Micro SaaS Success

Over the past few days much has been said about the apparent decline in growth at Salesforce and how that might reflect on Software as a Service (SaaS) providers in general.  Salesforce has become the poster child for SaaS, not in a small part because of it's market share and rate of growth.  It seems to me that the media and industry pundits are unsure if the rules of free market (saturation, segment maturity etc.) apply to SaaS.  Salesforce is doing incredibly well but by no means is it immune from the basic trends of a market downturn, when sales are down, CRM products take a hit, SaaS or not.  The real question is how is Salesforce doing against it's sector.  When you examine their traditional software cousins in this market, Salesforce looks simply stellar.  

It is my opinion that the real barometer of SaaS success in the marketplace is not to look at the elephants but the rabbits.  In a tough economic period, how does an emerging market perform relative to the broader economy and within that market how do the startups and innovators fare?  

For some time now I have railed on the virtues of embracing a "traditional" business model when running a SaaS cloud service.  As in 2000 and now 2009, "if we get the users, we will make money" mindset falls down without an established revenue model at the onsite.  At some point investors are about an ROI.  Excitement and cool AJAX don't pay for salaries or bandwidth.  DigitalChalk is proving the point, from the time of the market collapse and finance meltdown, our growth rate, revenue and average gross profit per user has steadily gone up.  

there appears to be two types of SaaS providers, the elephants that get the press and the rabbits or "Micro SaaS" that get fat on the grass right at their feet.  

The DigitalChalk core product revenue growth in the 4th quarter of 2008 grew at over 20% month over month with the average gross profit per transaction in a range most blue-chips would kill for.  Our February is tracking at 37% growth in transactions over January with gross profit up over 11% month over month.  In short, we are looking at some pretty amazing hockey stick growth charts for the past seven months.  The very cool thing about this business is (a statistic VC in 2007 would have gagged on) we have less than 10,000 users on DigitalChalk.  We are truly a Micro SaaS.  DigitalChalk will exceed $1.2M in core product revenue in Q3 2009 at current growth rates and we will do it with under 16,000 active users.  

Would I like the have Twitter valuations and VC funding raining down? Sure, but I like my prospects of employment and profit in three years a lot better at DigitalChalk!

Salesforce Site Hosting will Prod Business Cloud Adoption

Salesforce today announced the availability of Force.com Sites, a place for businesses to host their websites on Saleforce's Force.com infrastructure. This announcement is significant and should serve to push Google's AppEngine to address the needs of business. Here is why:

1. Salesforce has established a reputation of reliability in the business SaaS marketplace. Corporate executives, who would never consider deploying a critical business application on Google or Amazon, routinely run their entire business development engine on Salesforce.

2. Salesforce has done it right. By starting a community of developers around Apex, expanded to Force apps last year and now introducing public facing web applications, Salesforce is exploiting existing processes and data that businesses want to access.

The question of when businesses will start moving to the cloud has been hotly debated over the past few months. I believe the question assumes the "why" they should move to the cloud is obvious, but we shouldn't make that assumption. Until now, there has been very little "why" for businesses to make the leap. The benefits may now outweight the risks. Business technology is essentially comprised of services for storing and controlling data and processess that govern the business model. Gaining fast, reliable access to these processes and data is the business mission of corporate IT. It's going to take time to get the word out but I think this might be the game changer. The old adage "nobody ever got fired for buying IBM" might well be stated the same for buying Salesforce.

The Web 2.0 Diaspora - profitability now matters

The term diaspora is normally associated with the scattering of a people group geographically from their homeland. The term is originally Greek and is literally translated "a scattering or sowing of seeds". There is little question that the original homeland of Web technology is Silicone valley California but I often find myself mildly annoyed when listening to a Twit podcast or Buzz outloud and hear long narratives about local valley activities or politics. Don't they know there is a whole generation of us Web 2.0 businesses born outside the beloved homeland?

Being outside the valley has a few notable drawbacks. We are less subjected to the clouds of money floating down from the VC sky. Many of us started online businesses with the mistaken idea that a business model that included a plan to generate revenue was necessary. Oblivious to the obvious drawbacks of charging a fee for our services, we blindly went forward telling customers what value our service could provide and insisting they pay us for using it.

Lately I've been hearing how the winds of economic trouble has begun to blow the clouds of money away from my distant cousins in the valley. There is much fear of drought and disaster among the sequoias and other farmers in that region. I fear many of my friends in the valley may become chafe, blown by the winds of trouble and scattered abroad.

I would like to share a small lesson learned from those of us scattered beyond the reach of the money clouds. There is hope, even now if you stop relying on the rain and start digging wells. There is money in the fertile soil of software as a service (SaaS) but you must have the vision to build something of value that you can bring to the "farmers market" and sell.

Open Source Moodle is Driving Blackboard Innovation

We recently announced an integrated solution using Moodle on Amazon Web Services that provides a highly scalable option for schools and Universities running or interested in running Moodle. This give us the option to do single sign-on integration with DigitalChalk and offer a combined package that will work both inside and outside the Amazon cloud. The really interesting thing about this deal was how rapidly were were able to create this solution using open source. From inception to delivery took about six weeks to complete. Most of the development actually fell into our codebase, the open source SSO server and Moodle required very little work. For almost two years we have struggled to address SSO with the commercial market leader, Blackboard. Their building blocks toolkit were poorly documented and questions about supporting authentication outside their app architecture was addressed by telling us that Blackboard must be the primary athentication mechanism and they will provide very little to the external app.

