in the course of mergers and acquisitions, and in their growth path to or managing in the public markets . </li></ul>
    10. 10. OPEXEngine’s Annual Confidential Benchmarking <ul><li>Covers the small and mid-sized software industry, both public and private firms </li></ul><ul><li>Companies input their data directly into our secure, on-line survey form where data is aggregated and blinded </li></ul><ul><li>5 years of software benchmarking, database of 50,000+ datapoints </li></ul><ul><li>Hundreds of software companies participate </li></ul><ul><li>Individual Company Report and 60+ page Software Industry Benchmarking Report </li></ul>
    11. 12. Software Management Today <ul><li>It’s All about the Numbers – Especially for SaaS </li></ul>
    12. 13. First Stage – Manage Cash Next Stage: Customer Growth And reducing the cost of acquiring and maintaining each customer
    13. 14. What Benchmarks Matter Most for SaaS? <ul><li>Cash from operations </li></ul><ul><li>MRR and CMRR </li></ul><ul><li>New customer growth rates </li></ul><ul><li>Cost per customer to acquire new customer </li></ul><ul><li>Cost per customer to maintain a customer </li></ul><ul><li>Cost of product/cost of hosting </li></ul><ul><li>Omniture “Magic Number” </li></ul><ul><li>Average contract value per customer </li></ul><ul><li>Average upsell per customer </li></ul><ul><li>LTV </li></ul><ul><li>Churn: </li></ul><ul><ul><li>Customer renewal rate ( as a percent of customers up for renewal ) </li></ul></ul><ul><ul><li>Dollar renewal rate ( as a percent of total $ value up for renewal ) </li></ul></ul>Tracked by OPEXEngine
    14. 15. Customer Profitability Metrics for Private SaaS
    15. 16. Revenue Growth Driving Mrkt Caps FINANCIAL DASHBOARD OP EX Engine           Company CNQR KNXA N RNOW SFSF TLEO ULTI Fiscal Year 2010 2010 2010 2010 2010 2010 2010 ($000s)               Market Cap (priced as of the period end date) $2,624,770 $493,441 $1,594,300 $818,225 $2,141,273 $1,131,300 $1,317,922                 Recognized Revenue $292,936 $196,353 $193,149 $185,522 $205,926 $237,275 $227,811                 Recognized Revenue (Prior Period) $247,596 $157,669 $166,540 $152,687 $153,054 $198,412 $196,579    Revenue Growth / Prior Period 18.3% 24.5% 16.0% 21.5% 34.5% 19.6% 15.9%    3 Year Revenue CAGR 31.4% 1.5% 21.2% 18.3% 48.1% 22.8% 14.6%                 Short-Term Deferred Revenue (This Period) $44,358 $76,052 $75,827 $90,350 $219,868 $99,396 $71,808    Deferred Revenue as a % of Recognized Revenue 15.1% 38.7% 39.3% 48.7% 106.8% 41.9% 31.5%                 Mean Analyst Revenue Estimate (Current Year) $429,591 $279,204 $270,501 $262,461 $326,949 $344,766 $322,746
    16. 17. Private/Public Operating Expense FINANCIAL DASHBOARD OP EX Engine             Company CNQR KNXA N RNOW SFSF TLEO ULTI Private SaaS Fiscal Year 2010 2010 2010 2010 2010 2010 2010 2009 ($000s)               (ave. in $000s) Recognized Revenue $292,936 $196,353 $193,149 $185,522 $205,926 $237,275 $227,811 $15,778                      Total Cost of Revenue as a % of Recognized Revenue 28.0% 34.9% 31.9% 29.7% 27.4% 33.1% 43.6% 41.8%    S&M Expense as a % of Recognized Revenue 32.8% 24.5% 48.1% 42.8% 48.1% 28.4% 25.6% 62.4%    G&A Expense as a % of Recognized Revenue 13.2% 24.7% 15.1% 10.1% 17.5% 18.5% 8.7% 28.0%    SG&A Expense as a % of Recognized Revenue 46.0% 49.2% 63.2% 52.9% 65.6% 46.9% 34.3% 90.4%    R&D Expense as a % of Recognized Revenue 9.6% 6.1% 18.1% 10.9% 19.4% 18.3% 18.5% 24.9%    Total Operating Expense as % of Recognized Revenue 58.0% 65.3% 81.3% 63.7% 81.1% 69.5% 52.8% 115.3%
    17. 18. Key Insights for 2011 <ul><li>On average, SaaS companies getting to profitability around $25M instead of $50M as a few years ago </li></ul><ul><li>Important to compare your company to peers with similar sales model </li></ul><ul><li>A number of prominent and varied SaaS companies expected to IPO </li></ul><ul><li>Relatively shallow data in public companies filings is useful, but boards and analysts are looking under the covers at key metrics </li></ul>
    18. 19. Participate now in the 2011 software benchmarking survey <ul><li>SIIA Members: free if under $10M revenues; $999 for companies over $10M </li></ul><ul><li>Non-SIIA Members: $999 if under $10M revenues; $1995 for companies over $10M </li></ul><ul><li>Go to to find out more information </li></ul>“ At T2 Systems, we migrated our customers to the SAAS business model in 2005.  Since then, we struggled to find key benchmark data that we could use to determine the quality of the Company’s financial metrics.  OPEX Engine easily filled that void for our team by providing us with key data points ranging from customer acquisition costs to revenue per employee.  OPEX is one of our most important strategic planning tools.” Jim Zaloudek, CFO, T2 Systems, Inc &quot;The data and benchmarks in OPEXEngine’s Confidential Software Benchmarking Report are not available from any other source and covers both private and public software companies with a variety of business models.  The report and data are extremely well put together.  I highly recommend OPEXEngine’s operating benchmarks to any software executive of a large or small company.” Charles Gerlach, Director Business Operations, Oracle
    19. 20. Metrics-driven Corporate Performance Management (CPM) Kelly Bodnar Battles CFO, Host Analytics, Inc.
