The report looks at a few different dimensions including;

• Can I get my data in and out freely?
• Does it integrate natively with other systems?
• What third-party integrations are available?
• Can I write code to integrate with it

While it’s awesome to see some empirical data wrapped around cloud applications for real world business, I was a little dismayed at the methodology of the report. Where to start?

• The report has the somewhat bizarre requirement that to be included vendors need to have service and support from an office in Australia. That almost makes sense but then ITnews includes Google in the survey which, while having a presence in Australia, only has one for sales and marketing with support heading off to other locations
• The first issue I have is that using “data in/data out” as a proxy for “playing nicely” is a little flawed. While a vendor may offer a CSV download of data, if that data is tied to business processes that are proprietary to their application, the data download is somewhat redundant. I see no mention in the report of escrow services both for data and for the application logic itself. If one really wants to push the “playing nicely” barrow, escrow is an important part of that discussion
• The report gives a higher rating to applications that have native integration, and by doing so kind of discounts the awesome work that third party integrators are doing to tie together application as somehow inferior. But the report then goes on to give one example of a native integration, that between Xero and Salesforce which is in fact a third party integration created by my buddies at Trineo
• ITnews has split applications across five categories – CRM, Office Comms, Collaboration and project management, Finance and HR. Unfortunately they’ve then lumped three bizarre bedfellows together in HR – Paycycle, SuccessFactors and Taleo. Paycycle is a local payroll provider that, while in no way competing with SuccessFactors or Taleo, does compete with a number of other payroll providers, including some that are natively integrated with other applications in this survey. Unfortunately ITnews chose to ignore these other vendors for reasons only known to them
• Collaboration and project management are only represented by two Atlassian products, Jira and Confluence, and SharePoint Online – clearly there are a wealth of vendors in this space and the commonality between SharePoint and Jira/Confluence is hazy at best, unexistant more likely
• In financial applications, ITnews ignores the integrations that LiveAccounts and Saasu have with their own payroll products and slams them for being lightweight applications when it comes to integrations. ITnews also completely ignores the wealth of integrations that Saasu showcases on its website

I congratulate ITnews on trying to put this report together, but I have to say I’m pretty disappointed in what they have created, it’s not a particularly helpful document and if anything just confuses the situation.

Given the funding round it seemed timely to reflect a little on what the emergence of Wave means for the business models of companies targeting SMEs

Traditional Approaches

Led by vendors Sage, MYOB and Intuit, the traditional approach to SME accounting products is to have a dual sales strategy. These three customers all sell boxed software through traditional retail channels but also have an extensive partner network where accountants, bookkeepers and other professionals on-sell their software – either for commissions, margin or as a service backed offering. This has traditionally been an excellent approach, it leverages SMBs trusted advisers and the reach of High Street retailers.

A move to cloud computing however makes this traditional channel difficult. Retailers have difficulty understanding the concept of selling a fully virtual product (as an aside I know of some vendors who actually sell SaaS licenses in a box just to make customers feel they’re buying something real). At the same time professionals are wary for two specific reasons;

1. They tend to be highly conservative and are unwilling to move from a product they know and trust
2. Cloud has the potential to reduce the traditional areas that practitioners have been able to monetize their service, practitioners are naturally nervous about that

Traditional meets Cloud

Led by high profile vendor Xero, but with significant players including FreeAgent, KashFlow and others, this method mixes cloud software with generally traditional sales channels. While most cloud vendors forego direct retail channels, they instead replace this with sales/marketing initiatives such as those shown by Xero who has a sales/marketing partnership with telco T-Mobile. Similarly FreeAgent has a partnership that sees Barclay bank customers being offered the FreeAgent product.

This strategy has paid dividends for many vendors – Xero boasts of 50000 or so customers while the less visible vendors are all clocking up numerous wins as well.

The Brave New World

While consumers have long been accustomed to receiving free services in return for targeted offers (be it via advertising with Google or targeted services from Mint) it is relatively rare in the business world. The proposition however is obvious – micro businesses are very cash poor and a significant proportion of them are likely to be happy to receive special offers in return for free provision of services.

