Tag Archives: Software as a service

Because Money is Sexy

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Denis PombriantThe following is a guest post by Denis Pombriant, CRM industry analyst, author, and CEO of Beagle Research Group.

Why is enterprise sexy again? I take a long view of the question and position it within a macroeconomic trend.  The short answer is that enterprise software is sexy again because its time has come around again.  But here are some details to consider:

  1. More than anywhere else, enterprises live and die on the saying that they spend money for only two reasons: To make money and/or To save it.  So we are witnessing a paradigm shift, which your question alludes to.  Conventional, or I suppose we must call it legacy, enterprise software was built for a paradigm whose major attributes included client-server as state of the art, manufacturing as the primary business activity and one size fits all products.  That’s all gone.
  2. We are also at the end of a macroeconomic wave often called a Kondratieve Wave, or K-wave for short, whose major attribute was information technology (IT) as a competitive tool.  IT has become so much embedded in the fabric of business that it is no longer a disruptive innovation or differentiator.  You either have IT or you go out of business.
  3. The end of a K-wave usually brings a collapse of prices as everything commoditizes.  As your products lose their ability to command high margins, your only choice is to get lean or go home.  Companies that elect to go lean use information technology to shave cost.  Big companies need more technology than any others.
  4. The end of a K-wave (which can last 50-60 years) implies a new beginning.  But it takes time for a new wave to spin up to the point where it can support the huge demands of the enterprise.  Salesforce and NetSuite are each over ten years old and only in recent years have they become successful at penetrating the early adopters of the enterprise.  Social solutions are less than ten years old.  Twitter was founded in 2006 and Facebook in 2004.  It has taken a long time for them to scale to be able to support enterprise volumes and equally long to demonstrate value to the enterprise.
  5. The new enterprise business processes that will demand increasing amounts of these and other technologies are only now being built out.  Until there were tools resident in the cloud, able to collect and crunch massive amounts of data it was futile to try to imagine new business processes but now imagination can take wing.  A great example is Zuora, which has invented subscription management.  Zuora couldn’t have been imagined until cloud computing and SaaS became successful and companies became aware of the pain of doing business in a subscription world with manufacturing oriented ERP systems.  See my book, “The Subscription Economy: How Subscriptions Improve Business” and pay attention to the last chapter on metrics.  Most of the metrics don’t even make sense if all you know is ERP.

So, why is the enterprise sexy again?  Its time has come again.  There is a new business paradigm to be addressed and there is money to be made and saved by those who get there first.  Enterprise is sexy because money is.

About Denis
Denis Pombriant the founder and managing principal of Beagle Research Group, LLC.  His work appears in most major CRM publications both in print and online, in North America and in Europe.  His new research on social media adoption and benefits with Esteban Kolsky was published in August.  His new book, “The Subscription Economy — How Subscriptions Improve Business” is available on Amazon.  Pombriant is always working on a book and he maintains an active research, writing and speaking calendar.  He lives and works near Boston.

Special thanks to Craig Rosenberg, CEO and Editor of Funnelholic Media for connecting us with Denis.

 

Bill Wesemann: Sexy Has Come Full Circle

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Silicon Valley veteran Bill Wesemann knows sexy. With over 30 years experience, Bill has done it all, from selling computing services in the pre-PC era, through running worldwide sales working for Steve Jobs at NeXT and an IPO at Genesys, to angel investing and advising today. Below, Bill shares his insights on how delivering and selling enterprise software has come full circle, as well as a surprising story about the darker days at NeXT.

How did you get started in technology?
“In 1981, I was a pitcher in the San Diego Padres organization in need of surgery.  (By the way, the lifestyle of a minor league baseball player is similar to working for a startup.  You sleep when and where you can, and if you win that night’s poker game, you upgrade to the buses’ spacious overhead luggage bin.) Waiting in the doctor’s office for my surgical consult, l picked up a copy of Forbes with an article that changed the course of my life. It featured the Top 20 information services companies, among which were several big players selling computing capability directly to end users, including Tymshare.  I decided on the spot that was my next step and before too long I’d landed the job I wanted in sales.”

What has changed since the sexy pre-PC era?
“What I find really interesting is what was sexy at the start of my career in the early 80s has come full circle.  What made Tymshare and its competitors so revolutionary was that the buyer was the end-user and didn’t have to be hardcore programmers to use our service.

