CloudAve Software in Business. The Business of Software. Mon, 26 Jan 2015 17:35:35 +0000 en-US hourly 1 Copyright © CloudAve 2014 (CloudAve) (CloudAve) CloudAve 144 144 Software in Business. The Business of Software. CloudAve CloudAve no no How to Build Online Relationships into Meaningful Networks Mon, 26 Jan 2015 17:24:45 +0000 I was waiting for my son’s basketball game to start this morning and with the morning’s emails all drained I turned to Twitter and saw this Tweet from Marshall Kirkpatick Test: open your twitter stream, look at the 1st item in it, think of something to say in response, say it. Theory: it’s really that […]

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I was waiting for my son’s basketball game to start this morning and with the morning’s emails all drained I turned to Twitter and saw this Tweet from Marshall Kirkpatick

I consider Marshall a business friend. A fellow thinker and tinkerer of technology. Somebody I respect. And like. But here’s the thing – I honestly can’t remember how many times I’ve actually met Marshall in person? I know him really through online and from that we’ve had phone calls to debate his business and such.

It’s an online relationship and I actually believe that as of 2015 I’ve met more of my close connections in the past 5-7 years online before offline. Brad Feld. Fred Wilson. Tristan Walker. And many, many more. Some through blog comments – your place or mine. Some on Twitter.

I responded to Marshall’s obvious comment bait :) with “I’m always surprised more people don’t engage.” So many friendships or acquaintances start online.

I was reminded of that when Shafqat Islam weighed in:

It’s true. I knew Shafqat as a reader on my blog and then I was introduced to him on a trip through New York. His personality is infectious and we instantly became friends. I’ve seen him over the years at several cocktail parties and have him on my short list of people “I wish I had known in time to invest in his A-round” but have down to meet early on NextCo.

Figuring out how to engage is tricky. You want to be respectful. You want to say something informed. You want to toe the line between friendly public comment and being smothering.

1. Blog is best
The best way to engage with anybody you want to build an online relationship with is their blog if they have one. If they are not the kind of person that reads their blog comments then they probably aren’t the kind of person who would build an online relationship anyways. Most bloggers I know read most if not all of their comments. I recommend you keep comments brief unless it’s the perfect topic for you and you want to add to the story.

I read almost every comment made within the first week or so (I often don’t go back after a week to see who’s commented). I try to respond to many comments but not all. But over time I’ve seen the same names through the years and I know all of these people by name if not by face. If somebody like Cookie Marenco or Phil Sugar ever pulled me aside at an event I wouldn’t know what they looked like but by name I’d immediately chat with them. I feel like I’ve “known” them for years. Or Fake Grimlock. Or Startup Jackson.

2. Don’t go immediately for the kill
There are times where you don’t know somebody but you engage just to get a conversation started or be polite. Sometimes these people immediately try to friend me on Facebook, send me a deck or tell me they want to pitch me a company. I don’t recommend coming on that strong. You need to earn some name recognition and engagement before moving your relationship to the next level.

3. On Twitter add value, be funny, link or be brief
I like engaging with people on Twitter. It’s a chance to get to know new people and you aren’t locked into a 20-minute conversation to do so. You can watch who comments with whom frequently and get a sense of who knows whom. It’s fun.

I also remember early on Twitter there were some well-known people who never responded to anybody. I felt like they were doing it wrong. Twitter is best when it removes the barriers and the bubble and puts you in direct contact with people who want to know YOU and people you want to know.

As with blogging, there are those who engage from time-to-time that I feel I know. And there are people who come on too strong or pretend they’re your best buddy. I don’t recommend that.

It’s ok to be funny. I recommend being brief unless they talk back at you a lot or if you’re engaged in a good conversation. Respond from time-to-time but not to every one of their Tweets. It’s an art but surely you have enough of a filter to know not to be a creep.

4. Don’t hop into conversations of people you don’t know. 
I saw an interesting respond to Marshall and my back-and-forth from David Senior:

I thought in this case it was perfectly appropriate because it was a public question from Marshall and therefore responded to my response was fair play. But sometimes you might see a conversation between Marc Andreessen, Hunter Walk and Semil Shah on Twitter where they’re clearly talking with each other about a topic. If you don’t know one of them it can be a bit inauthentic to hop in, reply and copy all of them. People do – but it strikes me as in bad form.

It’s one of the things I think Twitter needs to eventually fix. How people have a closed conversation while allowing others to witness the results. It’s really a magical component of Twitter to see public conversations but the lack of tools I believe discourages this.

5. Be subtle, be occasional
Play the long game. Don’t try to be notices in your first engagement. Say something or two and then move on. Re-engage. But it doesn’t have to be every time or all the time. Blogs you can comment frequently but Twitter you need to be careful until you know them better.

6. Don’t assume engagement = knows you
I often find somebody at a conference will say “I comment on your blog from time-to-time.” Usually I will recognize the name and I like that. Or there are the people on Twitter whom I’ve been talking with for years and know their names. But often somebody will approach me and say, “Hey, I’m so-and-so. You wrote me on Twitter.” Crickets. I write lots of people on Twitter. FWIW – I usually click on people’s names and read the bio – which is why it’s worth updating yours. But unless I’ve been doing it for years I simply don’t remember each person I said “hey” to.

7. Find a subtle way to close the loop
Eventually it is nice to close the loop. This can be at a conference, via an intro from a mutual friend or similar. It’s always good when you do this because then future online conversations come from a position of knowing that person better. You don’t necessarily need to spend 45 minutes standing by them at a conference. You just need to close the loop, be subtle, and build the relationship and trust over time.

8. Well known people should engage, too
There are well known actors, musicians, VCs, bloggers, politicians – you name it – who engage with random people on Twitter. Twitter magic. But I see some people in our community who really only use Twitter to publish their media or have a one-way conversation or at best reply only to people they know. I won’t say this is doing things wrong. But this is doing things wrong. I’ve seen it directly through data. Every social media analytics platform, video platform with data or similar that I’ve seen show the same phenomenon. People who publish and don’t respond get some take up. People who publish and respond to “fans” get massive engagement and earn followers. Channel your inner Gary V. He’s the boss.

(Cross-posted @ Both Sides of the Table)

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How To Make 2015 Your Year for Enterprise Mobile Success Thu, 22 Jan 2015 20:25:00 +0000 We’ve been involved with thousands of enterprises that have moved to mobile, and we’ve learned quite a bit along the way about those enterprises that are likely to fail at mobile, and those that help enterprises shift from mobile laggard to mobile leader. I hope to share some of those insights we’ve learned with you […]

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Shutterstock_182035286We’ve been involved with thousands of enterprises that have moved to mobile, and we’ve learned quite a bit along the way about those enterprises that are likely to fail at mobile, and those that help enterprises shift from mobile laggard to mobile leader.

I hope to share some of those insights we’ve learned with you in this article.

One of the common threads among organizations that are underperforming is that they now exist now in full reactive mode. They tried to rush mobile solutions without taking the right things into consideration and they are falling short when developing the mobile apps their customers and employees need. Their mobile app efforts are falling down short from both a business and user experience perspectives.

It’s not all glum, however. We do see customers that are driving mobile success. And below are the five most important lessons we’ve learned about how successful, mobile-driven development teams and business leaders engage with their enterprise to drive success.

Start with the right platform

Success with mobile apps depends largely on the quality of the platform on which they’re built, ran, and managed. And building anything on infrastructure-as-a-service takes precious resources just to manage servers and systems. Not only do these efforts not provide value, they distract the enterprise from those efforts that do.

In contrast, the right platform will provide you with a secure and trusted platform, a metadata-driven architecture, and other resources such as mobile-first APIs, a rich marketplace ecosystem of pluggable solutions, and the ability to easily integrate your data as well as your systems of record.


Focus on the mobile “micromoments”

Build the processes your users need in the short moments they need them. Mobile leaders are creating that experience by truly understanding the context of what their end user is trying to achieve at any given moment. This is especially important today as people’s work habits change from sitting down to work for long stretches to oftentimes capturing small 10 to 30 second “micromoments” to complete a task.

By helping users to create or receive value in those moments, you may have to reduce the app from 20 screens down to one. All superfluous content needs to go. Give the user five data fields instead of 100. It’s about completing one task, simply and elegantly, and only providing users with what they need at to complete that one task.

Ship the Minimum Viable Product

Many large enterprises are stuck in their old ways of developing software, and like all dinosaurs they’ll pay the price for failing to adapt. They’re building for the days when software was deployed physically and applications had to hit all of the possible specifications upfront because shipping updates was expensive for everyone.

Mobile leaders turn this around. They ship the minimum viable product (MVP), meaning the app fulfills the minimum requirements of the user. Enterprises then take the near immediate user feedback and iterate improvements from there. In this way, the MVP speeds development time, shortens app’s time to value, and enables the end user to become a central part of developing the apps they use.

In fact, the market now has come to expect that you’re going to be updating apps rapidly. People know that over time you’re going to make improvements, which brings us to a final but very important point on the minimum viable app – and that it’s okay not to ship perfect. Don’t be afraid to miss the mark in your app the first time out. It’s a chance to get a better understanding of what’s not working so you can focus on what’s working.

Prioritize intuitive design

How your mobile app looks, acts, and its workflow is crucial to success: Even at the enterprise level. You need your users to actually want to use the apps you build. And for that impression, you are competing against the experience they have with their other well design consumer apps. Why do people love Evernote, Shazam, and Uber so much? It’s because they are all eloquently designed, do what they do very well, and these apps oftentimes know exactly what the user needs to do next. They don’t drown the user with too many options. And they provide precisely what the user needs to do their job.

The thing is that the expectation around a mobile experience from enterprise built apps is no different than it is with the consumer when you download an app from the app store. There’s certainly no need for a manual to come with it. And it’d better be intuitive, easy to use, and conform with standards for the operating system they’re leveraging, whether that’s iOS, Android, Surface, or whatever mobile platform rises next. 

Avoid the false dichotomy: IT vs. design

UntitledThere seems to be a false dichotomy of choosing between IT departments and effective design. It’s one of the reasons why we are working with so many companies and modernizing the experiences they’ve built several years ago. Whether it’s a call center operation or a European accounts payable system, we’re spinning what they’ve built upside-down to focus on the persona and the user and the process they follow to do their job.

What we learned most importantly was that design and IT are not mutually exclusive. It’s essential to get them to work well together today. That requires a healthy respect for the job that each does. It’s not necessarily easy, and it’s taken us a long time to get to the level where the technology teams want to see great experiences and the people building the great experiences appreciate watching great technology perform.

It’s important to note that great design needs to be integrated into the overall experience that you’re creating, and it’s especially critical in a mobile device. There’s no getting around the fact that people expect apps to work as well as any app does when it’s downloaded from the app store. You don’t get a pass because your app is designed in-house.

Make sure IT has a seat at the table

With that previous lesson in mind, it’s important for other reasons to always include IT. Marketing organizations have been notorious for completely sidestepping the IT department and reaching out to consultants to create that end-to-end solution without regard for IT’s needs (compliance, security, business continuity, etc.) and the value it brings to these efforts.

We see very clearly that IT needs a seat at the table, especially when you’re talking about enterprise content and enterprise data. This includes security and regulatory compliance mandates. You not only need to create a great experience beyond the firewall – you need to take security in mind when extending out to mobile. We’ve seen what damage a single breach can cause. And it’s not just a security issue. IT is also crucial to governance, scalability, performance, and capabilities issues.

Perhaps, most importantly, IT organizations need to be able to support the business in a way that isn’t strictly beholden to outside firms to deliver on outcomes. It’s one of the reasons why we see companies building centers of excellence around mobile and with the best practices we’ve discussed here that incorporate design and technology and security and strategy all into one group. This way, companies can deliver on that value that they’re looking for quickly. But, to succeed, you need to take all of these lessons to heart. You can’t skimp on any single one.


(Cross-posted @ Blog)

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Consumer adoption of Bitcoin | A jobs-to-be-done analysis Wed, 21 Jan 2015 15:02:37 +0000 Venture capitalist Marc Andreessen recently did one of his tweetstorms on the topic of Bitcoin, a technology he avidly supports. In 25 tweets, he talked about criticisms people have of Bitcoin. Including this one (#18) about “use cases”: 18/The third critique I call the “innocent” one — “Are there enough sufficiently compelling uses cases for Bitcoin […]

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Venture capitalist Marc Andreessen recently did one of his tweetstorms on the topic of Bitcoin, a technology he avidly supports. In 25 tweets, he talked about criticisms people have of Bitcoin. Including this one (#18) about “use cases”:

Let’s acknowledge this: When you’re talking currency and payment systems, the use cases and relevant users are enormous. The
whole planet, really, and all manner of transactions. Lots of places where Bitcoin could theoretically make an impact. In this post, I wanted to think through the consumer payment market, one of the bigger targets there is. According to the Federal Reserve, a U.S. consumer makes around 69 payments per month (pdf). Fertile ground for exploiting underserved jobs-to-be-done.

A powerful way to analyze any idea is to apply jobs-to-be-done analysis. Specifically, apply three jobs-to-be-done tests:

  1. Does the idea target an actual job-to-be-done that enough people have?
  2. Is the idea a meaningful improvement over the current way people fulfill their job-to-be-done?
  3. Does the value of the idea to customers exceed the cost of the idea to them?

