On Wednesday, the Internet was buzzing with the news that Steve Ballmer of Microsoft, and Rupert Murdoch or News Corp, were discussing an agreement that would allow Microsoft exclusive access to News Corp content. Here is the transcript from the Ballmer / Murdoch conversation that led to this announcement.
Ballmer: "Rupert, we both have a problem and I think we can help each other. Google is leaching your revenues away by indexing your content for free. If you let it go on much longer, your Media Empire will be as profitable as a bunch of high-school newspapers. Google is a thorn in our side as well. I am okay with giving them search advertising, but they are using those revenues to compete with Office, Outlook, Windows Mobile, IE and everything else we do. So here's my idea - let's cut the legs out from under Google. I will buy the exclusive rights to index your News Corp content, and then show it as online search results. It reduces the value of Google's results, you make money, and we benefit. Frankly, were making no money on search advertising now and can only improve by having better content."
Murdoch: "I like the idea. We will charge search engine providers to index our content. No pay - no content. Hey, I spend a fortune on all those Wall Street Journal people and Google simply goes ahead and indexes the content, and then charges for ads on the search results pages. This way, I make money and you reduce Google's value and associated revenues. If Microsoft gets my Wall Street Journal content and maybe a couple of other Financial site's content, why would anybody with interest in financial information, every use Google? Brilliant."
Ballmer: "So Rupert, here is where we get a bit of revenge as well. Google and the other search engines will be forced to pay for premium content, and then either pass the costs on to their advertisers, or they will need to take a hit in their margins. If this idea reduces the market value of all search providers, too bad. Either way, I don't care. Advertising in over 90% of their revenues and under 10% of ours. Let's see them try come into our business sectors without their big advertising revenue stream."
Okay - so the transcript is not the official one from the Ballmer and Murdoch meetings, but you have got to admit, it does make business sense for both of them. It will be interesting to see how the discussions continue, and how Google counters.
Showing posts with label business model. Show all posts
Showing posts with label business model. Show all posts
Friday, November 27, 2009
Wednesday, November 11, 2009
Micro ISVs are the Garage Bands of technology
Balsamiq (see prior post) bills itself as a Micro ISV. Until a couple of weeks ago, I had never heard the term "Micro ISV" so I decided to dig a bit deeper. My findings in a nutshell: Micro ISVs are a very interesting concept and are viable because of the seismic changes that we are experiencing in marketing and technology.
Here's a basic definition: "A Micro ISV is an Independent Software Vendor (ISV) that has just a handful of employees and is bootstrapped. Typically the software is distributed online and has a Freemium or Try-Then-Buy business model". The appeal of Micro ISVs is pretty much like being part of a Garage Band. You work on your songs, get a couple of gigs a month, and next thing you know, Rolling Stones is calling for interviews.
The cost of being a Micro ISV is now lower than ever before. Rather than spending a lot of $$s upfront, it is possible to deliver great software using a combination of open-source plus SaaS offerings. Here are some of the components, by function, that a Micro ISV can draw upon:
Product Development
Lastly, but most importantly is marketing and sales. Most Micro ISVs sell either single user software or SaaS, and have either a Freemium (ie. basic app is free, but premium features cost more) or Try-Then-Buy (ie. get 30 days free and then start paying) business model. So, the basic marketing and sales strategy is to (1) connect online with high volumes of users, and (2) get them to try the software. There are no sales teams out in the field, and marketing needs to leverage inbound interest, rather than traditional (read costly) outbound lead generation. To accomplish this, Inbound Marketing is key. By using social media (eg. blogs, SEM, Facebook groups, Twitter, etc.), viral marketing (eg. tell a friend options in the app, etc.), and online advertising (eg. PPC), it is possible to get tremendous exposure and generate revenues on a shoestring budget.
Balsamiq is a poster child of Micro ISVs. They have embraced system thinking and have generated tremendous online exposure. Within 12 months, they were generating over $1m in revenue with just 4 employees. Pretty impressive.
BTW: [I am currently advising a Micro ISV on their go to market strategy and product marketing approach. Expect to hear a lot more about them, and our Social Media techniques over the next few months.]
