Thursday, April 16, 2009

Update on SaaS and Open Cloud

Interest in On Demand services remains strong despite the tough economic climate that we are in. Second, Cloud Computing is clearly taking center stage over SaaS. SaaS and Cloud providers are clearly battening down the hatches and slowing key investments that will result in slightly lower growth than they would have otherwise achieved.

Why is it Happening? According to Saugatuck there are three main theme's in play

Buyer Interest in On Demand Services Remains Strong Despite a Tough Economic Climate.

Interest remains strong reg: NetSuite and where more than 150 mid-market CFOs attended on a very cold late-January day to learn more about NetSuite's future plans. Also at a recent event, mroe than 20 percent or more of the attendee’s were prospects.

Regardless, both firms are not only focused on selling to new customers, but are heavily going after existing customers, as they attempt to up-sell new offerings and solutions, and hold the line if not increase the number of seats per customer (a challenge for all SaaS providers – as one of the key customer benefits for SaaS is the ability to scale up and down as the business demand grows). In fact, retention will be a critical metric to watch in 2009, as we heard a number of cases where clients are absolutely committed to their SaaS providers, but are scaling back the number of seats that they are deploying.

In NetSuite’s case, they have recently come to market with a broad-based platform called NS-BOSS which provides the full NetSuite SaaS offering plus development tools to extend and customize customer deployments extensively (targeting VARs and SI who have vertical markets to exploit, as well as existing users who wish to use NetSuite as a platform to develop custom applications). More recently they have announced SuiteCloud, which provides strong integration capabilities to a variety of SaaS providers – in particular, which enables existing customers to connect both platforms. In the case of, the firm is very focused around its platform and its new Service Cloud initiative, which Saugatuck believes has significant market potential, and may be the engine of growth for its core CRM business this year.

The strong turnout at both of these events as well as at the Parallels Summit (1,000+) and the OpSource SaaS Summit (600+), combined with recent Saugatuck survey research of more than 1,750 users (conducted in early December, 2008 – a full two months after the start of the recent economic crisis suggests that buyers continue to be remain bullish on SaaS and Cloud Computing despite (and maybe because of) the tough budget climate. While collaboration and customer service / CRM remain near the top of the list of top applications in demand, there is a continued shift toward core systems of record, especially with HR and Finance now near or at the top of the list of top SaaS solutions going forward.

While in Europe, they shared that the economic crisis appears to be helping to accelerating customer adoption in France, especially around Google Apps. The biggest demand thus far has been in the mid-market, for customers who have 500-5,000 PCs, where decision processes and deployment cycles are shorter than in very large enterprises (and where the decisions are often business executive rather than CIO-driven). Similarly, at the SaaS / ASP Forum in Paris conversations with customers, SaaS providers, ISVs in transition and channel partners points to continued strong customer demand among both the US-heavy weights who are investing in Europe, as well as a variety of country-specific and pan-European SaaS providers.

Less SaaS More Cloud. Throughout our travels, industry messaging has clearly shifted to the Cloud versus SaaS. We were very happy to see this happening, as Cloud Computing in our view is the natural evolution of SaaS, and a much broader umbrella that encompasses not only the application / business services solution layer, but also the compute, infrastructure, Cloud development, integration, service hubs and business process / managed services layers.

In fact, is among the most aggressive of the larger SaaS players in adopting this positioning (given the broaden company focus around PaaS, Cloud application development et al), although both it and Netsuite have clearly been fine-tuning their messaging and value proposition to re-emphasize the key advantages that are core to both SaaS and Cloud Computing (i.e., (e.g., no capital expense, modest operating expense, and ability to scale as needed).

On the user side, whether at the Parallel’s Summit, OpSource’s SaaS Summit, SaaScon, CloudForce, the NetSuite NYSE event or other key events where we heard a variety of customers share their experiences – messaging around the Cloud clearly dominated over SaaS. We were pleased to hear some of the details and lessons learned from user executives at mid-size and larger customers who are further down the road with their deployments and their success (e.g., Wells Fargo, Merrill Lynch, Pfizer, Georgia Aquarium) – and especially concerning the complex custom Cloud development work that has been occurring, not just the deployment of standard “out-of-the box” SaaS solution capabilities.

We also valued participating in Pitney Bowes company-wide SaaS Summit – as they move forward in their strategies and plans to leverage SaaS across the wide range of offerings, services and markets that they are in. While this was a confidential closed door event (and as such we can’t share any insight into their plans) – it is gratifying to see larger enterprises deeply look at their business and delivery models to investigate how SaaS can be brought to bear in moving forward their business agenda. We look for other traditional business services providers who are not normally considered “technology” companies per se, to likewise rethink how SaaS and Cloud Computing can be applied for competitive advantage.

Providers Battening Down the Hatches. With the economic climate changing so quickly, the need for SaaS and Cloud providers to get as close as possible to break-even or better has become paramount. Most of the vendor executives and venture capitalist that we spoke to recognize that even though SaaS and Cloud Computing are the future, the easiest thing for customers to do in a tough economy is nothing – even if the value proposition clearly is superior over traditional on-premise options.

