I spoke to three entrepreneurs in the SaaS space over the last one month: Sahil Parikh of DeskAway , an on-demand project management software, Sumeet Kapoor of SmilesERM, an on-demand HR applications software and Arun Dixit of Udyog Excise, a SaaS based application for helping manufacturing organizations compute excise incidence.
At the same time, I have been reading and researching the post of Mark Sherman on the investment opportunity in SaaS. I would strongly encourage SaaS entrepreneurs to download the slides posted by Mark – it would help structure your thoughts on the business opportunity. I must also add: please do read my comments and contact me offline to get my research notes, if interested.
The business models followed by the three entrepreneurs seek to exploit the “long tail” of enterprise software applications. As I have predicted in my January post, SaaS businesses are likely to succeed if they seek to exploit inadequately covered niche within the enterprise software landscape (HR, Project Management) or a niche within the business segment (financial compliance for the Indian SMB sector).
The business model that entrepreneurs should build will have to start from a definition of the opportunity they seek to exploit. I asked Arun Dixit of Udyog whether he sees substantial potential within the India SMB manufacturing sector and his answer was an unequivocal ‘yes”. His marketing and business would revolve around addressing the needs of this specific segment. However, if Sahil and Summet would like to position themselves as specific application providers then they should not constrain themselves in the Indian market.
At the same time, the important trend that I noticed from my research is the subtle shift away from the “application” to the “solution”. I would recommend that entrepreneurs study Rearden Commerce to understand this trend. It takes an application like Spend Management and spins it around to develop a solution for employees and companies to buy services. I think it is a great idea for SaaS entrepreuners to think of their businesses as solutions. For instance, can Sahil’s DeskAway be the default management solution to manage projects undertaken by temporary workers?
In order to achieve the necessary scale to even develop ambitious business plans worthy of VC attention, individual SaaS entrepreneurs will have to strike alliances. One type of alliance that entrepreneurs should seek to strike is with niche BPOs/KPOs. The HR and the Analytics areas have enough entrepreneurial mass within them to make possible a few alliances.
My message to SaaS entrepreneurs: this is a great opportunity, do not be afraid to think big!
Wednesday, August 08, 2007
Tuesday, May 29, 2007
Inspirational to Transactional or the other way round?
I have always been fascinated by the number of “self improvement” magazines available in magazine stands in the US: health, beauty, home improvement, hobbies…: magazines Martha Stewart would have approved of. Meredith Corporations owns a portfolio of lifestyle magazines: largely targeted at women. Its media properties include the magazine Better Homes and Gardens alongwith its sister website http://www.bhg.com/. On its website, which was launched last month, (and I understand that all features will be up only by this year-end) consumers will have access to have to online home remodeling resources including using drag and drop design, painting, coloring and decorating tools. While trying these options themselves, consumers will be able to research associated products online. Meredith is developing a relationship with Home Depot and Lowe’s to create this catalog of products consumers can interact with. Dan Hickey, editor-in-chief of bhg.com claims he is delivering a holy grail to both consumers and manufacturers by combining editorial content with comparison shopping. Consumers will have the ability to move from the “inspirational to transactional” supported by information along the way.
I really wish Mr. Hickey the very best of luck. Nearly nine years before, in the early days of the Internet, I had co-founded an online content development company Aesthetic Technologies. One of the business ideas we interpreted vigorously was the very idea that Mr. Hickey is trying to implement. We tried to tie up with media properties sponsor content on content on specific areas (Femina for Pregnancy & Child Care, Health for Fitness, the India Today & the Media Transasia group for Travel, the then existing Spectrum group for Home Care). The inspirational editorial content will be co-developed by the participation of the traditional media house. The business model will be supported by advertisements specifically aligned with the editorial content.
I pursued this idea with single minded focus for nearly a year. I also explored the possibility of talking to publishers of technical journals on content topics such as “Fire & Safety” topics that had a more industrial or commercial audience (one of the challenges nine years back was that home PC and broadband penetration was not very strong). Our idea used to invariably meet with interest and we would have several rounds of meetings but only one occasion did we come : anywhere close to signing a deal. That was with the India Today group in the content area of Travel. But then our sponsor within the India Today group was Arun Katyar, an orginal Internet visionary. A seasoned media professional, Arun was the COO of the India Today Online venture. Today he is the CEO of SEraja, a Web 2.0 venture set up by the original Net entrepreneur: Rajesh Jain. Check it out at http://company.seraja.com/management.htm
Getting back to http://www.bhg.com/. Why is that nine years later, Mr. Hickey is still searching for the Holy Grail? It is a fairly straightforward idea end of the day. I am trying to understand what is it that has taken it so long:
1)The implementation is not as simple as it looks. Creating a database of products and services and targeting it to a content area is more difficult than it looks. Hmm …I don’t quite believe that. Do you?