Here's a basic definition: "A Micro ISV is an Independent Software Vendor (ISV) that has just a handful of employees and is bootstrapped. Typically the software is distributed online and has a Freemium or Try-Then-Buy business model". The appeal of Micro ISVs is pretty much like being part of a Garage Band. You work on your songs, get a couple of gigs a month, and next thing you know, Rolling Stones is calling for interviews.
The cost of being a Micro ISV is now lower than ever before. Rather than spending a lot of $$s upfront, it is possible to deliver great software using a combination of open-source plus SaaS offerings. Here are some of the components, by function, that a Micro ISV can draw upon:
Product Development
- Open Source development stack (Linux, MySQL, etc.). Free
- Source control, issue tracking, roadmap management, test automation, etc. (Altassian) $10 a month.
- Virtual Instances of the application on Amazon (EC2, S3, SQS, RDS). There is no upfront hardware to buy and it covers both website hosting and operations. Nominal fee. Usage based.
- Community driven support forums, wikis, peer2peer support (GetSatisfacition + ZenDesk) <$30 a month.
- Online sales and subscription management (Spreedly). $20 a month + 1 to 3% of billings
Lastly, but most importantly is marketing and sales. Most Micro ISVs sell either single user software or SaaS, and have either a Freemium (ie. basic app is free, but premium features cost more) or Try-Then-Buy (ie. get 30 days free and then start paying) business model. So, the basic marketing and sales strategy is to (1) connect online with high volumes of users, and (2) get them to try the software. There are no sales teams out in the field, and marketing needs to leverage inbound interest, rather than traditional (read costly) outbound lead generation. To accomplish this, Inbound Marketing is key. By using social media (eg. blogs, SEM, Facebook groups, Twitter, etc.), viral marketing (eg. tell a friend options in the app, etc.), and online advertising (eg. PPC), it is possible to get tremendous exposure and generate revenues on a shoestring budget.
Balsamiq is a poster child of Micro ISVs. They have embraced system thinking and have generated tremendous online exposure. Within 12 months, they were generating over $1m in revenue with just 4 employees. Pretty impressive.
BTW: [I am currently advising a Micro ISV on their go to market strategy and product marketing approach. Expect to hear a lot more about them, and our Social Media techniques over the next few months.]
Sunday, April 27, 2008
Only Possible With SaaS.........
In a couple of my past posts, I pointed out that SaaS is not a one-size-fits-all deployment option. However, I do believe that there are some types of solutions that can only be effectively delivered as a SaaS solution - call it the "SaaS only" option.
Typically, "SaaS only" is applicable when the software/service meets one of four functional criteria:
(1) "SaaS only" solutions require significant deployment and operational resources to be effective. The Celarix logistics visibility service is a good example of this. To achieve supply-chain visibility, you need at least 20 interfaces to logistics providers. Setting-up those interfaces is extremely costly and time-consuming. Managing them going forward is also complicated with hundreds and thousands of inbound transactions every day. With over 300 predefine interface as part of their service, Celarix can provide customers with the visibility they need significantly faster and more cost effectively than any other alternative.
(2) "SaaS only" solutions include data that requires constant updates. There is a brilliant new service being launched that can only be successful in a SaaS model - let's call it LeadDB. It's not the services' real name, but it is still in Beta and under-wraps. IQ is participating in the Beta. LeadDM provides a list purchasing service unlike any others that I have encountered. Once you have logged-in to their service, you can enter your segmentation criteria and they will return target names that meet those criteria. You can then buy specific names one-by-one or in bulk. Fast forward to their new offering - by adding a couple of lines of code to your website, you can receive contact names (that meet your segmentation criteria) for the companies that are visiting your site. Set a monthly budget and distribution rules and each day you will get a list of potential prospects for your lead gen activities. It's a great way to bridge the gap between people that complete our online forms and those that just visit. Given the timeliness of LeadDBs data and the complexity of updating their contact database, there is no way this type of solution would be possible in any model other than SaaS.
(3) "SaaS only" solutions provide information that is only available by aggregating data across their customer base. Google has just rolled-out a new capability in their Analytics tool called Benchmarking. Basically you can use it to benchmark yourself against your peers and see how your site performs in 6 different categories (IQ currently outperforms in 5 of 6 and our next website release should address #6). It would be impossible to do this type of analysis in non-SaaS analytics packages.