Just prior to corporate adoption of the PC, Tymshare offered “fourth-generation” software that allowed analysts to quickly develop applications and empower the end user.  In addition to owning the X.25 packet network called Tymnet, Tymshare also had early versions of email for which we charged $0.25 for every 1K characters.  Can you imagine that cost structure today? Needless to say, with an uncapped pay-as-you-use model, the bills got very big, very fast. As companies struggled to contain costs and set standards, a new regime run by the freshly-created Director of MIS, emerged.  With increased PC adoption, early versions of fixed-price packaged software, and solutions moved in-house, the model unraveled. In 1984, Tymshare was sold to aerospace manufacturer, McDonnell Douglas.

Fast-forward 30 years, and with the advent of SaaS, cloud technologies, social, and mobile, and the end users are once again discovering their own solutions. With today’s multi-tenant SaaS architecture, the ability to deliver cloud services anywhere to any device, and cost-effective per seat or pay as you go pricing has taken the enterprise software industry by storm. As vendors like Salesforce.com have shown, it is more cost-effective, scalable, and flexible to use on-demand could-based software.  So we have come full circle, only this time the economics favor cloud-based applications.”

What’s sexy today?
“I think the rise of angel investors in the past decade has been very good for enterprise all around. Early stage investors can not only participate in advance of seed rounds, but can contribute more than money. Not only can I share domain expertise, but I am also a partner and true fan of the business and the founders.  While the interests of traditional VC models and what is best for the business can sometimes be at odds, angels can be more patient and understanding of the ups and downs inherent to an early-stage company. Because we can become personally involved with the business, I believe this trend will continue to have a huge impact on the success of a startup.”

You know this post wouldn’t be complete without a Steve Jobs story, right?
“Well, I figured.  Let me quickly back up to the time just before I went to work for NeXT and set the stage for a classic Steve story.

When Windows 3.0 put a GUI on enterprise applications, people could actually use them – talk about sexy for the enterprise!  Before applications were natively built with a GUI (think PeopleSoft in the late 80s), we sold tools to augment mainframe applications with a Windows or OS/2 GUI. I sold one of those companies, Viewpoint Systems, to KnowledgeWare, a computer-aided software engineering (CASE) company whose CEO was none other than hall of fame quarterback Fran Tarkenton.  When I joined NeXT, I went from working with a CEO who knew everything about sports and nothing about software to a CEO who knew everything about software and could care less about sports. Talk about 180-degree change!

I mention CASE because it sets the stage for a classic Steve Jobs sales call story.  You see, NeXT sold enterprise application development software, so he actually had to go on sales calls.  This particular meeting was a big one with the US Postmaster General. There we are in a room in Washington DC, 20 guys in suits and the two of us (Steve clad in his classic uniform, of course).  Their very first question was, “Steve, can you tell me what you think of CASE?”  I cringed, and a full 30 seconds of silence passed.  Steve then pretends he’s going to sneeze and says into his hand as loud as he can, “It’s bull shit”. I cannot describe the stunned looked on their faces. Another 30 seconds of awkward silence passes and I say, “Next question?”  I’ve got so many of these great stories, but we’ll save them for a future post.”

What did you learn working for Steve Jobs that applies to entrepreneurs today?
“I will say the time I worked with Steve at NeXT were tough times for him. Some had started to write him off and he was struggling to find himself.   Even through the darkest days, the only time I ever saw him really down was when he briefly decided to give up the user experience and adopt the Windows GUI over the beautiful object-oriented interface we’d developed at NeXT.  Obviously he ultimately didn’t have to do it, but he almost conceded.  It was his spirit and relentless drive that never allowed him to give up.

I believe that those that were fortunate enough to work for Steve at any point in time are the better for it. I have had the privilege of working for many great companies, but I look back at those days as the best of my career.  We worked every day with a singular goal of doing something unique and contributing to something special.  It may sound trite, but that type of culture and unwavering dedication makes financial rewards secondary.   We got up everyday to hit a grand slam.  We weren’t satisfied with a base hit and we never gave up.   I think this is an important lesson for any entrepreneur that faces the fire, you’ve got to double down on faith and push forward.”

