CRM software runs my life

Month: August 2008

Costs of deploying SAAS

SAAS is a cheap delivery model right? Well it depends if you are a technical or a business oriented person. There was a very interesting article on Business Spectator today regarding the costs of deploying SAAS software.

One of the most interesting statistics for me was that (one of the few genuinely profitable SAAS success stories) spends half its revenue on sales and marketing. When I think about it it makes sense, but I guess coming from a technology background it isn’t something that I would have initially thought of. The scary thought that comes after this is what percentage of revenue is taken up once you include support as well? The even scarier one is are you really achieving scalability if these represent the vast majority your costs?

As the article points out, there are three economic fundamentals:

  1. How much it costs to attract new customers (known as subscriber acquisition costs)
  2. How much money can be extracted from those customers in regular subscriptions (known as “average revenue per user”, or ARPU)
  3. How often subscribers drop out and have to be replaced (the churn rate)

From point 1 I think SAAS companies still rely on their old mantra that the SAAS model generally is still struggling for widespread momentum. I think this still holds true, but perhaps these days more because of the costs of migration and training rather than lack of market acceptance or knowledge. The sales and marketing costs are therefore quite high as they are pulling lagging and inflexible customers into what is now a competitive market place with low barriers of entry.

These low barriers of entry tie into the last two points. Companies can theoretically treat SAAS software like they would their telephone company and switch at any stage. This means that new entrants can come in and undercut the established players, keeping subscription revenues down across the board.

The interesting part for me is that online classifieds is somewhat like the SAAS model. It relies on subscriptions and has a low barrier to entry. Why are they so profitable then? I have a few ideas:

  • A new twist on the established classifieds model, rather than a whole new model
  • Industry maturity leading to a consolidation of players (and profits)
  • The difficulties in targeting consumers online

To be honest I really feel like I am missing something here. Can anyone help?

My TechEd Testimonial

I was recently invited (for the third year in a row) to be filmed in a promotional testimonial for Microsoft TechEd Australia 2008. It was recently put online on the TechEd testimonials page, but I have uploaded a YouTube version to save everyone downloading Silverlight. Let me know what you think!

Yahoo Pipes and SEO

I was reading Seth Yate’s blog yesterday and noticed a few tweaks. One of them was the sidebar with a whole list of interesting bits of news and posts from other websites. This is a great way to boost your PageRank, seeing as Google loves you linking related content together. I started clicking a few links to find out how he actually pulled all the data together, and this is when I clicked “Recently Shared” and stumbled across his Pipe (you will need a Yahoo account to see it).

The basic idea of Yahoo Pipes is to pull together and mash up content. I would really suggest having a read of this guide to get a basic understanding of some of the possibilities. I have implemented it down the left hand column of this site, albeit after running the feed through Feedburner so I can assess it’s effectiveness.

The next step is to include the User Input element. I could pass the titles of my blog post into Pipes, which then searches Digg or some other blog indexer and gets the most relevant (and popular) articles? Who needs to add quality links into your blog posts when a well tweaked Pipe can do it for you? 🙂

Ebay CareerOne Partnership

New Digital Media have today announced a partnership between Ebay and CareerOne. Well I use the word ‘partnership’ loosely, because essentially it is a cross-linking agreement. There is a new sub-domain of CareerOne with an Ebay header, and on the flip side Ebay have added a Jobs tab and CareerOne banners smattered through their website.

I understood the MySpace cross-linking. Like their parents, News is trying to get the lazy kids of today to roll their eyeballs over some job ads. But in this case I think the word ‘integration’ is used a bit freely in both partnerships, tacking the header of one site across the body of another is not integration. I know people are going to think I am sponsored, but LinkedIn and SimplyHired did a much better job of integrating two different partners online. Maybe that is unfair because there were more common interests? I think that is the point. A recruiter wouldn’t partner with an auction house in real life, so what makes anyone think it would work online?

There is however a point that I am much more interested in. Maybe Ebay partnered with the wrong News Digital child. Maybe real estate has more in common? Ebay does after all have a Real Estate category, albeit languishing away the Home category. Ebay don’t have much to lose either; the Home – Kitchen category has 9000+ listings, while the Home – Real Estate category has 167. In fact already has general advertising live on Ebay, they just need to take it that little step further.

GPL Licencing Headaches

Let me say this from the start, I think Open Source software is the way of the future. Let me also say that I am not a lawyer. On that point I find it incredibly ironic that the urban definition of the IANAL acronym disclaimer directly references the GPL. This is even taken one step further with another more ridiculous acronym created during a GPL discussion, which conclusively proves that giving acronym loving nerds a sniff of legal jargon is a recipe for disaster.

