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Effective Small Business Owner or Corporate BS-er?

Posted on June 13, 2006 ·

Even after the second reading of 10 Reminders for Effective Management I can’t believe my eyes. I wonder if it’s a serious article or a satirical piece. As if the article wasn’t shocking enough, I really have a hard time believing that it’s posted on Small Business Trends – a site I came to like and even quote from time to time.

Although technically it’s advice to small business owners, it reminds me of the 80’s corporate mid-manager’s survival guides, as in “how to BS your way through your career, looking busy while doing nothing“. I know I have entrepreneurial readers – what do you think?

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Filed Under: Business, Personal Productivity, SMB / SME, Startups ·
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SaaS for Very Small Businesses – Show Me the Money

Posted on May 31, 2006 ·

Recently, in  SME / SMB Have Become Obsolete Acronyms I discussed how now, that business software and services have become affordably available to small businesses, the SMB term has become inadequate to describe this market, especially from the software industry’s point of view.  Simply because the needs of a $100M company, which SAP and Oracle consider a “small” business are not even comparable to a 6-10 person company – traditionally referred to as SOHO, while recently a new term is popping up: VSB – very small business, the absolute “S” part of SMB.

Innovators in the software business are increasingly focusing on this segment. The result of this change is that “Enterprise Software” is no longer the luxury of large corporations. This might sound like a shocking statement, since “Enterprise Software” typically means the world of SAP and Oracle, and the traditional heavyweight, expensive, pay-huge-license-fees-upfront, then try-to-implement-forever model that does not work anymore.

But there is another definition that is largely being overlooked: 
Software that allows a company to conduct it’s everyday business, supporting most of the core, fairly standard business processes any company performs repeatedly. 

With this definition, Enterprise Software has a whole new, largely unpenetrated market to enter: that of small businesses.   Such business functionality has traditionally been beyond reach for a typical small business, for two major reasons:

  • Cost (license, hardware, implementation, maintenance ..etc)
  • Lack of IT resources (integrating applications, designing processes, dealing with multiple vendors ..etc)

SaaS  is the right answer for both, since it allows the SMB user to start using the functionality without an upfront investment, does not require implementation, upgrades, maintenance, worrying about backups and security ..etc.  

Of course several Open Source packages are available completely free, which is a perfect solution for the cost problem, but frankly most of these packages are by geeks for geeks; i.e. you really have to be quite IT-savy to implement, integrate, upgrade them, and as we stated most small businesses simply do not have that type of resource. 

Stefan Topfer, Winweb‘s Founder and CEO started an excellent mini-series on Saas Benefits  detailing a lot of technical, delivery, usage aspects – now I am going to look at the changed economics from the other side, the software vendors’ point of view.

If SMB’s could not in the past afford Enterprise Software, the same held true for the Software Industry: they could not afford SMB’s, since there was just no way to profitable reach millions of small businesses.   The cost of customer acquisition vs. the very low license fees made it an uneconomical model, whether via direct or channel sales. A common “dirty secret” of the industry is that about 80% of a an enterprise software company’s cost is Sales and Marketing.  There’s a lot of “fat” in that sales process that needs to be cut out.

Once again, technology comes to the rescue: the Internet, and largely Search Engine Marketing changes everything.  Joe Kraus, Founder of JotSpot and previously Excite sums it up:
“ Ten years ago to reach the market, we had to do expensive distribution deals. We advertised on television and radio and print. We spent a crap-load of money. There’s an old adage in television advertising “I know half my money is wasted. Trouble is, I don’t know what half”.  That was us.  It’s an obvious statement to say that search engine marketing changes everything. But the real revolution is the ability to affordably reach small markets. You can know what works and what doesn’t. And, search not only allows niche marketing, it’s global popularity allows mass marketing as well (if you can buy enough keywords). “

Another benefit of SEM (search engine marketing)  is that while traditional advertising can pick the right demographic groups, it cannot pick the right time, only a fraction of the target audience is in “change mode”, looking for  a solution.  That’s the beauty of Search Engine Marketing: obviously if you are searching, you have a problem and are looking for a solution, which is half a win from the vendor’s point of view.

Small Business Trends published a survey on “Selling to Small Businesses”, which supports the increasing importance of SEM: “A full 73% of vendors attract small business customers through search engine results”

Joe has another excellent article worth reading; especially the last two bullet-points are relevant to our discussion here.

