All our SaaS servers are located at the LayeredTech/Fastservers data center in Chicago. They have given us 6-7 years of solid performance with plenty of available staff for onsite 24/7 support at all times.

I get asked regularly why I don’t use New Zealand based hosting providers for our global SaaS company. The reason is simple.

I’m yet to find one in New Zealand that actually takes it seriously, has full onsite 24/7 support and a level of transparent communication at least similar to most US data centers."

I  want to see:

• Multiple support staff onsite 24/7
• Redundancy that works
• Clear open communication with customers

What I’ve seen often (and lately) is:

• Staff go home at 5:30 and monitor remotely
• Redundancy that fails
• Lack of / confusing communication with customers

So what caused this blog post?

Most NZ techo’s would be aware that a few days ago that a data center had major issues with an infrastructure failure that resulted in about 24hrs of complete downtime.

I believe this affected many thousands of websites and a massive amount of email. A few of our non-related websites and email are through a well known New Zealand based hosting provider.

The outage came at a time we were dealing with some important issues and due to the lack of email our company had to pull all nighters calling customers and monitoring our DB based backup support system.

We run a 24/7 SaaS model with US customers awake while NZ sleeps which is why we need to know our servers have onsite support. If they go down, companies literally stop working. We don’t host websites, our SaaS app is a core business system for many thousands of users globally.

To re-iterate, the letter below is not from our Server provider in the US, it’s from a hosting provider here in NZ we just use for email and some small websites. During the outage, this company was very non-communicative with it’s customers. people were freaking out, didn’t know what was happening and they were also trashing the provider on Twitter and other places.

New Zealand hosting providers I’ve talked to and worked with seem to forget a basic fact that a large number of people and companies actually work late, through the night or have global user bases. Even if they do know this, a comment below shows that they seem to put less priority on issues occurring ‘Outside of work hours’ in New Zealand.

Read the letter below we received AFTER the massive outage with little communication through the event. In comparison, our other server provider had some issues lately and updated their status page regularly so customers knew what was happening.

The part that really brassed me off was the part that said:

“During more sociably acceptable hours…” they contacted help to source hardware. So thousands of people, companies and websites suffer whilst they have their breakfast waiting for the ‘shop’ to open.

In addition, their phones and support numbers weren’t accessible, the website was down and they weren’t being transparent or communicative on Twitter. Customers were mostly in the dark. At the very least they should have a blog or status website hosted separate from their facility to keep customers updated.

In contrast, the data center company we deal with in the US store replacement hardware onsite for almost everything needed in case of emergency. They also have a separately hosted Status website for updating customers.

Where was the risk analysis?

When designing the data center, did anyone ask the question “What happens if our firewalls fail?”

Take this as a lesson. Kiwi hosting providers and data centers really need to lift their game if they want global software co’s to host here.

• Tip 1. Don’t go home at 5:30
• Tip 2. Keep customers informed
• Tip 3. Have a status/blog site independently hosted
• Tip 4. Use ‘people language’ not ‘Geekspeak’ (We’re not all techos’)
• Tip 5. Keep replacement hardware/software onsite for key services

That’s the rant for the day – time to get back to dealing with the email backlog.

PS: I’m not angry, just a little frustrated and being totally honest here about how NZ providers need to lift their game.

Dear Customer,

Following Tuesday night’s reported outage (21.30-24.00) which was attributed to a core switch intermission failure, last night the same symptoms occurred (commencing 19.30). Clearly this highlighted that the corrective action of the previous night i.e. the replacement of both core switches deferred the issue rather than provided a permanent resolution.

Last night the fault was again identified by our network management software and the team reassembled consisting of the CTO, Sys-Admins and management. The issue was immediately escalated to our external maintenance support teams (CheckPoint firewall provider and hardware provider) as is standard practice for an outage of this significance. This identified that the fault appeared to be within the Checkpoint firewall clustering software (dual redundancy).

With the assistance of Checkpoint engineers the decision was made to split the firewall cluster and run them as individual stand alone units to resurrect the network. This appeared to temporarily solve the issue at 00.15. For context the firewall servers are running at 15-20% whilst not clustered i.e. with very low levels of utilisation for the spec of the equipment.

