Nicholas Donato explores how technology and social networking are influencing the way private equity funds operate, in his well-written article for the PEI Fund Administration & Technology Compendium, titled:

The fund of tomorrow … today

One of the questions that the article raises is whether social networking can change the way deals are sourced, in a people business like private equity?  Here is an excerpt from the article:

….. Navatar is also rolling out a free cloud service to connect GPs with M&A bankers and other industry contacts to form an online community where deals can be collaborated. Navatar’s social networking site for private equity professionals works by having buyout shops create an online profile describing the types of deals they target alongside their contact information. Bankers, business owners and other sources of deal flow can then access profiles that match their capital seeking enterprises. 

The free cloud service, that Nicholas refers to, is Navatar Deal Connect, scheduled for a beta launch in late August. The article goes on to say:

At the moment GPs don’t rely on portals for originating transactions, sources say. Private equity is after all a people business, points out Philipe Bucher, chief financial officer of Adveq.  But similar to the evolution of social networking sites, who’s to say one portal won’t feed off its own success to morph into a dominant internet presence, a feat Facebook accomplished after eclipsing rival sites such as hi5 and MySpace.“One can imagine a GP in the future sourcing deals from the comfort of an armchair,” jokes Bucher when asked whether portals have the potential to be a significant source of deal flow down the line.

Will GPs ever get comfortable with the idea of sourcing deals from an armchair?  I’ve never been a GP in a private equity firm, so I’m not sure I have the credentials to answer that (although that doesn’t stop me from babbling about how deal sourcing is about to change).  I can tell you, though, that during the early days of Linkedin, most of us who were sourcing consulting business for Deloitte (that’s what I did back then) scoffed at the idea of getting a Linkedin account – of course, most of my management consulting buddies (Deloitte partners) have had a (dramatic) change of heart on this issue.

OK, I’m biased, but what would it take for a social networking portal to bring about this change, in your opinion?

Alok Misra

If you haven’t noticed middle market private equity dealmakers trolling for deal flow these days,  just join the cocktail hour of an industry networking event.  Buyers, sellers, intermediaries (and others) frantically seek each other at these events, exchanging business cards and pieces of paper, as M&A activity heats up.

I’m sure that searching for deals was a similar exercise 20 years ago (maybe even 50). You’d think things would have changed, considering the increased cross-border M&A activity, or considering we have tools like internet, social networking and iPads. But they haven’t. Let’s see why.

Here’s an excerpt from a brochure related to a recent event (organized by Capital Roundtable):

With more and better deals out there, there’s also a great deal of competition.  So it’s never been so important to refine your strategy, improve your tactics, and study the approaches that are working for others. You just don’t want random deal flow.  Rather, you want the right deal flow where you see opportunities that are relevant to your strengths — and likely to be successful.

That takes a thoughtful marketing plan, one that you execute with precision and recalibrate as needed.  And it takes familiarity with all the potential avenues for originating deals today, from intermediaries and auctions and trade shows and ACG parties — to email campaigns and LinkedIn networks and Google AdWords….

And today, most firms are trying to figure out how to leverage social media and Internet presences into tangible deal sourcing.  Yet before you jump in with both feet, you’ll want to know how results are being generated by Facebook pages, LinkedIn groups, and Twitter tweets.

While no 800-pound gorilla website has yet evolved for aggregating private equity deals, …..

So it seems like you need more time (and more money) today to find deals, even though there are more channels than ever to connect with the right people. No wonder, things haven’t changed much.

They will, only if the 800 pound gorilla turns out to be more than just a website or a portal (or a social networking site, for that matter). The gorilla would have to take the critical elements of the old-school networking and relationships and scale them for a global M&A arena.

That’s our goal.

The outcome – Dealmakers won’t have to go looking for sellers (or buyers) – the deals will come to them … without having to pay anything.

The technology – cloud computing (the same technology that Navatar Private Equity CRM and Navatar M&A CRM runs on).

Stay tuned.

Alok Misra

Businesses drastically needed more efficient and economical enterprise software, and once customers were experiencing success with our CRM application, we realized that we could achieve something even more significant. What if we made our platform available to let others build their own cloud apps? The idea to offer our platform as a service was also a way to resolve our own problem: customers were demanding more apps, and we couldn’t build everything ourselves. But – more importantly, and something that as an engineer I could truly appreciate – it offered an opportunity to change the landscape for anyone who created applications.

There was so much that was arduous about software development. (If you haven’t been there, trust me; I was one of those sleep-deprived developers.) There were the purchases: networking devices, storage systems, databases, app servers, data centers. Then we had to write the software and ensure it was fast, high quality, mobile and above all scaled for the Internet. There were technology issues to address, such as authentication and availability. It seemed as if the to-do list never ended…

Those are the words of Parker Harris, Cofounder, salesforce.com. They have been excerpted from Parker’s Foreword for my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts.

To read the entire Foreword from Parker Harris, download a free book summary here:

http://navatargroup.com/book-force-com-as-your-key-to-the-cloud-kingdom.html

Alok Misra

The startup had done really well in their first year. They started with $500k of seed money, and the talented technical team launched the first version of the workflow management cloud product, built on Force.com, in 8 months. Their CEO, well connected in the technology world, brought in the first sales. They had 10 customers with around 120 subscribers in just 4 months. Although they were only collecting $20 per subscriber each month, things seemed upbeat. After all, they had the product already and all they needed were more customers. They projected adding 1500 subscribers in the next two years. They hired two more salespeople and began ramping up the back office team as well.

The trouble began when their customers started coming to them asking for more features. It seemed that another salesforce.com partner had also launched a competing offering. The startup had to act fast. Their technical team worked with the customers, compiled a list of all new features/functions required and came back to the CEO with the game plan. The underlying object model and design of the product would have to be changed to accommodate the new features. It would take around 6 months to develop and roll out. However, the catch was that there was no way to roll out an upgrade to existing customers due to the changes in the object model. Each existing customer would have to be migrated to the new version. Each migration for a customer was expected to take 3-4 weeks and would cost around $20k. By the time the new release would be ready, they estimated they’d have 80 customers to migrate, and would therefore need a significant chunk of change to fund that.