What we’re seeing is that the SaaS model changes not only the technology and the delivery of software to customers, but the marketing and sales process, too, which is perhaps where most of the excess “fat” can be cut from.  Software companies can now directly and affordably reach millions of small customers. The entire marketing,  sales, delivery, implementation, support, upgrade process is seamless, highly standardized, conducted via the Net, teleconferencing, Webex-like sharing in new low-cost ways.

So how do software companies make money on small businesses?   Ziff Davis  has the answer:  “Products for the long tail and SMB market, where 72 million businesses spend $5k or less each year, are a much easier play”  Wow, I don’t know where those numbers come from, but if I were a SME-focused software vendor, I’d certainly like them … there’s a goldmine out there. 

AMI Partners confirm:  U.S. SMBs to Spend $2.2 Billion on Software in 2006

(This article, with minor changes is cross-posted at The SME Blog, where I am a guest blogger)

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Filed Under: Business, Enterprise Software, SaaS, SMB / SME, Software ·
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How SAP Ended up Promoting NetSuite

Posted on May 22, 2006 ·

NetSuite, the provider of perhaps the best hosted integrated software solution for the SMB market tried to rain on SAP’s parade during SAPPHIRE 06 in Orlando. They planned to host a cocktail party in a hotel suite right across the Convention Center. The party’s theme was “SAP for the rest of us” and the email invitation posed a question/answer: “Who will become the SAP for the midmarket? (It Ain’t SAP),” Cute.

Of course SAP got p***ed and enforced it’s contractual right to cancel competitive events in any of the SAPPHIRE venues. SAP’s Spokesman Bill Wohl called NetSuite’s move “guerilla marketing“.

Now, what’s wrong with Guerilla Marketing? It’s fun … if you have humor to appreciate it. Last week SAP didn’t. The result? NetSuite CEO Zach Nelson laughed off the “loss” and will hold a web-conference instead. This being a juicy story of course it got picked up in the media and quite a few blogs – the media blitz lasted a few days, then will start again around the web-conference … so basically SAP’s decision to kill the party provided NetSuite with a fair amount of publicity – exactly what it needs as it ramps up for its IPO planned later this year. Zach should send a thank-you note to SAP.

Here’s what I think SAP should have done: let it happen, and set up their own counter-party. Had it been allowed to proceed it would have been a noon-event. Not that NetSuite is a negligible company, in fact they have an excellent product. Some say Salesforce.com is just a glorified contact manager relative to NetSuite, and I tend to agree. (I put my money where my mouth is: in my last corporate job I became a NetSuite customer, after careful comparison to Salesforce). That said, NetSuite is targeting strictly the SMB market, in fact more the “S” than the “M”, while SAP despite all their SMB initiatives is still largely the Enterprise Company – SMB is just not their sweet spot. SAP had their own SMB people in Orlando (I interviewed Gadi Shamia, SVP for SMB Solutions, and intend to write about it soon) – they should have set up their own party right next to NetSuite, and present SAP’s vision for that market segment. In fact they could have embraced the NetSuite event (steal their show) and make up SAP logo’d signs pointing to both events.

The impact of the NetSuite party, especially in an environment where most participants are already biased towards SAP would have been minimal. In fact NetSuite had more to gain from the cancellation and the resulting media blitz then actually proceeding with the party … so much so, that I wonder if NetSuite intentionally leaked the news to SAP – a brilliant PR coup, if you ask me.

Related Posts:

Filed Under: Business, Enterprise Software, ERP / CRM, Marketing / PR, SaaS, SMB / SME · Tagged: , , , , , , , , , , , , , , ,
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TiEcon 2006: Software Luminaries Panel : The Software Richter Scale: 1, 3 or 7?

Posted on May 16, 2006 ·

Liveblogging the Software Luminaries Panel at TiEcon 2006.  (Note: I am obviously publishing this, as well as other TiEcon posts after the Conference, but will only do very basic editing, and some linking, essentially posting my original notes.   I’ve also deviated from the role of passive note-taker here, as this is a subject where I am somewhat competent, and can’t help but insert my own comments here and there – you will see those in italics.  I invite Panelist, participants to feel free and correct / add to my notes in the form of blog comments. Thanks).