At 02.45 the network failed again. The team were still on-site monitoring the network. Our firewall maintenance providers were again called who arranged for patches to be downloaded. At 05.10 the patches were installed and the firewall management server reconfigured to accommodate the patch upgrade. This did not provide a permanent fix.

During more sociably acceptable hours we reached out to our friends in XXXX to help source checkpoint firewall hardware and to provide ‘men on the ground’ to help support our technical team that had worked through the night. In addition to this a decision was taken to move some core applications to the old network (ASA) that was still functioning as was not reliant on the check point firewalls. These include XXXXXXX.co.nz, Email (inbound and outbound) and XXXXXXX.co.nz. However the core network was re-established without the need to deploy this second network with the core applications migrated.

Low level analysis with the assistance of Checkpoint engineers in the USA identified high volumes of fragmented packets originating from one of our shared virtual hosting servers to be the root cause of the issue. These packets were flooding the firewalls and causing the outage.  The source of these packets was identified and blocked at 13:50. The checkpoint firewalls then returned to normal service which finally brought the network back on line at approximately 14:00 hours.

Like all hosting companies, we do not exercise strict control over the content that customers upload to their websites.  It appears that one customer site was compromised, which in turn caused the flood of malformed packets to the firewalls.  Our internal network analysis software did not identify these packets as they were not ‘standard’ TCP/IP traffic.

In order to prevent this level of disruption in future we intend to move all shared virtual hosting customers behind a separate firewall that is isolated from the rest of our networks.  This will ensure that should there be any re-occurrence the offending server is quarantined, and does not cause the kind of outage we have just experienced.

We do sincerely apologise for this outage. These problems are extraordinarily difficult to diagnose, and we are grateful for the assistance provided by CheckPoint engineers in the USA, and local XXXXX network engineers who have complemented the efforts of our own technical team.

Should you require a more technical update, please contact XXXXXX our CTO  or please contact me on my email or directly on my cell (xxx xxxx xxxx).

Once again our apologies for this critical issue and thank you for your continued support.

About The Author:
Julian Stone is the CEO of ProActive Software, developers and creators of the leading web based project management software http://www.proworkflow.com

I do realise that not everyone hangs on everything I have to say, but for those out these who leap out of bed in the morning just to hear my thoughts on things, here’s your very own “Julian101 iPhone app!”

Keep me in your pocket! Show me to your friends (and followers)! And let me keep you updated with my latest ramblings! I’ll be sharing thoughts on business, design, creativity and to be honest, whatever comes to mind!

Download Now!

From day one, we set out  to build a global business founded on our low inertia business model.  We’ve never just been NZ focussed, it is as easy to reach Los Angeles, London or Levin so why not?

We’ve worked hard to setup automation for trials, sales, support, billing, licensing, client account maintenance and support; leaving our staff free to really talk to customers.  The model has run in profit from day one and the organic growth has allowed us to invest revenue back into the business to support top class infrastructure to support our SaaS application.

“Remember that in SaaS, the app is to SaaS what the hamburger is to MacDonalds – people forget that. The app is a small part. To go global the BUSINESS MODEL and INFRASTRUCTURE and SYSTEMS need to scale… The actual application is the least of your worries. Automation and infrastructure leave people to do what they do best, interact with people to solve problems.”

Supplementing our top team, the backend system called “ProCodeManager, which has seen nearly as much development as ProWorkflow is the ‘Engine’ behind the business and provides us with information on every bit of activity in the business, including dashboards for all user activity, follow up, account management, and financial performance.  PCM also highlights issues, ie: mail backing up, server errors etc. So it helps keep us all  on the ball!

The company has no debt, no cash needs beyond sustainable growth, market salaries, corporate governance, no need for funding, sufficient cash in bank to consider dividends, a 7 figure revenue and a growing happy user base.  We can see the growth and customers tell us PWF really helps in their business – a great place to be,  The PWF solution is essentially  ‘recession-friendly’ as it allows customers to  focus on efficiencies. Saving money in hard times is a handy substitute for revenue growth. Furthermore big business is breaking into small businesses in the USA (and all over), creating a much larger market of SME’s (our target market).

As about 75% of our revenue is charged in USD from offshore customers and the US Dollar has finally returned to a realistic cross rate that has been a shot in the arm for us, we really would like to see the New Zealand government taking more note in policy of our wild currency fluctuations.  It would help us plan better.

