Both Ben and myself often talk about how lean business models provide a competitive benefit in good times, and are crucial in a downturn that we are now living through.  We can keep on explaining the pull-model vs. traditional software sales again and again … or jus sit back, shut up, and let a company that actually practices it explain it with one single slide.  Yes, this picture is worth a thousand words:

(From a longer presentation by Atlassian Chief Rebelutionary Mike Cannon-Brookes. His entire post is worth reading.)

Atlassian is a “different” company in so many ways… no wonder they are still hiring while the rest of the world is busy downsizing.  But one thing I’ve not realized until now is they have a backup business plan. They could quit Technology tomorrow and become a Creative Agency overnight.   Need proof?

How about this video – the perfect recruiting tool, if you ask me:

More recently they launched Create and Edit, a 3-part “wiki drama”:

This from a hard-core development company. Aren’t these guys supposed to be a bunch of left-brained geeks?  There must be a secret Australian bug that turned them into right-brained creative types…

Three weeks ago when I wrote How Software Can Be Resilient to Recession I was very careful using the “Big R” word – since then the bottom fell out,  the doomsday-chorus started.  On my personal blog I suggested we should Turn the Doom-talk into Constructive Business Model Ideas, and that’s what I intend to do now.  Here’s the gist of my intro piece:

The Web 2.0 economy went sideways, focusing on things that were:

• useless (superpoke?)
• consumer-only
• ad-driven

Here’s what works (as has always worked) instead:

• go where the money is, and that’s businesses (“Enterprise” vs. consumer, even if it means small business)
• deliver value – useful functionality that improves business
• charge for it – companies actually prefer to pay for reliable, good service. 
• SaaS : OPEX vs. CAPEX,  Sell to User vs. Economic buyer

So let’s talk about that last part – how do you deliver software and get paid for it.  Selling to the corporate world has just become a lot more difficult, if not impossible.  The standard knee-jerk corporate reaction to any downturn is freeze, freeze freeze:  hiring, travel, and spending on new contracts all get frozen.  These blanket freezes are blind: it does not matter how innovative your solution is, how much it increases productivity, or  -most importantly in a downturn-  how much cost it saves, you can’t get in as a new vendor.

Fellow Enterprise Irregular Anshu Sharma’s advice to ISVs is to partner with anchor tenants, i.e. vendors already in contract with your target customer and try to get in under their umbrella.  Sage advice, probably works for larger organizations, but partnering with the biggies can be quite painful.

What else then?  You may want to revisit your pricing, and also how, and to whom you’re selling.  Just as I was thinking about this post, we had a lively discussion in the Enterprise Irregulars group about  Forrester’s report predicting the dramatic fall in price for Enterprise 2.0 applications. Jive Software came up as the obvious example: everyone loves ClearSpace, everyone hates the price.

Ironically, just as we were discussing how Jive’s prices will have to come back to Earth, news of Jive’s dramatic layoff came in: the company let about a third of their workforce go.   Within minutes the CEO of competitor Atlassian announced they were still hiring, in fact he invited the ex-Jive team to check them out.

They are in the same market, so how come one fires while the other hires?   Since I don’t have a crystal ball (or inside information), I can only speculate:

• Jive has experienced aggressive, VC-fueled headcount growth, which they now cut back preparing for the downturn, while Atlassian has grown organically, without any funding. (They like to say they are “revenue-funded”)
• Jive has the heavy Enterprise Sales model, which will hit a brick wall with the corporate freezes now, while Atlassian does not really sell: they let customers buy.  Unlike Jive, they did not have to fire their Sales VP – they don’t have one.

But I don’t want to get into a Jive vs. Atlassian game here, especially since I really don’t know the details – let’s just stay on a general level for now. Update (10/18): Fellow Enterprise Irregular Bob Warfield asks: Why Are Startups Running at a Level Where They Can Lay Off 1/3?  I think it’s clear that only the VC-funded ones (some?  more?) are.

Another Irregular, Rod Boothby had a good writeup which is now two years old yet every word is valid: The Taxi Fare Secret.  His key point:

Sell Directly to the End User at a Price They Can Expense…

How do End Users Pay in an Enterprise Setting?

If you charge $9/user per month, but bill for the whole group, the bill for 30 people would be $270.   That requires sign-off, which requires approval, which gets you back to the CTO / CIO.

If you charge $9/user per month and make each end user pay their own way, then each person has to get the company to cover just $9 in expenses.

$9 is cab fare.

Taxi cab fare doesn’t require approval.

or… $9 might be just cheap enough for people to be willing to cover it themselves.

Very well said – and similar to my own experience of flying in below the radar screen, at prices that are expensable, not approvable.   That’s the recipe for ongoing enterprise sales in a recession.  Next we’ll look at revenue-generation on the consumer market, which will likely take us from the realm of taxi-fares to lunch-money … in fact cheap fast food.

We must be a crazy bunch on a suicide mission.  Why else would we launch a new blog focused on Cloud Computing and Business, when it's just a fad that will collapse in two years?

Harry Debes, CEO of Lawson Software is a respected Enterprise Software industry veteran, but I'm afraid for all his achievements he'll go down in history as the man who grabbed headlines with a fatally wrong call.  Of course not all wrong calls hurt one's reputation: IBM's Thomas Watson is still an industry legend despite the famous quote incorrectly attributed to him:

” I think there is a world market for maybe five computers“

The small difference is that what Thomas Watson could not fathom in 1943 ended up putting IBM on an amazing growth trajectory,  while Harry Debes's view may just turn out to be fatal for Lawson - or to quote my Enterprise Irregular friend, Vinnie Mirchandani:

"That's what American and Delta said about SW. And GM and Ford said about Japanese cars. And Sears and Wards said about WalMart."

