How do you know if your SaaS provider is a good choice? A session at the recent MIT Sloan CFO Summit provided some insight that might prove useful the next time you’re vetting a SaaS provider.
The panel was billed as a primer on what CFOs need to know about cloud computing, featuring the top financial executives of four SaaS providers. Far more interesting than the familiar chatter on the promise and pitfalls of cloud computing, however, was the panel’s response to a question from the MIT research scientist and moderator George Westerman on how SaaS providers gauge their own financial health.
Like any subscription-based business, the telltale heart of fiscal health for a SaaS provider is customer acquisition and retention, with the emphasis on retention. “I think of our business in terms of lifetime value,” said Harpreet Grewal, CFO of Constant Contact, an online email marketing provider. The key indicators for his company are how much revenue it is generating from customers, how long it is retaining them and how many customers it is adding to its core base. The cost of acquisition is high, so a smart SaaS provider “has to win over the customer every day,” Grewal said, because it is so easy for customers to switch them off. Panelist Ron Gill, CFO of NetSuite Inc., the maker of Web-based accounting and business software, said that the key metric of a SaaS provider is “net add” to annual revenue.”Basically, it is a game of building up a base of recurring revenue, keeping it and adding to it,” he said. That net add is a more important gauge than whether a SaaS provider meets quarterly guidance, the SaaS providers said.
Because recurring revenue is the mother’s milk of a SaaS business, CFOs claim they have more time to think strategically, rather than sweating every quarter about whether or not the last 20% of revenue is really coming in. That’s probably a good thing.
A prediction one of the panelists made was that the SaaS vendor landscape is poised for huge consolidation, similar to the software business shakeup that occurred after the advent of client-server computing and the release of R/3. “In 10 years, the real winners are those that offer platforms and are not just focused on building applications,” said Gill.
Yes, but what about security?
While security is a concern commonly voiced by customers when vetting a SaaS provider, the panel insisted it is the price of admission for any company that deals with sensitive data and hopes to remain in business. A couple of pointers on security:
1. When your SaaS or cloud provider says it is Statement on Auditing Standards No. 70 (SAS 70)-certified, make sure that applies to the data centers where your information is located, and not just a headquarter location, said Joyce Bell, CFO of ClickSquared, a provider of on-demand marketing software.
2. Read the SAS 70 report to determine if the controls are built into the processes the SaaS provider is running, and if the controls actually matter to your business, advised NetSuite’s Gill.
3. Your SaaS provider should give you a way to measure the controls yourself, said David Frenkel, CEO of Panviva, a maker of enterprise desktop software, or measurements are “as meaningless as the paper they’re written on.”
The buildup and tear-down of a business’ online reputation is akin to neighbors gossiping over the fences, except for the fact that social networking sites allow millions of strangers to see and hear why you would never buy your produce again from a regional grocery chain.
Back in the day, the primary recourse a consumer had was reporting a business to the Better Business Bureau or writing a letter to the head of a company. And in the early days of the Internet, complaints on community blogs were pretty much ignored by businesses, or were ripe areas for a business to post its own accolades. In other words, they weren’t considered a real threat or boost to a business’ reputation.
These days, customer frustrations are broadcast across YouTube, MySpace, Facebook, blogs and Twitter. And, lo and behold, you now have an online reputation to deal with.
Take United Breaks Guitars, a Youtube video by Dave Carroll. Baggage handlers broke his band’s guitars, and he wrote a song about it when United didn’t respond to his complaints. The video went viral. United apologized and donated $3,000 to a charity, but it was too little, too late. Millions of people watched the video and many made complaints of their own against airline practices, in general.
But there are ways that businesses can make it all go away, or at least bury complaints.
Services like ReputationDefender, based in Redwood City, Calif., help businesses control what customers see when they search online. The service essentially crawls social networking sites and pushes down unfavorable information, so that more positive information appears higher up in search.
This is a snippet of how the service works, according to the company’s website:
After identifying existing positive and neutral content about you and pushing to the top of your search results, our professional writers and editors create new, personalized, truthful internet content that’s consistent with the image you want to promote.