2) The traditional media has been just too traditional to take advantage of these opportunities. That is more likely.
3) A decade later, online content is still in its early days of development. I was playing around with www.bhg.com and was frankly annoyed by the pop-up advertisements. Great web content requires still remains an aspiration.
I am seeking to understand this ...comment on.
I really wish Mr. Hickey the very best of luck. Nearly nine years before, in the early days of the Internet, I had co-founded an online content development company Aesthetic Technologies. One of the business ideas we interpreted vigorously was the very idea that Mr. Hickey is trying to implement. We tried to tie up with media properties sponsor content on content on specific areas (Femina for Pregnancy & Child Care, Health for Fitness, the India Today & the Media Transasia group for Travel, the then existing Spectrum group for Home Care). The inspirational editorial content will be co-developed by the participation of the traditional media house. The business model will be supported by advertisements specifically aligned with the editorial content.
I pursued this idea with single minded focus for nearly a year. I also explored the possibility of talking to publishers of technical journals on content topics such as “Fire & Safety” topics that had a more industrial or commercial audience (one of the challenges nine years back was that home PC and broadband penetration was not very strong). Our idea used to invariably meet with interest and we would have several rounds of meetings but only one occasion did we come : anywhere close to signing a deal. That was with the India Today group in the content area of Travel. But then our sponsor within the India Today group was Arun Katyar, an orginal Internet visionary. A seasoned media professional, Arun was the COO of the India Today Online venture. Today he is the CEO of SEraja, a Web 2.0 venture set up by the original Net entrepreneur: Rajesh Jain. Check it out at http://company.seraja.com/management.htm
Getting back to http://www.bhg.com/. Why is that nine years later, Mr. Hickey is still searching for the Holy Grail? It is a fairly straightforward idea end of the day. I am trying to understand what is it that has taken it so long:
1)The implementation is not as simple as it looks. Creating a database of products and services and targeting it to a content area is more difficult than it looks. Hmm …I don’t quite believe that. Do you?
2) The traditional media has been just too traditional to take advantage of these opportunities. That is more likely.
3) A decade later, online content is still in its early days of development. I was playing around with www.bhg.com and was frankly annoyed by the pop-up advertisements. Great web content requires still remains an aspiration.
I am seeking to understand this ...comment on.
Thursday, March 22, 2007
Ideas are for Stealing
Let me give a shout for a blog that I read regularly and contribute to: www.venturewoods.org. Alok Mittal of Canaan Investments has done a great job in bringing Indian entrepreuners together. The business ideas often have too much of a specific Indian focus: good because it shows that there is a domestic market out there but but not so good when you think that next generation Indian start ups should really have a global focus. Nonetheless, it is a great site where you can meet enterprising people with interesting ideas. That is the best part of it: Alok has actually created a community.
I have just published a high level outline of a business idea and you can click on this link to reach there.
http://www.venturewoods.org/index.php/2007/03/21/career-management/
It is a Web 2.0 + SaaS type of business model and I personally find the confluence of these two emerging arenas very interesting. Please feel free to build on it and create a business if you want to. Just do provide a lyrical credit in much the same way Ringo Starr did in the number "I get by with a little help from my friends"
I have just published a high level outline of a business idea and you can click on this link to reach there.
http://www.venturewoods.org/index.php/2007/03/21/career-management/
It is a Web 2.0 + SaaS type of business model and I personally find the confluence of these two emerging arenas very interesting. Please feel free to build on it and create a business if you want to. Just do provide a lyrical credit in much the same way Ringo Starr did in the number "I get by with a little help from my friends"
Wednesday, February 21, 2007
Indian Images
We traveled on our vacation to North India; Delhi, Agra, Fatehpur Sikri, Lucknow. The decision to take the holiday had been made several months back on a Sunday morning I had stumbled upon a “Re. 1” Air Deccan ticket while desultorily surfing online.
Low cost carriers are changing the travel market dynamics in India. The airport was crowded with first time air travelers. Was this all at the cost of the railway passenger traffic? Not really, I think. We traveled by AC First class from Delhi to Lucknow and I was quite amazed to see the compartment full up. The passengers on Air Deccan were first time air travelers: couples from small towns, old parents visiting their children. The passengers on the First AC compartment on Lucknow mail were successful businessmen, bureaucrats and families looking forward to a relaxing journey. Low cost airlines are expanding the overall travel market by making travel more affordable and convenient.