(4) "SaaS only" solutions include a value-added component in their service. Constant Contact (CC) is a great example of this. The CC service has a few main components: (1) email creation, (2) list management, and (3) email distribution (with SPAM management, SPAM compliance validation and white listing). Of these components, #3 is most useful to me. I can easily replicate components #1 & #2 using an installed product, but having a level of assurance that my domain won't be black-listed as a spammer is a major benefit. A benefit that CC provides as part of their SaaS model and one that I could not easily replicate.
So, anybody thinking of deploying a new software solution (or re-deploying an existing one) in a SaaS model should really evaluate if their solution meets one of the four "SaaS only" criteria, or if the change is simply a "buzz" driven decision.
Next up is a model for identifying SaaS go-to-market strategies (i.e. marketing, sales, services) based on target customer profiles. Stay tuned.
Typically, "SaaS only" is applicable when the software/service meets one of four functional criteria:
(1) "SaaS only" solutions require significant deployment and operational resources to be effective. The Celarix logistics visibility service is a good example of this. To achieve supply-chain visibility, you need at least 20 interfaces to logistics providers. Setting-up those interfaces is extremely costly and time-consuming. Managing them going forward is also complicated with hundreds and thousands of inbound transactions every day. With over 300 predefine interface as part of their service, Celarix can provide customers with the visibility they need significantly faster and more cost effectively than any other alternative.
(2) "SaaS only" solutions include data that requires constant updates. There is a brilliant new service being launched that can only be successful in a SaaS model - let's call it LeadDB. It's not the services' real name, but it is still in Beta and under-wraps. IQ is participating in the Beta. LeadDM provides a list purchasing service unlike any others that I have encountered. Once you have logged-in to their service, you can enter your segmentation criteria and they will return target names that meet those criteria. You can then buy specific names one-by-one or in bulk. Fast forward to their new offering - by adding a couple of lines of code to your website, you can receive contact names (that meet your segmentation criteria) for the companies that are visiting your site. Set a monthly budget and distribution rules and each day you will get a list of potential prospects for your lead gen activities. It's a great way to bridge the gap between people that complete our online forms and those that just visit. Given the timeliness of LeadDBs data and the complexity of updating their contact database, there is no way this type of solution would be possible in any model other than SaaS.
(3) "SaaS only" solutions provide information that is only available by aggregating data across their customer base. Google has just rolled-out a new capability in their Analytics tool called Benchmarking. Basically you can use it to benchmark yourself against your peers and see how your site performs in 6 different categories (IQ currently outperforms in 5 of 6 and our next website release should address #6). It would be impossible to do this type of analysis in non-SaaS analytics packages.
(4) "SaaS only" solutions include a value-added component in their service. Constant Contact (CC) is a great example of this. The CC service has a few main components: (1) email creation, (2) list management, and (3) email distribution (with SPAM management, SPAM compliance validation and white listing). Of these components, #3 is most useful to me. I can easily replicate components #1 & #2 using an installed product, but having a level of assurance that my domain won't be black-listed as a spammer is a major benefit. A benefit that CC provides as part of their SaaS model and one that I could not easily replicate.
So, anybody thinking of deploying a new software solution (or re-deploying an existing one) in a SaaS model should really evaluate if their solution meets one of the four "SaaS only" criteria, or if the change is simply a "buzz" driven decision.
Next up is a model for identifying SaaS go-to-market strategies (i.e. marketing, sales, services) based on target customer profiles. Stay tuned.