I was pretty impressed to see that Wave is claiming that it already counts some 75,000 small businesses as customers, this only 11 months after its launch. Clearly the average revenue per user that Wave can drive from targeted offers is likely to be less than the subscriptions charged by the paid products. As such Wave is likely to need a much higher number of customers to generate sustainable revenues. That said however I have spoken to a number of businesses who have balked at the subscriptions being charged by the other SaaS accounting vendors. This along with the fact that Wave claims 50% more customers after 11 months than Xero has gained after four or so years – speaks to the potential of an entirely new business model.

Of course that’s not to say that Wave renders the other vendors obsolete – there is undoubtedly a place for a paid SMB accounting application, however Wave, by following both a new delivery model and a new business model, is well placed to become a very important industry player.

How Will Other Vendors React?

In theory there is nothing stopping one of the other SaaS vendors from delivering a low level free product. The reality however is that the investments they’ve made in chasing a channel strategy, and the basis upon which their business has been built make this highly unlikely. Rather I would suggest that another entrant will potential emulate Wave’s approach. The barriers to entry here are low and it comes down more to the ability of a vendor to build the relationships and momentum to gain traction. Wave’s 75000 customers and significant funding round will help get it that momentum.

Cloudability serves up a dashboard that quickly and clearly identifies where organizations are spending money and in doing so they aim to save businesses money as they identify expenditure that is no longer justified – those orphan apps that keep ticking over on someone’s credit card every month.

Cloudability is very new – they launched only a matter of a few weeks ago – and at this stage they’re unsure about where they will take their product, be it enterprise or SMB. They’ve identified a couple of opportunities;

• Giving enterprise CFOs visibility over organizational spend and hence the ability to gain oversight as to business unit expenditure on cloud solutions
• An SMB play that monetizes via highly targeted offers (“given you industry type and use pattern, this other cloud service would save you x dollars per month”)

As I said, I was really impressed with what Cloudability is doing – they absolutely answer a pain point for cloud users. I do think they need to think long and hard about the direction they go in – I don’t really buy the enterprise play, I see them ending up butting heads with some pretty comprehensive spend management solutions from the likes of SAP and Oracle to make that viable. Secondly the logistics around integrating with all the services an enterprise might need and creating controls over all the different expenditure paths would be problematic. Part of my concerns around the enterprise play, beyond the fact that Cloudability competes with some solutions form some very big names in the industry, is he fact that Cloudability doesn’t close the loop on monitoring – I’ve reviewed a bunch of cloud monitoring products and have often commented that without the management part of the piece, it is less of a product than a feature. I put this to JR Storment from Cloudability – his answer was that by covering the entire SaaS world and offering insights into monetization across all cloud services, they offer a breadth that is valuable for customers and that deepening the offering would impact upon this ability. He also mentioned that Cloudability’s strategy focuses more on managing the messaging and notifications from discrete cloud services – all billing messages will be delivered up through the Cloudability – providing a one-stop discovery offering.

Where I totally see the potential for Cloudability however is as an SMB play. Mint.com has proven the value of a solution that delivers real value at zero cost to end users – by giving users highly contextual offers, they’ve managed to monetize their service, while providing a solution at no cost to SMBs, a sector that is loathe to actually spend money on this sort of solution. Storment identified this as a real possible area of development for Cloudability – he gave the example of offering customer who use (for example) Amazon servers the ability to tie in  monitoring service like NewRelic or Pingdom to assess the availability of those services.

Storment reports that he’s had some great feedback from enterprise CFOs who like he fact that Cloudability can give them the ability to gain visibility over “rogue IT” spending. While this may indeed be an attractive proposition for enterprise financial types – I struggle to see how they an avoid just having business units acquire cloud services outside of the Cloudability dashboard – thus rendering this opportunity somewhat moot.

Below is the video in full – excuse the poor sound quality – it was a noisy day at the Structure conference!

Luckily Intacct liked our idea and came on board by supporting the creation of the whitepaper – obviously a lot of time and effort goes into writing a 20+ page report, it’s great when vendors facilitate that work without any expectation of input into the content itself. The report itself can be downloaded here. I’d love to hear your thoughts on the report.

