Software
As A Service
This
is a teaser. We are happily watching the beginnings of the
next round of the Software Service provider market. We don’t
know what it’s going to call itself, but we’re pretty sure it
won’t pick ASP. Something about bad luck.
We
love the idea of Software Services and have followed them for a long
time. We predicted that most of the first ASP round wouldn’t
work and why.
Soon
we’ll talk about what worked, what didn’t, and why this time
things look much more interesting.
In
the meantime, think about this. One of the reasons we think its
time for round two is Salesforce.com’s successful IPO. The
company was able to reprice their stock (upwards) prior to the IPO
and the stock was up 56.4% at
the end of the first day.
Salesforce.com’s
success is based on their subscription-based service for CRM
software, offering it to companies of any size at $70 per seat.
This has allowed many companies that were too small to take
advantage of larger (and expensive to implement) CRM products (like
Siebel) to hop on the Salesforce.com bandwagon. But
Salesforce.com’s success has not been limited to smaller
companies. Some large companies use it for its speed of
implementation and its ease in supporting decentralized workers.
This
has led to three interesting results:
-
Salesforce.com
is now trying to expand its offering by becoming a platform,
allowing companies to customize, integrate and extend
Salesforce.com using web services and leading development tools.
This will make it easier for Salesforce.com to keep its
customers as more competitors enter the market – customized
products are harder to give up.
-
Competitors
have been drawn to Salesforce.com’s successful software
service model in order to defend their market. For
example, Siebel now offers a net-aware version of its software
on an IBM-hosted infrastructure.
-
New
companies have started in the same model. Of these, one of
the best known is a Larry Ellison-funded accounting software as
services company (he owns 50%), originally NetLedger, now
NetSuite. For a while this company had a close relation to
Oracle, reselling its products; this link has now been severed
as Oracle itself wants to push harder in the SMB market and
presumably will launch its own software-as-service offering
soon.
Think
of this as a small place keeper for something much larger we’ll be
writing soon. A few observations while we’re thinking it
through, if you will. Of course, your counter-observations
would be gratefully accepted.
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