You review the content and have final say on its substance and tone — it’s your reputation after all.
Along with your new content, you’ll have direct access to a personal portfolio of web rankings, trend reports and monthly profile progress statements — all of which will be monitored by a dedicated image agent available by phone or email to answer questions, offer advice or simply marvel at how damned good you look online.
Then there is a crop of customer feedback management vendors and social media analysis tools that are starting to develop features that crawl social networking sites for mentions of your company name, with the goal of redirecting the destiny of your online reputation.
When a mention is found, you receive an alert, and what you do with this information is up to you.
The mainstay customer feedback survey vendors (Vovici Corp., Confirmit Inc., MarketTools Inc., Medallia Inc., Mindshare and Allegiance Inc.) and text-mining applications like Attensity are a few years out when it comes to developing modules that gather information from social media networks, according to Gartner analyst Jim Davies.
The primary way many businesses are still dealing with their online reputation is by feeding online complaints to the help desk, or tweeting the customer back — as is the case at companies like Comcast.
Moving into 2011, I think online reputation management is going to become more of a priority, and tools and services will become more readily available to address it.
But social networking sites just might incent more businesses to address problems up front, to avoid being the punch line of some hilarious customer complaint videos.
And while videos may be a more entertaining format, don’t downplay the power of Twitter.
Alice, from the comic strip “Dilbert,” asks IT nemesis Wally to make a change to a report. Wally’s response: “I need a business plan for your request.”
The exchange is telling of an IT culture stereotype — “Why can’t IT just give me what I need, now!“ But it’s also telling of what can go wrong with the concept of IT/business alignment. IT is expected to integrate itself into the corporate culture and follow the business rules. This alignment is supposed to alleviate, not add to, the hoops that each side has to jump through to meet the end goal.
But as mentioned above, it doesn’t always work out that way. The blame is on the business side as well (the need for a business plan comes from the business), yet the IT culture usually takes the hit.
What I mostly hear about is how the IT culture, not the business culture, needs to shift. A key criticism being that IT needs to treat the business’ customers as their customers, versus the business’ end users as their customer.
If the IT organization acts like any other department — marketing, sales or product development — the need for IT/business alignment goes out the window. IT is simply a business organization, rather than a technology organization, serving the needs of their business, and, ultimately, the customer.
I see the need for this kind of thinking, as Tim Crawford, CIO of IT services company All Covered, explained to me: Marketing doesn’t get in front of executives and start talking about their product; they talk about how it will help the business.
“[The marketing head] is talking about the message, and how the message is going to turn into greater sales and greater adoption of the products and services. [CIOs] need to have a conversation with the head of sales and marketing to say, ‘Look, I know marketing’s focus is getting the message out. I know sales is the one out there trying to pitch the message. Wouldn’t it be great if, as soon as you had a change in message, you could get that immediately into sales’ hands, and as sales is getting feedback on what’s resonating and not resonating on the message, that can get right back into marketing? Would that be useful?’
“There might be technology that’s enabling it, but nowhere in the conversation was technology mentioned.”
He is a strong proponent of the need for a shift in the IT culture on many fronts, but he is also realistic. The business needs to change the way it thinks about IT as well.
The CIO wants to learn more about the business — treat the business’ customer as its customer, but that means that the business side needs to be the one that brings that CIO into the customer fold.
“There’s a change in thinking that we have to do with the business we serve as well. [IT] has taken 30 years to build up this wall; now we have to spend some time and some of that equity breaking it down and changing the paradigm, not just in IT, but outside of IT as well,” he said.
So be prepared for a conversation that may go like this, explains Crawford:
CIO: “I want to understand what’s happening with our customers. Can you get me in front of the customers?”
Marketing or sales head: “Why? You don’t serve the customer. You serve internal organizations.”
Sounds a bit like a “Dilbert” cartoon.
I asked Gwen Thomas, founder of the Data Governance Institute, how businesses’ data management plans were changing , and she started to explain why “The Tragedy of the Commons” summed up the politics behind a data storage plan, and the need for data governance.