Ever the salesman, the CEO assured the team he’d be able to get the customers to pay for the migration. He went and talked to two customers about the plan. They would be getting all the fabulous new features in 6 months – however, they’d have to shell out a one-time $20k fee for the new features. The CEO wasn’t prepared for the response. “Why do we have to pay these fees for the new features? Doesn’t Cloud Computing mean that we pay you a monthly fee and you figure out the rest?” was the response he received. It became clear to him, after the first few conversations, that the customers wouldn’t pay anything for the upgrade. This was an unanticipated cost which threatened to completely destroy their business plan.

The example above is extracted from my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in CIO Magazine’s “What We’re Reading” List for March 1^st, 2011, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.

Getting your financial model right is one of the biggest challenges. It’s very important to ask the right questions upfront, so you don’t get blind-sided.

Unrealistic ROI expectation

“We’ve estimated that we should be able to sell 50,000 to 70,000 subscribers in 3 years,” asserted the CEO of a start-up that wanted to build a Force.com app for a vertical market. They assumed that, with 70,000 subscriptions at a price of $125 per month, they’d bring in over $100 million in revenue in their third year. Pretty aggressive!

Now let’s look at the CEO’s cost model. To build their product, they had hired a programmer with 5 years experience who had dabbled with Apex in a previous job. The programmer had convinced the CEO that he could launch the first version of the app if he received some help from a skilled company in developing the more complex pieces. Together, they estimated the total cost of launching the product at $150k. This included the programmer’s salary. They assumed that once they had a basic version, the programmer would be able to continue enhancing it.

The overall estimated cost was $500k per year – against revenue of $100 million. Do you see a problem with this model?

The example above is not fiction, it is painfully true. It is extracted from my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in CIO Magazine’s “What We’re Reading” List for March 1^st, 2011, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.

Getting your financial model right is one of the biggest challenges. The cost of building, maintaining, implementing, supporting, and upgrading all versions of your service will be much, much higher that you anticipate. You also need to be realistic about the number of subscriptions you will sell and the price and number of seats you will get.

The CEO, in the example, was right to get excited about the potential that cloud computing and Force.com offers. However, building a cloud app is not like winning the lottery. If you don’t ask the right questions up front to understand the cloud business model, you could be writing checks for years, without seeing any return.

Alok Misra

Building a consulting practice instead of a cloud product

“I hold you responsible for not telling me earlier that this would cost so much,” yelled the EVP of Product Development at the consultants that were helping him launch a cloud offering on Force.com. He was right about the cost spinning out of control. However, he and his team never really paid attention to the advice they were given. As far as the EVP was concerned, his team had been in IT product development for years and had the business knowledge as well as the technical caliber to pull it off. He wanted complete internal ownership of the project – the consultants were just there to help with a few tricky items on the fringes, so their advice was largely ignored.

Things started heading south after the first two potential customers continued to demand more features in the product before they paid a cent. Then came the expectations related to performance and more advanced features. The expectations kept mounting. Within the next few months, a significant number of the product team members got involved in figuring out how to meet the rapidly escalating demands from the first set of buyers.

Mired in product features and attributes, the product team didn’t realize that they were getting into a consulting role with their potential customers – but, that was also something they weren’t trained to do. They didn’t know how to manage the scope of work or customer expectations. They had no idea how to push back so they continued accepting all demands and suggestions, turning the product scope into a constantly moving target.

The EVP went to the CFO for more funding and the executive team was appalled. They had already spent upwards of $2 million and it seemed like a bottomless pit with no revenue in sight anywhere. The executives pulled the plug on the entire initiative.  

The example above is not fiction, it is painfully true. This is one of many organizations that thought that making money in the cloud model was easy – they spent all the money & effort but still ended up with less than they started with. The case study is from my recent book, Thinking of … Force.com as your Key to the Cloud Kingdom, co-authored by Ian Gotts. The book, featured in CIO Magazine’s “What We’re Reading” List for March 1^st, 2011, will help ISVs ask the right questions that are critical for commercial success in salesforce.com’s cloud.

It’s important to ask these questions before before you go and spend too much money. It’s quite possible that after considering all the questions you may come up with the answer No.  That’s a No to Cloud Computing, or No to Force.com, or Not now but possibly later. Any of these answers is fine.

What is important is that the decision has been made with due consideration.

Alok Misra

They aren’t wrong. Application integration, for instance, does require services. However, the cost of both middleware products as well as supporting services has been lowered significantly since integration became available as a service (ask Informatica). You will notice a similar trend with professional services in the cloud – they cost much less than professional services for on-premise software. In fact, traditional systems integrators have not yet been super successful in the cloud, primarily because it’s not providing them as much services revenue as on-premise software has been.

My point is that quite a few (but not all) of the professional services in the cloud are either costing much less (most people would agree with that) or are not required (since they are either redundant or available for free).

Let’s understand why. Cloud is a new technology but, unlike other new technologies, it’s a game-changer which drastically alters  the existing business models. The new model forces cloud providers to provide certain services for free, so that they can keep customers long-term (this wasn’t needed in the on-premise world), not because it’s some gimmick (in fact, since the cloud model is subscription-based there isn’t any room for gimmicks – sustained customer satisfaction is of paramount importance). Just the way Starbucks provides internet for free, in the hope you will buy their coffee (and scones, which I like), but if you don’t, you still get something (internet and a decent environment to use it) for nothing.

All this is great news for customers of cloud apps. They will be the ones to benefit most.