Anyway, we wanted to create a definitive report that would be relevant no matter what class of application was being looked at, while there is significant detail further on in the report, we came up with a simple checklist of pros and cons for the three different delivery methods:

On-premises Software

Pros:

• Greater end-to-end control of their software
• Maintain IP within the organization
• Implement significant customization

Cons:

• Generally higher cost
• Requires you to build and maintain your own IT infrastructure
• Must provide technical support, upgrades, and version control
• Upgrades may break any previous customizations

Hosted/ASP Software

Pros:

• Pushes infrastructure costs to the provider
• Potentially lower cost than on-premises deployment

Cons:

• Very limited customization
• Upgrades may break any previous customizations
• Support and service is typically an expensive extra charge
• Integration with third-party applications can be difficult/expensive
• Single tenancy limits the cost-reduction opportunities
• Customers have some security concerns
• Generally poor usability

Software as a Service

Pros:

• Core architecture makes it the most economical choice
• Ability to provision almost instantly
• Pushes infrastructure, service, and support costs to the vendor
• Integration is quick and easy using application programming interfaces (APIs)
• Customization available
• Upgrades are automatically applied to all users – all customers work with the
• same application
• Encourages alignment of people/process/system

Cons:

• Customers have some security concerns

For those who like things in pictorial form, the image below makes life even easier:

provides an integrated portfolio of applications for cloud computing. Our products can be deployed on premises for maximum security and control, or on public clouds such as AWS. Applications developed with Intalio|Cloud are elastic and multi-tenant, automatically.

I’d not heard from Ghalimi for a couple of years, since the 2008 Office 2.0 conference (an event which is, sadly, no longer). He’s always had a very holistic vision for office 2.0 and was excited to say that the latest offering from Intalio realizes that vision. So what does this actually mean in terms of a product lineup? Ghalimi referred me to the diagram below. Now this diagram looks very much like a million other diagrams out there that explain what Cloud Computing is – separating the different levels of the stack into IaaS, PaaS and SaaS. Nothing revolutionary in that you say? That is until you realize that this isn’t an ecosystem diagram, rather this is a diagram of the breadth of offering available from Intalio themselves.

Now this would be an impressive lineup from a Microsoft, an IBM or an Amazon, but this comes from a privately held company with only 100 employees. I talked to Ghalimi about the massive challenges he’s facing when explaining his offering – sometimes breadth is a much more difficult thing to articulate than a point solution. It’s obvious from his reply that Ghalimi is nothing if not confident. In a response reminiscent of Marc Benioff, Ghalimi instructed me to:

Think of our offering as an operating system for the cloud. Much like Windows, it needs to provide some core services (compute, storage, database) and development tools. And without a killer application (Office for Windows, CRM for us), it would be kinda useless, or at the very least much harder to use.

In another stroke of confidence (confidence given the comparative size between a public cloud behemoth like Amazon and Intalio itself), Ghalimi said that:

[Intalio gives the] benefits of the cloud without the limitations of the public cloud

On the PaaS level, Intalio has been built using the same structure as Salesforce’s AppExchange. Becuase of this, AppExchange applications can be run on Intalio using whatever delivery method the customer likes – private, public or virtual cloud and single or multi tenant.

Anyway – looking more generally, Intalio’s play reminded me somewhat of what Zoho is doing. They too have a very broad product offering – covering all of the SaaS applications with a fair dose of PaaS to go with that. So how does Intalio contrast themselves with Zoho. Ghalimi articulated the difference quite simply, saying:

they focus on Public Cloud delivery. We offer Public and Private, as well as support for Hybrid Clouds:

With a caveat that, in his understanding, Zoho is available for private cloud “if the organization is big enough”. Intalio is entirely agnostic in terms of delivery method – it can be run on public, private or hybrid clouds and has the ability to be either single or multi-tenanted to meet the demands of all use cases.

It’s an interesting play and mirrors (at least to a certain extent) the direction taken by salesforce.com who started off firmly at the SaaS level (with the salesforce app) moved down to PaaS (force.com) and has recently moved further down the stack into IaaS (VMForce). The vast difference between salesforce and Intalio is that the former is a billion dollar business with thousands of employees and significant traction in the enterprise. They can leverage this traction to gain business at other levels in the stack. Intalio, by contrast, despite having been around for years is very much still in startup mode and, despite some impressive customer names on the front page of their site (Zimbra, Finnair and Facebook among others) are something of an unknown.

It’s an eminently logical approach – tie all levels of the stack into one offering and give customers the options in terms of delivery. It is however hard to see how a small player like Intalio can pull it off, and it’s unlikely that Intalio would be much of an acquisition target, there’s very few vendors out there who don’t have a serious product overlap with Intalio.