“The Tragedy of the Commons,” in a nutshell, is the story of how villagers were given free rein over pasture land. Their cows could graze wherever, and whenever, they wanted on open fields. No one was in charge, and no farmer was incented to have his cattle or sheep eat less. This is a recipe for overgrazing, since a common ground approach only works if everyone understands their neighbors’ needs and are incented to do the right thing for their neighbors.
“A storage ecosystem is so much the same,” Thomas said. “If I’m collecting data for operational purposes, I have as small a budget as possible, which means I’m not excited about putting in metadata (which costs money to do) just so another group in the organization doesn’t have to spend an additional 30% later to find the data.”
In other words, people aren’t very neighborly when it comes to sharing the costs of data storage or the process of classifying that data so people can find it.
But that resistance is changing. Now people are suffering the costs associated with e-discovery, or compliance or search, and realizing that no one was paying attention to things like metadata and data classification, she said. “Once they suffer the problems of not being able to find information, they move from a management-by-technology approach to governance that brings together the business, information management and compliance.”
And as you put a data governance plan in place, be prepared for bruised egos. Some are simply going to believe that their own data is not as important as their neighbors’, because they get stuck with the least expensive storage technology and capacity. And they won’t understand why they need to incur the cost of putting in metadata, especially if the data is being used for the benefit of the entire business.
“Operations will ask why they should be charged for capturing metadata for the analytics department, and marketing won’t understand why they are being charged either, when the collective data is being used on behalf of the entire company,” she said.
Who knew data governance could be such a political hotbed, or that storage strategies could have so much in common with farming? On a side note, does the excerpt below by Garrett Hardin, the author of “The Tragedy of the Commons,” remind you at all of your own approach to storage?
As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, “What is the utility to me of adding one more animal to my herd?” This utility has one negative and one positive component.
1) The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1.
2) The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1.
Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another. … But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit — in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.
Let us know what you think about this blog post; email Christina Torode, News Director.
IT service catalogs are apparently back in vogue.
The cloud, in part, is driving this renewed interest. People want to use IT service catalogs to manage cloud services that are delivered to various business units, and charge them appropriately for the use of these services.
Another factor is that the demand for them never went away — the money did.
According to Lisa Erickson-Harris, an analyst at Enterprise Management Associates in Boulder, Colo., a survey of EMA clients showed that 16% have already deployed an IT service catalog as part of their ITSM strategy, and another 56% plan to deploy a catalog. The study is a year old, but the demand is still there.
“IT service catalogs are a very hot priority for IT service managers,” she said during a webinar this week by EMA.
And IT service catalogs are set to start managing items beyond the walls of IT. The facilities department can use IT service catalogs to track office space or building codes, or the transportation department could use it to schedule maintenance for truck fleets.
The possibilities are endless, but they may not ever enter the business realm if IT does not first deliver on its promises.
She advises business to start small — pilot a project, test out catalog items and how the system works, before you introduce it to the entire company.
You can have all the IT systems working well behind the scenes, but if the IT service catalog is not in sync with those back-end systems, the project could be sunk.
“An IT service catalog can give IT credibility, or give IT negative publicity … there is risk involved, and that’s because [the catalog] is the front office. It’s what people see, and what IT will be judged on.”
An IT service catalog is no small undertaking — it involves setting policies for what employees can and cannot buy, establishing and living up to SLAs and back-end system integration. Or, does it really need to be that difficult? From what I’ve heard, many IT shops have built a catalog pretty quickly using SharePoint.
I came across a helpful post on the Edge of Chaos/Agile development blog on the 10 most common mistakes for agile adoption.
No. 1: Don’t start with a tool. Choosing a tool will only slow down agile adoption. No. 2: Don’t start with processes, but rather agile values such as communication, collaboration, feedback, trust and passion, the blog’s author, Michael Dubakov, advises.
Sage advice. One of our contributors, Joseph Flahiff, has 15 years of project management experience, the last five of which have been spent working on agile projects. He can’t stress enough how much communication is key to the success of agile adoption.