In the above linked post about the three tests, I note that the output of the tests are really degrees of certainty about an idea. You can think of it as meters:

JTBD degrees of certainty

The more uncertain you are, the higher the adoption risk of the idea by your intended beneficiaries.

For this analysis, we’ll target a specific set of possible beneficiaries:

Bitcoin will become a frequently used currency for U.S. and European consumers, displacing dollars, euros and pounds.

Ok, on to the adoption analysis. Each test includes an assessment of its certainty.

#1: Targets and actual job-to-be-done of enough people

We long ago left barter behind as a primary basis for goods and services exchange. Currency offered many advantages: a way to exchange with you now, even if I don’t have a good you want; store of value of that outlasts many goods; ability to build up a supply of currency for larger purchases; immediate trust because the currency is known, as opposed to the risk of a receiving a deficient product in trade.

Currency won out over barter for many reasons. And to that end, Bitcoin addresses an actual job-to-be-done: a measure of value that can be exchanged for goods and services.

The level of certainty for this test:

Targets actual job-to-be-done
of enough people
Certainty meter- targets real JTBD enough people

 #2: Better than current solution

Any new thing has to provide better outcomes than the incumbent solution. And not just a little better. Studies show people will undervalue the benefits of a new offering, and overvalue the benefits of an existing solution. This reflects the varying degrees of the Possibility Effect and the Uncertainty Effect people have. Providing a strong improvement in outcomes is needed to overcome the inertia of the Early and Late Majorities.

Put yourself into the shoes of a typical consumer:

  • I need to pay for groceries
  • I need to pay for my Amazon purchases
  • I need to pay for school tuition
  • I need to pay for gas
  • I need to pay for rent

All these activities happen today with dollars, euros, pounds and so on. In what way does paying by Bitcoin provide better outcomes for my payment needs than the currency I use today? Among the Bitcoin improvements I’ve seen described:

Payment cannot be repudiated: The blockchain technology locks in the transmittal of the payment. There’s a full record of payment offered, payment accepted. Which is great as a record for the transaction. Except repudiation isn’t a material issue for consumers for today. They by and large don’t feel pain from it.

No centralized government control over the currency: Bitcoin is a distributed currency, with no central authority overseeing and manipulating it. The implied value is that issues like devaluation, inflation and governments tracking your spending are finally put to rest.

But stop and think about that. Who cares about these issues? Go find 10 neighbors. Ask them their level of concern that the money in their wallet is managed by a central authority. Find out what they think about the traceability of their spending. Many payment services companies actually offer traceability as a feature, not a bug (e.g. Mint, Yodlee, American Express, etc.). I haven’t heard much outcry about payment traceability among the general public.

Reduced identity theft fraud: Credit card numbers can be stolen and used by thieves. Marc Andreessen asserts that Bitcoin greatly reduces this risk. And I suspect he’s right, as far as we understand the risks today. But already, creative thieves are figuring out ways to steal Bitcoins. Innovation at its finest.

But getting better about reducing identity theft is a clear opportunity for better outcomes. Credit card companies have become quite advanced with this via big data algorithms, which spot out-of-norm transactions and flag them. Companies are also good at covering the losses resulting from payment identity theft.

Because Bitcoin is still experiencing losses due to fraud, it’s not clear in consumers’ minds that it’s less risky than current currency and payment methods.

The level of certainty for this test:

Meaningful improvement over
the current way people fulfill
the job-to-be-done
Certainty meter- meaningful improvement over current

#3: Value to consumers exceeds costs of new idea

In this test, you’re asked to look holistically at the costs of a new idea. Monetary costs, yes. But also other costs, such as:

  • Connecting the new solution to existing infrastructure
  • Loss of features you enjoy in current solution
  • Giving up the uncertainty of the current solution
  • New unwanted behaviors

Given the low (non-existent?) value of Bitcoin over current currencies, pretty much any cost will cause a high level of uncertainty for this test.

And Bitcoin has costs. Its current volatility makes it tough to rely on a consistent store of value. You receive $10,000 worth of Bitcoin today, what will that be worth in a month? There’s a learning curve for usage. You need to know how to operate a Bitcoin account, and retrain yourself to think in terms of Bitcoin values (like when you travel abroad and have to mentally calculate the local currency price into your home currency to understand what something really costs).

To the extent that economic cycles will inevitably continue, you need to get used to no central authority intervening to help stabilize things. It’s not clear what a Bitcoin-dominated world would look like in terms of economic stability. Likely, though, this uncertainty doesn’t weigh into consumers’ calculus of costs.

The level of certainty for this test:

Value to consumers exceeds
the cost of the new solution
Certainty meter- value exceeds costs

Wrapping up

It’s hard to see how Bitcoin becomes a regular currency used by consumers. It doesn’t offer sufficient improvement over incumbent currencies and the cost is hard to overcome with any potential value. One possibility: if the lower fraud rates associated with Bitcoin are reliable, perhaps merchants will offer discounts for use of them. That could spur some people to switch to Bitcoins.

The bigger story of Bitcoin is actually the blockchain technology. The ability to ascertain easily, without an intermediary, that a transaction (e.g. document signing, receipt of something, etc.) has occurred seems to offer tangible value over current solutions. That may be Bitcoin’s true legacy.


(Cross-posted @ I'm Not Actually a Geek)

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The Most Misunderstood Facts About Building a Business on YouTube Tue, 20 Jan 2015 18:12:40 +0000 Any reader of this blog for a period of time will know that I’ve been long YouTube for years. Along with Greycroft, I was the first institutional investor in Maker Studios (sold to Disney for nearly $1 billion) and am still the largest investor in Mitu Network, the largest online video producer of Latino content. […]

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Any reader of this blog for a period of time will know that I’ve been long YouTube for years. Along with Greycroft, I was the first institutional investor in Maker Studios (sold to Disney for nearly $1 billion) and am still the largest investor in Mitu Network, the largest online video producer of Latino content. We have made 5 online video investments in total – some we will talk about later this year.

The reasons I have been long on YouTube specifically are very simple:

  • YouTube now has > 1 billion uniques / month. This is 14% of world population and 33% of all people online.
  • A new generation of content producer and video style has emerged that is distinctly different from what you see in TV. 40% of all of YouTube is viewed on mobile devices and of high-quality content I believe it is between 60-70% based on my insider data.
  • The stars of tomorrow are being built on these short-form formats. It’s hard to understand this until you attend something like VidCon and watch youth interaction with their “stars.” You have an “Elvis Presley like moment” where you realize the next generation is already consuming different media than our tastes might appreciate
  • If you want to build a large business in video you need to fish in a pond where the fish are. That is YouTube today.

The arguments from any detractors of building a business on YouTube are:

  • The CPMs are too low (< $2 per thousand impressions for YouTube tonnage vs. $18-25 for many online media or $40+ for TV)
  • YouTube takes too high of a revenue split (45% vs. 30% that Apple and many other distribution companies take – FWIW, YouTube argues this is because their costs are much higher since they host and stream the video)
  • You can’t build a brand on YouTube
  • Content is a “hits driven business” and therefore you can only invest in platforms not media

I think most arguments miss the mark. The point isn’t to “build a business on YouTube” but rather to use YouTube as a marketing platform to build a video business that works across many platforms. If all you ever do is create YouTube content then I agree – that’s not a viable startup business. But if your goal is to develop an audience that can be monetized in other ways, I’ll repeat my argument “you need to fish in the pond where the fish are.”

I’ve given some specific advice on how to do this before. Notably I said:

  • You have to have owned & operated websites (O&O) to drive traffic to. You should be able to convert at least 5-15% of your audience
  • You have to have some of your own content formats and not just be an aggregator of talent.
  • You must invest in technology. If you’re just a content company your advantages are too small to win on the web
  • Your tech needs to add value to content producers, the audience and advertisers
  • Best is if you have a combination of ad revenue, sponsorships and some forms of non ad revenue (subscriptions, merch, music sales, etc.)

But here is the most misunderstood fact about YouTube that I think most smart business people have missed in their rush to criticize revenue splits* or CPMs.

  • Almost every online business I know (eCommerce, online software, mobile games) invests heavily in “customer acquisition”
  • This includes investments often not properly measured (SEO, PR, Social) as well as costs that people measure more precisely (advertising, SEM, FB CPA/CPI ads)
  • Take for example, an eCommerce company. They might spend actively on SEM (Google AdWords) if they can prove that the CAC (customer acquisition cost) is lower than the LTV (lifetime value) of a customer and the payback is < a given time period (say 1 year) or set number of purchases (1-3) until break-even. This kind of spend happens all day long inside startup companies and 100% of the spend on attracting customers is a cost.
  • But think of this. If you’re a video company your goal is to “acquire customers” to your website that you can eventually engage with and monetize. But you don’t need to spend money on SEM. You can spend money building audiences on YouTube. And here’s the thing … YouTube PAYS YOU to develop these audiences.
  • If you think of it as a “YouTube business” you’re doing it wrong. YouTube is a distribution and marketing channel like any other. It just happens to be large, dominant and willing to share revenue with you. And given that Facebook and Twitter currently pay you zero for content marketing and Google SEM charges you for customer acquisition – what exactly are you bitching about? If you don’t know what you’re going to do to develop your audience beyond watching your videos on YouTube … that’s on you.

YouTube Funnel

This is why many traditional video producers (from cable TV, music videos, etc.) won’t build large online video business: they lack the tech skills to engage, activate and retain online audiences cost effectively. Yet to develop audiences you also need to understand: compelling content, sound, special effects, etc which is why most online video startup digital media companies are in Los Angeles or New York and not Silicon Valley.

Only modern thinkers about the new nature of online video audiences will build big businesses online. I’ve written about that, too.

Summary: YouTube as a customer acquisition tool to building great online businesses is unrivaled today. YouTube as a platform in which to build your entire business is naive. Plan your business wisely.


post-script. I know that some people will point out that widely read presentation on YouTube on Sept 2013 criticizes YouTube for its revenue split. I think that is one of the most misunderstood points I’ve ever made.

I wasn’t arguing that this meant not to build on YouTube. For me this was a simple market analysis. I believe that the high revenue share YouTube takes encourages platform competition. In a rush to improve margins, MCNs want to cut deals with other video networks which both reduces YouTube platform dependency and gives you deals with players eager to cut content deals on more attractive margins.

If YouTube had cut revenue share for large MCNs it would be harder for competitors to entice them. I think the market is playing out exactly how I expected and you’ll see increased competition from Amazon, Facebook and Twitter in the years ahead and possibly Tumblr, Vimeo and Pinterest, too.


(Cross-posted @ Both Sides of the Table)

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Five big themes driving enterprise data and app development in 2015 Mon, 19 Jan 2015 14:40:31 +0000 f you read most of the prediction articles for 2015, it’s pretty clear that the conventional thought is that enterprise IT will continue to grow more collaborative with organizational phenomena such as DevOps becoming more common, that mobile computing will continue its ascent, and of course cloud computing will continue to augment and in some […]

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The Swamif you read most of the prediction articles for 2015, it’s pretty clear that the conventional thought is that enterprise IT will continue to grow more collaborative with organizational phenomena such as DevOps becoming more common, that mobile computing will continue its ascent, and of course cloud computing will continue to augment and in some cases displacethe traditional data center.

 But let’s face it: no one is really going out on a limb with those predictions, and I’m not going to say that they’re wrong. They’re not. But there’s more going on under those mega trends.

 I talk with a lot of enterprise customers who are trying to get to the next level of what they should focus on, and how to invest time, resources, and investments. Here are five of the top themes beneath the big themes that I hear from customers all the time.


Theme 1: Savvy enterprises will fully realize that access to data is central to enterprise app success.

Sure, cloud platforms are about all of the things we discuss all the time: ease of development, availability, security, scalability, and extensibility — but they’re also very much (centrally so) about the data.

 In fact, the database should be thought of as part of the cloud platform so that the data are accurate, up-to-date, and always available. For too many cloud platforms, the data layer is considered separate from the cloud platform, not an integral part of the platform itself. More enterprises will find this type of platform causes too much effort to be spent in integrating data and keeping it in sync. The result is cloud silos.


Theme 2: Users will simply not tolerate sub-quality enterprise apps.

User tolerance toward low quality apps is only going to decrease. What was tolerated before when it came to poor user interface and design absolutely won’t be tolerated anymore. How apps look and their workflow (especially mobile apps) are both crucial to success. This has always been true for consumer apps and has more recently become true for enterprise apps. Going forward, that won’t be so, especially as more and more millennials enter the workforce.

The expectations when it comes to the enterprise app experience are now no different than those for consumer apps. The app better be easy to use and intuitive, and if it’s mobile, it better be able to capture data within seconds as well as display relevant data instantly.


Theme 3: In 2014, enterprises came to fully understand how important the user interface is; in 2015 this understanding will shift to action.

There’s no reason why IT departments can’t provide apps that are effectively designed. My colleague Robert Duffner recently wrote a column on  The Six Habits of Successful Mobile First Enterprises. In it he, explains how design and IT are not mutually exclusive and that it’s essential that they work well together today. 2015 is the year they will. More companies will learn how to integrate design teams with development teams and to mature their development efforts so that great design is integrated into the overall experience that they’re creating.