It also helps explain my point, the GPL isn’t the Open Source saviour some people think it is. I hate to list points, because the people feel they need to find a way to argue against each one rather than the logic as a whole, but I am going to do it anyway:

  1. Money = Evil – Any efforts to profit from Open Source development work is treated with scorn. Comments such as “To release a non-free program is always ethically tainted” frustrate me. Equally promoting an Open Source product does not give you licence to trash commercial software. They are your competitors, if you think you are on their level then treat them with respect.
  2. Discourages Integration – The GPL is brilliant for making utilities. Compilers, databases and graphics programs are all essentially utilities that you interface with in a certain way, but never extend or deeply customise for your own purposes. Deep integration is one of the biggest competitive advantages that Open Source has over commercial software packages, so why make it hard? For example SugarCRM allows web service integration; but even modules, templates and dashlets that integrate within the existing API’s are considered to be covered under the GPL. Is this really a deep extension of the core product?
  3. Patent Protection – Patents are either loved or hated, usually depending on whether your name is on one or not. Regardless, the fact is that they are not going away. Open Source products are just as vulnerable to patent infringements and litigation as commercial software is. As the lines between Open Source and commercial work continue to blur, it is emerging that corporate indemnification is almost becoming a quality assurance stamp. A community cannot offer indemnification, so they really need to focus on their competitive advantages. Stay away from heavy duty licences that just muddy the waters for smaller businesses and institutions, don’t forget a hatred of licences seeded your whole industry!

As with anything legal there is no ironclad solution. As far as I can see the solution is to make it as easy as possible for people to contribute maximum value with minimum overheads and receive value for whatever purpose they desire. Rely on the fact that producing a commercial product that is 99% Open Source is not a safe, competitor-free business model!

LinkedIn as a Retention Tool

By now there are so many recruiters on LinkedIn that it is pretty clear it works as a recruitment tool. But what about as a retention tool?

The first clue I had about this was that a when a staff member was preparing to leave a company they tend to start pumping out the recommendations (and more selfishly, requests for recommendations). The best way to get great recommendations is to first write them for others, and I think the key points are best covered here. The same rules as resumes apply, don’t waffle and put in hard facts where possible. If an HR Manager starts seeing their employees engage in this mass-recommendation tactic then the warning lights should be on, just as they would be on if you saw them tidying up their CV at work.

On a similar note you might notice that the employees are becoming more connected to a competitive organisation, this could be as blatant as linking to a competitor’s recruitment manager or an industry recruiter. Again the real world parallel is seeing them having coffee downstairs with one of these people.

The LinkedIn company pages are also a great retention tool. For example looking at the company profile gives the HR manager a guide as to where their people are coming from and going to. The popular profiles might also suggest who is networking hard (or being recruited aggressively) within your company. It would help to keep this page up to date, it might be something that potential hires would find useful. I might have a crack at updating it now, I see LinkedIn have added the ability to upload company logos and company blog RSS feeds, cool!

Realestate Dramas

Domain Down

It is all happening in the world of Australian Online RealEstate tonight! The board have announced the immediate departure of their long serving (since 2001) CEO, Simon Baker. This was a huge surprise, although the fact that he sent out about 50 LinkedIn recommendation requests to people (myself included) late Friday night should have been a bit of a warning. Anyway at least Domain isn’t having the last laugh, their website is currently completely broken, simply stating that “an unexpected error has occurred”. I would say their support team are going to wake up to hundreds of thousands of error emails and a big headache tomorrow.

Globalisation Crunch

Starbucks Crushed
Some would say this is the silver lining to a US economic slowdown, a clean out of global mega-companies that prevent local competitors from entering the market. Starbucks seems to be the first to suffer publicly, with an announcement to close 61 of their 84 stores in Australia. The few stores that they are keeping (for now) are listed in this PDF. Looks like they are focusing on their more profitable inner city markets in Sydney, Melbourne and Brisbane.

Some commentators have had very strong words for Starbucks, particularly Chris Berg from The Age. He wrote an article putting Starbuck’s demise down to the vibrant coffee culture already present in Australia. It seems to me that Starbucks failure is a case of producing a sub-par product, rather than any local competition. Gloria Jeans for example is just as commercialised as Starbucks and has continued to grow rapidly over the last six months, but maybe they get a bit more local help.

Hopefully we are going to see more cases where fundamentally better products prevail. One could argue that GM and Ford are heading down this path too. I am definitely not anti-american either, I would love to work in the US at some stage in my life. I am simply an engineer, so I like to think that the best product will win at the end of the day; regardless of the marketing and sales pitch surrounding it. I have been in business long enough to know this isn’t always true, but cases like this make me feel less naive and more motivated to put that extra bit of effort into everything that I produce.

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