In his agile tutorial on SearchCIO.com this week, Flahiff explains:
The best description of the real heart of agile I have ever seen is buried in that [Agile Manifesto] history. According to [Jim] Highsmith (one of the manifesto’s authors), at the end of the [manifesto] summit, Bob Martin, another manifesto author, talked about the process of creating it and about how he “felt privileged to work with a group of people who held a set of compatible values … based on trust and respect for each other, and promoting organizational models based on people, collaboration and building the types of organizational communities in which we would want to work.”
This is what lies deep at the heart of agile: a set of values that put people first and foremost. Above all other things, in work of any kind, people are the most important.
It is not setting the scope up down to the letter — that’s going to change anyway, and it’s not about documentation — that often slows the project down.
The real sign that you are on the right track is a working piece of software … developed by a team of people. “Until a piece of code is working as you expected it to work, you have no empirical evidence that you are making progress. You have documents and plans, and you hope they may result in software that does what you want it to do; but you do not have empirical progress and you don’t have proof,” Flahiff said.
Still, putting people first over documentation, tools and processes is a challenge, as is getting the basics down for agile project management. To get started, Flahiff outlines agile definitions and project lingo in his tutorial.
What other agile basics would you like to see explained?
Last week, I brought up the topic of chief software architect Ray Ozzie leaving Microsoft. Since then, Ozzie, who rarely issues public statements, published a 3,453-word letter as a farewell and a final technology vision for Microsoft.
The “Dawn of a New Day” letter is a must-read. In it, he sticks mostly to the vision thing but also carves out some carefully worded explanations of why the company is where it is today.
Yet, for all our great progress, some of the opportunities I laid out in my memo five years ago remain elusive and are yet to be realized. … Certain of our competitors’ products and their rapid advancement & refinement of new usage scenarios have been quite noteworthy. Our early and clear vision notwithstanding, their execution has surpassed our own in mobile experiences, in the seamless fusion of hardware & software & services, and in social networking & myriad new forms of internet-centric social interaction.
It doesn’t take much to figure out that he’s talking about Apple and Google/Facebook. It goes without question that Microsoft has indeed transformed (a word he uses 14 times through the letter) not only the computing industry but also the world of business and communication. But a “seamless fusion of hardware & software” is something they’ve never been able to accomplish, and they have always trailed the pack when it came to creating “myriad new forms of internet-centric social interaction” — going all the way back to the first killer app, the Web browser.
Ozzie’s optimistic technology vision calls for Microsoft employees “imagining the ‘killer apps & services’ and ‘killer devices’ that match up to a broad range of customer needs as they’ll evolve in this new era.” But I’m still wondering if this is a vision that is already out of reach. Short of RFID implants or Wi-Fi access points attached to our corneas, we are already connected to the hilt. A bigger issue for businesses that want to be part of this future is management and governance. Those are areas that Microsoft can do a lot about, starting now.
Remember when Microsoft’s marketing machine could make up a word like goodness to describe a new software feature, and people would eat it up like, well, chocolate? The ooohs and aaahs at shows — and not just Microsoft-sponsored ones — when the vendor demonstrated products, were a bit cult-like.
And let’s not forget the famous video of CEO Steve Ballmer pumping up his sales team about the latest Microsoft technologies. The unveiling of a new Microsoft operating system was a major event that couldn’t be missed. Where’s that enthusiasm now?
Google, Apple, Amazon. Those were the vendors that kept coming up at a recent Society for Information Management event. Cloud, virtualization and mobility were the topics at every turn. Microsoft technologies on those fronts weren’t brought up too often.
One CIO said Microsoft’s smartphones blew away the competition when it came to email functionality, yet he used an Android. I saw many attendees carrying around iPhones, Androids, iPads and other netbooks.
Attendees also talked about replacing traditional mobile devices like laptops with end-user devices of choice, on hardware- and operating system-agnostic devices. The cloud and virtualization are allowing companies to build this hardware-agnostic platform, so why not let users buy their own devices, and play in their own OS-of-choice sandbox? One that maybe isn’t Windows.
Some people are questioning Microsoft’s ability to shift its strategy beyond OS licenses and the four walls of an office and the PC. Others are cheering on Microsoft’s efforts, particularly in the cloud, for just the opposite — its ability to create a community with no borders.
