Venture Capital Jobs Blog

Curated by John Gannon and Team

Posts Tagged ‘

Why Do SaaS Companies Lose Money Hand Over Fist?

leave a comment »

It seems pretty clear these (, SuccessFactors) SaaS companies could be just as profitable as SAP if they were prepared to dial back significantly on their growth. SaaS companies spend money hand over fist because they’re engaged in a land grab. The big players like SAP are extremely slow getting to SaaS for various reasons. As long as these companies can grow like this, they should keep investing heavily in it. The likelihood an on-prem vendor will dig these customers back out again seems very low. Customers being taken this way are probably lost for good to the SAP’s of the world.

(excerpted from Smoothspan blog post)

Written by John Gannon

May 19, 2009 at 4:03 pm

Cloud applications need (business continuity) love too

with one comment

Image representing Salesforce as depicted in C...
Image via CrunchBase

More and more businesses and consumers are trusting their data to SaaS providers who store customer data in the cloud.  Of course you have the well known SaaS players like and 37signals but there are also plenty of smaller guys out there.  Because its fairly cost-effective to build a SaaS app thanks to Amazon and other utility computing players, you have a proliferation of companies and solutions from which potential customers can choose.  Choice is certainly good for the customer, but because the SaaS space is so fragmented with many small players (many of whom are probably not financially viable in the long run) you could see a situation where your SaaS provider goes under, and takes your data with it!

There are a few ways to mitigate this risk, although frankly none of them are that great in my opinion:

  1. Work with only larger SaaS companies and ignore smaller SaaS players (lose out on innovations made by smaller companies)
  2. Request raw data dumps from your SaaS provider (good luck making heads or tails of that data)
  3. Work with providers who agree to some standard APIs or data models that allow for easy retrieval of data and prevent lock-in (we’re a long way from that sort of nirvana…)

I know many SaaS companies would happily do #2 (especially if the topic came up as an objection in the sales cycle) but frankly, without #3, there is not much a customer will realistically be able to do with the data.  Taking a vendor’s proprietary data format and making heads or tails of it is generally quite painful.  Small-medium IT shops may certainly get a warm fuzzy feeling that their SaaS provider will give them all the data they want, but if the customer is actually forced to do something with the data because their provider goes out of business, chances are they are going to spend alot of time and money ‘restoring’ the data into a comparable application environment.

Painful stuff…I wonder when we will start to see SaaS vendors moving in the direction of #3 (portability and interoperability between SaaS apps)?

Reblog this post [with Zemanta]

Written by John Gannon

February 21, 2009 at 11:58 am

Service Level Agreements in the Cloud

with 2 comments

Yesterday I posted a comment on SAI regarding Oracle’s use of a single tenant SaaS delivery model for CRM on demand.

I can understand why some customers want to be hosted on their own physical hardware.  However, I think this is actually a really bad idea from a service reliability perspective.

Think about it: if has a service issue which affects a large number of customers, they are going to respond as quickly as possible and give the situation the highest sense of urgency.  Whereas in a single-tenant scenario like the one proposed by Oracle, if you have an issue that is isolated to your single-tenant infrastructure, there  will be much less urgency in resolving your issue.  After all, you are just a single customer.

I can’t take credit for this idea as I had heard it several years ago from the guys at Keynote Systems.  Those guys have a whole business around SLA monitoring so I give it a great deal of weight.  It made alot of sense then and I think it really does now in this cloudy world.

Reblog this post [with Zemanta]

Written by John Gannon

January 28, 2009 at 12:48 pm

%d bloggers like this: