I was invited to attend a brainstorming session amongst executives of companies delivering software as service. Salesforce.com and the SIIA hosted the group. Folks from salesforce, Oracle, Salesnet, Intuit, and several other companies were there. While I didn’t say much, the 2.5 hour discussion was quite interesting. Our informal conversation ranged from topics like defining “ASP,” “software-as-service,” “host” etc. in order to clear up confusion that exists among customers, to establishing standards when it comes to contracts, service level agreements, business continuity plans, and the like.
A hot topic was the financial reporting of revenue – some of us will sign a $200k one year deal and get cash up front, in other cases it will be paid monthly but almost surely last for three years, in other cases the booking of the revenue gets even more complex. There was common frustration among companies that Wall Street doesn’t have its arms around analyzing the financials of a subscription-based software company. One company at the table today transforms its financial into a model that would fit the typical perpetual license spreadsheets so investors can understand the true results. Salesforce.com uses its status as “pure play” to its advantage; companies that have both hosted and traditional licensed software have financial complications.
The three key issues/questions from customers software-as-service (SaS) companies face, it was determined, are: 1) Viability of company (since it’s hosted…this can also be a competitive advantage). 2) Security standards. 3) Extensibility – XML interfaces allowing the software to be highly configurable. On issue #1, viability, many customer still request for the code to be put in escrow even though, in the event a SaS going out of business, having the code would be pretty much worthless (need data center, support, etc). More sophisticated companies are requesting detailed business continuity plans which addresses how the product can still be delivered if company X goes under.
The other point raised that was interesting is the necessity for the support team at a SaS company to be in the sales and marketing unit. Each month you need to re-sign up the customer to get the renewal. As such, at each support opportunity the customer support reps need to be thinking “sell” in addition to “serve.”
There were several buzzwords used that I don’t know much about: GLB regulations, SafeHarbor, HIPPA compliance, White Label Terms of Service, SAS 70 compliant, BSBC, and others. Time to Google them.
If you believe in a future of computing in which everything will be rented as a service – your computer, printer, all desktop software, etc. then following the emerging standards of the software-as-service industry is a must.