Now, does this mean that there will be no professional services needed and all systems integrators will eventually go out of business? Not at all. There will always be areas needing services. There may still be a lot more consulting services required, for instance, to sort through the mess created by a proliferation of niche cloud providers. Systems integrators that provide application support may have to start focusing on providing that support to cloud providers, instead of companies. In summary, if you are a provider of professional services, cloud computing will force you to rethink your portfolio, value proposition and target customer base … at a minimum.

Alok Misra

Marty Gauvin: No, not at all. Virtual Ark can manage dedicated instances of the application for specific customer needs as if they were “one” application instance. In our view, the security, integration and performance requirements of our target market, large enterprise customers, are ill-suited to multi-tenant solutions. We think this is a key reason why SaaS has not been taken up more strongly by this market segment, and why many ISVs have not modified their applications to be multi-tenant. Virtual Ark sees this as an important differentiator in its value proposition.

Here was my response to this, at the Techo-Pulse site:

It may be hard to argue with Marty when he says “large enterprise customers, are ill-suited to multi-tenant solutions.” Large customers, usually, are too “high-maintenance,” both in terms of their unique requirements as well as their highly political environments. Had they been simple to deal with, consulting firms like Deloitte or PwC, that make most of their money from organizational complexities, would have gone out of business by now. No wonder, it’s hard for a vendor offering a multitenant solution to convince a large customer to buy.

So if you’re an ISV targeting large enterprise customers, an easier option may be not to be multitenant, so you can tailor for each customer’s unique needs. It’s a perfectly valid (and maybe lucrative) business model. The issue is that eventually you will turn into a services company – or, in other words, most of your revenues will come from services (see my InformationWeek post Product Cloud Or Service Cloud? Know The Difference).

If you want to be a viable cloud vendor selling products (see my InformationWeek post Why Multitenancy Matters in the Cloud), you have no choice – your product must be multitenant in order to survive in the cloud world.

I think this debate about multitenancy will go on, as long as ISVs believe there are “quickie” routes to having a cloud product. I have covered this subject extensively in my new book : Force.com as your Key to the Cloud Kingdom.

However, Marty’s comments do raise other important questions: Is it possible to sell and maintain multitenant cloud products to large companies? Are there examples of companies doing that?

Would love to hear from you.

Alok Misra

If you’re part of a Government agency that engages volunteers, you may be interested in this recorded webinar from HandsOn Connect and salesforce.com:

Transforming Government Volunteer Management in the Cloud

In this webinar, you will learn how HandsOn Connect, the volunteer management solution that runs in salesforce.com’s cloud, helps agencies:

• Manage volunteers and volunteer opportunities
• Track projects, events, sponsors, and donors
• Host and manage your public-facing web site
• Access real-time reports and dashboards for decision support and impact tracking

HandsOn Connect is an out-of-the-box cloud product that requires no hardware or software. Since Navatar built HandsOn Connect, I participated in this webinar. One of the several good questions that an attendee asked me was:  What is the advantage of managing volunteers through salesforce.com, as opposed to any other platform?

For answers to this and several other key questions, watch this webinar now:

Transforming Government Volunteer Management in the Cloud

Alok Misra

 
ALPS Fund Services is a big name in the Mutual Fund industry. It distributes Select Sector SPDRs and provides a full services suite for open-end, closed-end, exchange traded and alternative investment funds. Combined with ALPS Distributors, Inc., ALPS Fund Services services more than $240 Billion in client assets.

 
What ALPS gains with Navatar is Mutual Fund CRM and sophisticated sales reporting with transaction data from transfer agents and brokers, all delivered through the Navatar Cloud for a low monthly fee.

 
Why Navatar? ALPS Portfolio Solutions and Select Sector SPDRs, Regional Sales Manager,,Jeff Brainard says, “We found Navatar’s Mutual Fund Cloud for Salesforce to be the most complete out-of-the-box product for our industry.”

 
Thanks Jeff. We look forward to helping Alps achieve record sales!

Allan Siegert

If we put the attrition issue (that I have to deal with) aside, the big positive in all this is that Navatar has become a trusted name not just for financial firms looking for SaaS solutions, but also companies seeking the most experienced and talented cloud resources.

As a recent addition to the Navatar team, here’s how I see it: When it comes to Force.com, we are considered one of the pioneers, after hundreds of deployments. We created one of the most complex commercial cloud products HandsOn Connect. Our thought leadership is reflected in our books (Force.com as Your Key to the Cloud Kingdom), whitepapers (Do’s and Don’ts of the transition to Cloud Computing), articles (Ten Common Mistakes Architects Make), webinars (Architecting Commercial Apps) and opinions (Why Multitenancy Matters in the Cloud).  In addition to Force.com, we’re really into the cutting edge of cloud technologies such as Azure, Google Apps, as well as mobile platforms such as Android, when it comes to our engagements.

However, I believe what really sets us apart is that Navatar is truly a cloud product company. We are one of the top resellers of salesforce.com. In financial services, our Mutual Fund Cloud, M&A Cloud and Private Equity Cloud, dominate the market.  Financial firms in more than 20 countries use the Navatar cloud service – including firms such as Jefferies & Co, Carlyle Group and Guggenheim Partners. We pioneered the concept of cloud products where customers don’t pay anything for implementation or support services.  And Navatar has done all of this without any outside capital and still stays cash-flow positive.  We went through the recession without any downsizing or salary cuts.

The projects we execute and the products we develop are cutting-edge, and a hard act to follow.  It is therefore not surprising that several of our alumni, that helped us start the NOIDA Cloud Computing Center, have expressed interest in returning. In addition, the good news is that talented engineers are beginning to reach out to us directly, as word about our success spreads.

As for me, retaining and expanding our extremely talented team is critical, as I begin the task of scaling a unique and proven cloud computing model.  I must clearly outline what it means to work for a company with true cloud DNA.  I have to help each of our current and prospective team members answer the question:   Will I be better off getting a large brand name on my resume or becoming one of the leaders in the cloud computing revolution?