In our view the key metric for business is revenue per employee, we are driving for a target of US350k per person, at this level we are relatively immune to what the world does in terms of economic activity.  We are exposed to some risk through broadband connectivity so the better and faster our connections to the world the better for us.

Expenses are relatively fixed and we should be able to drive about 300-500k of revenue per staff member.

With hard work and determined effort  we have made page 1 on Google for the term “Project Management Software” and are now finding an increasing number of referral based sales as we’ve been around a few years now. We’ve been aligning our marketing spend to our product releases and the tidiness of PCM and will tweak it more as our organic growth increases.

We released Xero and QuickBooks integration last year, a Time Tracking Widget in Q3 08 and have just finished the ProWorkflow API.  We have a growing number of developers lining up to get into the API, either to integrate with their intranets or to build cool apps! We plan to build an app library for the ProWorkflow solution this year.

The ProWorkflow affiliate program is about to be launched late Feb and our plan is to drive this hard. We want to reward those who refer sales to us.

As our biggest user base is in the US, and the US has been dropping around 500,000 jobs each month, we have of course noticed some slowdown over recent months.  But once customers move past the shock of revenue falls, efficiency soon gets on the radar – so growth, for us, is back.  For us 2009 is about pushing out to new customers, keeping on keeping on with our efforts to supply good products, build on top class infrastructure from a low inertia operation.

So yes, we are in great shape. Slim, trim and rocking!  We will continue to work hard to support our customers and help then find efficiencies – a real substitute for revenue growth until the global economy bounces back

And my advice on company survival does not change in hard times or at any time.   Grow sales faster than costs, automate process, focus people on the stuff only people can do, have a real value (savings or revenue growth) proposition for your customers, if you can, be international from New Zealand.

Remember, if you have to SELL a product, you’re doing something wrong. Instead, you should be FACILITATING a purchase. Think about that for a bit…

————-
About the author:
Julian Stone, CEO – Project Management Software visionary for:
ProActive Software, ProWorkflow, ProWorkflow Blog & Julian101
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He’s right though. We operate a leading project management software company – www.proworkflow.com. We’ve been around since 2002 and have seen a few things over that time. The most obvious is the natural shift from a ‘Code Selling’ model to a ‘Subscription/SaaS’. I say a ‘NATURAL’ shift because over the past 4 years we’ve been marketing a single solution with both code download and subscription option.

When we began, we only offered the code download option, and listed in many code libraries. 2 years later, we started the subscription offering (SaaS/Software as a Service). At no point did we ever really push the deployment option as a marketing angle. Simply put, our approach has always been that we have a solution, and customers can either download locally or host with us on subscription. It’s their choice – not us pushing.

Admittedly, the past 6 months our focus is leaning towards the idea of a full subscription model, but only because the ‘Code Download’ option has declined to the point that it’s obvious it’s a trend. We want to invest our efforts where the best return is for ourselves and the customers.

“So we’re not forcing subscriptions, rather the customers are now ‘preferring’ that option
- This marks a change in businesses perception of SaaS as a viable and credible option”

At our company, ProActive Software (www.proworkflow.com) code sales these days are nearly non existent as users are looking for SaaS solutions so they can outsource the maintenance aspect of their core software (They just want to use it – not have tech/IT hassles). It may cost them a little more in the long term for SaaS solutions, but we’re finding that in this economy businesses don’t have large piles of cash for traditional perpetual license purchases. They are looking at their cash flow and budgets monthly rather than annually. The Subscription/SaaS model suits this as it’s typically a low monthly price, and they can have the flexibility to leave at any time.

Some software co’s may say “flexibility to leave at any time” is a bad thing, however the opposite is true. SaaS companies must perform, deliver and support at a high standard if they are to keep their customers. This adds value to the customer as it’s not a purchase, but an ongoing relationship with the SaaS co.

Support is better, more proactive. Updates are delivered faster. The feedback loop from customer to developers is closed and all customers start to work on the central solution with a couple of common goals.

Customers – Make suggestions to the software company so the solution will work better for them

SaaS Company – Works hard with customers to perfect the app and systems so they can reduce support load and increase customer satisfaction.

So what’s the difference in regards to the software company making money?

With traditional software solutions (perpetual licensing), the software company would need to make double the sales to double their revenue.

