Tuesday, November 10, 2009

Unveilling of the Bessemer's 10 laws of Cloud Computing and SaaS - Winter 2010 Release

When we first published the Bessemer’s Top 10 Laws for Being “SaaS-y" on Sandhill.com almost two years ago in conjunction with our annual Cloud/SaaS CEO Summit, we were overwhelmed with the positive response and feedback we received. We have heavily modified many of the best elements that we believe are still relevant, and have added several entirely new concepts for this update publication on Cloud Computing and SaaS.

The Cloud computing stack is currently defined by three levels: SaaS, PaaS, and IaaS. Software as a Service (SaaS), the most mature of these segments, is comprised of end user applications like Salesforce.com. Platform as a Service (PaaS) is the service and management layer of the cloud platform, and is evolving dynamically to include things such as intelligent provisioning, as well as application and network management. Infrastructure-as-a-Service (IaaS) is the foundational layer of cloud computing, and includes raw storage, compute, backup, disaster recovery, databases, and security. As the first segment to emerge in scale and the most application oriented, SaaS has lead the market to date with the largest market size, highest gross margins, and highest per-seat pricing. Recently, however, we have seen the rapid emergence of hyper-growth businesses in the PaaS and IaaS markets demonstrating that these will soon be independent, multi-billion dollar segments in their own rights with the potential for massive sales volume and attractive cash flow characteristics.

Here is the new version of the 10 Laws of Cloud Computing and SaaS:

  1. Less is more! Leverage the cloud everywhere you practically can (more...)

  2. Get instrument rated, and trust the 6C's of Cloud Finance (more...)

  3. Study the Sales Learning Curve and Only Invest behind Success (more...)

  4. Forget everything you learned about software channels. The internet is your new channel and Technology Enabled Service providers are among the few partners that actually care if you succeed (more...)

  5. Build Employee Software. Employees are now powerful customers, not just their managers! We are witnessing the “Consumerization of Software” so focus on ease of use (more...)

  6. By definition, your sales prospects are online - Savvy online marketing is a core competence (sometimes the only one) of every successful Cloud business (more...)

  7. The most important part of Software-as-a-Service isn’t "Software" its "Service"! Support, support, support! (more...)

  8. Leverage and monetize the data asset (more...)

  9. Mind the GAAP! Cloud accounting is all about matching revenue and costs to consumption…well, except for professional services! (more...)

  10. Cloudonomics requires that you plan your fuel stops very carefully (more...)

BONUS LAW: You can ignore one or two of these rules, but not more - Great companies innovate, but pick your battles! (more...)

You can download the full white paper at www.bvp.com/cloud or click here


Peter Cohen Managing Partner said...

Excellent update to your 10 Laws. Your caution in Law 6 about over-estimating the impact of SEM and other lead-generation activity is particularly astute. Many SaaS providers focus exclusively on narrowly-defined lead generation tactics, and they under-fund efforts to build market visibility. Though more difficult to measure, positive visibility and trust are also critical to SaaS success.

One caution on Law 2, item 4, Churn. SaaS companies use different metrics to calculate renewals. (See http://saasmarketingstrategy.blogspot.com/2009/06/measuring-renewals.html).

Peter Cohen
SaaS Marketing Strategy Advisors

mguinan said...

In regards to calculatimg the "Magic Number" - should the amount included as sales and marketing costs match the length of the sales cycle? That is, if a company had a sales cycle of 6 months, should they include the past 2 quarters' of costs and not just the last quarter?