- Aurobindo Sarkar

Editorial Director Tom Steinert-Threlkeld says it is now possible to measure funds sales performance across various channels.
“Take Navatar. This is a buzzword-friendly service that works “in the cloud,” giving you access to tools for managing relationships with brokers, banks and financial advisers “on demand.” Alternately, you can consider it “software as a service,” running on top of a suite of services offered by Salesforce.com, which pioneered the concept of letting companies subscribe to online versions of computer programs which they didn’t have to install or maintain.

Navatar’s mutual funds add-on to Salesforce.com lets sales managers see aggregate sales data from different regions of the country or by broker-dealer firm or other overall measures. But it also breaks down sales to the transaction, so the performance of any individual rep can be tracked and evaluated.”

Navatar Mutual Fund Cloud is used by prominent firms such as Jefferies & Co., Guggenheim Partners, Alps Funds. It includes transfer agent data from DST, Sungard, Envision and others. It also includes intermediary feeds from Schwab, Fidelity, DST and others.

To learn more about Navatar Mutual Fund Cloud, visit:

http://sites.force.com/appexchange/listingDetail?listingId=a0N300000016cPkEAI

To read the full article, you can sign up for a free trial of this publication aimed at leaders in asset management http://www.mmexecutive.com/.

It is possible. After all, we’re all familiar with this story in the tech world - an upstart with a new technology starts stealing revenues from an established player,  established player buys upstart, established player kills new technology and goes back to maintaining its dominance (Lauren Carlson of CRM Software Advice discusses some acquisition scenarios in her survey).

But before we start writing its epitaph, let’s consider this.  Although salesforce.com introduced us to it, multitenancy isn’t a “product,” owned by one vendor - which makes it a little harder to be bought and killed.  It isn’t just a cool architectural concept – customers reap real cost benefits because of multitenancy. Jefferies, for instance, would have to maintain 3 separate boxes to handle CRM, broker data and compliance for their mutual funds, versus the multitenant Navatar Mutual Fund Cloud, which helps them function without any boxes for a low monthly fee (for more on multitenancy’s benefits, see my Informationweek post Why Multitenancy Matters in the Cloud).

Multitenancy, however, has no shortage of enemies. Most legacy software vendors are beginning to lose money to smaller multitenant competitors. To protect their turf, these vendors jump into the cloud themselves but discover they don’t like the financial model (Oracle’s example discussed in my old post Oracle Cloud Computing and the CFO’s Dilemma). Their answer, then, is to have a cloud play without multitenancy (yes, it’s possible if you can redefine what the cloud really stands for).

Even large systems integrators are no friends of multitenancy. As David Linthicum points out in his Infoworld post What cloud computing can and can’t do, consulting firms worry about losing the big bucks they otherwise make from enterprise architecture complexities. They don’t like to hear about any client efficiencies that may reduce their billable hours.

The question then is – with so many influential enemies, will multitenancy’s fate eventually turn out to be similar to Julius Caesar’s?

I don’t know. To survive, it will need many more customer ROI stories, more successful vendors as poster kids and a longer tail of cloud providers. Above all, it will need some influential champions with strong enough shoulders to  carry the multitenancy flag.

As always, would love to hear your thoughts (you can read more about multitenancy in my new book Thinking of … Force.com as your key to the Cloud Kingdom, just reviewed by Sand Hill Group).

Alok Misra

So, the article starts off says we are openly attacking the vestiges of the on-premise software model because we are providing all implementation and support services for financial firms interested in salesforce.com, for free. We go on to say that our announcement promises to start a new trend among cloud product providers – free services. This is bad news for legacy software vendors who earn millions of dollars from implementation, maintenance and support fees. You can “read” the rest of the article at:

Multitenancy: The Next Cloud Computing Wave?

After Navatar made the announcement for free services for Salesforce, here are a just a few of several questions I received:

“How will you make money?”

“Free – Ha Ha...”

“Very interesting … still digesting what it means..”

The questions were genuine and their underlying theme was clear – everyone seemed very surprised since they didn’t think it was possible to provide any services free of cost. They were trying to figure out what the catch was.

There really is no catch. This is the way it is supposed to be in the cloud computing model. Cloud products are not physically installed for each customer the way on premise products are.  True cloud products are multitenant and share databases, infrastructure and labor. Which means that the costs of implementing, maintaining, supporting and innovating can be shared too. That’s why, when you buy a cloud product you are supposed to get most services related to product implementation and support free of cost. It’s as simple as that.

All said and done, this is still a concept that will take some time to stomach – particularly, for folks that are like myself and have spent almost a couple of decades in the technology world, have long made a living implementing and maintaining software and have seen several fads come and go (I too spent years helping Deloitte and PwC make money on systems integration work). So their skepticism is understandable.

But there’s another category of doubters – those that have bought into the idea that implementing Salesforce for your business is simple enough to be accomplished with a few button clicks while playing poker.  It’s often hard for them to see the value of what we offer (at least initially) since they are driven by the notion that it’s an easy DIY job.  However, they typically realize after 6-12 months that the task of getting Salesforce to support their business, though not as daunting as plugging an oil well leak, can be extremely cumbersome and distracting.

So the answer is: No, we are not offering free lunches. Cost is one of the important advantages that Cloud Computing delivers – services costs are a big part of the TCO of software that the cloud promises to reduce. Real Cloud Product Companies will offer low cost subscriptions to useful, out-of-the-box (or, shall we say, out-of-the-cloud) products without charging customers for services – which is what we at Navatar are doing. The idea is that every Hedge Fund (or every Broker/Dealer or every Mutual Fund) doesn’t have to spend time and money doing the same thing just to implement and support software. Once customers see that value, they will be the real winners.