There were parallel sessions run with industry luminaries in ballrooms next to each other. Moderator  M.R. Rangaswami opened on the humorous side: the audience picked the right session, as he peeked into the next room where the Semiconductor luminaries session would take place, and saw a sign there saying “semi-luminaries” 🙂   M.R. is Co-Founder of the Sand Hill Group and host of the recent Software 2006 conference (an annual event).  .

As introduction he uses his Software 2006 slides about  Software’s quiet revolution. Three major realities:

  1. Changes represented by SaaS , Open Source, while CIO’s indicate increased spending on software.
  2. Real business is in the Enterprise (but consumer technologies find their way into the Enterprise)
  3. Thriving ecosystem critical

Panelist(s)

  • Larry Augustin , Angel Investor, Founder VA Linux, SourceForge …etc.
  • Amit Chatterjee , VP Strategy SAP
  • Mark Gorenberg , Partner Hummer Winblad Venture Partners
  • Jason Maynard , Research Analyst Credit Suisse
  • Zach Nelson , President and CEO Netsuite
  • Sanjay Parthasarathy , Corporate Vice President Microsoft Corp. (Chief Evangelist of Microsoft Church)

Starting with a few canned questions for warmup, then taking audience questions.

Question:  Will there be a billion-dollar software company in SaaS? 

Jason:  Yes, Salesforce, NetSuite to begin with.. Client-server, on-premise screwed customers, overpromised, underdelivered. SaaS will be huge, it has barely  scratched the surface so far. 

Mark: Agrees.  Hummer Winblad did 12 pure-play SaaS investments. SaaS is most disruptive.  Siebel was the uncontested market leader and the appearence of Salersforce.com killed it. (I can’t help but insert my own opinion here: Sure, Salesforce squeezed Siebel from the bottom up, but two other factor were just as significant in their demise: the “overpromise, underdeliver” syndrome, i.e. customer dissatisfaction after expensive and lengthy projects; and the fact that SAP that already owns the Enterprise market significantly improved their own CRM  offering, and the integrated approach offers a better value proposition to their customers then the standalone Siebel CRM-only solution).  

Sanjay: We’ve already seen billion-dollar  SaaS companies:  eBay and  Google, just not in Enterprise.

Amit:  SaaS by itself is not a business model… for larger organizations hybrid models work better …with increasing process complexity and integration requirements there is a need for a mix of  on-demand and on-premise solutions.

Question specifically to Zach: Larry Ellison (Oracle CEO, owns over 50% of NetSuite, which is expected to pull off a billion-dollar IPO this year) stated that SaaS is only for SMB’s not for large corporations. Is that so?

 Zach: He is generally trying to avoid speaking for Larry. (They clearly have an interesting relationship, Larry has to be somewhat anti-SaaS, and Zach can’t really get into a public debate with his absolute majority owner. It seems to me that Larry is betting on two horses at the same time)  Nobody will switch software because they want to, or because SaaS ismore fashionable. First and foremost customers have a functionality challenge, which the software company has to meet.. Functionality is the primary consideration, and the delivery model supports it.

Sanjay:  We shouldn’t be talking about software as a service, it’s actually software + service.

Mark: A number of companies are selling to both small and large organizations. What’s exciting is that this is the very first time when medium sized companies can get the same functionality as the large guys! ( I tend to think the same is true for small businesses, in fact that may be an even more radical change, and it’s a mistake that analysts often only think of the midsize market when they speak SMB )

Jason: Disagrees with SAP’s Amit on the notion of need for hybrid.  Software needs to become a utility.  There is no room for innovation in most corporate  IT budgets, 80% of which is spent on running the infrastructure.  Let go of thee server!  I know it’s hard …it’s your baby … you may get visitation rights at your SaaS provider:-) (huge laughter at audience)

MR  makes a comment/question on recent high-profile outages in the industry, largely at salesforce.com but elsewhere, too.

Zach: Not all delivery models are created equal.  Sforce runs on “big iron”, (find article here) while Netsuite opted for a grid-like system based on cheap boxes. When a salesforce.com server goes down, it effects the majority of customers,  when NetSuite loses a box, a maximum of 50 customers are effected. This setup  also helps rolling out new versions smoothly, in a phased fashion,  while  Salesforce.com has to do it in “big bang” style.   Zach predicts Salesforce moving to a grid-like environment soon.

Larry: It’s about ease of adoption.  Software has become a lot easier to create, it’s acquisition is a painful process, and that’s the part that SaaS improves.