    20. 21. Agenda <ul><li>Introduction </li></ul><ul><li>Evolution of Financial Roles </li></ul><ul><li>Metrics-driven CPM </li></ul><ul><ul><li>Application evolution </li></ul></ul><ul><ul><li>SaaS benefits </li></ul></ul><ul><li>Impact of Getting this Right </li></ul><ul><li>Wrap up </li></ul>
    21. 22. Background and CPM-Related Beliefs/Biases Background Engineering Undergrad JP Morgan Banker McKinsey Management Consultant 2) The “I finally figured out what I want to be when I grow up” years “ Operational Finance…” IronPort Systems EE #49 Cisco EE #198,234 Host Analytics EE #51 Beliefs/Biases <ul><li>The “Keep Your Options Open” years </li></ul><ul><li>“ The generalist with an expensive education!” </li></ul>HP Corporate Development/Strategy MBA 2 – Importance of rigorous fact based decision-making 1 – Trained to be a data hound 1 – Let the data set you free 2 – Finance is in a unique role as “keeper of the data” 3 – Our challenge is to evolve our role
    22. 23. The Evolving Role of Finance SaaS and CPM can be key enablers
    23. 24. Successful CFO’s <ul><li>The most successful CFOs will enable decision making not only through the </li></ul><ul><li>delivery of timely and accurate information in context , but also with an </li></ul><ul><li>appreciation of the type and level of decision risk associated with each alternative scenario under consideration. </li></ul><ul><li>Bill McNee, Founder & CEO, Saugatuck Technology, Inc. </li></ul><ul><li>Today’s CFOs must balance ”traditional responsibilities with the ability to provide analytical truths and points of view that shape overall strategy. ” </li></ul><ul><li>Brad Richmond, SVP & CFO, Darden Restaurants, Inc. </li></ul><ul><li>CFO Magazine, December 2010 </li></ul>
    24. 25. Corporate Profit Improvements Cross-Functional Process Improvements Evolution of Financial Applications Dashboards and variance reports Financial Consolidation and Iterations Budgets, Aggregation and version control <ul><li>Tailored Excel Applications or Finance Applications 2.0 </li></ul><ul><li>> Improved Integration, Multi Dimensional, </li></ul><ul><li>Finance Only </li></ul>1 st generation 2 nd generation Today - 3 rd generation Basic Excel or Early Finance Applications - > Basic and Discrete Process Improvements
    25. 26. The SaaS Model - Context Setting <ul><li>Economic model (renewals) provides economic incentive for SaaS vendors to invest in customer satisfaction over the life of the relationship </li></ul><ul><li>Delivery Model allows customers to be customers and vendors to be vendors over the life of the relationship as well </li></ul>Creating, Distributing, Upgrading, Installing , Patching Software Customer Support, Business Systems staff Disaster Recovery, Back up, Power, Hardware, Data Center, IT staff Learning, Configuring and Using the Application Responsibilities Vendor Customer
    26. 27. How SaaS Makes a Difference Performance Right features Driven by vendor, Technology agnostic Customization Ease Of Us e Low initial costs Low ongoing costs Fast, free access to latest functionality/upgrade Driven by vendor, enhanced by cloud Real time customer monitoring enables continual and immediate customer support by vendor Real time, integrated external content - Benchmarks, Drivers Best people on the right problems Integration of efforts and avoid silos Enabled by cloud delivery
    27. 28. Metrics-driven CPM at Host Analytics The ecosystem approach Corporate Metrics Weekly Monthly Quarterly Functional Metrics vs. Budget vs. Benchmarks Bookings, MRR Pipeline Customer Count Cash, CF, AR, AP Headcount Trends/Time Responses Opportunities Website hits Customer Portal Activity Support tickets Customer usage Summary GAAP Financials Customer Churn DSO Detailed GAAP Financials NPS Partner Count Time to Activate Employee Retention Win/Loss Rates Product Mix Uptime PM Utilization Ticket resolution time Bug count What are the key drivers for your business? What do your stakeholders care about? How frequently is helpful, practical? What is the right context? Dashboards -> Ad Hoc Reports -> Financial Reports -> Report Books What is the right format?