Theme 4: Tools get put into use that empowers data analytics for all users

Historically, data analytics tools have been difficult to design, build, and maintain. But this year, we start to see fully cloud native data analytics tools that are designed cloud from the ground up. They’re agile and can be set up with a tap of button. And instead of being accessible only to a handful of data scientists, they are accessible to everyone in an enterprise.

By leveraging the vast amount of data deliverable by cloud, more relevant, actionable information can be instantly visualized than was ever before possible.


Theme 5: Cloud Identity moves center stage and context redefines the network perimeter.

The typical enterprise worker is using dozens and dozens of apps, and many of them are cloud-based, with more becoming cloud-based every week. This means the perimeter is disintegrating into the fog of the cloud – but fortunately user identities don’t have to.

 In fact, the interaction with authorized users and data is where we find the modern perimeter. This means it’s no longer viable to simply trust users once they are authenticated to a network and then allow them to do whatever they wish once inside. Today, for proper identity management, it’s important to understand what exactly users are trying to achieve when accessing an application. And, by understanding the past behavior of each specific user, what is known of his or her activity histories, the data and resources the user is currently attempting to access, and when a high degree of assurance of the user’s identity is possible, smart authentication and access control decisions can be made instantly and anywhere.

In fact, by placing access and authentication in their proper context, enterprises can redefine their enterprise IT perimeters in terms of business process, data, where the data can flow, and what users are permitted to do. With all of that context, smarter decisions now can be made about what users are permitted to do.


Certainly, not all of these themes will be embraced evenly throughout enterprises. By the end of 2015, you will see that more enterprises take the availability of their data in the cloud as a critical requirement, that subpar enterprise apps are largely left ignored by users, that big data analytics tools become more accessible to more users in more enterprises, and that cloud-based identity is increasingly embraced.

CloudAve is sponsored by, and Workday.

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All These Enterprise IPOs: Why It’s Just Getting Good. Why These are The Best of Times for SaaS. Mon, 19 Jan 2015 14:20:49 +0000 Reading the tech press you might get the sense that The Enterprise is something they are sort of forced to write about because it’s having a good run.  We had a great Consumer run, a nice set of Multi-Billion Dollar deals around Social Networking, a WhatsApp/Snapchat fad around mobile messaging, an Alibaba, Instacart, Fab-ulous e-commerce […]

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Screen Shot 2013-05-23 at 2.31.14 PM

Reading the tech press you might get the sense that The Enterprise is something they are sort of forced to write about because it’s having a good run.  We had a great Consumer run, a nice set of Multi-Billion Dollar deals around Social Networking, a WhatsApp/Snapchat fad around mobile messaging, an Alibaba, Instacart, Fab-ulous e-commerce run … and now it’s the Enterprise’s turn.  With Enterprise IPOs left and right, with more coming up soon. Marketo, Zendesk, Hubspot, Tableau Software, etc. with their Billion+ Enterprise IPOs.  Splunk at a $7 billion market cap after its IPO.  WorkDay at $14 billion.  Yammer and Eloqua sold for $1b+, Etc. etc.  Box debuting at a unicorn market cap.

Here’s the thing.  It’s nothing new, as anyone in SaaS and the Enterprise can tell you.  Because it takes, in the Enterprise, 6-10 years to build something real, something ready to IPO.  So what seems faddy today is in fact just the start of a 2.0 SaaS/Enterprise wave that started back in ’04-’06.  In fact, what we’re seeing today is really just The Last Generation.  The guys that are now getting to $100m+ ARR today.  That’s old stuff, really.

In fact it’s just getting to the good part.  Why?  What’s going on?

First, nothwithstanding a fall in absolute enterprise/SaaS multiples since 12 months ago … Wall Street is buying into Enterprise recurring revenue models.  The reasons include the rare combination of predictable revenue + high growth.  Usually high growth carries high beta, but that’s much less the case with annual SaaS contracts with their extremely high renewal rates.  And Wall Street has good comps to look to now, multiple successful billion dollar valuation leaders at high multiples.

But Wall Street is just a financing and liquidity vehicle.  It’s not the explanation for Why It’s Just Getting Good in Enterprise IPOs.

There are three key factors that are driving the dramatic acceleration in the Business Web and SaaS — and thus this and the next wave of Enterprise IPOs:

1.  Number One, The Markets are Exploding and Growing Faster Than Ever.  Let’s look at the #1 leader in SaaS,  It wasn’t too long ago that Salesforce hit $1 billion in recurring revenue.  Now, it’s well past a $5 billion run-rate.  Next up: $10 billion in ARR.  It’s not that far off.

Now yes, Salesforce is executing to perfection.  But fundamentally, they are solving the same problems, with basically the same core software and features, that they did at a $500m run rate, a $1b run rate, and now a $4 billion run rate.

What’s happening?  There are just so many more businesses, and so many more customers, moving more and more of their businesses processes to the web.  Every day.  Customers that weren’t ready to use Salesforce, or Marketo, or Box, or Any Leading SaaS Service just a year or three ago … are ready.  And even more will be ready next year and the year after.

Beyond that, SaaS is just starting to hit the mainstream phase outside of the U.S. and the U.K.  International growth is just starting.  And mobile enterprise is likewise just kicking into gear.  On mobile, the enterprise is about 2-3 years behind the consumer web.  The growth there is almost entirely ahead of us.

Generously borrowed from Tomasz Tunguz

2.  Second, You Can Scale Much Faster Now (Though It’s Still Very Expensive).  Because the markets are larger, you can scale faster.  Eloqua, as noted, above was founded in 1999 and was acquired by Oracle for $1 billion in December 2012.   It’s arch-rival, Marketo, founded in 2006, hit a $1 billion market cap in May 2013 — in half the time.  And adjacent competitor HubSpot hit $60 million+ in ARR in 5 years and its own billion+ IPO in late ’14.  The idea that Yammer could be acquired by Microsoft for $1.2 billion just a few years ago would have sounded like a delusional fantasy.  Now, it’s only half crazy that Slack got that same approximate valuation just 12 months after it starting collecting revenue.  Because it got from $0-$10m in ARR in single digit months.

Bigger markets mean that if you hit the market just right, with the right team and the right product … you can get to scale so much faster and stronger than just a few years ago.

3.  Competition is Much, Much Fiercer.  And This is a Good Thing.  Even just 5-6 years ago in the Enterprise, the truth is, you could launch a half-decent product that did something truly innovative and still get traction.  If you take a look at the Box of 2006, or even my own EchoSign in 2006 … the 2006 versions of these products are, to be charitable … primitive by 2015 standards.  And there are at least 30x-60x more entrepreneurs founding companies in the broad Enterprise/SaaS space today.  Maybe more.

Competition accelerates change, strengthens the products — which further accelerates market adoption and growth.  The frenetic pace of Consumer Internet hasn’t fully reached the Enterprise.  But it’s getting there.  In another 12-24 months, the Enterprise will be just as rapidly innovative and competitive at a product level as Consumer Internet is.  It’s close already.  We won’t have to talk about the Consumerization of the Enterprise anymore.  Because it’ll be a fait accompli.

4.  The Next Wave is Coming.  A long pipeline of potentially Billion Dollar+ high profile IPOs, both those with a consumer-esque aspect like Box, Evernote and DropBox, and more true business-process Enterprise, like MobileIron, Veeva Systems, Zendesk, Hubspot, and others have paved the way for the ’15+ batch.

But that’s still the last generation, the guys from ’05-’11, who’ve done an incredible job building their businesses, in many cases relatively quietly by Consumer Web standards, over the past 4-10 years.

There’s far more innovation happening now with second and third-generation SaaS and Enterprise veterans and next generation plays — and new markets.  That’s when it get’s really good — once you actually know what you are doing, and Go Big from Day 1.   First, we’ve been doing this long enough for the second-timers to be at their second at-bat.  WorkDay was an early example of a hyper-successful repeat Enterprise play.  But there are many others.  The second and third generation list goes on but really, is just getting started.  More on the second-timers here.

Perhaps more importantly, there are so many new markets that are SaaS-ifyng.  From browser-based call centers to search-as-a-service, to grab-and-go eDiscovery to web-based HR training and employee onboarding, just a few years ago these would have seemed too small.  Not today.

So it may seem a touch frothy.  It may seem au courant.  But trust me.  The Return of the Enterprise (really, it’s the rise of SaaS and the democratization of B2B) … it’s just getting started.  It’s just getting good.

Hold on for what’s going to be a wonderful and rather dramatic ride.

(Cross-posted @ SaaStr)

CloudAve is sponsored by, and Workday.

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Blogging for the Hell of It, Not Blogging to Stay Relevant Mon, 19 Jan 2015 09:45:40 +0000 I used to love blogging. For me it was always a creative outlet. I love sitting down – often in “one take*” like a classic film – and capturing what was on my mind at the moment. What I loved about it was that my thoughts were instantly in the ether, I would get quick […]

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I used to love blogging.

For me it was always a creative outlet. I love sitting down – often in “one take*” like a classic film – and capturing what was on my mind at the moment. What I loved about it was that my thoughts were instantly in the ether, I would get quick feedback from readers and I would know where my ideas stood in the world of ideas. If what I said was shit I knew it instantly. If what I said was clever but I said it with less empathy than I should have – I knew that, too.

Blogging proved to be a great way to hone my ideas, have public conversations with people and as it turns out – build meaningful relationships through public dialog that spilled over into the real world.

Somewhere along the way blogging changed. From the very first time I listened to Airplanes by B.o.B. it resonated.

“Somebody take me back to the days
Before this was a job, before I got paid
Before it ever mattered what I had in my bank
Yeah, back when I was tryin’ to get a tip at Subway
And back when I was rappin’ for the hell of it
But nowadays we rappin’ to stay relevant
I’m guessin’ that if we can make some wishes outta’ airplanes
Then maybe yo maybe I’ll go back to the days
Before the politics that we call the rap game
And back when ain’t nobody listen to my mixtape
And back before I tried to cover up my slang
But this is for Decatur, what’s up Bobby Ray?
So can I get a wish
To end the politics
And get back to the music
That started this shit?”

That’s how I feel.

There were days where I could write about what I was thinking about Apple or Twitter or Facebook. Or I could just write about life. But over time I realized too many people were paying attention. I often would be concerned about not offending people because no blog post is worth losing friends over.

I can only point to three examples in the last 10 years of writing where I know that what I specifically said made somebody resent me. I regret all three and even though what I wrote I believe to this day was accurate – it still wasn’t worth it.

If I write about big companies and what I think about their strategy, tactics or ethics – I will have feedback from somebody in that org within 12 hours. If I write about startups where I’m concerned about bullying or inappropriate use of customer data I am all too aware that each have investors, each have founders and each have friends. When I write about companies I like and invariably don’t mention other companies I get emails from people supporting the companies I don’t mention.

I guess it’s just a reality of blogging and I accept that. But I decided to take a 30-day break nonetheless.

In December we announced our newest fund – Upfront V – had closed. I took that as a moment to have a break and come back refreshed. It feels good to be back.

I don’t know what blogging will bring in 2015 but I hope to go back to the day when I was just blogging for the hell of it. I hope to just write what’s on my mind in stead of thinking that every post needs to offer advice or insight or wit. I’m still going to try and at least be sensitive to others when I write but I hope not to completely pull punches. And when I feel motivated and impassioned about political topics that affect and interest me: gay rights, immigration reform, income inequality, gun control, ageism, gender bias or anti-semitism – I will still speak up.

I’m always open to input on topics people want to hear more about or less about. I read every comment on this blog that’s timely (I don’t go back and read comments made on posts from 6 months ago) and I read nearly every @mention on Twitter – even if I don’t respond to all.

It feels good to be back.


*post-script – only if you’re interested.

It surprises many people that I often don’t edit my posts at all when I write. That’s how I end up with typos and occasional split infinitives. I prefer to write stream-of-consciousness so that blogging is just an extension of what’s on my brain.

I have ADD, which means I lack “impulse control” which is why when I’m done with a post I immediately hit publish. This is why I can’t really work with editors and don’t work as well publishing on third-party sites. When I’m done I must publish.

I often come back to my posts after the fact for a quick edit of errors. This happens because people mention mistakes in my comments section or on Twitter and all things equal I’d rather fix typos. Occasionally I will add or delete paragraphs but not often. I like “single take” blogging.

(Cross-posted @ Both Sides of the Table)

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Kindred Disciplines: Growth Equity and Growth Hacking Wed, 14 Jan 2015 14:35:10 +0000 Growth hacking is now a mainstream term in tech circles, particularly those that are consumer-focused. Growth hackingdefinitions abound, but generally emphasize a data driven, creative and flexibly opportunistic approach to customer acquisition. Many would argue that growth hacking is simply a new term for an old concept – marketing. While the functions, tools and skills […]

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yinyangGrowth hacking is now a mainstream term in tech circles, particularly those that are consumer-focused. Growth hackingdefinitions abound, but generally emphasize a data driven, creative and flexibly opportunistic approach to customer acquisition. Many would argue that growth hacking is simply a new term for an old concept – marketing. While the functions, tools and skills require for growth hacking may be essentially the same as “marketing”, the psychology and mission of growth hacking feel totally different to me. When I hear “marketing”, I think soft, fuzzy, ambiguous, and cost center. When I hear “growth hacking”, I think maniacal focus on growth, scrappy, data driven, tech/tool savvy, and creativity bordering on irreverence. The difference in psychology isn’t an indictment of traditional marketers; most of the marketers I know have a growth hacking mentality. But in the broader context of what it takes to be successful in a growth stage businesses, the difference in psychology and mission matter.