With SaaS companies, the software company only needs to hold onto the customer for twice as long to double their revenue.

And we all know it’s a lot easier to retain a customer than to find a new one! So to put it very simply, With SaaS, the software company MUST satisfy it’s customers not just once, but continually to succeed. And that has to be good for the customers!

————-
About the author:
Julian Stone, CEO – Project Management Software visionary for:
ProActive Software, ProWorkflow, ProWorkflow Blog & Julian101
————-

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…

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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I’ve asked permission from this company to republish the email conversation as it sheds some light on talking to ‘price driven’ customers. Here’s the email… (Read from Top down)

———-

CUSTOMER: Hi ProWorkflow team!

Just checking to see how much a 2 user license would cost running ProWorkflow on my own server.
Thank you.

- CUSTOMER

—–

Hi CUSTOMER,

Thanks for the enquiry…

We have a standard price of $20 per staff login per month, with code customers we change it so instead of paying per month, you can pay 3 monthly, 6 monthly or yearly. You can always get in touch with us to increase/decrease this number.

So it would be $40 per month x the recurring period you would like, so if you want to pay 6 monthly then it is $240 per 6 months.

- PROWORKFLOW

—–

CUSTOMER: Hi ProWorkflow team!

I am afraid that I will not be able to justify $480 per year recurring. You have written a fine piece of software but there are other much less expensive options, one being ??????? which is free for up to 10 users (they also offer a QB link for extra $). Others would include ???????, ????????? and ????????  (PWF Note: Whatever you do, someone always does it cheaper!)

I know that you used to have a perpetual licensing model. I could justify the $480 as a one-time purchase and would be happy to pay for upgrades periodically. (PWF Note: Maybe, but on that model R&D is unsustainable)

I don’t expect you to change your pricing for me  just wanted to provide some feedback.

Thanks much.

- CUSTOMER

—–

CUSTOMER: Hi ProWorkflow team!

Thanks for the feedback… Just some background though so you see where were coming from.

We have been developing the ProWorkflow solution for a long time. We listen to our customers and it has become clear over time that different customers have quite different needs. Our customers differ significantly in how they manage their projects, staff and processes. There Is no standardized way to manage projects and staff, each business tends to evolve a process that works for them using a mix of different systems and tools. Our aim is to continually develop a flexible solution that meets most needs, but the fine balance between ease of use (usability) and having every feature is ever present. So is the trade off between cost, features and service.

Different customers also look for differing levels of product support. Some are happy with a ‘next working day’ response, others want it now. Some want a one off fee, others want recurring – these differences are largely driven by the variation in the different business models used by our customers.
So the service and features required differ from customer to customer, and often what a customer needs today changes tomorrow.

A ’single solution’ simply did not deliver what our customers are asking for. So we have moved to introduce Standard, Professional and Advanced product offerings that bundle features and services to better match customer needs as they have been expressed to us.

Customers can choose whichever option suits them best, switching as their needs change.  So they can use the $30 Advanced version, then switch down to the $10 Standard version for a few months. This flexibility is the reason behind the 3x packages.

Regarding recurring VS perpetual licensing though…

Customers have asked for more  features, service and support.
- This costs ProActive, not only up front in infrastructure, but also ongoing per account. Ie: A perpetual license is fine, but if you ever need support, it needs to be in place, as does the R&D team so that there are upgrades being developed to offer. This all has a cost ongoing to ProActive that scales, regardless of whether a customer has perpetual licensing. So the one time fee doesn’t work as a sustainable model.

Product delivers value ongoing.
ProWorkflow delivers ROI not just once, but ongoing, for many years. Our licensing reflects this.

Underlying quality, reliable technology has increased in cost
All our technology partners have increased in cost. A free model would not allow us to recoup this.

I really cant speak for the other companies, only ours, but I can tell you that we’ve done a great deal of research into the cost of R&D, infrastructure  and support resource as well as the ROI the solution delivers. Were happy with our pricing now as we can build a sustainable company. Many of these other cos are eating into VC funds to win customers, or using free accounts as a marketing tool, hoping to get new customers to Spread the word. That’s not sustainable long term so we avoid that.

I hope that’s shed some light on our scenario  ;-)

Kind regards,
- PROWORKFLOW

—–

CUSTOMER: Hi ProWorkflow team!

