Thursday, October 09, 2008
Sequoia Capital Meeting: Our take on the economy and on-demand adoption
Chris Barbin
There's a lot of talk today about a meeting held earlier this week at Sequoia Capital, Appirio's lead backer, with the CEOs of their portfolio companies. The headlines grab your attention: Sequoia has emergency meeting, Sequoia sounds the alarm, Sequoia says to cut expenses now. The meeting was held in confidence, but we thought we'd share our perspective on the condition of the economy, what it means for Appirio, and, most importantly, what it means for customers considering the adoption of on-demand.- SAP customers faced difficulty financing upfront license fees. On-demand customers, on the other hand, pay for their solution as they use it. They don’t need to finance a big up-front investment in a monolithic solution with an uncertain business benefit.
- SAP customers balked at difficult-to-justify maintenance fees. On-demand customers, on the other hand, know what they are paying for — they see continual enhancements to their solutions without expensive upgrades or patches.
- SAP only learned of this in the final days of the quarter. On-demand customers, on the other hand, don’t need to engage in the edge-of-the-cliff negotiations with their technology vendors at the end of the quarter. These vendors know that they will only keep their customers for as long as they are able to create value, and need to be working every day to keep their customers happy.
The average company spends 4-6% of revenue on IT-- for a customer at $1B in revenue, that is $40M - 60M in annual IT expense. Organizations that 'cloud-source' their IT infrastructure to on-demand providers can reduce this to 2-3%... a 50% reduction. This model provides cash critical in a down economy, and also provides executives flexibility and innovation that on-premise vendors cannot.
Labels: CloudComputing, investors, Microsoft Exchange, SaaS, SAP, Sequoia-Capital, Software as a Service, VC
Thursday, March 20, 2008
What Do Open Source and On-Demand Have in Common?
Chris Barbin
What Do Open Source and On-Demand Have in Common?
They both keep Steve Ballmer awake at night? Nope, too easy. They both changed the game in enterprise software? True. But the most interesting answer is "community" - they are both driven, and advanced by, the power of the community that surrounds them.
This power was one of the topics raised at this year's Dow Jones Web Ventures conference held earlier this week, where Appirio joined Vauhini Vara of the Wall Street Journal and Salesforce.com president Steve Cakebread onstage.
(Interesting side note: Steve Cakebread is not only president and Chief Strategy Officer at Salesforce.com, but also a Salesforce.com user, and the system administrator at his family's well known wine business - Cakebread Cellars. It's a testament to the simplicity of Salesforce.com that the same platform can serve both a 60,000 person company like Japan Post, as well as a 50-person SMB shop like Cakebread Cellars.)
We joined Steve and Vauhini onstage to discuss how we're using the Force.com platform to create custom SaaS applications for enterprises like Dolby Laboratories and CRC Healthcare. The questions during Q&A focused mostly on core topics - about a potential recession, whether hybrid vendors like Oracle and Microsoft will succeed in on-demand, why Salesforce is betting on the platform play versus offering more applications, etc.
One of the most interesting questions - the one prompting this blog - came from an audience member who asked, "How does Salesforce take user feedback into consideration when developing their platform?"
Steve said that Salesforce.com is giving the community - users, partners, customers, prospects, developers - a public forum where they can share their ideas and suggestions and implementing a process to take action. Salesforce has created an on-demand product called Ideas to create this forum that turns ideas into action. It ranks the most requested suggestions, which they then incorporate into their own product development. They also use it to encourages their partner community, including vendors like Appirio, to address the other ideas that don't make it into their own development cycle. Salesforce Ideas is now being implemented at other companies, like Dell and Starbucks.
This illustrates a fundamental shift in how product development, IT and enterprise software organizations operate now. Taking a page from the open source model, smart companies like Salesforce.com, Amazon and Dell are tapping into the community to drive innovation internally. The Internet has given them the means of collaboration. Each of these companies focuses on transparency, openness and getting rid of the "not invented here" syndrome.
We like to say here at Appirio that you have two ears and one mouth for a reason - you have to listen to your customers if you're going to win and keep them. It's nice to see that we're in agreement with the leaders in our industry.
Labels: Dow Jones Web Ventures, IDeaS, on-demand, open source, SaaS, salesforce.com, Software as a Service, VC