Sanjay: Service orientation helps picking best-of-breed solutions, mix and mach. The current trend of consolidation in the industry is actually contrary to it.

Amit: SOA is critical, some services in the cloud, others in the enterprise. 

Zach: Picking composite applications to mix and match is difficult, especially as business processes get more complex.. Composite transactional  applications are a fantasy –  far to difficult to synchronize.  Example: Microsoft CRM and Great Plains are hard to synchronize, even though MS owns the code for both.  Integrated transactional systems are unbeatable – that’s why SAP owns the Enterprise.

Question:  Consolidation, Oracle acquisitions .. getting bigger and bigger – is there room left for innovation?

Larry: Oracle is buying since it’s not doing a great job of innovation itself.  Startups have the benefit of new distribution mechanisms, SaaS, Open Source, user base helps them.

Amit: Lot of room for innovation by partners id they participate in verticals.  He “only” has 6000 developers, cant cover the whole world.(audience laughter)  Larry interrupts: I’d like that problem, I have 12. With 6000 how can you NOT cover the world? (even bigger laughter). Amit: Citibank has more developers then SAP.

Question about data privacy, Security. 

Zach: Especially for small, midsized businesses NetSuite’s security is better than running on local server next to coffee machine. 

Larry: Security is still a huge  unsolved issue.

Sanjay: The real data challenge is mashing structured and unstructured data. 80% of corprate data is unstructured  without business processes: xml is the glue. 

Larry: Html amplified the problem of huge amount of unstructured data, the future will be to move to have data in xml and html is just the presentation.

Question: Are there profitable SaaS companies?.  Sforce is barely profitable.

Mark: Salesforce.com is barely profitable, .Rigthnow is making decent profit,  employees (?_) is largely profitable.

Jason: Many are profitable,  SaaS lowers the cost of distribution – there is price elasticity in the market.  SaaS also helps reducing R&D, support costs – salesforce only needs to support one version, SAP, Oracle multiple ones.

Zach: When he joined NetSuite their sales model was direct. Now with success ecosystem develops.  Typically start with direct, build customer base, then ecosystem develops.

MR‘s comment/question: Software 2006 had a panel: Open Source: money machine or money pit? 

Larry: Open Source is a young model, there can not be a lot of profitable companies yet,  Red Hat beng an outstanding example.  On $10M in R&D Salesforce.com spends 100M in Sales & Marketing..  It’s cheaper to create software then sell it > Open Source helps eliminating the huge sales costs.

Jason concurs,  sales is 80% of cost.  Enterprise Software companies don’t make a lot of profit on software sales, their profit comes from maintenance.  Smart Open Source companies jump out of this expensive sales cycle and focus on support only.  They will increase botttom line while reducing top line.

Larry:  There is also a culture change: people did not understand software, they had to be educated and had to pay for that education.  Now everyone is computerized, carries a PDA, cellphone ..etc.  This means the  education need is reduced, good opportunity for Open Source’s pull model.

Question: SAP , MSFT will you be giving away your products free? 

Sanjay: Fuzzy answer on giving away software and promoting distribution. 

Amit: Support, explore Open Source, but not fully embrace.  SAP does not have the distribution channel that MS has. SAP needs to build ecosystem.

Question:  Will MS look into buying SAP?  Tried. Jason: pragmatic approach: it won’t happen, if for no other reason, the fight with the  EU..

Question: What Open Source opp’s exist? 

Mark: Recently made two investments into companies that develop applications for the lamp stack.  Issue: IP ownership, integration.  Sales issue: agree with the Open Source effect on lead generation, but how to close sales?  What happens when you move to markets that people don’t understand?

Question: any Open Source  companies to go public?  

Jason:  Potentially MySQL.  Markets pay 10-times sales, 30-times cashflow. Fewer, but better , more sustainable companies.

Question (more a remark) on SAP’s new compensation plan. Hasso Plattner recently  announced he is aiming at doubling the market, if they achieve that, the top 100 execs will make 100’s of millions.  Is that a realistic objective? 

Amit: The announcement certainly helps: -) but the true driver for growth  is product innovation.  

MR askes the panelists for their final remark

Mark: We’re in the greatest disruptive times. Hummer Winblad invested more in the past few years than in the previous 17..

Sanjay: Software industry does not spend enough time with users. 