Growth equity and growth hacking enjoy a symbiotic relationship. Although there are capital efficient ways to growth hack that don’t require growth equity, some growth hacks absolutely require capital.  Growth equity investors who understand customer acquisition costs, lifetime customer value, customer success and customer retention strategies are well suited to provide the right kind of capital for growth hackers. Growth hackers and growth equity investors are kindred spirits and although we look at the world through a slightly different lens the philosophy and objectives we’re passionate about are similar.


Growth equity investors and growth hacking require a common predicate; product-market fit. Without product-market fit, growth hacking is a fruitless exercise and could actually do more harm than good. For the same reasons, without product-market fit, a growth equity investment is useless as the proceeds are likely to be spent unwisely trying to force growth for a product in search of a market.


Growth equity investors and growth hackers understand that the path to repeatable and scale-able growth comes out of a process of constant and conscious experimentation. Generate a thesis, test, measure, re-calibrate and repeat. The desired result is profitable growth. If the experiment works and produces the desired result, spend more on the experiment, but remain committed to testing, measuring and re-calibrating in a process of constant improvement and optimization.


Not all growth hacks require capital to execute. But most do, particularly in enterprise sales oriented organizations. That being the case, growth hackers and growth equity investors are fanatical about measuring results, keeping in mind the only authentic growth objective that matters; profitable, repeatable and scale-able growth. The need to measure stems from a common focus on efficiency. In the case of the growth hacker, the goal is to optimize the ratio of growth to input (whether the input be capital, effort or reputation). In the case of the growth equity investor, the same desire to optimize the ration of growth to input expresses itself though the desire for capital efficiency.

Growth hackers and growth equity investors should hang out more often. We’ve got a lot in common, including an appreciation for humor.


(Cross-posted @ Non-Linear)

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14 Principles of the Future Organization Wed, 14 Jan 2015 14:22:18 +0000 Over the past few months I’ve been sharing a series of posts on the 7 Principles of the Future Employee and the Evolution of the Employee. This was followed by the 10 Principles of the Future Manager followed by the Evolution of the Manager. Today I want to introduce the 14 Principles of the Future […]

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Over the past few months I’ve been sharing a series of posts on the 7 Principles of the Future Employee and the Evolution of the Employee. This was followed by the 10 Principles of the Future Manager followed by the Evolution of the Manager. Today I want to introduce the 14 Principles of the Future Organization (which will eventually be followed up by the Evolution of the Organization). This is a concept that is taken from my latest book on The Future of Work and one that I feel is quite important. We are seeing an amazing evolution around how we work, how we lead, and how we structure our companies. These are the 14 Principles of the Future Organization.


Globally distributed with smaller teams

We are absolutely seeing a shift towards organizations “command and conquering” where they are distributed their real-estate and their employees among various pockets around the world. It’s not unusual to see a single employee working in a remote location just so the company can say they have an “office” there. Talent is no longer dependent on proximity to the corporate headquarters. In addition the Jeff Bezos “two pizza rule” is a must in order to allow employees to actually get work, that is, a team should be able to be fed by two pizzas, if the team is larger than “two pizzas” it’s too big.

Connected workforce

A company cannot have a distributed workforce unless that workforce is able to stay connected with the right people and information; anytime, anywhere, and on any device. This means deploying the right collaborative technologies that enable this to happen. Technology is the central nervous system of an organizaiton.


The same spirit, passion, and creativity that entrepreneurs have must also be fostered inside of organizations. Employees should be able to test out ideas, run experiments, pitch new projects, and “run” with the ones that have potential.

Operates like a small company

A small company make decisions quickly, isn’t bogged down by bureaucracy, and are more agile and adaptable. In a rapidly changing world organizations cannot operate as their stereotypical “larger selves” where employees spend all their time checking emails, have meetings about having meetings, and basically operate at the speed of sludge.

Focuses on “want” instead of “need”

Organizations used to assume that employees worked there because they needed to. Today, talented employees are seeing all sorts of opportunities to make a living beyond traditional employment. This means that in order to attract top talent organizations must create an environment where employees actually WANT to be there instead of assuming that they NEED to be there.

Adapts to change faster

Today, “late followers” means “out of business.” Years ago it was acceptable to see what other companies were doing and being a “fast follower,” not so today. Decisions have to made faster and actions need to be more swift. This isn’t just an adaptation to technology either, new behaviors entering the workforce are also crucial to pay attention to and embrace.

Innovation everywhere

Innovation no longer comes from a team, a department, or from a few people at the top of the food chain. In order to succeed in a rapidly changing world innovation must have the ability to come from anywhere including outside of the company. “Idea” and “innovation” are also two different things. Ideas happen all the time but the process of taking that idea and turning into something is innovation. Does your organization enable anyone to come forward with an idea and then give them the opportunity to turn that idea into something?

Runs in the cloud

On-premise technologies have a shelf life and their days are surely numbered. How much longer do you think your company can sustain it’s on-premise deployments before falling behind every single other competitor that is able to adapt to technological change faster than you? Three years? five years? Maybe ten years? Stall as much as you want but the “future organization” runs in the cloud.

More women in senior management roles

There are nowhere near enough women in senior management and leadership roles at companies around the world . This means that most companies are missing out and an increase talent pool with access to new skills and perspectives. Women have the majority of purchasing power, will soon become the majority of the world’s population, will soon earn more than men, and will quite frankly end up kicking ass in the next few years. The forward thinking organizations recognize the value of having more women in senior level roles and are taking actions to help encourage and support this.

Flatter structure

No organization that I am aware of has ever embarked on a journey to create a more hierarchical structure with more layers, more management, more bureaucracy, and less collaboration. Yet this is the stereotypical idea of what a strict hierarchy looks like and how it operates. Some structure within an organization is good but there needs to be a balance between being completely flat and being a pyramid. In other words structure is fine provided that it serves the purpose of helping employees understand where they fit within the company and what the relationship structure looks like. However, this structure doesn’t mean that everything flows “top down.” Communication and collaboration flows up, down, and side to side.

Tells stories

Oftentimes organizations focus on telling stories to customers to build relationships with the, elicit an emotional response, align with customer values, and get them to buy something. But it’s also crucial to tell stories to employees as well. Employees want to work for organizations that they believe in and whose values align with their own there is no better way to do this than through telling stories about how the company started, why it exists, and where it’s going.

Democratizes learning

In most companies today, if you want to learn something you have to book a class or a training session, oftentimes days or weeks in advance. Learning is a very structured and linear process which is completely outdate today. For the future organization any employee is able to act as a teacher or student that can learn from colleagues anytime and anywhere. Of course, this is largely facilitated through the use of collaborative technologies.

Shifts from profits to prosperity

Profit is just the financial gain that an organization receives and it’s the primary measure of success for most of them. Prosperity on the other hand looks beyond just how much money a company makes and looks at things such as employee health and wellness, community involvement, sustainability, and making a positive impact on the world. These are the values and attributes that the future organization must and will possess.

Adapts to the future employee and the future manager

It goes without saying that the organization of the future must adapt to the changes we are seeing around how employees work and how managers lead. Both of these are things discussed in previous posts which were mentioned above.


(Cross-posted @ The Future Workplace)

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The Future of OpenStack is Now, 2015 Tue, 13 Jan 2015 17:26:39 +0000 This year will be a crucial year in OpenStack history.  This is the year we fix much of how OpenStack is structured or die trying.  By structure, I mean the vision, the project structure, the integrated release cycle, and the board and TC’s role in driving direction. First, stop and read this blog posting by […]

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openstack-logo52-300x300This year will be a crucial year in OpenStack history.  This is the year we fix much of how OpenStack is structured or die trying.  By structure, I mean the vision, the project structure, the integrated release cycle, and the board and TC’s role in driving direction.

First, stop and read this blog posting by Thierry Carrez, release manager for OpenStack.  Then, if you haven’t already, make certain you watch my related keynote (preso w/no video is here) from the OpenStackSV meeting in September of last year.

The problem can be stated simply, if somewhat brutally:  OpenStack is at risk of collapsing under it’s own weight.

The original vision had the OpenStack community delivering a tightly integrated release focused on basic infrastructure services on a 6-month release cycle.  The problem is that this shared vision was at odds with two things: 1) the inherent inclusivity of the OpenStack community and 2) people’s wildly differing interpretations of the word “cloud”.  To be honest the latter is endemic to the cloud space and has been since its inception, but the mission statement [LINK] of OpenStack doesn’t clarify, instead using the hopelessly abuse word “cloud”.

Let’s examine these challenges I outlined and examine a way forward, ending with a plea from myself on how you can help.


When OpenStack launched in summer of 2010, I and many others saw the immediate value of an open source infrastructure-as-a-service stack with a vibrant community.  Something Eucalyptus and CloudStack had both failed to achieve.  In fact, the very hallmark of OpenStack was it’s inclusivity.  If you joined the community, played by the rules, and wanted to make something happen, it was clear how to do so and you were actively encouraged to go for it.  This is an important facet of why OpenStack grew so fast and had so many amazing participants.

However, there was one dark spot in this inclusivity.  Namely, competing OpenStack projects were actively discouraged as were adding projects written predominantly in non-Python languages.  The attitude in the former case was one of “why don’t you fix what is already broken?” and in the latter, one of “we want to allow developers to move easily between projects!”  Both laudable goals, but both ultimately unwieldy and misguided.

Although unspoken, another source of this tension was the process by which the “integrated release” was delivered every 6 months, where in theory we:

  1. release code
  2. have a summit where we discuss the next major release
  3. work for months including mid-cycle meetups to get new code ready
  4. test, test, and re-test all of the code together
  5. release code and begin again

Now with only two projects, Nova and Swift, in the beginning, this was not a problem, but as the number of projects grew, significant organizational issues began to arise.  Thierry did the most eloquent job explaining so I am just going to try and fill in the gaps and talk about this more from a product and business perspective.

The issues with the growth in projects was deeply compounded by many of the new projects being “cloud” but entirely different areas of cloud, such as Platform-as-a-Service, Database-as-a-Service, etc.  Many of these don’t need to be part of an integrated test release every 6 months and in fact should probably be developed on their product cycles

All together this meant several things:

  • The integrated code cycle demanded a rethink
  • The importance of delivering a tightly integrated release was in question
  • OpenStack as a single monolithic “cloud operating system” was clearly untenable
  • The idea that developers could move seamlessly between projects was dubious
  • Delivering inclusivity is probably the “killer app” for OpenStack and its Foundation

OpenStack by Design

In my OpenStackSV Keynote, Lie of the Benevolent Dictator, I highlighted what I saw as a critical gap in the organizational structure of the community.  Namely that we needed real product management and product strategy leadership.  During the 2014 Atlanta Spring Summit, the Board and the Technical Committee had their first joint session.  From that meeting it became clear that the TC was focused on managing the 6-month integrated release cycle and was focused exclusively on tactics.  At the same time, the Board and Foundation did not feel that they had the remit to drive technical product requirements.

The result is that there is a lack of cohesive long term (2-5 year) planning around OpenStack from a product perspective.  Instead, we rely on the the grassroots level organization that may or may not happen as each developer or company contributes code.  In effect, we suffer from the Tragedy of the Commons.

We asked for this when we encouraged an inclusive environment and I certainly don’t want to do away with a key strength of OpenStack; however, the bent for inclusivity needs to be tempered with better long term product planning.

We need OpenStack by Design and Intention, not by accident.

OpenStack’s Way Forward

Again, Thierry’s extremely eloquent outline of how to move forward from a technical point of view is fantastic, but perhaps there is room for improvement?  If inclusivity and the community is the most important aspect of OpenStack, then perhaps we should operate as such.

I believe there are a number of key items that need to happen this year at the Board, TC, and Foundation level.  Fundamentally, we need to look more like a set of loosely-coupled independent projects that MAY be put together in a variety of ways. [1]

These are the key items that need to addressed this year:

  • Reorganize to a more scalable model, like the Apache Software Foundation
  • Discard the integrated release process, in favor of interoperability testing
  • Promote DefCore and the CI system for delivering interoperability between projects
  • Explicitly encourage non-Python OpenStack projects
  • Re-position OpenStack in the minds of the market and community
  • Create an ongoing educational process to help reinforce this re-positioning
  • Develop “integration streams” for interrelated OpenStack projects that need interop
  • Re-imagine the TC as an integration and architecture team not SDLC management
  • Plug product management kung fu into the TC

Your Help is Necessary To Enable This Vision in 2015

I have been working behind the scenes, along with many other board and TC members, to help educate on these issues.  I worked with the DefCore and RefStack teams, helping to encourage formation of the product management working groups, and bringing up key issues at board meetings.  I believe that our collective efforts helped us get to the point where change is possible and Thierry’s article shows that the appetite and willingness to change is here.