About Bill 

Bill Wesemann is a Silicon Valley veteran with over three decades of experience in enterprise software. He began his career in technology in the early 80s selling computing services in the pre-PC era with several successful exits. In the 90s, he ran worldwide sales for NeXT, led sales at Genesys, which went public 1997, and was then CEO of NextPage.  For the past decade, he been an angel investor, advisor, and on the Board of Directors LivePerson (LPSN).  

 

It’s time for me to confess…

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I think enterprise software is sexy as hell.  There, I said it. I think creating value that customers will pay for is extremely hot. A recurring revenue stream makes me giddy.  And nothing, absolutely nothing, turns my head more than profitability.

Why is enterprise boring by definition?  How can improving or changing the way people do business not get you fired up?   Even when I was a noob to the Valley, I still preferred business over consumer. Maybe it’s just because I don’t understand consumers or I don’t want to fall prey to their fickle nature.  Maybe I really am just old and boring and can’t accept it.  Or maybe it’s because I grew up in the age of SaaS.  At my first startup in 1998, we didn’t even know what to call it. We said, “Um, it lives in your browser.” [Blank stare.]  “You can log in from any computer, even from home.” [Furrowed brow.]  Our incumbent competitor wasn’t just premise-based, but kiosk-based, so it was a mind-bending concept for our prospects to grasp. At some point these magical services became ASP, then on-demand, then SaaS, and now we’re all happily living in the cloud – until the next rebrand.

The inspiration for this blog came after reading a great article in TechCrunch where Alexander Haislip explains that the model to follow is not Instagram, but companies that have “real intellectual property, obvious monetization and a plethora of cash-rich potential acquirers.”  I loved Alex’s contrast on the statistical exit probability and valuations of consumer and enterprise markets…. but it was the reader comments that hooked me. It was a lively debate and I’d wager I could guess the age of each commenter within 5 years.  And then I found the one that struck a nerve, “God in Heaven, I don’t know ONE techie who WANTS to build that crap!”

Crap? Really?

As I sat ranting in my head about how these SoLoMo app building, Red Bull drinking, freemium loving, hoodie wearing twentysomethings don’t have a freakin’ clue, it hit me – I am a complete hypocrite.  I cannot count the number of times I’ve turned up one side of my lip while emitting an audible sound of disgust at the thought of working for a global, lumbering, legacy enterprise like Oracle or Cisco. How could that enterprise be my enterprise?   I realized that, just as the newest generation of entrepreneurs and enthusiasts have little understanding of what’s come before them, I’ve completely failed to pay homage to all that came before me. … and what those companies did to empower our generation to build the next great thing on top of their achievements.

When I joined the “dotcom” ranks, we were revolutionizing the world with “the Internet,” turning tradition on its ear, changing the way the world communicated, and had zero respect for anything that got in our way.  In hindsight, it’s clearer to me that while all of that is true, we owed that opportunity to the trailblazers that made our revolution possible.  Without the on-premise and client-side software providers, what improvements would we have had to offer with our fancy new SaaS-iness? Without the hardware, database and communications infrastructure, what would we have built upon? The big boring behemoths are behemoths precisely because our world can’t run without them.  Remove that infrastructure and our apps, enterprise or otherwise, grind to a screeching halt.

I’d also venture to say that this generation’s arrogance is completely justified.  Social and mobile are absolutely revolutionizing how the world connects and interacts.  It did, however, take a lot of once-alluring hardware innovation and uber-sexy enterprise (and consumer) software to get here.

Thankfully Aaron Levie has declared enterprise is sexy “again” (twice!). And even if Dustin Moskovitz and Drew Houston haven’t explicitly declared their infatuation they (along with others) have certainly done it in deed. Yes, fanboys, someone can voluntarily leave Facebook for enterprise without dying of boredom. And just for the record, I love SoLoMo apps, Red Bull and hoodies.  Just don’t get me started on freemium unless you’re ready for an earful. It’s a topic for an upcoming blog.

Here’s my point: From mainframes to mobile, everything that has value was sexy at some point, even if that’s no longer the case.  This blog will feature interviews and guest posts from everyone along the way.  Tales from the trenches, lessons learned, and a timeless perspective on who and what has contributed to creating the industry I love.

Wanna share your sexy story through a guest post or interview?  Let me know in the comments or connect with me on Twitter.

Special thanks to David “The Punctuation” Gleason for his Wikipedia mind, colorful insight and masterful editing prowess.