The return tickets were booked on Makemytrip.com (disclaimer: I have booked so many air tickets that I have received a year’s free Outlook Traveler subscription). I have always liked the clean interface (though Air Deccan ticketing is not integrated into the platform) and the prompt dispatch of paper tickets. This time, however, I had the unfortunate problem of trying to reschedule the dates, for which I had to make at least ten calls, each of which was greeted by a “ I shall get back to you” response. We used online portals once again to book our hotel in Agra. We decided on this part of the trip late and had no time to doi any bookings. On a cold morning, as my friend’s car sped past the wide roads of Lutyen’s Delhi, I fired my laptop using a wireless card and hit Makemytip and Travelguru.com. When a quick search yielded nothing, we called in the service center numbers from our cell phones (it was a STD call but what the heck – this was an adventure). We had just reached Faridabad by then and were sitting down to a predictable Sagar Ratna breakfast. My friend stated our requirements to the telephone service centers of both portals and we were promised a call back. Within 15 minutes, a lady from Travelguru offered us Oberois at Rs. 20,000 per night and said that that was the best they could do at such a short notice. The lady from Makemytrip took our requirements and budgets and called us back with an offer of Clarks Shiraz, assuring my skeptical friend, it is a “really good property and you are getting a deal ma’m”. Before we were at Palwal our bookings were done. She was nice enough to take our call in Agra and give us detailed driving directions.
Online travel portals can draw two lessons for building successful business models, from this experience. First, success in the online world will be dependent on building consistent customer service standards. Second, online portals will need to more successfully aggregate and discount hotel rooms and holidays.
So much for getting there. We had a great time in our holiday. We saw historical sites and we caught up with our friends. We had our fill of the range of North Indian cuisine: Punjabi Tandoori chicken in Delhi, Mughlai murg mussalam in Agra, Tunde and Galawat kababs of the famous Awadh tradition in Lucknow. We went to the dargah of Salim Chisti and to the ashrams of Mathura. We snapped pictures of the cooks in the old city of Lucknow who proudly told us that his pictures have gone all across the world. We felt sad that, in what we remembered as the serene shrine of Fatehpur Sikri, we were harassed for donations. We felt proud that the guides in Agra Fort spoke Japanese & Spanish. We shopped on the streets of Delhi and Lucknow and in the quintessential Indian shopping mall – Delhi Haat. We listened to Qaawali sung in a contemporary style by the Hussain brothers and I finished reading Paul Thoreau’s Hotel Honololu. We breakfasted in the heavenly AirForce golf course terrace overlooking the Jaipur Polo grounds and dined on Bengali cuisine at the chic Oh! Calcutta, a first generation entrepreneurial success.
All in all, we enjoyed once again the traditions of our great country: the land of colors and contrasts.
Tourism can make a big contribution in increasing the living standards of people in India , if infrastructural challenges can be met. Some of the areas to look out for are:
Consolidation of existing non 5-star hotels to a national chain that is consistent in quality and cleanliness.
Emergence of travel operators focused on domestic tourism and catering to the increasingly sophisticated middle class tastes.
Creation of infrastructural facilities like theme parks, fair grounds, stadiums, sports arenas.
Development of nation-wide food & beverages chains.
Creation of new travel options such as coast-to-coast sea cruises, river ferrying, luxury coaches.
They will not be as technologically innovative or financially scalable as online travel portals. But they will be fun to create and run.
And, I do hope that one day we have an organization like the National Trust of the UK. Seeing the condition of some of our national monuments I often despair of India’s future. Those who do not respect history are condemned to the lack of a future.
Low cost carriers are changing the travel market dynamics in India. The airport was crowded with first time air travelers. Was this all at the cost of the railway passenger traffic? Not really, I think. We traveled by AC First class from Delhi to Lucknow and I was quite amazed to see the compartment full up. The passengers on Air Deccan were first time air travelers: couples from small towns, old parents visiting their children. The passengers on the First AC compartment on Lucknow mail were successful businessmen, bureaucrats and families looking forward to a relaxing journey. Low cost airlines are expanding the overall travel market by making travel more affordable and convenient.