I want to continue representing the community as a whole on the OpenStack Foundation Board of Directors.  I know that I can represent your interests and help guide OpenStack down the right path.  This year is a formative year for OpenStack and I know that my particular flair for breaking the glass will be critical in encouraging change.

For the first time I’m running as an individual representative who wants to create the best OpenStack possible for everyone.  I am focusing on inclusivity, revitalizing the OpenStack community and process, and driving towards a model that ultimately is the best for vendors, customers, end-users, developers, operators, and all other stakeholders within OpenStack.

I want your vote!  Thank you.



[1] Hopefully this will get rid of the banal requests from unwitting customers for “vanilla OpenStack”, something that has never existed anyway.

(Cross-posted @ Cloudscaling)

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My Endorsements for the 2015 OpenStack Individual Director Elections Tue, 13 Jan 2015 17:25:47 +0000 If you are voting this year in the individual director elections, and I sincerely hope you are, I would appreciate it if you would give special consideration to the following candidates and a super brief “why” Kavit Munshi – international … Continue reading

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openstack-logo52-300x300If you are voting this year in the individual director elections, and I sincerely hope you are, I would appreciate it if you would give special consideration to the following candidates and a super brief “why”

  • Kavit Munshi – international and Indian representation
  • Tim Bell – user representative and continuity with user committee and user survey
  • Jesse Proudman – operator representative and independent voice
  • Haiying Wang – international and Chinese representation

There are many other fantastic candidates running including Monty Taylor, Rob Hirschfeld, Alex Freedland, Sean Winn, and Ken Hui.  However, I decided to cut this down to a very short list that was stack ranked as follows:

  • International representation (we need more)
  • User representation (we need more)
  • Operator representation (we need more)

Good luck to everyone.

(Cross-posted @ Cloudscaling)

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The Low Viral Coefficient of SaaS, And Why That’s Just Fine Tue, 13 Jan 2015 17:18:34 +0000 We’ve talked a lot on SaaStr about how to get from $1m to $10m, $2m to $5m, $10m to $30m, etc. etc. One area we haven’t talked as much about is getting from say $100k in ARR to Initial Traction, or $1-$2m in ARR.  A bit, but not as much. The reason is while I […]

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We’ve talked a lot on SaaStr about how to get from $1m to $10m, $2m to $5m, $10m to $30m, etc. etc.

One area we haven’t talked as much about is getting from say $100k in ARR to Initial Traction, or $1-$2m in ARR.  A bit, but not as much.

Screen Shot 2015-01-12 at 5.35.14 PMThe reason is while I believe for a Given ACV, everyone sort of scales the same way after Initial Traction … we all find different ways to get to Initial Traction.  To the first $1m in ARR, to do the Impossible.  Some of us are good at outbound, and we literally network and call and email our way to $1m in ARR.  Others are content marketing geniuses and build a mini-brand abnormally early.  Others are great at PR.  Or smothering what few leads they do have with love.

We all hack our way to $1m in ARR a bit differently, albeit from the same general large playbook.

So when someone asks me at say $8k a month in MRR, from say 30 or 50 or 100 customers or whatever … how they can get to $1m ARR faster … I really have only two answers.  One tactical, one strategic.

The tactical answer is this:  Double Down on Whatever Has Produced You Even a Single Customer.  Because since no one has ever hear of you, any possible subvertical, any channel, any keyword, any blog post that gets you just one single customer … will get you at least one more.  And probably 10 more.  So double down your time and efforts on anything that has even remotely worked.

My strategic answer is this:  Whatever you do, make your first 10, 20, 30, 100 customers happy.




The thing is, this probably won’t help at all getting to $1m in ARR any faster.  Yes, your first customers will refer you to others, get you more leads.  Absolutely.  It will work.  It always works, as long as you make them truly, attitiduinaly loyal.  (More on that here).  The problem is time.

Our friends over in B2C talk a lot about viral coefficients.  How quickly one WhatsApp user gets you another.  How quickly your social map explodes across some new app.

It turns out in B2B it’s there, it’s just usually, a lot slower.

Let me explained how it worked for us at EchoSign.  EchoSign is a somewhat collaborative app, in that when I send you a contract to sign, it goes from one org to another.  One company to another.  That creates a viral exposure and opportunity for the signer to potential register, try the app, play with it, use a Free version or Free Trial and … eventually .. convert to paid.  You can see our early user growth in the chart above.

And we could track the viral conversions quite easily.  From date of first contract send to New Signer, to how long it took for that new account to convert to paid.

The answer was: 8 months.

Eight months from one paid customer to product another, on average.  Sometimes faster, of course.  Sometimes far, far longer.  And often in took multiple exposures (say 3) before someone would really get going and buy.

So for the first year, that was incredibly painful.  Because we had so few customers in the early days, that even after 8 months, they could only beget us a handful.

Screen Shot 2015-01-12 at 5.42.33 PMIt really wasn’t until the end of Year 2 that viral really kicked in.  That’s just the math of a low viral coefficient.  And it didn’t even get good until Year 3, when we finally had a large enough installed customer base, using the product, to become our second largest source of new customers.  Today the best SaaS companies are scaling faster, so you may see material results faster.  Maybe.   But you still have the physics of lower viral coefficients to overcome.

I’d say typically, SaaS apps don’t have enough customers to see the material, economic benefits of viral revenue until they cross $1m-$2m in ARR at the earliest.  You may see hints of it before, and in your leads, but usually, there aren’t enough customers or time for it to move the needle as a material revenue contributor before then.

Now, if you’re building a free B2C app, where you need tens of millions of users to get to Initial Scale, that’s a disaster.

bodydoubleBut in SaaS, when you’re on a 7-10 year journey to $100m in ARR, it actually doesn’t matter that much if your viral coefficient is low when you get the viral customers.  Faster is better of course.  But it’s all still good, so long as it comes and it’s not the only source of new customers.  And when it does come, it comes on materially, and strong.

So what’s my point?  My point is Viral is a Medium and Long Game in SaaS.  It can’t make you in Year 1, usually. Sometimes, e.g., DropBox (muchly) or Slack (maybe).  But not usually. But it can help in Year 2, maybe materially.  And then really take off after that.

But it’s no short term magic card.  Epic in the long run, but potentially immaterial in the early days.  Just plan around that for your so-called “viral” SaaS app.


marked up version of viral chart from here

(Cross-posted @ SaaStr)

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The Second-Timers: Mark Organ, CEO/Founder of Influitive and Eloqua: “10 Hard-Won Lessons” Thu, 08 Jan 2015 19:11:33 +0000 We’ve had a lot of fun with our Second-Timers series, from successful SaaS CEOs who are now on their second SaaS company.  It started with our overview here, and since then, we’ve had Lessons Learned for The Second Time from Nick Mehta from Gainsight, Kris Duggan from Betterworks, and more. Up next is one of […]

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We’ve had a lot of fun with our Second-Timers series, from successful SaaS CEOs who are now on their second SaaS company.  It started with our overview here, and since then, we’ve had Lessons Learned for The Second Time from Nick Mehta from Gainsight, Kris Duggan from Betterworks, and more.

Mark-Organ-founder-and-CEO-of-Influitive-300x232Up next is one of my favorite CEOs and stories, Mark Organ of Influitive, and previously founder and first CEO of Eloqua.  Eloqua was acquired for approximately $1 billion dollars by Oracle … after a long haul.  Right as the SaaS and capital markets were bouncing back from Lehman Brothers and the ’08-’09 meltdown.  In some ways, Eloqua was quite early to the current Marketing Automation category, and leaders such as Marketo, Pardot/Salesforce, Hubspot, Act|On, Silverpop, and other winners all owe Eloqua (and Mark) a bit in my opinion.

Back in ’05 and ’06, when guys like me were trying to figure out where SaaS 2.0 was going and what it meant, everyone wanted to learn from Eloqua.  We snuck into the Eloqua party at Dreamforce in ’06 to try to meet Mark and learn more.  :)

Mark’s current company is Influitive.  It’s a company that, like Eloqua, was perhaps a tiny bit early when it was started, blazing a path.  But luckily, today the markets are just so much bigger and faster.  Influitive lets you focus on your real champions, the customers that are your true advocates, and leverage them to more satisfaction and revenues.  It’s on track to cross eight-figures in revenue in ’15 after a very strong, break-out ’14.

Mark’s learnings the Second Time around below:


10 Hard-Won Lessons I’ve Learned on How to Create Billion Dollar SaaS Category

The major you didn’t take in college. The person you could have asked out – but you bailed. That horrendous Screen Shot 2013-11-08 at 2.24.48 PMemail or tweet that should never have seen the light of day.  How many of us have the running inner dialogue of “If I had a chance to do that differently, I would have done it better”?  

Hindsight is 20/20 and looking back provides exceptional learning to those willing to dust themselves off and go for it again.   In my second time creating a new SaaS category, I’m bringing the same passion. I’m tapping some of the ideas that worked the first time around, with my marketing automation pioneering startup, Eloqua.  But this time I’m also making some notable changes based on valuable experiences or past mistakes to make ‘version 2.0’, Influitive, that much better.

Launching and scaling a SaaS company is hard enough.  Developing an entirely new category is an Everest climb compared to the category entrant’s pleasant Sunday jaunt up the hill.  You don’t have the luxury of just being a little better, faster, cheaper than the incumbent tech. There isn’t a reference point for comparison.

Screen Shot 2015-01-07 at 8.28.22 AMSuccessful category creators evangelize the fundamental value of a new way of life.  It is a revolutionary act, conjuring value from thin air – or better said, value from synapses, because categories are created in the minds of your prospects, not your marketing department.

As CEO of a new category, there is a non-negotiable principle that sets it apart. The prime directive is to market, nurture, exploit the category.  Great category creators like Uber, Tesla, Salesforce have showed how it’s done.  It is not easy.  It means double the marketing requirements, because you need nurture the category you have helped to co-create with your early customers, and also market your company as the best example of that category.  It puts extra pressure on the product team to get to fit fast and drive powerful word of mouth – necessary to keep distribution costs under control.

With that said, I have learned a few things about how to do this.  Even with all of the disruptive technology around today, some things remain the same.  But others have fundamentally changed, and/or I’ve learned what not to do on the second go.

Lessons learned, tactics repeated

  1.     Customer success is the bedrock on which everything else is built – Staying customer obsessed is the cornerstone of creating a SaaS category. Not customer focused.  Maniacal measurable customer value obsession.  Do whatever you need to do to generate measurable value for the customer, even if it doesn’t feel “scalable”. While your customer profitability will initially be anemic at best, with this acute focus on delighting customers, attempting to scale without a proven and trusted method for managing your most important relationships is a fools errand.  Delighted customers scale well through sharply higher LTV (account growth and referrals). More than makes up for the effort spent to deliver value. Once you figure out the model for making customers successful, you can automate to lower service costs.  Our VP of Customer Success increased accounts per account manager from 8 to 45 in just a couple of years through intelligent automation – while increasing customer satisfaction and advocacy.
  2.     Determined focus on lead generation – Success in B2B SaaS is largely about building a vision and efficiently converting the resulting awareness into leads. You can never stop generating leads …. Ever. I dream about lead generation and I obsess about the SQO (sales-qualified opportunity) numbers more than the MRR numbers.  The SQOs – and the velocity of SQO generation (and even acceleration, if things are going really well) tell you whether or not your message is resonating.  Lead flow that is increasing in quality and quantity is an indicator of healthy category creation. That the market is growing at an appropriate rate to support your hiring.  A CEO needs to be involved from a lead gen standpoint due not only because more qualified, senior decision-maker leads that close larger and faster are generated, but because it is the best way to directly learn about how your message and product are resonating with the market.
  3.     “Rocketship talent” – Find the up-and-comers, the stars before they’re universally acknowledged as stars. The biggest hiring mistakes I have made have been with people who can do the job in their sleep.  Execs that have a gap to fill in their experience are excited to come to work every day, to learn and grow.  Yes, they will make mistakes.  But my experience is that their passion makes up for those errors 10 times over. I spend at least 25% of my time identifying and bringing on team members who are unproven legends in the making, and helping them develop into the executives they have the potential to become.
  4.     A commitment to pushing the knowledge frontier - Creating a category relies on an unrelenting focus on thought leadership in order to win the war of ideas.  Ideas compete much more viciously than even the fiercest of product rivals.

You’ll have the nay-sayers.

The non-believers.

Or worse…the non-interested.

To win them over you need to be producing innovative and exciting thoughtware. You need a sustainable, repeatable process for unearthing, winnowing and developing the unique ideas that will excite your market.  Open minds = open wallets.

  1.     Dominating market segments and delivering to the under-served hero - The goal of a category creator is to ultimately dominate a market. Dominate to me means a minimum of 5x RMS (relative market share).  For example, if you are the market leader with 40% share, that means that the next largest player has 8%.  Not that easy to do, if it’s a huge market.  But if you define your initial target market narrowly enough, it’s doable.  Huge markets are made up of hundreds or even thousands of nano-market segments.   Finding and delivering value to these submarkets is a fundamental requirement to asserting a dominant market position. 