Our announcement about Moodle on the Amazon Cloud got picked up by a prominent ZDNet blog about open source (thanks Dana!). The Blackboard World conference is going on right now and someone chimed in on comments to tell us how great the new Blackboard is. One thing is for sure, Blackboard has remained on a very Web 1.0 archtecture for many years. Feeling the heat from open source may have forced them to innovate and catch up. Disruption in the marketplace always forces innovation! (See the BB reps comments below)

Keynote speaker Blackboard CEO Michael Chasen demonstrated the power and direction of Blackboad NG at today's afternoon session of Blackboard World '08 in Las Vegas. TRULY a Next Generation product that makes any institution's 'learning' go everywhere. + It will now wrap Moodle & Satai. + Courses will be available from Facebook and other social networking sites. + Content displays on iphones, cellphones and other mobile devices + Open API's and Open Source code development for Building Blocks, Modules, add-ons and more! Blackboard is no longer a stand-alone Learning Management System---it just made "learning" ubiquitous to a new generation of users. The glimpse on their web site (http://www.blackboard.com/projectng/) is only a peek compared to what CEO Chasen demo'd today! (not a Blackboard employee but someone who was at the presentation and more impressed with NG then ANYthing I've seen in a decade of online learning/teaching/CMS/LMS)

-YEA RIGHT.....

Greed Tarnishes Salesforce Reputation

On Thursday I was almost giddy when I found a link to get the iPhone upgrade for my (now legacy) iPhone a day early. I upgraded iTunes and my iPhone and started installing new applications. One of the first choices (and high on the most popular list for business.. hmm... who else broke in early?) I made was to get the Salesforce app. This was particularly interesting for me because as a Salesforce user and compulsive slave to my email, I regulary access my Salesforce account on my iPhone to view incoming sales leads as soon as I am notified. The Safari browser is ok but with the scrolling and zooming required it is always slightly annoying.

The Salesforce App looked like a great find, views formatted and scaled to the iPhone screen. I installed the app and entered my account information. It gave me a message saying there was no user in the account with that ID. Odd I though, so I retyped and got the same results. Ok, I'm in a hurry. I'll just wait a day and try to access the system on Friday, after all, they aren't expecting users today right? Next day, same deal, no user in the system. I went so far as to research things on Salesforce support but found nothing. I got busy and didn't get back to it until Saturday. A Google search on Saturday gave me the sad results, I must purchase a Mobile user account to access the system. How much is a mobile user account you ask? $50.

You have to be kidding right???? The app is free but access to the system is $50?!? I get their business model but this really was a bone headed decision, I'm already paying over a $G per user per year to access the system. Accessing the system on mobile Safari cost me $0.00 extra. Salesforce is missing a great opportunity to increase my addiction to their product. Right now they own the CRM SaaS market and they have my data. I've been willing to live with a mild case of vendor lock-in because their technology is so good but now I am beginning to wonder if someone from Redmond recently got hired in their product planning department.

I smell an opportunity. Any of you hot shot Apex developers interested in building your own version of an iPhone app for Salesforce? I'll pay up to $4.99 for your app. Anyone??

Hanging out in the Cloud Cafe

There is beginning to be a nice ecosystem of service providers popping up around Cloud Computing. Today I enjoyed a conversation with John Willis, host of the Cloud Cafe podcast. We spent time discussing the future of cloud computing and where things are heading with regards to standards, cloud portability and the business model of using cloud computing.

For anyone interested in learning more about the geeky things in DigitalChalk, you will enjoy this podcast. John maintains one of the most comprehensive venues for all things cloud computing related. I'm personally excited to see him start introducing Amazon Cloud training courses on DigitalChalk.

Why Yahoo Can't Sell Search

I want to thank Yahoo for sending me a notification today that my credit card was going to be charged $150 again for the privilege of being listed on search index. It allowed me to (try) to remove my payment information to avoid wasting another $150 this year. It seems that with Yahoo stupidity has not bounds. Not only did they charge me to get our site indexed on a timely basis, they failed to deliver on the stated benefits. For the past year Yahoo delivered a whopping .04% of DigitalChalk organic search traffic and it took them SEVEN MONTHS to get us into their index. Of the 492 websites that provided me with referral traffic in the past 12 months, Yahoo ranked 17th behind AOL, ASK! and news.com (all of whom I did not do anything to get indexed with). Do I need to tell you who was first? Of course not. I paid nothing to Google for my site to be indexed and through simple SEO activities we moved from start-up to a PR4 in our first five months.

I'm happy to spend my SEM budget on Google. Now that they are supplying the ads for Yahoo search I'll get placement on whatever paltry search scraps Yahoo throws my way.

Oh, by the way, you can't cancel with Yahoo. Once they take your credit card, it's a black hole. You have to see this from their FAQ to believe it. To stop paying them the $150 I had to change my credit card information to something bogus. There is no such thing as cancellation when it comes to paid listings on Yahoo. The reason given? "For security reasons, we are not able to close customer accounts." Who's security are you protecting Yahoo? Jerry, it's not going to work buddy! Carl, save yourself the humiliation, there is nothing worth saving.