Chaotic Flow

Streamlined angles on turbulent technologies

Today, Apprenda, a company that I’ve been tracking for a while emerged from stealth mode.  Some of you may be familiar with SaaSBlogs which is managed by the company’s founders.  The timing couldn’t be better from my perspective, because I’m in the middle of this series on SaaS Model Economics 101 that I kicked off this week, concerning the creation of economic value and competitive advantage for SaaS vendors.

Apprenda’s SaaSGrid is a potentially game changing approach to Platform-as-a-Service ( PaaS ) which is a sector that up until now has largely been limited to hosting, billing etc. solutions for existing multi-tenant SaaS applications on one end of the spectrum, and do the whole thing our way solutions, like Force.com from Salesforce.com, on the other end–without much in between.  The reason SaaSGrid is potentially game changing is that Apprenda proposes to allow you to take your single-tenant software application, rapidly plug it into their Web services, put it out on the cloud, and voila! what was not SaaS, is now 100% multi-tenant SaaS.

Before you say that it is not possible, and even if it is it has to be less efficient than native multi-tenancy, here is what the CEO, Sinclair Schuller, has to say about it.  “I’ll go out on a limb and bet my reputation that in most cases, a SaaSGrid application will be more efficient in almost all regards than most native multi-tenant applications…In some cases, a native multi-tenant app can be more efficient if it can exploit some sort of specialization in its architecture, but this scenario is not common.”  My personal view is that storage and processing are free, so who cares.  The real cost advantage comes from aggregating customers onto a single infrastructure, not the 30% higher computing efficiency of a specific infrastructure.   So much for your sustainable cost advantage SaaS vendors–legacy software companies and IT departments may be following hot on you heels.

If PaaS offerings continue to move in this direction, then current SaaS vendors will need to focus much more keenly on creating product differentiation and lowering acquisition and adoption costs.  Something I personally believe is only good business.  Cost advantages NEVER last.  In my SaaS Top Ten Do’s and Don’ts I assert that the technology cost advantage commoditizes SaaS markets.  It is something you must achieve to play in this game.  But, it does not guarantee that you will win.  Without proficiency at mass customization, driving down cost of acquistion and differntiation, you are simply a commodity in a commodity market.  And, that market just got a lot more crowded.

I’ve recently started working with Zendesk, and I can’t say enough about this Web 2.0  SaaS helpdesk company.  In my last post, I made the point that most SaaS vendors just don’t get Web 2.0.  Zendesk is the exception that proves the rule and I think this company has an amazing future.

You might think that the last thing the world needs is another helpdesk product.  I personally can’t think of too many spaces that are more crowded with everything from cheap packaged software to large scale ERP-integrated SaaS offerings.  So, what makes Zendesk special?  They get what all the other B2B SaaS / Enterprise 2.0 companies are missing.  When I submit their offering to the Web 2.0-savvy IQ test, their marks are off the chart.

First and foremost, Zendesk is a native Web-centric application that completely integrates the backend helpdesk with a company’s online customer support presence.  When you turn on Zendesk, you not only turn on the traditional helpdesk ticket tracking, business rule automation and reporting, you turn on your customer support portal, online forums, mashup widgets, pervasive RSS and your support@yourcompany.com email–all these customer communication points are seamlessly integrated to your back end helpdesk.  When I speak of B2B2C being an emerging disruptive force in Enterprise 2.0 SaaS…this is exactly it.

Zendesk launched in November of 2007 and in a short half-year has  [an undisclosed but an amazing number of ] paying customers and an increasingly impressive list of brand names.  Why?  Because you can sign up and get going without any help at all.  The website content, trial sign-up and purchase are seamless and is 100% automated.  And, the minimalist design is so intuitive that no training is required.  Although I know these guys like to give each new account a little tender loving care, the truth is that getting going is as straightforward as any Web 2.0 consumer site.

If your run a Web-based business, or simply want to provide better support over the Web, and agile customer service is more important to you than heavy-iron process automation and compliance on the backend…my pick is Zendesk.

I spend about half my time working with SaaS companies and the other half working with Web 2.0 startups, and it disturbs me greatly when I see just how little interaction these two communities share.  The two things that I see again and again that disturb me the most are  a) most SaaS vendors are embarrasingly Web-unsavvy and b) most Web 2.0 vendors prefer to cobble together their own internal business systems out of open-source rather than sign up for really cheap, really good SaaS products and focus on their core business.

OK SaaS vendors, here is a Web-savvy self-test…

(questions in order of increasing difficulty)

a) Can your customers find you on the Web, learn about out on the Web, try you on the Web, and buy you on the Web without any help or physical intervention whatsover?  I’m not saying you shouldn’t sell or offer help if it speeds up your pipeline; I’m asking if you didn’t offer help, can they can buy without it.  If they can’t, you have inserted unnecessary offline obstacles into online your sales process.

b) All your qualified prospects are on the Web.  Are you an expert at online marketing?  Are you actively using your Web-based product to increase your organic Google juice?  Or, simply paying for SEM. Do you have a real blog and social media strategy?  Or, just a lame, uncomfortable attempt at a corporate blog.

c) Your benchmark for usability is not that client-server system you are displacing, it is eBay, Google and Facebook.  Is your product so intutitive that traditional training isn’t necessary?  Can users discover new capabilties as they go along?  Are you creating entertaining, instructional video or just a boring help file to educate users?

d) Is your application Web-aware and cloud friendly?  Do you have an open, standards-based approach to integration built on a simple Web services frameworks such as REST and JSON?  Do you natively support RSS and widgets? Are you actively cultivating a developer community and crowdsourcing extensions and mashups?

e) Your customer’s customers are on the Web.  Does your application reach out to them?  Does your application enable more efficient communication and interaction between your customer’s employees and your customer’s customers.  And, what about social interaction between customers? Or, are you just lowering TCO by duplicating the capabilities of some legacy client-server system with a browser interface and a multi-tenant database.  Sorry salesforce…a truly breakthough idea…but it’s soooo 1996, today’s SaaS vendors can do a lot more.