Alok Misra

Your Investor Relations team will not have to spend time preparing spreadsheets and performing complicated calculations. The pre-defined logic in the system computes the capital drawdown/distribution and fee allocations to various limited partners. The system also allows flexibility for exceptions – for example, the allocation for a limited partner can be overridden if their side letter states they don’t invest in certain countries or industries. The system also performs automatic rolls ups for each LP and fund, on various metrics, to help users manage the process efficiently.

The IR team will not have to manually create and mail capital call letters either. The Capital Calls functionality will, in a few easy steps, allow them to:

• Set up custom capital call/distribution email templates using the fund’s logo and branding
• Dynamically populate the capital call notice with relevant contacts, limited partner’s commitment and capital call/distribution information
• Identify the contacts across limited partners to whom the capital call/distribution notices need to be sent based on the limited partner’s preferences
• With a single click, email notices to all the relevant contacts across limited partners

We will continue to add more functionality to increase the productivity of your investor relations, fundraising and deal flow teams. If you weren’t aware, Navatar Private Equity CRM is built on salesforce.com’s cloud computing platform. Follow the link for a demo:

Demo of Navatar Private Equity

Shweta Kumar

Take the case of Netage, an established vendor that has been providing CRM to Financial Services. Netage will continue to lose deals to Navatar (read River Cities Capital Funds has selected Navatar’s Private Equity CRM over Netage Dynamo). The reason is simple: for a legacy vendor like Netage, winning the cost/value battle against a cloud provider like Navatar is next to impossible unless they can rethink their entire business model.

Legacy vendors typically give the cloud a try, as a defensive move – they launch a hosted offering, available through the internet to avoid losing business. They often try to save money by using all or some of their existing on-premise infrastructure and practice for their hosted offering (masked as a cloud offering), by avoiding the investment in a new technology infrastructure that supports multitenancy. However, the high cost of replicating and maintaining instances for each single tenant (or customer) eventually catches up with them, and their margins get lower as each new customer sucks up more resources (read Why Multitenancy Matters in the Cloud to learn more).

It isn’t just smaller companies – larger companies such as Oracle are faced with the same issue when it comes to competing with cloud providers (read Oracle Cloud Computing and the CFO’s Dilemma). But because of their size and scale, larger companies like Oracle have the ability to change the market demands/dynamics and fight the battle on a different turf. 

The clock, in the meantime, is ticking for most other legacy software providers. If all they do is launch a cloud offering in addition to their on premise offering while maintaining the same business model, they will die soon. Their survival will depend on whether they can make a complete transition to the cloud world.

I think that you can offer Cloud/SaaS products as single-tenant, multitenant or both (meaning one model for Goldman Sachs and another for Peter’s Garage) and also label them the way you want … the main question is that of revenue and cost … or, more plainly, whether you will become a winner in your space in the long term.

The keywords are both “winner” and “space.” If most of your customers can be served through multitenancy, you will have a winning SaaS/cloud product since you will eventually win the cost/value battle over your competitors. If most of your customers, on the other hand, require customizations that make your model single-tenant you may eventually become a winner in the consulting/SI space but not in the product space (someone else will figure out how to offer a multitenant product at a lower cost).

It’s a well known fact that Marc Benioff’s early investors pressured him to also offer single-tenant versions of Salesforce and give customers a choice… we can all guess where salesforce.com would have been had he accepted that compromise. But let me also give you examples from experiences that I have lived (through Navatar).

Our cloud products for Financial Services on the Force.com platform are all multitenant. For instance, 70+ Private Equity firms that use Navatar’s Private Equity product run their own instances of salesforce (where the product is loaded), have made their own configurations (and customizations) … however, they are still able to receive upgrades seamlessly from salesforce.com as well as from Navatar. That’s the architecture we were able to design (force.com surely helped). We sometimes have to stay away from potential customers who want heavy customizations that can prevent us from offering them seamless upgrades (even though we have a consulting practice)… that’s a price we pay.

Another example: Our consulting practice specializes in building products (on Force.com) for others. One such product we recently built was for Points of Light Institute, a pioneer and leader in facilitating volunteering. They offered a client/server product to nonprofits, to manage volunteer activity within their community. The cost of maintaining and supporting their 300 customers/affiliates was too high and the model wasn’t scalable. The new Force.com-based multitenant product allows each customer to customize, create their own web pages etc, without losing the ability to upgrade to the next version (in development). However, it was the targeted saving of 50% in the cost of maintenance/support that made the move to the cloud worthwhile for them … without multitenancy, instead of savings, they would have been building fatter maintenance and consulting practices.

Also, as someone pointed out, multitenancy is a necessary, but not sufficient condition for a profitable cloud product business – there are a whole bunch of others, and I complete agree.  It’s also worth mentioning the blogs of those that actively participated in the debate and helped me enhance my own learning on all of this. Here are some of them that you may find interesting:

Customization: An enemy of SaaS, There goes the neighbourhood, Multitenancy in the Cloud, Principal-driven Customization, Trident Capital blog.

There is no doubt that Force.com, Salesforce.com’s platform-as-a-service (PaaS), is the leading cloud computing platform today. If you are an independent software vendor (ISV) or an entrepreneur looking to build commercial products in a public cloud, it’s probably on your radar already. Force.com gives you the potential to save on development time and get a product to market faster–even more important, the potential to build a business with fewer resources.

Does that mean you can create a profitable cloud business by building your product on Force.com? The answer is–not necessarily.

In reality, most companies struggle to see the return on investment after all their development effort. Here’s why: In a perfect world, seat sales through the AppExchange would happen at the same rate that consumers download music on iTunes. Business buyers, however, are harder to reach and take forever to convince. Both traditional ISVs and startups usually discover they have been overly optimistic not only about how fast they can sell but also about what price targets they can achieve. To make things worse, ISVs find the product development, maintenance, and delivery costs to be much more expensive than anticipated.

Please join us to meet other Salesforce.com customers in the great State of New Jersey, network, to learn more about this important initiative as well as share your tips and best practices! Hope to see you there!

