Aria Systems

New Board Member for Aria

Dave Labuda formerly of Portal Software (CTO and CEO) has joined Aria's board.  This announcement is getting us lots of positive attention!

We connected with Dave via Mark Gorenberg, who worked with Dave  at Sun Microsystems and have been speaking with him for the past few months.   He has added tremendous value in this short time and I look forward to working with him more closely in the years to come.

Welcome Dave!!

Future of SAAS Billing

I had a great discussion with Phil Wainewright recently and he posted some thoughts on our discussion and billing for SAAS.

Berkshire Hathaway Annual Report

I’ve been traveling a lot the past two weeks and I’m a bit behind in everything but I spent some time reading the annual Berkshire Hathaway letter from Warren Buffet this past weekend.  As always, it’s chock full of great information but this description of their portfolio company FlightAware is great:

This company delivers benefits to its customers that are the equal of those delivered by any business that I know

of. It also possesses a durable competitive advantage: Going to any other flight-training provider than the

best is like taking the low bid on a surgical procedure.

Billing isn’t brain surgery, but going with the low bid can be detrimental even fatal to your business.

 

Tags: buffett, berkshire

Hot or Not/Lecayla

Two acquisitions caught my attention today: 

1.  Hot or Not acquired by Avid Life Media

2.  Lecayla acquired by OpSource

Hot or Not is interesting to me because of my curiosity regarding Internet businesses especially where entrepreneurship and exit valuations are concerned.  According to the Tech Crunch article linked above, Hot or Not received $20M in total consideration which is an estimated 4x revenue and 10x profits.  Apparently, Hot or Not had no outside professional investors, so the full amount gets returned directly to the existing shareholders.  James Hong, one of the founders of the site has a post here regarding the restarting of the site in 2006.  Assuming their option plan was 15% of the outstanding equity, it was probably a good return for the owners and employees.  It definitely wasn’t an IPO type of exit, but seriously, it’s a picture rating web site!!

Lecayla is interesting to me for many reasons.  First, I’ve come to know Conor, the CEO of LeCayla, fairly well through SAAS events, deals we’ve worked on together and deals where we’ve competed and I like him.  Second, LeCayla is a great comparable for Aria since they are a SAAS “billing” company and are at least adjacent to us in functionality.  Third, OpSource has been a good partner for Aria and sells a lot of our software. 

From the sparse details regarding the deal, it seems it was an all stock deal, meaning no cash changed hands.  The existing LeCayla investors are now the proud owners of OpSource stock.  (hopefully they got some preferred, but most likely, it was common burdened with at least $40M in preferences.) 

Unlike the Hot or Not deal, LeCayla had some real potential.  The SAAS delivery model is still emerging.  None of our SAASy peers have come close to creating meaningful revenues yet.    (In my opinion, SAAS won’t be taken seriously by the software industry until at least one company reaches $1Billion in revenue…market cap doesn’t count!) And, maybe more importantly, Billing is a mission critical application where existing ISV competitors have REVENUES in the BILLIONS! 

 

 

Who Owns Your Data?

cross-posted from here:  http://www.ariasystems.com/thepit/

Recently, after 4 + years of using Aria for their customer management needs, our first customer Seawave (www.seawave.com)  was acquired by one of their competitors:  Globe Wireless, and has transitioned their billing to Globe’s existing system.   This transition provides an excellent case study for those concerned with ownership and transition of customer data at the end of a commercial relationship.  While it’s a bummer to lose such a great customer, transitioning data to another provider was an important step in Aria’s evolution and something to consider when analyzing mission critical SAAS applications.

After a few weeks of planning and coordination, we executed a “balance-forward” billing conversion and transitioned Seawave from our system to the internal Globe Wireless system.  As a B2B service provider to the Marine industry, Seawave has very complex billing logic including over 400 different  service rates and several layers of parent-child relationships.  Adding to this complication, they also have a mix of payment methods including net terms invoicing (paper and electronic) and credit cards. 

While Seawave owns the data, they don’t own or have access to our schema therefore, they had to do a bit of heavy lifting on their end to determine how to map the data and accounts to their new system.  Inevitably, this will lead to a mismatch in functionality between the two systems, so compromises had to be made.  The initial phase of the transition has been completed but because their business is seasonal, it will probably take a few cycles of close observation before its declared a success.  We are providing them with “read only” access to the system, frozen in time after the transition period.