Larry: Fantastic time to be a software entrepreneur.  Small team , little $, reach to market – not possible 10 years ago

Zach: It’s a great time to start a software company, when you do it, remember  you need a great application to run the business. (audience laughter; good plug for NetSuite …possibly the last one before going into pre-IPO silent period?)

Amit: Customers matter. SAP needs to focus more on the ecosystem.

Jason: MS announced spending additional $2B on emerging areas. Look at areas they are spending… go in those “white spaces”, since  they are good in seeing the  opportunities, but can’t exploit them properly.

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Filed Under: Bay Area, Business, Enterprise Software, ERP / CRM, Open Source, SaaS, SMB / SME, Software, Startups, Technology ·
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SMB / SME Have Become Obsolete Acronyms

Posted on May 10, 2006 ·

SMB / SME describes Small – Midsize Businesses (Enterprises), but in terms of describing a market segment, especially in the software industry it has become obsolete. Why?

It used to collectively refer to companies too small to be attractive for the major Enterprise Software providers – and of course the same held true vice versa: it described a group of businesses that could not afford “enterprise software”. Well, that’s changed with Oracle, SAP now catering for the lower- mid-market, and a growing number of innovative new software solutions affordable even by the really small businesses. Hence the problem with the SMB / SME acronyms: they were sufficient to describe the “crowd to be ignored”, now that the software industry can actually address the needs of this segment, it’s too heterogeneous to be lumped together. To demonstrate the point, here are two articles talking about sofware in the SMB market:

SaaS Players Jostle For Position (internetnews.com) uses the term SMB, cites a VC and software vendor, but clearly the focus is on “small- and medium-sized companies of several hundred employees and 20 or more sales reps”

In Gartner, SAP and small business – an oxymoron? Dennis points us to Small Business Vision – a Gartner Event. As he says: “SAP also has a definition of SMB which starts at revs of $250 million. (last time I looked) Which kind of says it.”

There is very little a $200M business and a 10-person startup have in common – their IT needs will definitely be different. Most analyst who talk about SMB really mean midsize businesses. That’s an important market, but let’s not forget the huge untapped opportunity the “long tail” presents; i.e. the millions of very small businesses that can now directly be reached, sold to, serviced inexpensively over the Net – classic SaaS style. Essentially what we are seeing is that the SMB / SME market really isn’t one segment at all, but at least two … perhaps three:

  • SAP, Oracle may consider a $100-200M million business “small”, but it really is midsized, the “M” in SME, with a few hundred employees and a dedicated IT department, that will likely need help with software implementation, but will cope with the ongoing maintenance themselves. SaaS is a wise choice for these businesses, but certainly not the only one.
  • One could define the “S” part, i.e. small businesses in terms of revenue or headcount, but from a software point of view a more important criteria is that they typically do not have permanent IT staff on payroll. This by definition makes any software products that are implemented and ran at the customer’s premises a poor choice – a potential maintenance nightmare. There is simply no better option for this group than SaaS – Software as a Service.
  • The third category in my mind is the very-very small business, possibly with 1-5 employees, who are likely all do-it-all types, focus on their core product / service, and are likely to struggle not only with IT, but some of the standard processes of running a business. This category needs more help than just technology, and vendors like WinWeb are experimenting with a unique combination of hosted software as well as “Live” services, i.e. expert advisors in various aspects of business. (Update: see Stefan’s new post on Live Services)

I’m hearing a new term more and more: VSB – for Very Small Business, describing either the third group above, or a combination of the second and third.

(Key ideas in this post were first published at The Small Business Blog where I am a guest blogger)

Update: 3 days after this post, Wikipedia now has an entry for VSB.

Update (8/14/2006): Vinnie‘s guest blogger, Jyoti Banerjee approaches the issue from the opposite direction, the “M” in SME / SMB, but comes to the same conclusion, i.e. they should not be lumped together with small- and micro-businesses.

Update (10/23/07): Further SMB segmentation by Gadi Shamia.

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Filed Under: Business, Enterprise Software, SaaS, SMB / SME, Software ·
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SaaS vs. Open Source for SMB’s – Part 2.

Posted on April 5, 2006 ·

Yet another “Pros and cons of Open source vis a vis SaaS for an SMB” post today.  I feel this one barely scratches the surface, missing basic points like the availability or (mostly) lack of IT skills at a lot of SMB’s. 