As such, many providers have scaled back new spending and expansion plans – which will no doubt impact top-line growth, as the SaaS industry slows moderately in the face of tightened customer budgets. But this trend is not universal – by any means – as more recent conversations (over the past few weeks) with a number of SaaS and Cloud companies suggests that after a lighter investment period November 2008-February 2009 (when the economy looked to be in free-fall), many providers are scaling up their sales and marketing plans for significant calendar Q2 and Q3 programs.

In fact, revenue guidance from large industry players such as continues to show solid growth in 2009. In the Industry / Financial Analyst sessions that we attended last month at CloudForce, only moderately lowered their fiscal 2010 revenue guidance to $1.300-$1.330 billion (which represents 21%-23% growth over fiscal 2009) – which is only slightly lower than the guidance that they provided in October, 2008 ($1.350-$1.360 billion).

Bottom Line: No doubt, the current economy is impacting user budgets and spending plans – with recent forecasts by Gartner and others suggesting flat to slightly negative IT spending in the current year. However, Saugatuck believes that based on its’ most current in-the-field travels and survey research – SaaS and Cloud Computing will continue to gain share at the expense of traditional on-premise alternative. In many respects, the current economic climate only heightens the economic advantages that these new computing paradigms represent.

Social Media Usage in Canada - More Highlights

CNW Group and Leger Marketing today shared a preview of comprehensive new research into the social media usage, views and habits of Canadian consumers and public relations practitioners. These summary results were announced at the mesh 2009 Web Conference.

The study was unique in its approach of looking at both the consumer and PR practitioner sides of the social media relationship; looking for gaps and overlaps in PR practitioner perception and the consumer-reported reality. More than 1,500 Canadian consumers were surveyed on issues ranging from how often they use online communications tools, to how social media has influenced their purchasing decisions. PR Practitioners were asked how they thought consumer users would respond. In order to ensure the integrity of the research, only those consumers and PR practitioners who engage in social media were invited to participate.

This Canadian Social Media Reality Check illuminates some surprising and challenging assumptions on the state of social media in 2009.

"Our goal was to combine our expertise in the fast-evolving business of online news with Leger's renowned communications and media research capabilities, to shed light into important questions we have all been asking about the use and impact of social media," said Carolyn McGill-Davidson, President and CEO of CNW Group. "We found the results both startling and reassuring in almost equal measure. There is some encouraging validation in here and a number of remarkable insights into the real state of social media in Canada."

An overview of Social Media Reality Check key findings:

·Social media is growing 49% of consumer social media users and 62% of practitioners use social media at least once a day, consumer use grew by 48% year-over-year.

·Social media is influencing purchase decision making 61% of consumer social media users turn to social media when researching purchases.

·Social media is credible 31% of consumer social media users and 55% of practitioners agree that social media is more credible than advertising. This was one of several interesting points of divergence between the views of users and PR professionals - a gap that will be explored in more detail when the full results are released.

·Social media for news and information is important 63% of consumer social media users use social media to keep up-to-date on news and information; 40% are using it to engage with organizations in a dialogue.

·Social media users are still loyal to the more popular tools Facebook is the most popular social media space for consumer social media users (77%) followed by YouTube (65%) and MySpace (20%).

·Social media has broadened its demographic 42% of consumer social media users 45 years and older are likely to use online channels to research products, significantly more than younger users.

·Social media has untapped opportunities for PR practitioners 69% of PR practitioners feel they understand social media but could be using it more effectively; 70% of PR practitioners do not have a tool to monitor social media and only 29% know who their organization's key online influencers are.

The study paints an encouraging picture: social media use is high and rising, it's credible, it's influencing purchase decisions. Great news for practitioners who say they see the value in social media, despite the fact that most aren't yet working with objectives, monitoring or measurement."

The Social Media Reality Check Study was completed as a partnership project, as opposed to paid research. Full findings from the study will be published as part of a joint webinar to be hosted by CNW Group and Leger Marketing on April 29, 2009. For more details and to register for either the webinar or to receive a full copy of the survey findings, please visit:

To join the ongoing conversation on the Social Media Reality Check prior to full release of the results, see the related post on the mesh conference blog -

This survey was conducted among 1,516 users of social media and 615 practitioners. With a sample of this size, results of the user study can be considered accurate to within +/-2.5% and results of the practitioners can be considered accurate to within +/-4.0 %, 19 times out of 20.

Wednesday, April 15, 2009

Social Media Usage in Canada on the Rise

CNW Group and Leger Marketing have concluded a study of social media usage in Canada by consumers and public relations practitioners called the "Canadian Social Media Reality Check."

According to the results, 49% of consumer social media users and 62% of PR practitioners use social media services at least once a day. Sixty-one percent of consumer respondents use social media to research purchases. Thirty-one percent of consumers and 55% of practitioners stated that social media is more credible than advertising.

Sixty-three percent of consumers use social media to gather news and information, while 40% use it to communicate with organizations.Seventy-seven percent of consumer respondents use Facebook, while 65% use YouTube and 20% use MySpace.

In addition, 69% of PR practitioners feel they could use social media services more effectively.
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