The return tickets were booked on Makemytrip.com (disclaimer: I have booked so many air tickets that I have received a year’s free Outlook Traveler subscription). I have always liked the clean interface (though Air Deccan ticketing is not integrated into the platform) and the prompt dispatch of paper tickets. This time, however, I had the unfortunate problem of trying to reschedule the dates, for which I had to make at least ten calls, each of which was greeted by a “ I shall get back to you” response. We used online portals once again to book our hotel in Agra. We decided on this part of the trip late and had no time to doi any bookings. On a cold morning, as my friend’s car sped past the wide roads of Lutyen’s Delhi, I fired my laptop using a wireless card and hit Makemytip and Travelguru.com. When a quick search yielded nothing, we called in the service center numbers from our cell phones (it was a STD call but what the heck – this was an adventure). We had just reached Faridabad by then and were sitting down to a predictable Sagar Ratna breakfast. My friend stated our requirements to the telephone service centers of both portals and we were promised a call back. Within 15 minutes, a lady from Travelguru offered us Oberois at Rs. 20,000 per night and said that that was the best they could do at such a short notice. The lady from Makemytrip took our requirements and budgets and called us back with an offer of Clarks Shiraz, assuring my skeptical friend, it is a “really good property and you are getting a deal ma’m”. Before we were at Palwal our bookings were done. She was nice enough to take our call in Agra and give us detailed driving directions.
Online travel portals can draw two lessons for building successful business models, from this experience. First, success in the online world will be dependent on building consistent customer service standards. Second, online portals will need to more successfully aggregate and discount hotel rooms and holidays.
So much for getting there. We had a great time in our holiday. We saw historical sites and we caught up with our friends. We had our fill of the range of North Indian cuisine: Punjabi Tandoori chicken in Delhi, Mughlai murg mussalam in Agra, Tunde and Galawat kababs of the famous Awadh tradition in Lucknow. We went to the dargah of Salim Chisti and to the ashrams of Mathura. We snapped pictures of the cooks in the old city of Lucknow who proudly told us that his pictures have gone all across the world. We felt sad that, in what we remembered as the serene shrine of Fatehpur Sikri, we were harassed for donations. We felt proud that the guides in Agra Fort spoke Japanese & Spanish. We shopped on the streets of Delhi and Lucknow and in the quintessential Indian shopping mall – Delhi Haat. We listened to Qaawali sung in a contemporary style by the Hussain brothers and I finished reading Paul Thoreau’s Hotel Honololu. We breakfasted in the heavenly AirForce golf course terrace overlooking the Jaipur Polo grounds and dined on Bengali cuisine at the chic Oh! Calcutta, a first generation entrepreneurial success.
All in all, we enjoyed once again the traditions of our great country: the land of colors and contrasts.
Tourism can make a big contribution in increasing the living standards of people in India , if infrastructural challenges can be met. Some of the areas to look out for are:
Consolidation of existing non 5-star hotels to a national chain that is consistent in quality and cleanliness.
Emergence of travel operators focused on domestic tourism and catering to the increasingly sophisticated middle class tastes.
Creation of infrastructural facilities like theme parks, fair grounds, stadiums, sports arenas.
Development of nation-wide food & beverages chains.
Creation of new travel options such as coast-to-coast sea cruises, river ferrying, luxury coaches.
They will not be as technologically innovative or financially scalable as online travel portals. But they will be fun to create and run.
And, I do hope that one day we have an organization like the National Trust of the UK. Seeing the condition of some of our national monuments I often despair of India’s future. Those who do not respect history are condemned to the lack of a future.
Wednesday, January 17, 2007
Software + Service = Service Only?
The more I think of SaaS (Software as a Service) model, the more similarities I see with Web 2.0. Both target the “long tail” in their respective markets: SaaS, in the enterprise market and Web 2.0 applications like Flickr and You Tube in the consumer space. Both depend on the rapid reduction in production and distribution costs. I think of the long tail in the enterprise market in three different ways:
The SMB End
SaaS providers will target the small and medium business segment with standard business application suites and applications. Examples include Salesforce.com, RightNow and NetSuite (for CRM solutions) and Bluetie with its mail and collaborations solutions.
The Niche Application End
This comprises of applications that are not completely or adequately covered by the major software vendors. Examples include Human Capital Management (SaaS providers: Workstream, Authoria, Employease and Taleo), Supply Chain Management (Kinaxis), Expense and Payables management (Concur Technologies, Expensewatch.com, Razorsight), Product Life Cycle Management (Agile Software offers a subscription option), Analytics (Nsite acquired by Business Objects) and Postage solutions (Stamps.com) These companies typically target companies of all sizes.