For reference on the subject I recommend Shop Talk: SaaS vs. open source – what SMBs should know by Paul Gillin and my own SaaS vs. Open Source for SMB’s? A No-Brainer. 

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Filed Under: Enterprise Software, Open Source, SaaS, SMB / SME, Software ·
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Ellison’s Double Dip: a Conflict of Interest? No.

Posted on March 30, 2006 ·

Netsuite LogoMatt Marshall at SiliconBeat is wondering whether Oracle CEO Larry Ellisons 60% ownership (*) in NetSuite, preparing for a $2B IPO represents a conflict of interest.

I don’t think so.  Oracle dipped into the On-Demand market before,  it did not quite work, so Ellison decided to tackle it differently, through his investments.  He is a Warlord battling in different theaters and maintaining two separate, not directly interchangeable armies.   This is still true, even though Oracle’s second attempt in the SaaS space will likely be successful, especially after absorbing Siebel.

The issue isn’t so much On-Premise vs. On-Demand anymore,  but the market segment they go after: NetSuite is still mostly an SMB player, although more the “M” than the “S” piece.   The SMB market requires a totally different Sales and Marketing approach, amongst others, and Oracle with it’s current “legacy” salesforce can’t reach this market profitably.  It’s the Business Model, not only the technology, that requires a separate “army”.

For the above reasons I’ve long been advocating that SAP also should invest in it’s own NetSuite-equivalent (or better, and I happen to know who ) to tackle the SMB market.

Back to the Ellison factor, Jason  still contends that “NetSuite could get scooped up by Oracle before it ever sees the light of the public markets.”

* (I think it’s actually less than 60%, but more than 50% – but that’s irrelevant here.)

Update (4/2):  Vinnie agrees: “I have always believed if Larry had invested in every one of Oracle’s alums, he would be a far richer man than Bill Gates…. Maybe Larry should similarly invest in Open Source, Third Party

Maintenance, BPO, Search, Web services start-ups. They represent the

growth and the innovation in the market, not the company he founded.”

Sramana Mitra‘s post is also worth reading.

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Filed Under: Business, Enterprise Software, ERP / CRM, SaaS, SMB / SME, Software ·
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SaaS vs. Open Source for SMB’s? A No-Brainer.

Posted on March 5, 2006 ·

(Update)
I have to take issue with Paul Gillin’s approach as he discusses whether SMB’s are better off with SaaS or Open Source Applications. If we equate Open Source to downloadable, on-premise installed software, I have no doubt, and have stated it before that the only good answer is SaaS. But, hold on, a few minutes later we’ll see these two options may not be mutually exclusive for long.

Paul analyzes several criteria:

  • cost
  • speed of deployment
  • customization
  • reliability
  • data ownership
  • vendor viability

These are all issues well-discussed on the web, and although Paul does not explicitly say, my reading is that he also leans towards the SaaS conclusion. The problem is that this criteria-by-criteria approach works well with a typical (mid-size) company where some level of IT expertise is present. Small Business America is very different from the web-savy geeky software startups; the majority are more traditional businesses with no CIO, IT department, in fact often without any IT support whatsoever. While the two main obstacles SMB’s face with any on-premise implementation are cost and (lack of) IT expertise, you can’t just translate the latter into cost – i.e. the cost of hiring full-time IT support. The opportunity cost of Management venturing into IT hiring and project decisions instead of focusing on their primary business makes this an impractical approach, leaving us with only one choice: SaaS.

Another issue not discussed in the article is integration. Open Source or SaaS, getting several packages work together requires IT and business process expertise, which typically means hiring expensive consultants. Therefore, I would go one step further: not only SaaS is the best choice for most SMB’s but they should seek to minimize the number of providers, i.e. the best choice is to use integrated All-In-One solutions.

The current undisputed leader in this field is NetSuite, but as they follow Salesforce.com’s footsteps and move upstream chasing midsize businesses, they leave an opening for up-and-coming challenger 24SevenOffice, which focuses solely on SMB’s, and covers a wider range of business functionality than the incumbent.