Date/Time:   Wednesday, December 2, 2009 •  5:30 p.m. to 7:30 p.m.
Location:      Princeton Overlook – Regus Business Center • 100 Overlook Center, 2nd Floor • Princeton   Location Information

RSVP: njusergroup@gmail.com by Wednesday, November 25, 2009.

Agenda:       

5:30 p.m. – Networking & Refreshments
6:15 p.m. – Introductions & Announcements
6:30 p.m. – Application Demo – Ketan Khandkar, Navatar Group

7:00 p.m. – New Salesforce.com Community Site Preview

Hope to see you there!

Ironically, this is happening at a time when it has never been easier for a Venture firm to switch to better systems with almost no effort. The same browser they use to search for news and research can also be used for the industry’s most sophisticated CRM. No hardware needed other than the laptops they are now using and access to the Internet.

Whether they use our service built on the force.com platform or on top of salesforce.com or some of the other services out there, you have to wonder why, during this time of great stress they are still trying to make do with Excel and Outlook. If it is cost that is holding them back, you really have to wonder. We have priced our service at about the price of a couple of cups of coffee a day on Wall Street. On top of that, our Marketing Department is launching a “buy one get one free” promotion.

If you are in one of these financial firms and suffering from the funding drought – maybe it’s time to think about improving your pumping equipment?

Is it true then, that our Financial Services solutions for Force.com are popular because they’re low cost? Of course. Navatar’s solutions to manage CRM, Operations and Portfolio for these firms are probably the most cost effective alternatives. They deliver on the Cloud Computing promise – to lower costs and enable scalability as financial firms navigate the turbulent waters of today and prepare for the future. You can read about how Transparent Value, a Guggenheim Partners Company is achieving this, in the article, Asset Management Firm Moving Apps to the Cloud, written by Penny Crosman at Wall Street & Technology.

However, there is another important aspect to all of this.  Around 60% of our financial customers bought from us since someone (another firm) recommended us.  You would think the recommender probably said, “Yes, indeed, the cost is low and the product has all the features we need.”  In reality, our recommenders endorse us for much more than that - they are happy to recommend us for the combination of product features and the service they receive from folks well versed in Financial Services. They like the idea of a one-stop-shop they can turn to, for anything related to running their operations efficiently. And it’s all baked into the cost of the service.

The service aspect really is the crux of the Cloud Computing model.   A cloud service provider is a company that delivers cloud services as part of its business model. The public “Cloud” will be an abstract place through which service providers will deliver things like storage as a service, software as a service, or maybe even sushi as a service in Indiana one day.  But the common link between all those things is, and ever shall be, the delivery of “service”.  That quote is from an article Delivering Cloud Services: ISVs – Change or Die or both! written by Daryl Plummer at Gartner.

So, let’s ask the question again. Is it really the cost?  My answer is that the big differentiator is the value that the Cloud Computing model enables us to provide.  It makes us successful and it is exactly that value which will help our Financial Services customers take advantage of the new upcoming opportunities in this downturn.

Let’s tackle the first part of the question. It is, indeed, a huge shift, moving to a subscription based pricing model.  Oracle probably has a twofold objective – to protect the current customer base (probably a bit easier because these customers have already spent millions on software/consultants and are seemingly ‘locked’ in) as well as acquire new midmarket customers that haven’t yet had a taste of Oracle’s software.  Can Oracle potentially repackage what customers would have paid into annual license and ongoing maintenance fees into a monthly subscription fee spread over the life of the contract, and protect current revenues as well as get new customers?

I don’t think so. When it comes to midmarket, vendors more grounded in the SaaS world (or the multi-tenancy experts) will surely come with lower priced options and Oracle will have a tough time competing.  The answer would have to be lower revenue per customer. Which means that just to produce the same revenue numbers, Oracle will need to acquire more customers. More customers implies more salespeople, more infrastructure, more support, more (you fill in the blanks).  In summary, that means incurring higher costs but getting the same revenue.  Safra Catz will not like that.

Which brings me to the second part of Mary’s question – will Oracle need to invest heavily in a multi-tenant architecture to solve this? Absolutely. Multi-tenancy will be necessary to deliver cloud services and shift to subscription-based pricing, while protecting the bottom line at the same time. Yes, building and delivering that kind of architecture isn’t Oracle’s forte. But their industry and financial stature gives them so many interesting choices that it shouldn’t be that hard for them either. They could go and buy a company (and a platform) tomorrow. They could sell more database licenses to salesforce.com and then use Force.com as the platform to build and deliver multi-tenant versions of Oracle apps (Peter Coffee points out in his blog entry What the Cloud Entails how increasingly complex multi-tenant apps are being built in a faster timeframe on Force.com). Or they could hire the best cloud talent and build the multi-tenancy infrastructure themselves.

Did I miss any other options that Safra has? I’d love to hear your comments. Oh, and of course, here’s a  (free) whitepaper (from yours truly) that may have a useful point or two about the pitfalls and benefits of the subscription-based pricing world:

Whitepaper: The Dos and Don’ts of the transition to Cloud Computing

Jim also poses more great questions, such as:

“As the business relies more heavily on these new infrastructures, will they be able to hold up to high scale? Will the business folks really want to take on the tasks to maintain these processes and applications? Who is going to build the integration components to glue these new processes apps together? Will the business folks build and IT be stuck with the results? How does one make sure there is not rampant duplication of processes and applications?”

Another good blog post Force.com – CiO’s dream or nightmare? by Ian Gotts (who heads Nimbus Partners) also outlines some important implications for a CIO, in the new cloud world order.