Another important concept is that of elevating and celebrating the under-served hero.  At Eloqua, it was the quantitative, process oriented demand gen marketer.  At Influitive, it’s both advocate marketers and the advocates they serve. If you choose the right customer and user that is undergoing massive growth due to underlying disruptive technology, you will have a major brand asset that will keep on giving long into the future.

Learned the hard way, changing things up

  1.     teaminfluitiveGreater emphasis on investing in people and culture –  At Eloqua, I was a maniac on customer success.  I wanted to be out in the field with the sales guys and the account managers as much as possible.  Too late in my tenure did I learn that happy employees are key to category success, because nothing drives customer delight like delighted employees.  This means supporting team member performance and development both in their everyday roles and in their long term aspirations.  Peter Drucker famously opined that “Culture eats strategy for breakfast” and we recognize that in order to hit our strategic goals, we need a unique and healthy corporate culture to get there (Check out our awesome Glassdoor reviews!).  Culture does not mean more perks.  It means great management (and management training), accountability, transparency in decision making, inclusiveness, celebration.  And above all, empowerment of every individual to do what they need to do, to say what they want to say, and create a better experience for themselves and everyone around them.
  2.     Better handle on board management – I generally felt that our board was a nuisance, at best, when I was CEO of Eloqua.  Learning from my experience, it was priority to build a world class, independent board right from the get-go at Influitive.  We govern ourselves as close to public company style as possible for our stage.  I talk to board members on a weekly basis and all board members receive a semi-automated report daily on our progress, which includes deals won, demos, new hires, and insights from our team.  By keeping lines of communication open, meetings fun and productive and mixing up formal and informal sessions, our board is serving its purpose of providing direction and support.
  3.  User experience at the core – Those of you who have used Eloqua software in the aughties would know that user experience was not a strong suit of the Eloqua product line.  Here at Influitive, from day 1, we have had an internal mission to make sure our product is a joy to use. That means hiring people who have empathy for users, and have skills on mapping user flows, understanding friction points, conducting user research. A great UX is the most important feature-set.  Not an overlay.  Not something that we will get around to addressing at some point. We constantly experiment to find better ways to deliver to our users and leverage our product for our own needs wherever possible so we are in the ‘user-seat’, or eating our own ice-cream as we call it here.
  4.     Swinging for the fences - While I did have big dreams at Eloqua, I was mostly concerned with surviving another quarter, another year.  This time, we have higher ambitions, we want to win it all.  And that means extraordinarily high rates of growth, with minimal decay rate on that growth. High growth in every time frame – this month, next quarter, next year, 3-5 years from now. Think about how Salesforce or LinkedIn is practically a different company every year, in order to keep their growth rate as high as possible. It means that the seeds of the next growth idea must be planted ahead of time. It means that the barriers against future competition need to be erected early. And it means that we and our investors will get a strong return from equity financing. Jason discusses going big on round 2 in a great post here.
  5.     Being more proactive about ‘customer protection’ -  Unearthing a category brings in the competition. Fast. Innovative. Without warning. We did not spend much time thinking about anti-competitive “moats” at Eloqua, as the company grew accustomed to a life without serious competition.  That situation changed rapidly, and when it did, there were insufficient barriers erected to maintain high growth and renewal rates.  This time, we are anticipating insanely vicious competition, and we have a plan. We are building a multi-layered defence. We are creating powerful incentives to join the Influitive system due to benchmarking across all of our customers, integrations with adjacent providers, building a proprietary network of power users, and cultivating network effects to provide increasing returns for every customer who uses our product.

Does experience guarantee success?  Of course not, far from it.  But a high rate of learning, constant sensing and iteration, goes a long way.  I hope that the readers here can learn from my hard-won insights and build a category-defining SaaS company right, the first time.

(Cross-posted @ SaaStr)

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Don’t Forget the Services Revenue Thu, 08 Jan 2015 17:27:45 +0000 If you’re doing SaaS for the first time (or even the second), the whole idea of charging for “Services” may seem an anathema.  It sure did to me. If your product is so easy to use that you barely need sales people, why in the world would I need to charge for implementation?  For support?  For […]

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If you’re doing SaaS for the first time (or even the second), the whole idea of charging for “Services” may seem an anathema.  It sure did to me.

  • If your product is so easy to use that you barely need sales people, why in the world would I need to charge for implementation?  For support?  For training and engagement?
  • And isn’t it a bit unseemly to charge for services?  Doesn’t it sort of say your product is Old School?  SAP-level clunky?
  • And isn’t services revenue a friction-full waste of time anyway?  I mean, it’s not recurring.  It’s not true ARR.  Does it even count?  I’m a SaaS company.

Maybe.  Maybe for the 15% of the world that is like you and me, charging for services doesn’t make any sense, perhaps even anti-sense.

Screen Shot 2014-11-27 at 7.11.43 AMTurns out though, that in the vast majority of six-figure contracts, virtually every seven-figure contract, and quite a few five-figure contracts … there’s always a services component.

And it almost always seems to average out to 15-20% of the ACV.

I remember the first time I experienced this confusion myself, on one our first high-five figure contracts.  We had a brutal negotiation over price.  And then, at the end, they send us a Schedule for Services.  After getting beat down on pricing on the annual contract price … the Schedule for Services they send us (without me even asking) guaranteed us another $20k a year in services, with $250 an hour as the assumed price for the services.

I didn’t fully understand what was going on here until I became a VP in a Fortune 500 tech company.

But the answer, it turns out, is simple once you get it.

First, in medium and larger customers, there’s always change management to deal with when bringing in a new vendor.  And they not only understand there’s a cost associated with that (soft even more than hard) … your buyer wants to do the least amount of change management herself as possible.  If you can do the training for her for a few bucks and saves her a ton of time … that’s an amazing deal.

Second, in medium and larger customers, they often have no one to do the implementation work themselves.  So even if you weren’t saving your customer theoretical money by helping with implementation, roll-out, support etc. … they probably have no one to do this internally anyway.  You’re going to be doing some, a lot, or all of this for them.  They are OK paying for this, in the enterprise at least.

And most importantly … it’s how business is done.  And — budgeted.  When most larger companies enter a new vendor into their ERP system, they typically add an additional budget item or two along with the core contract price.  One additional line item for service and implementation, in most cases.  And in some cases, an additional budget for other add-ons necessary to make the implementation a success (e.g., an EchoSign on top of Salesforce).  Both of these are often line-item budgeted at 15-20% of the core contract value for the product.

So net net …

  • You probably can’t charge another 15-20% for services and implementation and training for a $99 a month product.  Well maybe you could, but it’s probably unprofitable and not worth it.
  • But, as soon as the sale gets into the five figures, considering adding 15-20% for Services.  You’ll probably get it.
  • And plan for charging, and delivering, additional services revenue in mid-five figure and larger deals.  The customers are happy to pay, and in fact, will expect it.

And if you don’t charge … you’re just leaving money on the table.  You’ll have to do the work anyway.  You may send negative signaling that you aren’t “enterprise” enough, that you aren’t a serious enough vendor.

And importantly, this extra services revenue still “counts” as recurring revenue if it’s < 25% or so of your revenues.  I don’t mean that literally (it doesn’t recur), but what I mean is that Wall Street and VCs and acquirers and everyone will still consider you a 100% SaaS company if <= 25% of your revenues are nonrecurring.  And you’ll get the same SaaS ARR multiple on those extra services revenues.

Same multiple.  No extra work.  10-25% more revenue.

Don’t leave the services revenue on the table.

(Cross-posted @ saastr)

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Did SAP Overpay For Concur? Thu, 08 Jan 2015 00:10:00 +0000  Since SAP announced to acquire Concur and eventually closed the acquisition for $8.3B many people have reached out to me asking whether SAP overpaid for Concur. I avoid writing about SAP on this blog even though I work for SAP because this is my personal blog. In this case, I decided to write this post because […]

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 Since SAP announced to acquire Concur and eventually closed the acquisition for $8.3B many people have reached out to me asking whether SAP overpaid for Concur. I avoid writing about SAP on this blog even though I work for SAP because this is my personal blog. In this case, I decided to write this post because this is the largest enterprise SaaS acquisition ever and this question unpacks the entire business model of SaaS enterprise software companies.
If you’re looking for a simple “yes” or “no” to this question you should stop reading this post now. If not, read on.
People reaching out to me asking whether SAP overpaid for Concur in itself is a misleading question because different people tend to compare Concur with different companies and have a specific point of view on whether the 20% premium that SAP paid to acquire Concur is justified or not.
Just to illustrate financial diversity amongst SaaS companies, here are some numbers:
This is based on a combination of actual and projected numbers and I have further rounded them off. The objective is not to compare the numbers with precision but to highlight the financial diversity of these companies based on their performance and perceived potential.
Market cap is what the market thinks the company is worth. The market doesn’t necessarily have access to a ton of private information that the potential acquirer would have access to when they decide what premium to pay. While the market cap does reflect the growth potential it is reflected in a standalone pre-acquisition situation and not post-acquisition.
The purchase price, including the premium, is a function of three things: revenue, margins, and growth (current, planned, and potential). However, not all three things carry the same weight.
For SaaS companies, annual recurring revenue (ARR) is perhaps the most important metric. It is not necessarily same as recognized revenue what you see on a P&L statement and ARR alone doesn’t tell you the whole story either. You need to dig deeper into deferred revenue (on the balance sheet and not on P&L), customer acquisition cost (CAC), churn, and lifetime value of a customer (LTV) that companies are not obligated to publicly report but there are workarounds to estimate these numbers based on other numbers.
If you’re a fast growing SaaS company the street will tolerate negative margins since you’re aggressively investing in for more future growth. Margin is less interesting to evaluate a fast growing SaaS company, for acquisition purposes or otherwise, because almost all the revenue is typically invested into future growth and for such SaaS companies the market rewards revenue and growth more than the margins.
Margin by itself may not be an important number, but the cost of sales certainly is an important metric to ensure there is no overall margin dilution post acquisition. Mix of margins could be a concern if you are mixing product lines that have different margins e.g. value versus volume.
Current and planned growth: This is what the stock market has already rewarded pre-acquisition and the acquirer assumes responsibility to meet and exceed the planned or projected growth numbers. In some cases there is a risk of planned growth being negatively impacted due to talent leaving the company, product cannibalization, customers moving to competitors (churn) etc.
Growth potential: This is where it gets most interesting. How much a company could grow post-acquisition is a much more difficult and speculative question as opposed to how much it is currently growing and planned to grow pre-acquisition (about 29% in case of Concur) as this number completely changes when the company gets acquired and assumes different sales force, customer base, and geographic markets. This is by far the biggest subjective and speculative number that an acquirer puts in to evaluate a company.
To unpack the “speculation” this is what would/should happen:
This number should go up since there are opportunities to cross-sell into the overall joint customer base. LTV does reduce if customers churn, but typically preventing churn is the first priority of an acquiring company and having broader portfolio helps strengthen existing customer relationship. Also, churn is based on the core function that the software serves and also on the stickiness of the software. The most likely scenario for such acquisitions is a negative churn when you count up-selling and expansion revenue (not necessarily all ARR).
This should ideally go down as larger salesforce gets access to existing customer base to sell more products and solutions into. The marketing expenses are also shared across the joint portfolio driving CAC down. This is one of the biggest advantages of a mature company acquiring a fast growing company with a great product-market fit.
Revenue growth
As LTV goes up and churn goes down overall ARR should significantly increase. Additional revenue generated in the short term through accelerated growth (more than the planned growth of the company pre-acquisition) typically breaks even in a few quarters justifying the premium. This is an investment that an acquiring company makes and is funded by debt. Financing an acquisition is a whole different topic and perhaps a blog post on that some other day.
Margin improvement
This is a key metric that many people overlook. Concur has -5.3% operating margin and SAP has promised 35% margin (on-prem + cloud) to the street by 2017. To achieve this number, the overall margins have to improve and an acquiring company will typically look at reducing the cost of sales by leveraging the broader salesforce and customer base.
This is a pure financial view. Of course there are strategic reasons to buy a company at premium such as to get an entry into a specific market segment, keep competitors out, and get access to talent pool, technology, and ecosystem.
Based on this, I’ll let you decide whether SAP overpaid for Concur or not.
Disclaimer: I work for SAP, but I was neither involved in any pre-acquisition activities of Concur nor have access to any insider Concur financial data and growth plans. In fact, I don’t even know anyone at Concur. This post is solely based on conventional wisdom and publicly available information that I have referenced it here. This post is essentially about “did x overpay for y?,” but adding SAP and Concur context makes it easy to understand the dynamics of SaaS enterprise software.
Photo courtesy: Iman Mosaad

(Cross-posted @ cloud computing)

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Throw Out Your 2015 Strategy and Budget Right Now Thu, 08 Jan 2015 00:05:22 +0000 The arrival of a new year (and the beginning of a new one) brings a flurry of cognitive churning. As individuals, we 1/ reflect on the year passed, 2/ ritualistically write and read predictions for the next year, and 3/ make resolutions and set goals that are intended to inspire us to greatness during the […]

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Multi-Ethnic Group of People and Budget Concept

The arrival of a new year (and the beginning of a new one) brings a flurry of cognitive churning. As individuals, we 1/ reflect on the year passed, 2/ ritualistically write and read predictions for the next year, and 3/ make resolutions and set goals that are intended to inspire us to greatness during the next twelve months.