To this end we’ve been thinking about developing the CanterburyCloud. So what’s the CanterburyCloud? – well it’s a lot of things. In part it’s a network where start-ups can leverage the communal wisdom of their peers. It’s potentially a co-working space where companies can work and bounce ideas off like-businesses. It’s potentially a marketing platform – a network of businesses that can, to an extent, share marketing budgets and evangelise each other’s products. I guess at the end of the day it’s about creating a Cloud Centre of Excellence in Canterbury – taking the legacy of companies such as Tait Electronics and Jade, and mixing it with a healthy dose of agility and web savvy.

We’re keen to hold an unconference to explore this opportunity – it’s not going to be a tech event, rather it’s going to look at business models, strengths and weaknesses and the general appetite for working together. We’re going to hold the event on Friday 30 October at the Canterbury Development Corporation Training Room 1, Level Two, 193 Cashel Street Christchurch. We’ll be kicking off at 1pm. As is de rigeur for a tech event, there will be pizza and drinks afterwards and (hopefully) a general vibe of positivity and can-do throughout. Telecom New Zealand has generously come to the party and is sponsoring the event – so a big thanks to them for that. Thanks also to CDC for providing the venue.

For those of you who aren’t accustomed to the unconference format, here’s a nice definition courtesy of Wikipedia;

An unconference is a facilitated, participant-driven conference centered around a theme or purpose. The procedural framework consists of sessions proposed and scheduled each day by attendees, mostly on-site, typically using white boards or paper taped to the wall. While loosely structured, there are rules at BarCamp. All attendees are encouraged to present or facilitate a session.

The plan is to have six – eight sessions of around 20 minutes each. As is the norm for this type of event, session planning will happen on the day – come along pre-armed with ideas for topics!

So… who’s keen to come along and explore life on the edge? Feel free to register here, or email smina@memia.com your intention to attend. See you all there.

- More free Themes
- More options for accepting payments (gateways)
- Introduction of localisation (Multi Lingual and Multi Currency)
- Initiate relevant marketing efforts through Special Offers, Coupons or Newsletters
- Improved, interactive web reporting
- Integrate the relevant fulfillment options for your product offering

Dremus offers a customized e-Commerce shop for $29.95/month, with no signup or membership fees. Personally I think there’s an opportunity for Dremus to have more of an ecosystem approach, not charging a monthly fee but having a “clip the ticket” approach. Having said that their target market are businesses new to e-commerce who might be frightened off by a percentage approach.

Dremus has a free trial – however readers who signup for the trial by Monday 30 November 2009 have the chance to win one of 50 six month subscriptions. Nice!

Trineo is a development and consultancy service focusing on both salesforce.com implementation and custom force.com development out of the Canterbury Innovation Incubator in Christchurch. Managing director of Trineo, Daniel Fowlie, is going to spend around 26 hours in a plane in order to make a seven minute presentation of his LegalSoftOnline product. LegalSoftOnline is still in stealth mode but I’ve seen both early versions, and the current iteration. In talking about his product, Fowlie said that;

A typical server-based legal practice management system can cost tens of thousands of dollars, with additional IT, deployment and upgrade costs. An online system such as Trineo’s, however, does everything a server-based system does, but is far more flexible, equally secure, and has no large upfront cost.

I’m stoked to see Daniel doing well – both becuase he’s a really nice guy, and more generally becuase he’s building a product from here in EnZed! See more here.

Good luck Daniel!

Why is it that doomsayers popup every now and then with a completely negative message and somehow manage to get major press. Harry Debes, CEO of Law Software has publicly declared that the sky will fall on SaaS (Software as a Service) companies in 2 years. Personally I think it is either a naive, arrogant or plain stupid statement to say “The SaaS market will ‘collapse’ in two years”.

1. Naive

Firstly, SaaS is happening now, growing at a huge rate, and as business models are getting perfected, profit is now coming to the new SaaS players who are committed and have learnt from the mistakes of the larger SaaS dinosaurs of the past..

With rapid development tools such as CFM, ASP, Ruby on Rails, etc and a very low cost of entry, entering the SaaS space has now become the domain of all developers. Because they can, they will, and this will breed a new business economy full of a variety of SaaS business – everything from cheap, small solutions to larger enterprise tools. The massively competitive landscape is here to stay. It won’t collapse, rather the stronger business models will succeed. Not necessarily the biggest companies, but the stronger models.

