SmoothSpan Blog

This continues my interview with Steve Singh, CEO of Concur.  In this installment, Steve gives his view on Salesforce, their Force platform, SAP’s ByDesign and acquisition strategy for SaaS companies,

As before, my parenthetical remarks (meaning my reaction but not something Steve and I talked about) are in parenthesis.  Any mistakes are mine, and any great insights are Steve’s!

What’s your view of Salesforce.com?

Steve:  I have tremendous respect for Marc, he’s the best.

If I compare Salesforce to Concur, we took a vertical business process and owned it across all horizontal customers.  We took a stagnant industry and turned it on its head.
Salesforce is more on the outside “we’re a big tech company.”  They want a broad technology platform.

What are your thoughts about Salesforce’s Force?  Could you see using the platform at Concur? 

Steve:  Concur wouldn’t use it.  The cost structure requires a higher price to customer, so it only works for small companies who can’t take on the cost.  If you already have a big SaaS presence, why do it?  No economic  reason.

Bob:  (Steve focuses a lot on economics.  He’s made the comment before that scale drives the economics of profitability for SaaS.)

Would your customers use it?

There is tremendous value to IT customers.  Mostly those related to CRM.  Marc has nailed it.  On-demand platforms should focus on a vertical niche.  We’ve launched  a supplier platform.

Bob:  (I would echo Steve’s sentiments on Force.  I’ve yet to meet someone building a major app on it.  There are many who want to leverage it for connectivity to the Salesforce CRM world.  I’d like very much to talk to anyone that wants to educate me in the error of my ways on this platform.)

I’ve said that SAP’s ByDesign brings competition to the SaaS world for the first time, but that it’s a good thing for all concerned.  What are your thought’s on SAP’s By Design?

Steve:  They announced something that was already public for quite some time.  You can’t fault them for trying.  They’re trying to start in the middle market where they have no presence.  Their challenge is whether they can deliver a whole different experience.  Meanwhile the rest of us aren’t standing still.  The leaders of SaaS are in an incredible position.

Bob:  (Steve’s remark that SAP has targeted the middle ground where they have no presence sounds like a classic example of my “protected game preserve” strategy for companies attempting a SaaS transition)

Concur has been pursuing an acquisition strategy.  How does SaaS change the rules of that game?  What do you look for and what do you try to avoid?

Steve:  You could view acquisitions more successfully in a SaaS company because you can integrate the technologies in the back room while maintaining a different UI for a period.  Captura, Outcast, Joco.  They were SaaS apps to start.  Data layers, business layers, UI layers.  You can integrate in steps.  You can leave out integration when it doesn’t help.

There will be more SaaS M&A.  Look at payroll.  Adding employment verification.  What does it have to do with payroll?  Leverage business and service delivery models to address related spaces that are part of the business process.  Adds a lot of depth.

Can you acquire a non-SaaS company and SaaSify it, or do you only want SaaS?

Steve:  It’s not worth it.  Too hard.  I would rather build the functionality or buy a younger already SaaS company.  It’s too hard to make the change.  Once is enough  for a lifetime.

Bob:  (I had another conversation today about the software M&A game.  The person I was talking to was concerned that there are fewer and fewer buyers as things roll up.  SaaS may change that dynamic in a lot of ways.  If you are starting a company, SaaS even makes better sense as an exit strategy.  First, because Steve is right, companies should prefer to acquire SaaS.  Second, it positions you for the opportunity that the up and comer SaaS companies offer.  The game at the top of being bought by Oracle and SAP may be less lucrative (or even unavailable if they don’t want what you offer) than hooking up with the middle tier of healthy acquirers, which may just be the biggest pure-play SaaS companies.  This also makes me wonder what the private equity world is thinking about SaaS.  Are they frantically converting their properties to SaaS without the pain of public scrutiny, or are they pursuing business as usual?  One person I talked to said the great thing about SaaS is you’re acquiring a recurring revenue stream.  In a traditional acquisition, license sales all too often crater right after the acquisition.  Salespeople will totally drain the pipeline to get every last bit before the change.)

Next?

Our third installment will air next week and will have Steve Singh’s thoughts on Sales and Marketing for SaaS companies.  Stay tuned!