Recently I had the opportunity to interview Lucid Era CEO Ken Rudin.  Lucid Era is one of the newer SaaS players out there.  They offer Business Intelligence Solutions, which is an exciting space.  Consider how fast the evolution of that market has come to completion with the recent acquisition of Cognos (IBM), Business Objects (SAP), and Hyperion (Oracle).  Having cleared the decks from the last cycle, the market is ready to begin the next and Lucid Era is well positioned in that respect.

As always in these interviews, my remarks are parenthetical, any good ideas are those of the 3Tera folks, and any foolishness is my responsibility alone.  Also, in the interest of not getting too long winded in a blog, the interview will be published in several parts.  If you haven’t already, you may want to subscribe to the data feed for the blog so you don’t miss one.  Just check out the data feeds in the top left corner of this page, below my picture. 

What’s Your Basic Elevator Pitch to a Customer? 

Ken:  What I tell VC’s and other people in the software business is that Lucid Era is a series of pre-built analytic applications built on the world’s first complete hosted BI platform.  Our Sales Analysis app came first, for Sales VP’s and Sales Ops.  It helps customers accelerate their pipeline and increase the efficiency of sales.

The short form is that we are to BI as SFDC is to CRM for SaaS.

To a customer, I would say, “We provide analytic applications that help Sales Mangers and Sales Reps maximize their sales revenue by managing changes in their overall pipeline, maximizing the revenue from individual opportunities, and maximizing the effectiveness of their sales reps.”

Bob:  What metrics does your BI solution analyze? 

Ken:  You can create your own and some built in.  People say, “I have CRM, isn’t that supposed to do that?”  CRM helps you manage the sale sprocess, which is different than optimizing that process.  Most customers surveyed bought CRM to increase revenue, yet less than 20% say CRM did that after they installed it.  The reason?  You’re just automating someone doing the wrong thing faster. 

What we like to do is look at the process and figure out what’s really going on.  SFDC captures the right data, and we do the analysis to turn that data into real decision making information.

Concrete examples:

• What deals are stuck in the pipeline? 
• $5M in pipeline but what’s really moving?  What’s new?  What has changed?  What deals are bigger/smaller/stuck?
• Average length of time for each part of cycle. 

What decisions does this result in?  Call the stuck deal accounts and if they don’t move take them out of the pipeline and focus on real deals.

We also have a Pipeline Velocity report: how fast are deals moving through?  Watch the hot deals that are moving quickly because they’re the ones you are likely to close.  Don’t just focus on the static snapshot, understand the dynamics.

Another one is Sales Rep Ramp metrics.  How fast can I bring on a new sales rep and get them productive?  Usually this is tribal knowledge.  How long before they perform as well as seasoned reps?  The answer is often surprisingly longer than most sales organizations would like to think.  Knowledge of this lets them hire and train far enough in advance to make their numbers.

How is your product sold?  By seat/month?  Other metric?

Ken:  We sell right now by the application.  Sales Analysis and Revenue Cycle are the two applications we started with.  Sales Analysis is based on CRM data.  Revenue Cycle is CRM data plus Financial data.  Revenue Cycle is a superset of the Sales Analysis application.  Sales Analysis is $1500 per app per month and Revenue Cycle is $2900 per app per month.  This is 10 users and all the storage you need for most companies.   The workload isn’t the seats, it’s aggregating and cleaning the data.  Adding seats is incremental, so we want more people to use it so there is more value perceived.  Makes the app stickier.

Bob:  (I like to try to get a handle on how these different SaaS deals compare, so I converted these prices into equivalent seats at $50/seat month.  It comes out to the RC app being not quite 60 seats.  When you consider the average Salesforce deal is still only 20 seats, Lucid Era is moving up market.  Based on my chats with other SaaS CEO’s like Chris Cabrera and Steve Singh, this is a good thing. )

How many customers and how many seats have you sold?

Ken:  20 customers ranging from 40 employees to 25,000 employees.  Small, mid, and big are all benefiting.  2 companies are over 10K employees.  Quantum is one of those.  They had lots of BI but sales didn’t get their needs met.  We can get them up and running in 48 hours or so.  It only costs $2900 to learn if we’re lying or not.  That’s equivalent to the cost of one business trip cross country.

Bob:  (Once again we see evidence that even small SaaS companies are getting some immediate traction with large enterprises.  I see that as wonderful validation that the SaaS model is spreading rapidly and is no longer controversial at all.  In addition, Ken makes the point that I hear over and over again talking to SaaS CEO’s:  there is no try before you buy with SaaS because you can buy it for a month, use it for real, and see very cheaply whether it works or not.  As Ken Rudin puts it, “You can see if we’re lying for $2900 and 1 month invested.”  That’s a powerful sales technique compared to the long evaluation cycles and huge costs of traditional On-premises enterprise software.)

How has SaaS changed since you first started in it?

Bob:  (Ken has been at SaaS longer than almost anyone, and he has worked for several of the players, so I was particularly interested in this topic.)

Ken:  I’ve been at it since Salesforce had 17 employees.  For me the biggest difference is that SaaS was a foreign concept in ’99.  There were strong objections.  In the early days 70% shut the door in our faces and refused to give up their data.  People had to get comfortable. 
Today, people seem surprised that customers will give us some of their most sensitive data.   A lot of it is our customers are from Salesforce.com so they are already there.  But people are used to it, and it isn’t an objection any longer, it’s more a question.  How are you keeping my data secure?

Bob: (I love the idea that objections morph into questions.  People can accept that a SaaS vendor can keep data secure these days, they just want to verify how that will be done.)

What did you want to do differently from these other SaaS ventures at LucidEra and why?

Ken:  A lot of the vendors still focus on the on-demand nature of the app as being why you should buy it.  In other words: no software.  At the time it was interesting, but we’re way beyond that and vendors still haven’t moved on.  As a customer, why do you care, as long as it works?  We focus on the simplicity, not on-demand.  That’s our key mantra.  Simplicity is the benefit, on-demand is the feature or mechanism.

Take that a step further.  SFDC got away with it for many reasons.  The early “no software” tagline tells you nothing about the value you’ll get.  It says what we don’t do, not what we do do.  But in those days, we had to emphasize our innovation.  Today we don’t push our platform, we focus on the fact that we can improve revenue for customers very very easily.  It’s really simple.  And there’s huge value. 

Let me give an example:  Joe vs Charlie as top sales reps based on revenue plus discounting.  Traditionally, companies just look at who sells more, but that is a simplistic view.  Larry Ellison used to love to see a report that factored in discounting.  Suddenly, we see that Charlie isn’t selling as many gross dollars, but he discounts far less than Joe, so the net profit is higher.  Turns out Charlie is really the top sales rep and Joe was just giving away the product.

The other thing is I wanted trials to be valuable, not just a sales process.  We deliver value even in the trial.  That’s important.

Bob:  (SaaS takes a lot of the friction out of the sales cycle.  Ken is taking that to the next level.  If the sales cycle itself is already delivering value, there is almost no sales cycle.  If he can install the software in 48 hours with a $2900 check, that’s a credit card transaction and then you’re looking at real reports based on your data.  Sounds like a hot idea!)

Next Installment

In our next installment, we’ll get Ken’s perspectives on raising VC (he had an interesting time of it) as well as more thoughts on the sales cycle.