Why enterprise SaaS is more like a consumer Internet business
In my past life I used to sell big software. I sold verification software to semiconductor companies for hundreds of thousands of dollars per license. It took several months of pre-sales involving navigating the customer’s organization building relationships identifying key projects playing ping-pong between project teams and central purchasing teams long-drawn evaluations nuanced contract negotiations big purchase orders and wider training and roll-out programs in order to make the sale. I came to associate enterprise software with schmoozing key people for months looking them in the eye when making commitments and signing up multi-year contracts for millions of dollars.
Those were also the days when iOS and Android did not exist, mobile carriers controlled what content we consumed on the data network of our phones, and apps were bundled in handsets before they were shipped. The profound impact of the penetration of smartphone apps worldwide is now congruent with tech start-ups worldwide. Similarly there has been a sea change in how enterprise software is bought and sold. This is transforming the world in equally profound ways though lesser known. In fact I believe the next ten billion-dollar publicly listed tech companies from India will include more enterprise software companies than consumer Internet companies.
When I was running Chaupaati Bazaar in 2008 my product manager and I used my credit card to rent web servers from Amazon an email server from Google and log reporting from Splunk (now a multi-billion dollar publicly listed company). Five years later at Chalo in 2013 my card was used by a 24-year old engineer on over a dozen websites. These were tools for code repository continuous integration payment gateway real-time messaging product management logging alerts bug tracking project planning etc. Now at my new company HyperTrack in 2016 my card has already been charged for over 20 software-as-a-service (SaaS) products and represents purchases by multiple engineers. While the controller in you will probably suggest that I should invest in a corporate credit card instead of sharing my personal credit card information with someone else I would like to bring your attention to two observations.
One, the number of cloud services consumed by my start-ups in similar stages has progressively increased by multiples. While you might think this is an aberration this is quite the norm for a Silicon Valley start-up and trends similarly for an Indian tech start-up. Two, the power to make or influence the buying decision has moved from businesspeople to the lead developer to multiple developers. Again not an exception but the rule. This is happening because businesses want to move faster in doubling down on their core business and small autonomous teams building on top of available technology stacks are able to deliver that more effectively than long projects to build everything in-house.
More enterprises worldwide have in-house developers now and more of them have the autonomy to buy cloud-based SaaS products for a monthly fee than ever before. Mayank Bawa who sold his first start-up Aster Data to Tera Data for over $300 million in 2011 recently founded his new cloud-based SaaS start-up Workspan that helps manage inter-company marketing campaigns. In our meeting in the Bay Area earlier this year he whispered an insight in my ear: “The number of enterprises in the world are growing and the size of the enterprise is reducing. It is happening faster than we can imagine.”
Quite inadvertently the impact this has on the enterprise software industry is that central purchasing teams and bag-carrying salespeople are getting replaced with small teams with credit cards and best-in-breed cloud software available for tens to hundreds of dollars a month. A by-product of this phenomenon is that the sales cycle is not the primary determinant of the cost of sale because you do not need an expensive local sales team to handhold the customer over each hump in as many face-to-face meetings. The primary determinant of the cost of sales is the amount of money invested in providing trial packs to customers before they buy. In that sense enterprise software has started looking more and more like a classic consumer Internet business. You can now build a differentiated product that uniquely solves a pain point and get users to try and buy the product while you are asleep. You can now growth-hack the product in well instrumented and creative ways to increase the usage per customer.
As the prescient CEO of Box wrote in TechCrunch in 2010: “Enterprise Software is Sexy Again”. Since then Aaron Levie’s thought leadership has inspired many young geeks who were otherwise drawn away from big enterprise software. They can now look favorably at building enterprise software just like they would for consumer Internet businesses. Though I am neither as young as I used to be nor as geeky I have been inspired by Levie and far younger entrepreneurs like John Collison of Stripe (also inspired by Levie) to start HyperTrack offering location tracking as a service to developers worldwide.
In the months since we started building our product last year we got two young entrepreneurs to shut their consumer Internet businesses to come write code for us a seasoned product manager from Google’s San Francisco office to move to India to lead product for us a rockstar developer from Amazon’s Seattle office to move back to make our web services scalable and an early engineer from Prezi’s Budapest office to move back to build beautiful interfaces. Over the next many months we hope to inspire thousands of developers to give our software a shot and in turn get inspired by the innovative ways in which they use our web service.