I do agree with Jim and Ian about the change that’s looming. CIOs need to do some serious thinking and figure out how they’d add value. It seems to me that there’s clearly an anchor role that needs to be played so that all of this comes together within an organization. Take the example of large banks such as Citi or JPMorgan Chase. Retail banking and investment banking are two disparate business functions within each bank and neither function really cares what the other is implementing technologically. But someone would have to figure out how to get these two functions (and others) within a bank to play together so the bank can benefit from a coherent cloud strategy. I also think that that someone would most logically be the CIO (although large Cloud Service Providers may compete for that role in future – outsourcers want that role but they’re unlikely candidates in my view).

Ian provides some very good pointers for the CIO. Another great post when it comes to pointers, is from Thomas Bittman (also, from Gartner) titled If You Build a Private Cloud, Will Anyone Come.  “We’ve got to get our IT people to stop thinking about products and technologies and even architectures first, and instead to focus on understanding their service requirements first,” says Thomas.  I completely agree. Thomas advocates making ROI decisions based on SLAs and costs for each service, before getting mired in architectures.

I think this is a big paradigm shift for a CIO.  But then, aren’t CIOs smart people? If I can figure this out, so can they.  What may be harder for a CIO, though, is to change their IT organization to become more service-focused and less obsessed with ownership. If a CIO can pull off that change, he/she will be in the drivers seat.  Otherwise they will open opportunities for others.

Wipro is, undoubtedly, a very smart company. So is Oracle. And it definitely makes sense for two smart companies to generate some headlines. However, that’s all I see in this news item – no more. We only wish moving a software company and their customers to a SaaS model was that simple. I would understand if they were talking about providing manpower to maintain an app at 50% of the cost (that is the core business of Wipro – providing cheaper resources in India for tasks that are commoditized). We, at Navatar Group, live and breathe this every day (we help software companies move to Force.com, salesforce.com’s Platform-as-a-Service).

So what is the big issue, you may ask? The most important issue is that SaaS is more than just a technical platform. It is a business model to help you provide a “service”. A software company will die sooner if they move their existing software to a SaaS platform in this fashion. They will cannibalize their existing revenue, tick off their salespeople, lose their customers to startups and will be writing checks forever to meet daily customer demands.

Cloud Computing is a paradigm shift. A software company mustn’t jump into the SaaS model just because it’s cool and everyone else is doing it or even because it’s 50% cheaper now. They will probably survive a bit longer if they stick to their core competency – selling a “product” as opposed to providing a “service”.

To learn more about the issues faced by large software vendors like Thomson Reuters and CODA that have done this successfully, download this free whitepaper:

The Dos and Don’ts of the transition to Cloud Computing

Alok Misra

Does the world really need another Online Event Registration system? Yes, the world needs an Online Event Registration system that is integrated with your salesforce CRM. Let me ask you this. Wouldn’t you want to track attendance in events, conferences, webinars or trainings, in your salesforce system? It would help you understand your customers and prospects for upselling, cross-selling or better service. Navatar’s Online Event Registration system built on Force.com Sites is completely integrated with salesforce.

Aren’t there other existing Event Registration systems that are already integrated with Salesforce? Sure, there are. The key difference is that Navatar’s Online Event Registration system runs on Salesforce.com’s cloud. In other words, it is completely native and is hosted on the Salesforce.com servers. You do not need any other hardware, software or integration solution. It is all done for you.

So how can the event registration system help me? Try to answer the questions listed below. If you find yourself answering yes to some of them, this system may be for you.

1      Publishing events: Do you want to, without IT’s involvement and with a few clicks, publish an event on your website, open it for registrations and then remove it after the event is over?

2      Event Marketing: Do you want to prepare a list of participants based on last year’s events attendees?  Do you want to further filter this list to filter out email opt-outs? Do you want to drive email marketing campaigns to send out mass email invitations?

3      Multiple Sessions: Do you want to manage multi-session conferences? Do you want to allow participants to register for multiple sessions within an event?

4      Multiple Discount Types: Do you want to allow for various kinds of discounts based on the number of registrants, type of registrant, and type of registration- full/partial?

5      Multiple Payment Types: Do you want to give the registrant multiple payment options to choose from? Do you want to provide online credit card processing?

6      Registration Confirmation: Do you want to automatically send out acknowledgement mails confirming event registration?

7      Event Attendance: Do you want to track attendance and no-shows for the event?

8      Private Events: Do you want a mechanism to facilitate online registrations for a private event that won’t be posted on your website?

9      Event Analytics: Do you want to run analytics to gauge an event’s success? Do you want to generate a list of confirmed attendees to prepare a seating chart? Do you want to know how many different types of meals to order for an event? Do you want to know the names of registrants for each session of your event?

If you want to learn more about the product, you can view an online demo.

For further inquiries, you can reach our sales team at sales@navatargroup.com or 212 461 2140.  You can also write to me directly at skumar@navatargroup.com.

We find that an ISV usually realizes that moving to the Cloud isn’t optional, before they come to Navatar Group for help. The ISV doesn’t realize, however, that simply Cloud-enabling their On-Premise software won’t translate into a profitable business model. We recommend this book as a ‘must-read’ for every ISV so you can make an informed choice between selling a ‘product’ and providing a ‘service’, based on your customer needs and your ability to change. Answering the Smart Questions will provide a basis for a realistic cost benefit analysis as well as help you understand what will resonate with your customers and where you will need advice or partnerships.

You can buy the book at Amazon. The link is:

Thinking of … Offering a Cloud Solution? Ask the Smart Questions.

• Benefits of a native app
• Pure platform or extending SFDC
• salesforce editions that your product will support
• Force.com features that you will be using
• How to create a rapid prototype
• Benefits of Visualforce vs. Standard Page Layouts
• When to write Apex Triggers
• Reporting/analytics requirements
• Benefits of Sites and Customer Portal
• Incorporating Security Best Practices
• Maintaining your product
• Supporting your product

Learn from top Force.com experts Sati Hillyer, Force.com Evangelist, salesforce.com and Ketan Khandkar, Principal, Navatar Group.  Also read the new article Architecting a Commercial App as well as Ten Common Mistakes Architects make when building a Force.com App.