I’ve come to see this all as distinctly human but also quite strange. 1/ We can’t do anything about what happened in the past, and many of our “reflections” end up being revisionist history. 2/ The predictions we make – at least the most interesting of them – are almost invariably wrong, but we make them anyway as a way to either “exert control” on our world or to show others how smart we are. 3/ Resolutions simply don’t work. Most are actually a mild form of self-flagellation. We list the things we “should” do that we didn’t do during the last year as if beating ourselves up for not having done them will result in a desired behavior modification. My sense is that for most people, little good comes of this, yet we repeat the rituals annually.

Companies go through a similarly strange year-end rituals. In the case of companies, the effort is focused on strategic planning and budgeting. The same reflection on the prior year, prediction of future events and goal-setting ensues and in many cases, with equally predictable results. Companies that simply go through the motions often rationalize prior years results, 2/ Make unreliable and sometimes unfounded predictions about the future and 3/ Set goals and objectives that are “shoulds”, rather than will-full organizational commitments.

I’m in search of ways to have these individual and corporate year-end rituals be more productive. I don’t yet have all of the answers. On the corporate side of the ledger, I know that I’ve seen the strategic planning and budgeting process executed well and very poorly. It really comes down to how the strategic planning and budgeting process inform the Company’s direction during the following year. Getting it right takes patience and intention.


Patience is critical. January 1st is one of 365 days we could have chosen to begin our tracking of earth’s orbit around the sun. There is nothing special about January 1st, yet we treat that date as if it is fundamentally different from December 31st, 2014. The whole planning and budgeting calendar gets calibrated around delivering an approved budget by the start of a the new year. There is some merit in having deadlines for sure. But I’ve also seen too many companies rush through the planning and budgeting process because of arbitrary deadlines. I’m not suggesting that the planning and budgeting process shouldn’t have a sense of urgency; they should. But lets not pretend that the arbitrary dates we set for the planning a budgeting cycle are fundamental at the expense of thoroughness and solidarity. A management team must spend a lot of time together before they can gel around a strategy, developing the buy-in that is necessary for unified action. The process or driving organizational alignment doesn’t always fit into or nice, neat planning calendars.

I’ve also seen many occasions where a management team tries to force a breakthrough during the strategic planning process. My experience is that breakthroughs don’t happen during formal planning processes; they happen organically when they happen. Breakthroughs are inherently unpredictable. Companies need to be open to breakthroughs occurring organically outside of the formal planning process, rather than trying to force them according to schedule.

Seeing the flaws in the formal, calendarized planning and budgeting ritual leads me to think of strategy and fiscal management as an every-day activity, not a once a year activity. Strategic planning should come out of its “off-site” conference room hiding place and into the light of the every-day discussions between the members of a management team. When strategy is an every-day activity, the planning process becomes about tweaks and alignment rather than major breakthroughs.When strategy is brought into every-day discussions, there is no need for a forced breakthrough during a scheduled planning season.

The same goes for budgeting. Budgeting is worthwhile because it forces companies to think about resource allocation, that resource allocation needing to be aligned with a strategy. But budgets are of little predictive value. This is why I vastly prefer twelve month rolling forecasts, updated monthly. It is taboo to call each new monthly forecast a budget, but it is also incredibly constructive to take a renewed look at resource allocation every single month throughout the year. After all, there is no way your budget can account for everything that will happen (both within and outside your control) throughout the next twelve months.

I’ve seen too many cases where the budget becomes the numerical representation of the script. The rigidity of the traditional strategy and budgeting process can actually be counter-productive, creating a box that makes it difficult for a management team to navigate the year in a flexibly opportunistic fashion. It is hard to stay true to an intention when the numbers have you in a box.


Intention is hard to describe but easy to identify; but I increasingly feel it is imperative in both a corporate and personal setting. It’s akin to purpose. Some of the best descriptions of intention come from mindfulness practice. Deepak Chopra’s describes intention as follows:

Intention is the starting point of every dream… Everything that happens in the universe begins with intention… An intention is a directed impulse of consciousness that contains the seed form of that which you aim to create.

Powerful stuff. I want some of that in my day-to-day personal life and embedded in every company in which I’m an investor. Imagine what would be possible if a management team went into every work day with alignment on “a directed impulse that contains the seed form of that which you aim to create.”

The formal strategic planning literature would probably refer to this as strategic intent, popularlized by Hamel and Prahalad:

Companies that have risen to global leadership over the past 20 years invariably began with ambitions that were out of all proportion to their resources and capabilities. But they created an obsession with winning at all levels of the organization and then sustained that obsession over the 10- to 20-year quest for global leadership. We term this obsession “strategic intent.”

At the same time, strategic intent is more than simply unfettered ambition. (Many companies possess an ambitious strategic intent yet fall short of their goals.) The concept also encompasses an active management process that includes focusing the organization’s attention on the essence of winning, motivating people by communicating the value of the target, leaving room for individual and team contributions, sustaining enthusiasm by providing new operational definitions as circumstances change, and using intent consistently to guide resource allocations.

What I like about strategic intent is that offers a clear statement of purpose for an organization without delving into the specific tactics that should be employed to achieve that purpose. But it is very hard for an organization to keep its attention on purpose, allowing the tactics to evolve as necessitated by circumstances. But rigidity in tactics is a death-knell in fast-moving markets. And this is the core of my beef with traditional strategic planning; I’ve seen too many cases where strategic planning becomes tactics planning where each and every move to be executed by a company throughout the year is “scripted”. Scripting tactics might work in a 30-90 day window, but beyond that, it is a futile effort. Worse, it is damaging if a management team and/or board feel obligated to have the company follow the script despite changes in circumstances.


I don’t have all the answers for how to build more patience and intention into the strategic planning and budgeting process. But I know the desired outcome. I want a process that results in the organization being aligned on a core sense of purpose and creates a platform for the organization to be flexibly opportunistic. I’m not convinced that traditional strategic planning and budgeting are the right tools for the job. And so my search for the right tools, both in my personal and corporate life goes on.

In the meantime, be purposeful and adaptable in 2015. No matter what your strategy and budget say, the year will end well if you and your organization are purposeful and adaptable each and every day throughout the year.

(Image credit: Bigstock)

(Cross-posted @ Non-Linear)

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Software Load Testing: A Perfect Match for the Cloud Tue, 23 Dec 2014 07:14:46 +0000 The cloud has allowed modern, web-scale IT companies, like Airbnb and Netflix, to grow and flourish into booming enterprises all over the web. With its flexibility and efficiency, it supports the demand of an organization’s growth from zero to millions of users, allowing them to prepare for this potential growth, as well. Before the cloud, […]

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The cloud has allowed modern, web-scale IT companies, like Airbnb and Netflix, to grow and flourish into booming enterprises all over the web. With its flexibility and efficiency, it supports the demand of an organization’s growth from zero to millions of users, allowing them to prepare for this potential growth, as well. Before the cloud, simulating millions of concurrent users and running scalability, stress, or stability tests was very hard to implement, if not impossible. Cloud technology has brought software testing, especially performance testing, to a whole new playing field.

Load Testing without the Cloud

Traditional approaches to load testing include running tests in a scaled down environment, meaning only test samples can be done using spare or unused compute capacity. Another option requires companies to purchase many servers to demonstrate their expected environments, only to be left with unnecessary and expensive “irons” after testing is complete. These options are not effective, nor do they make financial sense.

Unlike functional tests, performance tests are complex and have expensive infrastructure configurations. As a result, organizations often compromise on test quality and end up oversizing production in order to eliminate the risks of an unexpected load.

Load Testing and the Cloud Go Hand in Hand

Development and test environments are known to account for more than 50% of an IT organization’s environment and, as such, need to be maintained efficiently. The cloud enables this efficiency by allowing companies to replicate their environments to run tests, or to run their environments for a designated period of time in order to develop a feature. Resources aren’t wasted since they can be very easily shut down or allocated to different tasks. Use-cases of load testing in the cloud are useful for cloud native web-scale applications, as well as enterprises.

It is only natural for web-scale environments to be load tested in the cloud. Contrary to traditional testing methods, load tests enable whole production environments to be replicated, no matter the amount of servers (or compute resources), without compromising test quality. In addition, hardware doesn’t have to be taken into consideration when the public cloud is used.

Enterprise CIOs should gradually adopt this new IT environment and their first move should entail testing and development in the cloud. Due to traditional capacity limitations, load testing might be the ultimate first use-case. Enterprises today strive to use a hybrid cloud configuration to support environment replication, so that they have the option of “bursting out” to the public cloud when there is a need to do so. The option to create an exact replica of a production environment generates a higher level of certainty when an enterprise needs to define and commit to strict SLAs.

BlazeMeter, a new player in the software industry, serves as a great example of a platform that uses the public cloud for application performance testing, from modern, scalable applications to enterprises. BlazeMeter compliments the open source load testing software, JMeter, to offer more features for enterprises and aid in out of the box load testing.

BlazeMeter provides a modern UI and tools that simplify load tests. For example, their FollowMe Google Chrome extension can be used to record a workflow (e.g. a user’s think time) and configure test parameters using its simple UI, generating the JMeter template that can be used to run the test.

Final Words

Allowing for endless scale and the support of millions of users at any given time proves that the cloud is the best choice for companies that have the hopes of growing exponentially into the next giant web or mobile application. In an online reality, it’s almost impossible to accomplish what the cloud achieves with conventional methods, and using the cloud to perform load tests grants companies opportunities that wouldn’t have been previously feasible.

Cross posted on IamOnDemand blog

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New Research: The Top 10 Factors for Employee Happiness on the Job Tue, 16 Dec 2014 14:04:16 +0000 Employee engagement and happiness is definitely one of the topics du jour for modern management and the future of work. Plenty of studies have already (and continue to) come out that show how low employee engagement is around the world (only 13% of employees are engaged and 87% are not!). Low employee engagement numbers correlate […]

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Screen Shot 2014-12-07 at 8.51.34 PMEmployee engagement and happiness is definitely one of the topics du jour for modern management and the future of work. Plenty of studies have already (and continue to) come out that show how low employee engagement is around the world (only 13% of employees are engaged and 87% are not!). Low employee engagement numbers correlate and oftentimes cause decreased productivity, waisted resources, and an overall toxic environment that nobody wants to be a part of…and why should they?

This is why it’s important to understand what employees around the world value in their jobs. So what do employees actually want and what do they care about?

A Tinypulse survey from 2013 revealed that transparency was the #1 factor for employee engagement

A 2014 SAP survey found that compensation is the #1 factor that matters most to employees

Another survey by the SHRM (Society for Human Resource Management) conducted in 2013 also found that compensation and pay was the #1 factor contributing to job satisfaction

Several other studies have also emerged around what employees care about at work but the most recent one from Boston Consulting Group which surveyed over 200,000 people around the world is one of the most comprehensive. Unlike previous studies which may point to flexibility or salary as the top factor for job happiness, BCG found that the #1 factor for employee happiness on the job is get appreciated for their work!

Based on the color coded categories you can see in the sidebar, out of the top factors the majority are grouped as either “work environment” or “job content and opportunities.” Perhaps what is more interesting is the contrary to some of the other studies which show compensation as the #1 factor for happiness, this report puts salary at #8. This reaffirms what I consistently see in organizations that I speak with. You can’t pay someone a lot of money, treat them poorly, and expect them to do their jobs well just because they get a nice check.

It’s important to remember that the “balance of power” is shifting away from organizations and towards employees. Today, we have a lot of choices to consider and several opportunities to evaluate when exploring how to make a living. Instead of going to work for a large established company that has more money, people can now:

  • join a small growing startup
  • become a freelancer on sites like odesk or elance
  • drive for Uber or Lyft
  • create their own products to sell on sites like Etsy
  • raise money through crowd-funding on sites like Indiegogo or Kickstarter
  • and much more

The war for talent has never been greater so in a world where cash is no longer the #1 factor attracting employees to organizations, these organizations must focus on other factors to create a more desirable and engaging place to work. What do you think of these recent number? Are you shocked or surprised to see that compensation is #8?


(Cross-posted @ The Future Workplace)

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You’ll Know in One Sales Cycle If Your VP Sales Won’t Work Out: Four Case Studies. Mon, 15 Dec 2014 15:10:46 +0000 Just about a year ago, we did a post that proved, at the time, to be somewhat controversial.  That in Just 30 Days, or at least, just one full sales cycle — you’ll know if your VP Sales isn’t going to work out. This isn’t intuitive, and is something I had to learn the hard way. […]

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Just about a year ago, we did a post that proved, at the time, to be somewhat controversial.  That in Just 30 Days, or at least, just one full sales cycle — you’ll know if your VP Sales isn’t going to work out.

Confused-sales-guyThis isn’t intuitive, and is something I had to learn the hard way.  Many VCs and others will give you the contrary advice.  So will many VPs of Sales.  Give it Time.  Sales is Hard.  That new VP of Sales joined with “nothing”.  Be patient.

Patience is important in SaaS, no doubt.  Just not here, not in this one case.