    28. 29. Base Case Versus Benchmarks – HAI Example <ul><li>How to choose? </li></ul><ul><li>Right companies, metrics, timeframe for comparison </li></ul>
    29. 30. Other Examples <ul><li>Business case for every material decision </li></ul><ul><ul><li>What is the right threshold? </li></ul></ul><ul><ul><li>Advanced tools can help find the most profitable path </li></ul></ul><ul><ul><ul><li>discretionary initiative modeling </li></ul></ul></ul><ul><ul><li>Don’t forget the qualitative factors and the human element as well </li></ul></ul><ul><li>Smart data </li></ul><ul><ul><li>Linked benchmarks </li></ul></ul><ul><ul><li>Macro economic indicators linked directly as drivers into budget process </li></ul></ul><ul><ul><li>Process best practices </li></ul></ul><ul><ul><ul><li>Currency rate upload/automation, spread codes etc </li></ul></ul></ul>
    30. 31. Things to Consider <ul><li>The KISS Principal </li></ul><ul><ul><li>“ Keep it simple stupid” especially when just getting started </li></ul></ul><ul><ul><li>You don’t need a PhD in Statistics to make this work </li></ul></ul><ul><li>Just do it </li></ul><ul><ul><li>It doesn’t have to be perfect </li></ul></ul><ul><ul><li>Launch, iterate, learn, adjust </li></ul></ul><ul><li>Automate, link when possible </li></ul><ul><ul><li>Scalability </li></ul></ul><ul><ul><li>Data integrity </li></ul></ul><ul><li>Single source of truth (SSoT) is key </li></ul><ul><ul><li>Less thrashing, more time spent on problem solving </li></ul></ul><ul><li>SSoT needs to be accessible broadly </li></ul><ul><ul><li>Virtual feedback loop </li></ul></ul><ul><ul><li>Builds trust </li></ul></ul><ul><li>“ 2 heads are better than 1” – don’t forget to collaborate </li></ul><ul><ul><li>This is a X-functional discipline lead by finance, not a siloed finance effort </li></ul></ul>
    31. 32. Host Analytics at a Glance <ul><li>Integrated CPM Suite </li></ul><ul><ul><li>Budgeting </li></ul></ul><ul><ul><li>Consolidations </li></ul></ul><ul><ul><li>Reporting </li></ul></ul><ul><ul><li>SEC Compliance </li></ul></ul><ul><li>SaaS Delivery Model </li></ul><ul><ul><li>Low TCO </li></ul></ul><ul><ul><li>Fast ROI </li></ul></ul><ul><ul><li>Rapid low cost implementation </li></ul></ul><ul><ul><li>Access to latest functionality </li></ul></ul><ul><li>World class support and services </li></ul>Our Customers Our Solution
    32. 33. Recent Aberdeen Survey Results What can happen if you get this right… <ul><li>Survey of 200 CPM users </li></ul><ul><li>30 Host Analytics customers participated </li></ul><ul><li>HAI customers were the ONLY respondents who equaled or surpassed best in class in CPM benefits/results </li></ul>
    33. 34. <ul><li>Challenges </li></ul><ul><ul><li>Late and inconsistent excel data </li></ul></ul><ul><ul><li>Long, long meetings </li></ul></ul><ul><ul><li>Adjustments mid-year very hard </li></ul></ul><ul><ul><li>Sales forecasting accuracy </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>A single source of consistent data </li></ul></ul><ul><ul><li>Budgeting now takes half the time </li></ul></ul><ul><ul><li>What-if scenarios and ad-hoc reporting </li></ul></ul><ul><ul><li>12 month rolling forecasts </li></ul></ul><ul><li>Results </li></ul><ul><ul><li>Confidence in their data </li></ul></ul><ul><ul><li>Meetings are dedicated to decision-making </li></ul></ul><ul><ul><li>Self service reporting </li></ul></ul><ul><ul><li>Finance understands the model behind the numbers </li></ul></ul><ul><ul><li>No involvement from in-house IT staff </li></ul></ul><ul><ul><li>$1M in inventory reduction through better forecasting </li></ul></ul>“ Before, we were lucky just to get the numbers. With Host Analytics we get the numbers and the whole story.” “ Budget meetings are now about the business, not about the integrity of information.” - Mark Cohen, Vice President of Finance and IT, Thule Vehicle Accessories North America Thule – Specific Customer Case Study Sound familiar? See recent Computer World article featuring Thule and HAI entitled, “ Why some companies are ditching their spreadsheets ” for more detail
    34. 35. Conclusion <ul><li>Promoting fact-based decisions throughout the corporation is critical in our evolving role </li></ul><ul><li>The Cloud and CPM tools will help you realize the value </li></ul><ul><ul><li>Turn data into information, benchmarks </li></ul></ul><ul><ul><li>Elevate the role of finance quickly </li></ul></ul><ul><ul><li>Add rigor and trust into financial processes without increased overhead </li></ul></ul><ul><ul><li>Expand collaboration across the corporation without increasing associated infrastructure </li></ul></ul>
    35. 36. Thank You
    36. 37. Q&A Dial 14 to ask a question or use the Chat Box
    37. 38. Thanks for attending ! The recording link will be distributed via email.