Thanks for such a detailed response. I totally understand where you are coming from. It is logical. (PWF Note: Awesome! They understand!)

My complements again on a great product. I have evaluated something like 35 alternatives. (PWF Note: This is normal – the amount of solutions people try prior to PWF) Not-withstanding your comments I think you have hit the nail on the head. It amazes me that some folks can spend so much time and energy and still get it wrong. (PWF Note: Agreed!)

Best wishes for continued success.

- CUSTOMER

—–

SO that is the conversation! Always remember that when talking to price sensitive customers, the issue is seldom about price, rather they often just think it’s a random figure, not based on anything and easy to change. Also focus on explaining the reasons behind the pricing.

A SaaS customer is a relationship. So keeping honest and open and educating the customer is the best way to get them on board.

About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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Republishing Note:
Anyone is welcome to republish this article as free online content, provided that the paragraph below is included in the full form as shown.
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Here at ProWorkflow, our churn is fairly low, and many remain as long term customers. I’ve seen quite a few companies move between businesses and employment and recommend ProWorkflow as they go. I can think of many instances where customers have used ProWorkflow at 3 or more businesses or places of employment.

But keeping on the topic of churn, there is one common similarity between those few customers who cancel that has me intrigued. Nearly all of them leave ProWorkflow in a really positive manor and rave about us and the product as they ‘leave the building’. It’s perhaps not the right ‘fit’ for them now, but they love us, love the product and tell us to keep up the good work!

We always take the comments onboard and continually seek to improve the solution. Here’s an example of a really polite, encouraging cancellation (Thanks Zak!):

Hi Julian,

ProWorkflow was fantastic!. It is well laid out, has all the features needed and is easy to use. I really enjoyed using it. I have trialled more than 12 other online project management Web2.0 apps in the past couple of years, but yours was definitely the best.

My challenge was to encourage our clients to use it, but that provided difficult. Most of our clients, senior professionals, are GenX’rs who still struggle with Web2.0 apps and online portals. So we decided to cancel the service rather than keep paying the fee monthly as it sat idle.

However, in saying that, the next opportunity I have to sign up with you guys in the future, I will. But for now we have to cancel. Again, thanks for the great service. Keep up the great work and innovation and I will be recommending ProWorkflow to all of our B2B partnerships and government agencies wherever I can.

Many kind regards

Zak

Realising that your product doesn’t fit everyone – all the time – is a key to building relationships and not burning bridges. As corny as it sounds, I’m sincere when I say that we like to make friends with customers coming onboard, and keep them as friends if they leave.

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

So here goes! My attempt to describe the industry:

“Being in the software industry these days is like trying to build a house on top of a train travelling at 200kph heading towards a tunnel – and the train tracks are still being built with no indication as to where they’ll lead to!

And all the time you’re trying to get people to rent a room in the house you’re building on top of the train!

And did I mention there were 50 other trains all heading toward the same tunnel?”

How’s that for an adventurous ride! I’d be keen to hear other people’s thoughts on the industry and how they’d sum it up in an ‘elevator pitch’.

I keep thinking though, how are the young kids coming through ever going to be trained sufficiently at any college to understand, be a part of, or excel in this new world? What they learn at school/tech is outdated when they leave, and you can’t guess the future trends enough to teach them.

It’s definitely going to breed some new thinkers in the coming generation. The new blood is going to have to ‘hit the ground running’ in highly competitive markets with little credibility or resources – only ideas and limited skills.

It’ll mean some really creative ideas will come through – possibly new business models, but my concern is that (in very general terms) we’re going to end up with a few ‘fad mega-successes’ or ‘mega-mergers and acquisitions’ and a huge number of struggling niche ideas with good revenue. Sustainability will become a rarity.  This is a “very general idea” of what could happen based on my knowledge, talking to hundreds of software co’s and some guesswork.