Friday, April 4, 2008
Nucleus Research misses the mark on Saas vs ASP
I have been an interested reader of the Nucleus Research's studies since they launched. For the most part their analysis is insightful and balanced but they really missed the mark in their "Hosted versus on-demand" study.
http://nucleusresearch.com/research/notes-and-reports/hosted-versus-on-demand/
If you have ready any of my other posts on Software as a Service (SaaS), you will realize that I consider SaaS to be a strong business model and a great deployment option, but I do not consider it to be the best model or the death of SW as we know it. It will be a delivery model, but not the only delivery model available. Yes, this runs contrary to a lot of pundits (like Nucleus Research), but let's face it - there are a variety of attributes that make a product successful in a SaaS model, while there are other attributes that would make it less successful. For example, highly integrate applications are not well suited to SaaS given volumes, latency, etc. On the other hand, services with additional value-add components like GSX / Celarix or Constant Contact are perfectly suited. Also, hell will freeze over before government entities and a lot of large organizations use SaaS as the only delivery model for their applications. There are just too many compliance, legal and security issues that they would have to overlook or ignore to make it feasible. For many organizations, economics is also not a good reason - the US Government and Fortune 100 companies each have significant enough data center expertise and economies of scale that very few, if any, SaaS providers can compare to.
Most importantly, just providing a solution in a "multi-tenant architecture" is not enough justification for a SaaS model. Multi-tenant architectures work well, that is how we deployed Celarix, but they also have downsides (which Nucleus forgot to mention). Everybody has to get upgraded at the same time, regardless of organizational change management impacts or interfacing issues. If the application is down or performing slowly, everybody is impacted. I have experienced these issues at Celarix (fortunately very seldom). At IQ, our applications are provided either on-site or on-demand (ASP / SaaS). Each customer gets their own virtual instance of their application run from a cluster of blade servers. The cost economics work well AND the customers can define their own backup, interfacing and security requirements. The choice of deployment option is up to our customers (which is where it should be).
At IQ we use a variety of SaaS solutions such as ADP, ConstantContact and GoToMeeting amongst others. Each of these solutions deliver financial value - I don't need to get servers, communication lines setup or IT resources involved. Each of these solutions also deliver unique business value (e.g. ConstantContact takes care of message delivery and SPAM compliance), but that doesn't mean all applications deliver additional benefit from a SaaS model. That I believe is the fundamental issue I have with Nucleus' report - software that delivers unique value as a SaaS solution should be delivered as one. Otherwise give the customer a choice.
http://nucleusresearch.com/research/notes-and-reports/hosted-versus-on-demand/
If you have ready any of my other posts on Software as a Service (SaaS), you will realize that I consider SaaS to be a strong business model and a great deployment option, but I do not consider it to be the best model or the death of SW as we know it. It will be a delivery model, but not the only delivery model available. Yes, this runs contrary to a lot of pundits (like Nucleus Research), but let's face it - there are a variety of attributes that make a product successful in a SaaS model, while there are other attributes that would make it less successful. For example, highly integrate applications are not well suited to SaaS given volumes, latency, etc. On the other hand, services with additional value-add components like GSX / Celarix or Constant Contact are perfectly suited. Also, hell will freeze over before government entities and a lot of large organizations use SaaS as the only delivery model for their applications. There are just too many compliance, legal and security issues that they would have to overlook or ignore to make it feasible. For many organizations, economics is also not a good reason - the US Government and Fortune 100 companies each have significant enough data center expertise and economies of scale that very few, if any, SaaS providers can compare to.
Most importantly, just providing a solution in a "multi-tenant architecture" is not enough justification for a SaaS model. Multi-tenant architectures work well, that is how we deployed Celarix, but they also have downsides (which Nucleus forgot to mention). Everybody has to get upgraded at the same time, regardless of organizational change management impacts or interfacing issues. If the application is down or performing slowly, everybody is impacted. I have experienced these issues at Celarix (fortunately very seldom). At IQ, our applications are provided either on-site or on-demand (ASP / SaaS). Each customer gets their own virtual instance of their application run from a cluster of blade servers. The cost economics work well AND the customers can define their own backup, interfacing and security requirements. The choice of deployment option is up to our customers (which is where it should be).
At IQ we use a variety of SaaS solutions such as ADP, ConstantContact and GoToMeeting amongst others. Each of these solutions deliver financial value - I don't need to get servers, communication lines setup or IT resources involved. Each of these solutions also deliver unique business value (e.g. ConstantContact takes care of message delivery and SPAM compliance), but that doesn't mean all applications deliver additional benefit from a SaaS model. That I believe is the fundamental issue I have with Nucleus' report - software that delivers unique value as a SaaS solution should be delivered as one. Otherwise give the customer a choice.
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