This is the situation today. Now, let’s revisit the original question: SaaS or Open Source? A tiny startup named SQLFusion is working on making that question obsolete. The dilemma with Open Source: a lot of good applications are available, but they are written by geeks for geeks… you really have to be quite knowledgeable to download and implement them. Example: at one of the startups I am advising I use SugarCRM over the internet. Starting to use it was a no-brainer, but when I looked at the prerequisites and the process of installing it myself, my head started spinning. No way, this is not for me! Open Source Fusion, which I hear is within days of opening for a limited beta will bridge the gap between availability and usability of Open Source Programs, by offering such apps to be used over the Internet. In true On-Demand fashion, maintenance, upgrades all happen in the background, one can start using the programs without implementing them. So it will no longer be SaaS or Open Source, but SaaS and Open Source.

The first incarnation of Open Source Fusion will provide access to individual applications, still leaving the integration dilemma for SMB’s, but the technology under the hood enables the company to later offer an integration layer between the key applications it serves up.

So the future is Open Source Software as a Service. Hm, here’s an ugly acronym: OSSaaS (?)

Update (3/6). Releated posts:

Update (5/23): Stefan over at The Small Business Blog discusses the issue; his company, WinWeb is expected to offer Open Source apps as a service soon.


Filed Under: Enterprise Software, ERP / CRM, Open Source, SaaS, SMB / SME, Software, Startups · Tagged: , , , , , , , , , , , , ,
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Wikis are the Instant Intranet

Posted on March 4, 2006 ·

(Updated)

Since I received a few questions after my post: 43 Wiki Prank and the Whiteboard Test, I though I should add a bit of clarification. The underlying thought in that article was to pick the right tool for the right situation, and the whiteboard-test is just one trick to differentiate when Wiki’s are helpful vs. Forum, Blog ..etc software. It’s by far not the only situation when a wiki is invaluable.

Another example is setting up a living, breathing Intranet, one that people can actually use. Anybody who works in large corporations probably thinks of the IntraNet as a one-way communication channel for Management to talk (down) to employees. Getting your own content in? Forget it! Even when I was VP in a mid-sized organization and did not have wait for approval, I still had to talk to the IT Director, wait for him to fit it in his team’s schedule, then tell him what was wrong when my content finally showed up.

It does not have to be this way! Companies “own” (well, at least part of the day) the intellectual capacity of their employees, so why not put it to work? Even in the large corporate environment a wiki can be a lively collaborative addition to the Intranet (see the wiki effect by Ross), but for smaller, nimble, less hierarchical business a wiki is The Intranet.

At a much smaller organization I wanted to introduce a wiki for collaboration, for all the reasons explained in the video below. The company was a bit more old-fashioned, not exactly the early-adopter type. I expected some resistance against something with a geeky-funny name like wiki… so I simply announced we’ll be creating an editable Intranet. People started to use it from day 1, and few cared that the thingie behind is called a wiki.

David Terrar describes a somewhat similar story here.

Finally, the excellent video by JotSpot Founder Joe Kraus.

Other related posts:

Update (4/9): A really good guide to wikis by David Terrar.

Update (10/22): Here’s a case study of Confluence, the leading enterprise wiki being used as the ExtraNet.

Update (4/9/07): Read/WriteWeb on The Age of Instant Intranets.

Update (9/20/08):  A Funny Thing Happened on the Way to the Intranet

Filed Under: Collaboration, Enterprise Software, Open Source, Personal Productivity, SMB / SME, Social Networking, Software · Tagged: , , , , , , , , ,
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Web 2.0 & Enterprise, Round 3: Enterprise Software for Small Businesses

Posted on February 22, 2006 ·

(Updated)

This post is a continuation of Web 2.0 in the Enterprise – Round 2 in which I reflected on some thoughts brought up by Stephen Bryant in Five Reasons Web 2.0 and Enterprises Don’t Mix.

The Web 2.0 in the Enterprise TIE event I previously referred to was hectic, trying to cover way too many subjects in 90 minutes, with one common underlying assumption: Enterprise means large corporations. The theme of the night was how these Web 2.0 technologies and business/communication approaches will “seep in” to the large enterprise from the bottom up.
What is then Enterprise Software? Typically SAP, Oracle et al come to mind, and I can hear the roar “Enterprise Software is Dead” – well, is it?
If we define Enterprise Software as the traditional heavyweight, expensive, pay-huge-license-fees-upfront, then try-to-implement-forever model it is certainly challenged from two ends, by Open Source and the SaaS model. But there is another definition that is largely being overlooked:
Software that allows a company to conduct it’s everyday business, supporting most of the core, fairly standard business processes any company performs repeatedly.