Year: 2000
20% – Struggling Software co’s
75% – Average Software co’s
5% – Successful Software co’s

Year: 2004
40% – Struggling Software co’s
56% – Average Software co’s
4% – Successful Software co’s

Year: 2008
60% – Struggling Software co’s
27% – Average Software co’s
3% – Successful Software co’s

Year: 2012
75% – Struggling Software co’s
23% – Average Software co’s
2% – Mega Successful Software co’s

Year: 2016
85% – Struggling Software co’s
14% – Average Software co’s
1% – Mega Mega Successful Software co’s

With the increase in competition, speed of new players (coming and going) and more M&A’s by Google and others… This is how I see it going. I hope I’m wrong, but time will tell…

Republishing Note:
Anyone is welcome to republish this article as free online content, provided that the paragraph below is included in the full form as shown.
————-
About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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Here’s my comment on the issue…

Design is everything! and its nothing! If you have function without form, people are slow to adopt and will tell people your design sucks.

If you have form without function, people tell people the tool is awesome (even if it doesn’t meet their needs). So you’ll get higher signup rate with higher churn.

But then forget all that because all industries treat design differently anyway.  ;-)

Good design can help viral spread in (for example) vertical creative and IT sectors as people like to ‘be seen to use the cool tools’, however interestingly enough… in the general SME market that XERO and IPayroll are approaching, design means diddly squat – it’s functionality and usability that matters (design is just the icing on the cake).

Note: I do like the XERO design (slick) and dislike the IPayroll design (too 1998) personally.

Yes you need a tidy design, but the SMB market will be captured by meeting their needs at an affordable price without pee’ing them off through usability issues. It could be a wet fish with a screen for the SMB market – but if it ‘does the job’ it’ll sell.

Simple as that!

I’ll put it differently…

If approaching vertical markets like creative or IT, it’s the ’slickest solution’ that gets the rave reviews. people are fickle in verticals and chase the ‘new hot thing’ so if you don’t ‘meet their needs’ you won’t be in the game for long. We’ve been working hard at ProWorkflow (Project Management Software) for some time to strike the balance between nice design and solid function.

But in the general, wide SMB market, it’s the solution that ‘does the job’ that’ll sell. These people can’t be fooled. If it doesn’t work, they’ll drop it. Forget pretty buttons, 72pt type, mirrors and glows. the SMB market just want you to ‘fix the problem’ whereas many vertical niches want to ‘look cool first, then fix the problem second’

Disclaimer. I’ve been selling to thousands of SMB’s and verticals for 5-6 years and the secret to closing a sales is whether you use design, usability, functionality or pain as the ’sales closer’.

Knowing which approach to use and when comes with broad experience and experimentation.

Maybe someone should start a business doing ‘Design As A Service’ specifically for SaaS business wanting to use Web2 approaches on new platforms?

We’ll call it DAAS for SAAS on PAAS!

Oh! and FYI… this is an example of exactly what not to do design wise…
Check out: http://www.zogix.com/

God Awful! When Web2.0 design goes bad! Cutesy bubbles, shadows, pink and HUGE type (cos we’re all blind). This is an example of design not being applicable to their market. And there’s no relationship between their site design and the product design.

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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http://diversity.net.nz/xero-year-end-results/2008/05/14/

Here’s my comment on the blog post.

What it amounts to I believe is that XERO is like no other business in the sense that, remarkable product or otherwise, to build a sustainable SaaS business just takes time and hard work (and watching the balance sheet).

SaaS businesses in the early years always looks ‘on the surface’ like they’re finding sales hard as the revenue always appears less than people expect. This is because the very nature of SaaS is many, small payments, monthly. It takes time to build the revenue, and for quite a while it seems like not a lot is happening – but then the revenue picks up. And SaaS revenue is like gold!

When you have thousands of committed customers paying monthly, it takes a major event to dent the revenue stream. SaaS becomes a solid revenue model, compared to traditional software service companies that may have only a few high paying customers. ie: When they lose a customer – there goes 250k and some jobs.

I do wish XERO all the best, and New Zealand’s tech community is watching with great interest, but what we all want to see is XERO get to the positive cash flow – covering overheads, before the cash in bank runs out. A XERO success is good for everyone…

So yes, looks like they need to ramp up fast, and they’ll know that and be working towards it… But my comment for the day (We’re in SaaS too) is don’t judge a SaaS businesses potential by it’s first years results. it’s the nature of this type of revenue stream to be low initially, then (if they have a winner product/model) it grow exponentially.

What we don’t want to see is linear growth. These business models should grow exponentially.

As a side note. It takes some balls to run a company with public financials. I wonder what comments we’d all make if we could publicly scrutinize each others business accounts?

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