Another quote by Vinnie, closer to our industry:

"Dun & Bradstreet, which GEAC acquired for a song, was one of the most spectacular slides in the software market. In less than 5 years it went from dominant position to a distress sale as it missed the client/server wave in early 90s."

I've seen that one close, fortunately for me from SAP's side - the winner in that round.  We're witnessing another tidal wave now, the shift to Cloud Computing.  It won't happen overnight, but those who completely ignore it will vanish.  Some of my fellow Enterprise Irregulars elaborate more:

• Vinnie Mirchandani points out that SaaS is what more and more customers want, and those who stop listening to customers inevitably hit the wall sooner or later.  Need proof?  How about this 100% SaaS customer, showcased at the recent Office 2.0 conference?
• Jim Berkowitz  of CRM Mastery fame agrees,  adding that calling people, potential customers “stupid” never leads to any good.  
• Bob Warfield makes the case that even if we ignore what customers want and only consider profitabilty, Debes is wrong, Salesforce.com is almost as profitable as Lawson, but grows much faster, while Conquer, another SaaS success story is actually more profitable than Lawson is. 
• Jason Corsello adds that Lawson actually launched a SaaS offering last year, but experienced lackluster customer response largely to pricing and deployment issues ... so now that they couldn't pull it off, the declare the entire market doomed.
• Josh Greenbaum concludes: "SaaS isn’t collapsing, it’s only just getting started".

I can live with that... it's only starting... so we're not a suicidal bunch, after all.  But thank you, Harry Debes, for sparking a great discussion.

If you read just the few articles I've quoted above, you get a fairly good picture of the many benefits the Software as a Service model offers.  Let me add a few of my personal favorites:

• Extended reach - small businesses can now have business functionality previously only available and affordable for large enterprises.
• Commoditization of the software market - commoditization hurts most companies, except the few who drive it, but guess what - it's great for customers.
• End of Bloatware  - for the first time SaaS vendors can run stats and observe what features are actually used by customers, so they can cut out the fat and enhance the in-demand features.
• New Business Models, like benchmarking - based on anonym aggregate data provide your customers with performance metrics.  Even newer business models we have not even imagined yet.
• Dramatically changed Sales and Marketing model: pull vs. push.  Instead of the traditional sales model it's all about transparency, information, letting informed customers find you.  The Product sells itself and your Customers are your Marketing team.

We'll be writing about these and more. I'm a "business application guy", so I mostly talk about SaaS - but our name is Cloud Avenue, not SaaS Avenue, for good reason: fellow blogger Krish will talk about it soon.  By the way, Krish and I got to know each other through our blogs - just like my fellow Editor, Ben Kepes, and just about all other contributors. We also have our CloudLab - for product / service reviews.  Yes, we will report on products, but do not strive to be a mini-TechCrunch: we have no intention to report about everything new.  We're not a news-blog.  We'd rather sit back, analyze a market, find key players, then produce a series of reviews / comparative analysis.  Quality before quantity or urgency.

We're believers in Cloud Computing, but  not over-zealous cheerleaders.  Just as I'm finishing this post, another SaaS debate erupted, which prompted Anshu Sharma to note: "there must be a Sky is Falling Support Group".  The really notable part of the Cloud-Filled Debate @Forbes is Nick Carr's responses: not because of the Big Switch author's unquestionable "cloud-bias", but because of how realistic he is:

"Forbes.com: Is cloud computing over-hyped?
Nicholas Carr: At the moment, yes, and that's typical for technological advances.

What's your imagined time line of the adoption of cloud computing? Will it take years? Decades?
If you're talking about big companies, I would say it will be a slow, steady process lasting maybe 15 to 20 years.

On what Gartner Research analysts call "the cycle of hype and gloom," where do you think cloud computing is currently positioned?
It's definitely near the peak of its hype. The doom period, when the media and IT managers realize the challenges ahead, is likely coming soon. But regardless of hype or gloom, the technology will only keep progressing."

Overhyped, slow process, doom is coming... has Nick Carr switched sides?  No, he is just being realistic - and that's what we need to do here  @CloudAve, too. We will talk about integration problems, security issues, privacy concerns, even legal ramifications - many of these I don't claim to know much about, which is why it's great to have a diverse team of authors with complementary areas of expertise. And our door is never closed: we welcome guest posts, and who knows, you may feel inclined to join us as as a regular writer...

Finally, we could not afford to bring you CloudAve without sponsorship.  My regular readers know I've been an advisor to Zoho for years now - I've found them to be a showcase for a lot of my ideals.  Zoho stepped up as exclusive sponsor of CloudAve.  This does not make us a Zoho PR outlet, in fact they can expect less coverage here than they got on my personal blog.  We enjoy complete editorial independence.

What we do not have, and will not have is any form of advertising.  None of those flashy banners, boxes, making the site close to unreadable. Just pure content.  And since we are not dependent on page views, we can afford to offer our content under a Creative Commons licence.  Yes, it's all yours, take it - just don't forget attribution.

So here we are - welcome to CloudAve. We hope you will follow us.   And once again, thank you, Harry, for all the attention to Cloud Computing.

P.S.  Our house is not exactly in nice order yet.  Apologies for the shabby appearance, while the house platform is getting fixed.