2. Arrogant

It’s a bit of a heavy statement to make that ALL SaaS businesses will collapse. That’s just crazy and an arrogant statement. All businesses have different dynamics and models and whilst I think that the Enterprise space will always be a harder sell, the SME’s and SMB’s are already warming to SaaS and it’s getting further into the SME culture.

3. Stupid

You said that history repeats itself and people make the same mistakes. To a point I agree, but history also teaches us lessons and many of us learn from them. The mistakes made in SaaS in the early days by the big players are a very different set of mistakes from the ones being made today. But this time it’s different. In the past, some HUGE mistakes caused an entire industry to stop and rethink.

Nowadays, the cost of entry is low and there are so many opportunities that people just learn, adapt, change or move on to something new. In the past, VC money or major capital constraints meant that many companies didn’t get a second chance.  These days, everybody can afford a second, third, forth chance and their learning mistakes don’t collapse the industry in the process.

Some comments I just had to comment on…

“The first time, it was called “service bureaus”. The second time, it was “application service providers”, and now it’s called SaaS.”
- This time around, the culture of business is ready for the technology.

“But it’s pretty much the same thing. And my prediction is that it’ll go the same way as the other two have gone–nowhere.”
- The timing was wrong. Now it’s right for adoption.

“One day Salesforce.com will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse.”
- How can you assume the world cares about Salesforce’s stock value? There are MANY profitable SaaS businesses without investment that won’t collapse. Customers are too entrenched – or… wait for it… Just don’t care about Salesforce.

“People are stupid. History has shown it repeats itself, and people make the same mistakes.“
- Correct that STUPID people make the same mistakes. INTELLIGENT people learn from them and go on to build successful businesses.

“It was going to take us seven to 10 years before we made any money. That’s nonsense.”
- Well, you’re doing something wrong. We made money from day one and were profitable in a few short years. Just because you can’t figure it out, don’t assume others can’t.

“And SAP’s Business ByDesign is a disaster. [SAP] said it would have 10,000 customers [for ByDesign] within a couple of years. And yet they have less than 100 today, after all that hype and marketing.”
- Sap is a VERY DIFFERENT selling proposition from most SaaS businesses today – it’s a dinosaur.

“You don’t break-even till the four-and-a-half year mark, but here’s a bigger problem–there’s no guarantee that that customer is still going to be yours in four years’ time.”
- Toughen up! There are no customer guarantees… You don’t OWN the customer.

“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.”
- Rubbish! Some SaaS solutions get you ‘data entrenched’ (like project management software) and plenty of code solutions are easy to get rid of (like antivirus).

I think that we all need to accept that the ‘Cloud Computing’ era is dawning upon us. Sure there will be a few rocky patches along the way as there always is with new tech culture, but it is a changing landscape and those who don’t adapt, will fall behind.  Also keep in mind that is is possible to have both a Code and SaaS strategy in play.

So there’s no point being a doomsayer, especially in a new tech culture that will jump on posts like this and tear down the comment. All it’s achieved is that many vocal tech bloggers now have another post to blog about, thus lifting their own blog traffic, scoring another point for the blogosphere and discrediting your thoughts.

Let’s really try to be positive about the future, rather than writing negative posts about how the “SaaS market will ‘collapse’ in two years” – it’s just rubbish…

About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

There’s a growing opinion that the answer to that is no. Om Malik got stuck into Gmail last week.

How is one supposed to run a business on such an unreliable platform? The integration of Google’s services remains a distant dream, reminding us of the limitation of its competence beyond search and advertising.

Today Phil Wainewright posted about Sergey Solyanik, [a?] development manager at Google who has gone back to Microsoft because “he values reliability far, far more than coolness”.

Sergey’s point according to Phil is that Google’s emphasis

[is] on building Web properties that are popular, but which primarily help people waste time online

It’s interesting how we pidgin hole companies. Google is a technology company for sure, but they are a technology company that does online advertising really well. Is it reasonable for us to expect them to be able to deliver on-demand business grade services?

I rather suspect that for Google to deliver other (any?) applications is a stretch because of the same barriers that all entrenched, incumbents face. Culture, resources, big revenue levers getting attention etc., etc.

The evidence seems to be growing that Google is lacking something when it comes to building business grade, on demand services.