Experiential model. . . follow the money . . myths . . .1st wave software service ASP move (capital was free, money poured into the initial setup, long time for the recurring revenue), 2nd wave - permission based financing strategy, very little capital goes in initially to get to the first customers because you can launch the service quite quickly compared to the enterprise model. What used to take 18 months to get "Golden master" with the ASP model takes much less time (6-9 months). CSF Unit economics - prove to land customer is less than than that of what they get back from the customer in the life of the customer. Another myth is that it takes longer to get to profitability. Exit - last 2 -3 quarters, highly visible companies are showing much higher P/E ratios such as Salesforce.com. Here to stay over the next decade.
Economic model based around subscriptions based on a smooth revenue streaming. Strong lifetime revenue. Scale benefits as the company grows. Enables you to compete with the big players very quickly. On demand allows you to play at a very different set of rules.
"Democratization of software"
Love-in not lock-in - really allow people to feel that they are not locked in. . . keeps the vendor honest. Only promise what you have.
Sales model -- free trial, as you use the service, you enter the first tier of pricing. Leak in from the bottom up. Expense-able not approvable business model.
Low upfront costs web 1.0.
Web 2.0 value prop. quite different . . The ability to road test the solution first before they actually have to commit - alignment with the vendors - real asset of this model. Actually get access to a community of users input and it shows up as value. Upgrades are seamless. Allows for much more rapid innovation 2 week release cycle. Most SAS companies have labeled their releases as Fall 06 or Winter 06 - speed of innovation follows a release cycle of 3-4 times a year.
"Power in the cloud" - new value by being part of a community. Creating brand new business opportunities that could only be created in the new cloud. Ability to see when the customer is having problems in aggregate and solve it before it has a larger impact. With traditional software they had no idea how they were using it and neither did the vendor - in SAS gives a dashboard to both sides - usage based feedback -- big metric of success.
Focus NOT on the core - sweet areas of a company -- G2000 customer require more integration compared to SMB customer. Start in the mid tier market space. Emergence of open standards integration can be easily done.
SMB market traditionally very fragmented.
White space. . enterprise mash up space - central easy to use resource, new buyers are looking at new ecosystems IBM, ADP.
'democratization of software'
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