My learning, and point, was that if you have a Great VP of Sales … there’s just one thing I know:

That if you are growing X% without a Great VP of Sales, that once you hire a truly Great VP of Sales … that you should be growing faster than X% within one sales cycle.  One.  1.  Uno.

How much faster can vary.  Maybe a lot, maybe just a smidge.

It really doesn’t matter what resources are there at the time (no leads or lots of leads; no reps or too many reps; no marketing help or too much help).  That will just impact how much better, how much faster things will go.

But … faster.  Period.

One Sales Cycle.

I learned that myself.  And my case study is here.  Now, I’ve gone back with both my VP of Sales (Brendon Cassidy) and 2 of our sales directors, now each serving as VP of Sales at other SaaS companies.  Did it happen again?  Did they improve sales in less than one sales cycle?

Yes.  Every.  Single.  Time.

Let’s dig in.

First up, how did Brendon, my VP of Sales, do the next time at bat?  After finishing up a strong stint at Adobe after our acquisition, Brendon joined Talkdesk a few months ago as VP of WorldWide Sales.  As the second U.S.-based employee, with essentially zero infrastructure under him.

Sounds tough, doesn’t it?  Indeed.

And how well has he done?  Even with zero infrastructure on Day 1 — he more than doubled sales in just 60 days.  Again.

Net new sales (not total MRR, just new sales revenue from the sales team) below:

Screen Shot 2014-12-03 at 11.47.31 AM

When he joined, Talkdesk at the time was doing about $1.4m in ARR.  It will end the year at almost $4m ARR.  Neck-bending acceleration.  But how?

Same old story as last time.  Same old story as when he joined EchoSign.  And same story as when he joined LinkedIn before that.

Mega-impact.  In one sales cycle.  Irrespective of what was, or wasn’t, there when he showed up:

What happened?  Did Brendon join as the world’s sales expert in call and contact center software?  Of course not.  In fact, it turns out be an even more complex sale than EchoSign.

Did he magically conjure leads out of thin air?  No.  Well a couple.  But really there wasn’t enough time to do this.

What he did .. again … was:

1-/ Bring in a great team, almost immediately.  3 amazing reps that had worked with him before.  A world-class solutions architect.  Etc.

2-/ Qualify and Close.  He immediately drove deal sizes up, and sales cycles down.

Combine 1+2 = dramatic increase in revenue per lead.  Increase the revenue per lead, even with no other changes … and your revenue goes up.  Period.

Once again.


>> Ok great, you say.  But that guy is some sort of magician.  He did it before.  Give me more case studies.  Ok. 

Next up, Sam Blond VP of Sales at Zenefits.  Sam was our top Director of Sales at EchoSign, having rocketed through the ranks after coming in as our first SDR.  Sam was Brendon’s right hand man.  The padawan to the jedi.  I introduced him to the CEO of Zenefits when they had one rep and < $1m in ARR.  He joined in January ’14.  Fast forward twelve months, they’re at ~$20m ARR.

Ok so obviously Zenefits has done awfully well this year, growing > 20x in 12 months.  Wow.  But how long did it take Sam to have a quantitative impact?  6 months?

Half a sales cycle.

Again, net new sales (not total MRR, just new sales revenue from the sales team) below:

Screen Shot 2014-12-05 at 3.27.09 PM

Sam came in.  He knew nothing about selling insurance.  Nothing.

But …

He brought in 3 great reps that had worked with him before.  Introduced a more aggressive sales closing process, and halved the sales cycle.

Just those two factors alone doubled the Revenue Per Lead.

That’s how he made an impact in Half a Sales Cycle.  No magic.  Just 100% pure execution of The Playbook.

>> Ok, Brendon is a magician, and Zenefits is an outlier, you say.  Show me more.



Next up, Stephen Green, VP North American Sales at Showpad.  That’s him on the right.  Stephen was another Director of Sales at EchoSign.  In fact, Sam brought him in to EchoSign originally.  Showpad enables field reps to dynamically present content on their tablets in the field.  It’s very cool.

And they’ll will hit $5.5m ARR this year growing 150%+ YoY (from $500k to $5.5M in under 18 months).

But having known the founders since they first came to the U.S. around $500k in ARR, let me tell you, it hasn’t all been easy.  It’s taken a while to get the lead gen engine going, go upmarket, etc. etc.  It’s a space where awareness is building.

So OK.  What happened when Stephen Green joined earlier this year?

Here’s a chart of net new revenue from the North American sales team (i.e., not all bookings, just new revenue from new accounts):

Screen Shot 2014-12-03 at 10.32.24 AM

Same old story.  Was he an expert in the Showpad “solution” when he joined?  Nah.  Were huge deals just waiting to close sitting in the pipe when he joined?  Not exactly.  Was there a new, amazing product release that changed the game?  Nope.

He just did The Playbook.  He’s a seasoned sales leader.  He knows how to talk to customers.  How to ask for the budget.  How to get deals closed faster.  How to cut sales cycles and ask for the e-signature.  And he also brought in other reps almost immediately that upgraded the team.

So what happened?  Again – Stephen reduced sales cycles from 15 weeks to 6 weeks.  Again – he increased the quality of the closers.  Together, these factors doubled the revenue per lead.  In one sales cycle.

Ok you’re cherry picking, Lemkin.  

But I could tell you more.  Mohammad Ocean from our team did the same at Pipedrive within 60 days.  He took inside sales revenue (vs. self-service) from $0 to $50k/month in less than 60 days.  Boom!  Greg Smith is doing the same at now too.

Ok, Ok you say — but what if your sales cycles are really, really long.  And all outbound driven.  Even with the World’s Greatest VP of Sales, I Won’t See Results That Fast.

Fair enough.   You won’t.  I didn’t really know the answer to this question myself until our Benchmarking the Best SaaS Start-ups Sessions at Dreamforce, embedded below (thanks to Salesloft), when both the CEO of Talkdesk and the CEO of Guidespark spoke.

Now Guidespark has been, until recently, a 100% outbound model.  With relatively long sales cycles, given its six figure+ deals and focus on outbound sales.

It would probably take 6+ months to know here if the VP of Sales was going to make it (given the lengthy sales cycles + outbound approach).  The new VP of Sales would have to quickly hire and scale an SDR team once he joined.  And then work those raw leads into opportunities, which takes time.  And then get them into a 6+ month sales cycle.

You simply aren’t going to know in 90 days in a 100% outbound model with a 6+ month sales cycle if the VP Sales is going to make it :)  And Keith Kitani, the CEO didn’t — at least not quantitatively (though he knew quickly from the forward progress and opportunity creation that Shep was going to kill it).  But by month 6 it was clear in the actual numbers that it was working, really changing, and the full quantitative results were there by month 9.  One full, long, sales cycle.

Screen Shot 2014-12-03 at 10.50.11 AM

By then, Shep Maher, the VP of Sales was just killing it:

Screen Shot 2014-12-05 at 3.44.31 PM

A longer sales cycle = a longer time To Know.  But again, results in one (albiet longer) sales cycle.

So net net:  7/7 times in these case studies … You’ll Know if the VP Sales isn’t Going to Work in Just One Sales Cycle.

You can’t predict after that how well a Great VP of Sales will do exactly.  But you can predict was almost 100% certainly if she won’t work out if there isn’t some material improvement in one sales cycle.

So … again …

Don’t wait more than one sales cycle to make a change.  70% of VPs of Sales don’t work out.  Maybe, even make a change in half a sales cycle.  You’ll know even by then.

(And, p.s. — one more learning.  If you do have a team like you see above, like I did — Never Sell.  Keep going for it.  Because it just gets better.)

>> Hear more of these stories:  Zenefits, Talkdesk, Guidespark and More at The SaaStr Annual on Feb 5!  Sign up here ASAP — it’s 90%+ sold out.


sales guy image from here

(Cross-posted @ saastr)

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The EMC Federation Joins the OpenStack Foundation Mon, 15 Dec 2014 14:35:05 +0000 Recently a major set of milestones was reached for the EMC Federation’s involvement with OpenStack. First, EMC and it’s affiliated companies and brands (VMware, VCE, Pivotal, RSA, Cloudscaling) determined a cohesive strategy for engagement with the OpenStack Foundation Board. Second, EMC appointed a VMware employee, Sean Roberts (@sarob), as the official representative of EMC and […]

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Recently a major set of milestones was reached for the EMC Federation’s involvement with OpenStack. First, EMC and it’s affiliated companies and brands (VMware, VCE, Pivotal, RSA, Cloudscaling) determined a cohesive strategy for engagement with the OpenStack Foundation Board. Second, EMC appointed a VMware employee, Sean Roberts (@sarob), as the official representative of EMC and hence the EMC Federation generally. This means that I am no longer the EMC (Cloudscaling) OpenStack Foundation Gold Director.

The why of this may be confusing so I will briefly explain the background and then provide some more details on what exactly transpired.

By and large the OpenStack bylaws have stood the test of time quite well at this point. Most of the upcoming proposed changes are simply things we could only have known in hindsight. One area that I think the bylaws got right are the articles that limit participation by “Affiliated” companies:

2.5 Affiliation Limits. Gold Members and Platinum Members may not belong to an Affiliated Group. An Affiliated Group means that for Members that are business entities, one entity is “Controlled” by the other entity. “Controlled” or “Control” means one entity owns, directly or indirectly, more than 50% of the voting securities of the Controlled entity which vote for the election of the board of directors or other managing body of an entity, or which is under common control with the Controlled entity. An Affiliated Group does not apply to government agencies, academic institutions or individuals.

What this means, in essence, is that if there are two companies with a relationship like parent/child or joint venture, in which one owns more than 50% of the other, only ONE of the companies can join the OpenStack Foundation as a Gold or Platinum Member. This is a good measure to prevent a group of companies from “stacking the deck” within the OpenStack Foundation and using that as leverage to control or dominate OpenStack, which is something no one wants. I also need to note that any company may also have one to two Individual Members represent them. Two Directors from any single affiliated group is the maximum representation on the OpenStack Board of Directors. This works out to one Gold or Platinum Director plus one Individual Director OR two Individual Directors. This is why I am allowed to run as an Individual Director in 2015. Of course, I would very much appreciate your support in this endeavour!

So, things became very interesting upon EMC’s acquisition of Cloudscaling as it inherited the Gold Member status of Cloudscaling while VMware also retained their Gold Member status, creating an edge case where the Bylaws were technically in violation. This required EMC and VMware to work closely with the Foundation staff to resolve the situation.

This is why VMware resigned their Gold Member status and why EMC appointed a VMware employee as a representative for EMC and hence the EMC Federation.

Which means we should quickly explain what the EMC Federation is.

EMC Federation
The EMC Federation is composed of a number of different entities, from security companies, to storage, to Platform-as-a-Service, big data, virtualization, converged infrastructure, and now OpenStack via the Cloudscaling acquisition. Members of the EMC Federation are already representatives on the OpenStack Foundation Board of Directors, OpenStack Foundation Gold Members, OpenStack Foundation Corporate Sponsors, and have deepening ties to OpenStack generally.

In April of 2013, EMC and VMware launched Pivotal and created a federation of its businesses. EMC is the majority owner, by a large margin of VMware, Pivotal, and RSA is a wholly owned subsidiary. Recently, VCE, the leader in converged infrastructure joined the Federation. Federation messaging and joint solutions were prominent during EMC World 2014. The following diagram gives you some idea of how the Federation is organized.


When asked about why the Federation model is needed and what differentiates the companies from competitors, the answer is “choice”. While VMware is the leading hypervisor, EMC also desires the opportunity to forge alliances and solutions with Microsoft, Citrix, and others. Conversely, VMware desires to support and work with a variety of storage and security solutions.

Similarly, members of the Federation desire to operate and support OpenStack’s mission in different manners (converged infrastructure, appliance models, and software distributions) while also supporting the joint goals of empowering and promoting OpenStack within the enterprise.

Wikibon covers the EMC Federation Model extensively here:

The EMC Federation OpenStack Strategy
As a group, the EMC Federation strongly desires to play by the rules of the OpenStack community, while deepening our commitments and contributions. As a group we are already a #6 contributor to the latest release and we aspire to go even further. OpenStack is a critical strategy for the Federation as a whole, even for members like Pivotal who see a significant increase in the number of enterprises who wish to run CloudFoundry on top of OpenStack.

What this meant for us when resolving the Bylaws issue is that we wanted to have the entire EMC group represented as a whole, such that others like VMware, VCE, and Pivotal, could all be a part of the picture. The Bylaws however require that the Gold Member selected is an actual legal entity.

Our final resolution was then to have VMware resign their Gold Membership, EMC retains the Cloudscaling Gold Membership, and in order to show EMC Federation coordination, EMC is appointing Sean Roberts to represent EMC, and hence the entire Federation, as our Gold Member representative. Finally, all of the branding on the OpenStack Foundation website will be a Federation-oriented branding (EMC2).

Meanwhile, behind the scenes, I’m working closely with Sean Roberts of VMware, Josh McKenty of Pivotal, Jay Cuthrell of VCE, and others to make sure that we have cohesion across the Federation.

Hopefully this helps explain these recent changes.

(Cross-posted @ Cloudscaling)

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