When considering an on-demand provider for mission critical functions, make sure you own the data and the provider has a plan and experience transitioning to other providers. 

 

 

 

 

 

Tags:  billing, saas, data

What happened to JotSpot?

Almost one year ago, Google announced its acquisition of JotSpot, Aria used one of the pay versions of the product and we loved it.  As a refresher, JotSpot was/is an "enterprise wiki" founded by Joe Kraus (Excite@Home), who coincidentally stopped posting on his blog. 

Unfortunately, we (Aria) are caught  in a billing "no man's land" because we still get the "pay your bill deadbeat" nag pop up which asks us to enter in our payment info.  Unfortunately, it's a never ending cycle because the service is now free and doesn't except new pay methods!!

We loved JotSpot!.  It helped us manage our projects, improved internal communication and enabled us to leverage our effectiveness. 

A year is long enough to integrate!!  Give us access!!  They have some of our stuff...we can't get it and support doesn't respond. 

I'm glad it's not anything mission critical.

NetSuite IPO

Jason Wood has a great post regarding the recently filed NetSuite S-1 and their potential IPO:  NetSuite IPO...another SAAS horseman braves the public markets. 

The following quote gave me pause:

Does the fact that NetSuite is 7x smaller than SfDC indicate demand for back-office SaaS pales in comparison to front-office SaaS? In aggregate, back-office ERP is several orders of magnitude larger than front-office SFA, yet uptake of SaaS appears far less pervasive.

Aria has been toiling away at "back office SAAS" and it is inherently more difficult to implement than "front-office SFA"  largely because of sticky issues like configuration, security and compliance.  As an example it's hard to create a sandbox environment for our customers to create end-to-end testing because of necessary integrations with financial processors etc. 

NetSuite  has an additional layer of risk because they "touch the money,"  while SFDC, RightNow et al don't directly impact their clients' financial statements.  (SAS70.....grrrr)

That being said, I do believe that "back office SAAS" is the next front in the SAAS vs. ISV battle. 

CEO Roundtable in Chicago

Later this week (Feb 15th) I'll be participating in a CEO Roundtable discussing SAAS monetization.   Here is the link: 
http://bill4saas.com/

SAAS Economics

Last week, Will Price from Hummer Winblad posted an analysis of the capital required to build a SAAS company today vs. “a universe” of 1990’s vintage companies and concluded that a platforms must emerge to drive down the comparably high fixed costs of SAAS companies.  While his analysis may be the truth, it may not be the whole truth. 

For one thing, I don’t think it is a valid direct comparison because it looks like (based on the linked data here and here) he only includes publicly traded companies and not privately held or companies achieving liquidity via M&A.   Also, it’s important to consider the relative immaturity of the SAAS business model vs. ISV’s during the mid 1990’s.  As an avid fan of Geoffrey Moore, I wonder if it would be more valid to compare companies on the same segment of the innovation diffusion curve? 

Interestingly, in this post by Moore last June, he declares it a “Digital Ecosystem Truth” that services will displace products in a world where bits displace atoms. 

Bits have a lower marginal cost than atoms and a non-linear return on equity.

RE RE Read

During the holidays I spent a few hours cleaning up and organizing the massive amount of books I’ve accumulated over the years.  This is a tough task for me because I am easily sidetracked and pulled into an old book.  On this particular day, I was lured into Wayne McVicker’s “Starting Something.”   This book struck a major chord with me the first time I read it because of my experience with LaserLink and the sale to Covad Communications in March of 2000.  I’ve read and reread passages of this book several times in the past year and each time something useful pops out.  In a chapter called Bluescreen, dated December 1998, Wayne describes the enormous tension and resulting depression he felt regarding the financial risk he was taking with his company.  There are several positives to becoming an entrepreneur including freedom and potential upside, but too few realize the downside or more precisely, the amplitude of the highs and lows. 

I often use the phrase “party hats or razor blades” to describe the morale at Aria.  A key new customer or some external industry recognition can propel your “good feelings” about your accomplishments to an inappropriate high, while an equally insignificant loss can dash your positive attitude.  I think it is important to keep all new information in a realistic frame of reference in order to understand the true long term impact on the business.  For instance, a key win can dramatically change the current position of the company, but if managed correctly, a single lost sale should have no long term negative impact on the company.  Wayne does a great job articulating this balance which can be compounded with your personal fear or conceit.