Peering into the SaaS Crystal Ball…


Software 2008
, a key part of the Interop Expo, was help April 29-30, at the Mandalay Bay Convention Center in Las Vegas.

I was on a panel on Tuesday, April 29, 3:45–4:45 pm entitled The New SaaS Model: Designing, Distributing and Monetizing Applications that was moderated by Shankar Iyer from WebEx. With me on the panel were Jason Lemkin, CEO of EchoSign and Dan Carmel, CEO of SpringCM. Both these companies are parts of the WebEx Connect ecosystem.

I took the long view while the other guys’ remarks were aimed at the more immediate future, as they grapple and scrap to close deals with marginal help from the platform / ecosystem.

My view was that the evolution of SaaS towards true utility computing has the real potential to rewrite the rules for small independent software vendors. Users’ expectations could shift much more quickly than software vendors’ product roadmaps, as the convenience of getting a bundle of services for a single monthly fee from a trusted vendor trumps the desire to find, buy and install best-of-breed applications for each specific functional need.

This sort of bundled service delivery is already happening on the home front. Consider Comcast. They bring me my VoIP telephone, my cable TV, my high speed internet and also a “free” antivirus (McAfee) for all my home computers. McAfee is “good enough” so I have basically stopped buying anti-virus programs for my home computers, even though I know that Kaspersky is a much better anti-virus program (I use it at work).

What does this imply for how ISVs should structure their businesses?  Then ask: what kind of returns can their investors hope to get? In my example above, instead of paying $75/year to Kaspersky, I am choosing to let Comcast decide what to pay McAfee. Hmmm!

I ran into Sanjay Subhedar, general partner at Storm Ventures, after the panel. (His company invested in EchoSign.) He remarked that my view of the future was a bleak one from his point of view, since it would severely limit his investment opportunities if it came to pass.

So perhaps it’s a good thing then that we turned down VC money and took an investment from Cisco instead.