The Niche Business End
This comprises of specialized applications targeted at focused business segments. Examples include sales and information tracking applications for chip manufacturers (Platte River Systems), preconstruction management services for the construction industry (iSqFt). These companies typically provide additional value to their customers other than software leveraging the business community effects of players all using the same system.
These are my 2007 predictions in this space:
Prediction 1
There will be considerable venture capital activity in the last two categories as innovative entrepreneurs exploit gaps in the enterprise software market space even as the SaaS pioneers like SalesForce.com establish their leadership in the first category.
Prediction 2
ISVs will be work extra hard to get their SaaS strategies in place. This will be a non-trivial task as it would require re-architecting their product to move to a multi tenancy environment and juggling internal sales, implementation and invoicing processes. Existing ISVs which will succeed in a SaaS strategy will, in all likelihood, do so via acquisition of pure play SaaS vendors or by way of developing a completely separate business focus.
The stake in the game for ISVs will be high. My analysis indicates that the market already places a premium on providers who have SaaS offerings in place. Pure play SaaS vendors like SalesForce.com and Right Now have a price-revenue ratio of 10 & 5 respectively compared to a ratio of 2.5 of more traditional ISVs in the SCM, HCM, Analytics, ERP, PLM spaces. The ratio of 2.5 excludes the large enterprise players SAP and Oracle who boast of ratios of 22 and 6 respectively. My prediction for 2007 is that:
Prediction 3
The market will disproportionately reward companies with SaaS offerings.
The third interesting trend in the SaaS model is the convergence between SaaS and BPO. ADP’s acquisition of Employease and the strategic tie-up between TCS and Salesforce.com is indicative of that trend. My prediction is that:
Prediction 4: 2007 and beyond
As the SaaS market matures, SaaS players will tie-up with traditional outsourcing companies to provide end-to-end managed services to their customers and SaaS investors will strive to exit by way of sale to the IBMs and Wipros of the world.
The SMB End
SaaS providers will target the small and medium business segment with standard business application suites and applications. Examples include Salesforce.com, RightNow and NetSuite (for CRM solutions) and Bluetie with its mail and collaborations solutions.
The Niche Application End
This comprises of applications that are not completely or adequately covered by the major software vendors. Examples include Human Capital Management (SaaS providers: Workstream, Authoria, Employease and Taleo), Supply Chain Management (Kinaxis), Expense and Payables management (Concur Technologies, Expensewatch.com, Razorsight), Product Life Cycle Management (Agile Software offers a subscription option), Analytics (Nsite acquired by Business Objects) and Postage solutions (Stamps.com) These companies typically target companies of all sizes.
The Niche Business End
This comprises of specialized applications targeted at focused business segments. Examples include sales and information tracking applications for chip manufacturers (Platte River Systems), preconstruction management services for the construction industry (iSqFt). These companies typically provide additional value to their customers other than software leveraging the business community effects of players all using the same system.
These are my 2007 predictions in this space:
Prediction 1
There will be considerable venture capital activity in the last two categories as innovative entrepreneurs exploit gaps in the enterprise software market space even as the SaaS pioneers like SalesForce.com establish their leadership in the first category.
Prediction 2
ISVs will be work extra hard to get their SaaS strategies in place. This will be a non-trivial task as it would require re-architecting their product to move to a multi tenancy environment and juggling internal sales, implementation and invoicing processes. Existing ISVs which will succeed in a SaaS strategy will, in all likelihood, do so via acquisition of pure play SaaS vendors or by way of developing a completely separate business focus.
The stake in the game for ISVs will be high. My analysis indicates that the market already places a premium on providers who have SaaS offerings in place. Pure play SaaS vendors like SalesForce.com and Right Now have a price-revenue ratio of 10 & 5 respectively compared to a ratio of 2.5 of more traditional ISVs in the SCM, HCM, Analytics, ERP, PLM spaces. The ratio of 2.5 excludes the large enterprise players SAP and Oracle who boast of ratios of 22 and 6 respectively. My prediction for 2007 is that:
Prediction 3
The market will disproportionately reward companies with SaaS offerings.
The third interesting trend in the SaaS model is the convergence between SaaS and BPO. ADP’s acquisition of Employease and the strategic tie-up between TCS and Salesforce.com is indicative of that trend. My prediction is that:
Prediction 4: 2007 and beyond
As the SaaS market matures, SaaS players will tie-up with traditional outsourcing companies to provide end-to-end managed services to their customers and SaaS investors will strive to exit by way of sale to the IBMs and Wipros of the world.
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