Microsoft is making some cloud counterattacks of late, with Microsoft Office 365, a direct shot at Google Apps. And competitors are trying to make their products more like Microsoft technologies, as seen by new features in Google Docs.
Windows visionary Mark Russinovich was also transplanted to the Azure team this year.
But while one Microsoft visionary joins the cloud team, another visionary, Ray Ozzie, was lost to it this week, as SearchCIO.com editorial director Scot Petersen blogged about. Ozzie invented Lotus Notes and founded Groove Networks, a company ahead of its time with its anytime, anywhere “virtual” collaboration software.
We’ve seen Microsoft fall behind before, and come back in a big way — where is Netscape today? Microsoft has lost considerable ground on the virtualization and cloud front with its late-to-the-game technologies. But again, it has made up ground with a familiar tactic, making its hypervisor free, and bundling virtualization technology with software already in place in businesses and managed by devout Microsoft shops.
Let us know what you think about this blog post; email Christina Torode, News Director.
It’s been years since the talk to break up Microsoft. When the company was on trial for antitrust violations in 2000, many experts felt that a breakup was just punishment.
But as time went on, many others, from a purely technological or financial standpoint, felt that breaking up was the right thing to do for the Redmond behemoth. Its stock has languished in recent years despite constant growth, and investors worry that as Microsoft cedes more control of your computing environment to Google, Apple and Facebook, its future growth prospects look dim.
They are right, and the future may be now as users in the mobile workforce start demanding more flexible and efficient computing alternatives.
The announcement this week that Ray Ozzie is leaving his post as Microsoft’s chief software architect, plus some illuminating comments by IDC analyst Al Hilwa, makes me think that it’s time to revisit this theory once again.
Microsoft has gotten too big to maneuver with the likes of the Big Three. “Microsoft’s business is probably too diversified to really depend on a single visionary or software architect,” Hilwa told The Microsoft Blog. “And besides, it is hard to operate when almost each division has a president with his own vision for the group.”
The day is certainly past when Microsoft should go the way of Standard Oil or AT&T, and the new power structure in the industry perhaps vindicates the company’s defense of its earlier business practices. It’s also way too late to recapture, for some, the days when the company didn’t have to work hard to attract and keep the best employees, some of whom are saying goodbye in interesting ways.
But it’s not too late for Microsoft to start taking some bold steps and start creating a future in which it can serve its customers and its investors with equal assurance. That includes breaking up or spinning out segments of the company that can flourish with less corporate overhead and more focus.
Virtualization, to me, is in many ways like vitamin supplements: Whether you want to save money, pool resources or make employees more productive, there’s a virtualization pill for that.
What I hadn’t considered was how developing a virtual data center — from apps and desktop through servers, storage and networks — could be somewhat of a cure-all for governance.
Your employees want to use an iPhone, but the approved smartphone is a BlackBerry? No problem. Your business managers want to use iPads, but you offer only Dell laptops? A virtual data center has you covered.
Take for instance Joe Surber, vice president and CIO of Atlanta-based natural gas distributor AGL Resources. Surber sees the virtual PC infrastructure that his company is building as a “real game changer” that will allow IT to let employees choose their own devices.
This may not be a cure-all for device management, but it’s a step in the right direction. CIOs are struggling with lockdown, versus a governance policy that allows for exceptions as cloud services and mobile devices creep in under the radar.
Virtualization lets IT govern, but behind the scenes. In the case of desktop virtualization, IT still controls what data those devices of choice can access. It’s what marketing people like to call a “win, win” for IT and users.
AGL was a BlackBerry shop, but iPhones and Androids were popping up everywhere. Surber’s IT team created an application that allows just about any mobile device to access the company’s application servers — that reside in its virtual data center. “So we can say ‘Yes, you can use that device, but we’re not going to pay for it,’” Surber said.
This leads to another virtualization pill: the ability for IT to say yes more often, while offloading some costs on the business.
I’m sure I’m missing ways virtualization is — and is not — a cure all, but I think virtualization is getting IT closer to staying ahead of the curve, as far as accommodating users’ needs.