With this definition, Enterprise Software has a whole new, largely unpenetrated market to enter: that of small businesses, referred to as the SMB or SME segment. Such enterprise functionality has traditionally been beyond reach for a typical small business, for two major reasons:

  • Cost (license, hardware, implementation, maintenance ..etc)
  • Lack of IT resources (integrating applications, designing processes, dealing with multiple vendors ..etc)

SaaS is the right answer for both, since it allows the SMB user to start using the functionality without an upfront investment, does not require implementation, upgrades, maintenance, worrying about backups and security ..etc.

Of course several Open Source packages are available completely free, which is a perfect solution for the cost problem, but I think most of these packages are by geeks for geeks; i.e. you really have to be quite IT-savy to implement, integrate, upgrade them, and as we stated most small businesses simply do not have that type of resource. Yes, that means the Silicon Valley tech-startups are not a true representation of the SMB world
Likewise, I don’t believe SOA, best-of-breed packages working together are an option for the SMB market, for the same reason. They will play an increasingly critical role in larger enterprises with a professional IT organization, but for a few more years SMB’s are far better off with integrated, All-In-One type On-Demand solutions.

Of the Web 2.0 companies Stephen mentions in Five Reasons Web 2.0 and Enterprises Don’t Mix two are offering Integrated On-Demand solutions:

  • NetSuite
    Stephen lists NetSuite along with Salesforce.com, and while they are in the same club, the significant difference is that Salesforce.com is only CRM, while NetSuite offers an integrated CRM+ERP package. They both are trying to become a “platform” via NetFlex and AppExchange, respectively. Both companies are definitely pushing upstream, going after the Enterprise market as in the first definition, i.e. large (or midsize) corporate customers.
  • 24SevenOffice
    Coming from Europe this company is lesser known. They focus on the SMB market and offer a modular but integrated system with a breath of functionality I simply haven’t seen elsewhere: Accounting, CRM (Contacts, Lead Mgt, SFA), ERP (Supply Chain, Orders, Products), Communication, Group Scheduling, HR, Project Management, Publishing, Intranet. Essentially a NetSuite+Communication, Collaboration. I’ve taken their test-drive (currently IE only) and liked it. I would debate how they structure their menu-system, as functions like Product, Inventory, SCM are all hidden under Financials.

Back to the economics: if SMB’s could not in the past afford Enterprise Software, the same held true for the Software Industry: they could not afford SMB’s, since there was just no way to make the numbers work. The cost of customer acquisition vs. the very low license fees made it an uneconomical model, whether via direct or channel sales.
Once again, technology comes to the rescue: the Internet, and largely Search Engine Marketing changes everything. Joe Kraus, Founder of JotSpot and previously Excite sums it up:
“ Ten years ago to reach the market, we had to do expensive distribution deals. We advertised on television and radio and print. We spent a crap-load of money. There’s an old adage in television advertising “I know half my money is wasted. Trouble is, I don’t know what half”. That was us. It’s an obvious statement to say that search engine marketing changes everything. But the real revolution is the ability to affordably reach small markets. You can know what works and what doesn’t. And, search not only allows niche marketing, it’s global popularity allows mass marketing as well (if you can buy enough keywords). “

Another benefit of SEM is that while traditional advertising can pick the right demographic groups, it cannot pick the right time, only a fraction of the target audience is in “change mode”, looking for a solution. That’s the beauty of Search Engine Marketing: obviously if you are searching, you have a problem and are looking for a solution, which is half a win from the vendor’s point of view.
Small Business Trends recently published a survey on “Selling to Small Businesses”, which supports the increasing importance of SEM: “A full 73% of vendors attract small business customers through search engine results”

Finally a quote from Ziff Davis again: “Products for the long tail and SMB market, where 72 million businesses spend $5k or less each year, are a much easier play” Wow, I don’t know where those numbers come from, but if I were a SMB-focused software vendor, I’d certainly like them … there’s a goldmine out there.

Update (2/22): Perfect timing for this report to come out just now: U.S. SMBs to Spend $2.2 Billion on Software in 2006, Says AMI-Partners

Update (4/17): Interprise Suite (recently debuted at Demo 2006) claims to be “The FIRST Accounting / ERP / CRM Solution to Bring the Power of the Internet to Small and Mid-sized Business“. While I take issue withe the claim to be “first”, considering the breadth of functionality it’s definitely an option to consider for SMB’s .

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