View recorded webinar now.

How did he begin?  By simply jumping in.  Register for the Force.com Cloud Developer Challenge, happening now through July 31, 2009. By registering you will be able to submit your application for the challenge, and receive additional communications such as hints and tips.

Submit an application and you will receive a t-shirt (while supplies last) from salesforce.com. Impress us with innovation or creativity and you might be rewarded with an Apple MacBook Pro, iPod nano or touch.  Who knows, you may also be on your way to becoming one of the top Cloud architects.

Go to the Force.com Cloud Developer Challenge to learn more.

Are you ready?

Why? According to the article, “It is not enough to just cloud-enable your software. You still have to deliver it as a service and that is simply not the business of most ISVs. So, you might have to change.”  Further, “some software vendors will either change their business entirely, or go out of business if cloud computing becomes the mainstream norm for delivery of systems.”

We agree. We at Navatar have been helping several ISVs (large and small), that have an existing On-Premise business, “cloud-enable” their products on salesforce.com’s Force.com platform-as-a-service.  We find that, not surprisingly, most ISVs are convinced that simply migrating their product to a cloud platform would turn them into a Cloud Service Provider (CSP) or a Software As A Service (SaaS) provider.  Since they do not understand the change required to shift from a product-based to a service-based model, their Cost/Benefit analysis for the effort is often flawed. As a result, they are able to SaaS-enable their product, but they struggle to make money on it.

For more on this subject, download a whitepaper that we recently wrote, at http://navatargroup.com/WhitePaper.html. You will learn about the experiences of ISVs such as Thomson-Reuters and CODA as well as opinions from Deloitte Consulting experts. The whitepaper is free.

Alok Misra

It will take some time before large companies start replacing MS Office. However as third parties create more commercial products in the Cloud that are tightly integrated with Google Gmail, docs, calendar etc, we may see more organizations considering the switch from Office to the Google platform. We will be testing the waters soon with Navatar’s Financial Services products for Force.com, taking advantage of the tight partnership between Google and salesforce.com. 

Stay tuned!

Alok Misra

Allan Siegert

Cloud Standards Effort Could Turn Into A Dustup
VentureWire, May 04, 2009

“A trade organization whose members include IBM Corp., Microsoft Corp. and a laundry list of other tech companies announced this week that it has formed a group to create standards for a way of accessing information over the Internet known as “cloud computing.” But the new effort is just as noteworthy for who isn’t included: Google Inc., Amazon.com Inc., Salesforce.com Inc. and other Internet companies….”

Here’s the link to downloading Volunteerforce – it’s free

http://sites.force.com/appexchange/apex/listingDetail?listingId=a0N300000016cifEAA

Alok Misra

 
The most critical one, in my view, is of making the SaaS product profitable. You need to understand who will buy your product and why, what they will pay for it, what the costs of building, marketing, selling and servicing will be, etc. I can tell you, from first-hand experience (Navatar Group is a leading provider for Force.com products for the Financial sector), that it is easier to build a SaaS product, than it is to make money on one.

 
Why? Because SaaS customers expect more flexibility, adaptability and constant improvement – all at a lower price. Simply building a Private Cloud (or for that matter using someone else’s Cloud) and migrating your existing On-Premise product will not solve much. Before investing too much into Cloud development, it may worth spending some time to understand the cost of acquiring and servicing customers for your SaaS product.

 
For more on this subject, download a free whitepaper that I recently wrote, at http://navatargroup.com/WhitePaper.html

Alok Misra

The attendance was massive and from some of the largest firms in Europe. Some estimates were 4,000 people. Discussions were lively! We’d tell you more but the true spirit of the event is well captured by the force.com blog – so we’ll point you there: http://blog.sforce.com.

Have a great weekend!

The user group is committed to learning all we can from each other on building apps on Force.com with its rich tools and technologies.  This forum is for networking, questions and inquiries on the platform and technologies, and general interaction between members and interested parties. Please come and contribute to our/your success!

When

Wednesday: March 18, 2009?

Time: 10 – 12pm PST

Don’t worry if you miss the launch at the User Group event, though – you will still be able to participate in the contest by registering at http://www.navatargroup.com/slumdogcontest.html.

Look forward to seeing you in Santa Clara!

Ketan Khandkar.

Who

Developers, Power Admins, IT

Where

2700 Mission College Boulevard

Santa Clara CA 95054

408.988.1500

Speakers

Ron Hess & Mike Kreaden: Sr. Force.com Platform Evangelists

Ketan Khandkar (me), Principal, Navatar Group

Agenda (Subject to change)

10:00 am: Sign in, Reception & Networking

10:15 am: Force.com Apex code & Visualforce with Spring ‘09 platform updates & Demos

11:00 am: Short break/Networking

11:15 am: Slumdog developer contest launch (Navatar Group, sponsor of UG meeting)

11:45 am: Prize Giveaways

Simply register to participate and learn more. There aren’t many rules to hinder your creativity. After the contest, we will give away iPod Nanos and iPod Touches to the five most exciting submissions. In addition, if your submission is one of the five selected, you will also have an opportunity to have your resume considered for joining the exciting and fast-growing Navatar team in the United States or in India. Sound interesting?

Why is it a slumdog contest? Because at Navatar we are doing some of the most exciting things happening today in the Cloud Computing world with Force.com, even though most of us came from humble beginnings. For instance, read the success story of Rexlo Joe who came from a remote village of Tamil Nadu, India a few years ago to become a top Cloud Computing Architect on Wall Street (read Rexlo Joe’s success story). With the Navatar Slumdog Developer Contest, we want to recognize and highlight your talent and your work.

Launch of the Navatar Slumdog Developer Contest

We also invite you to participate in the launch at the Silicon Valley Developer Force User Group at Santa Clara on March 18th, 2009. The User Group event will have a quiz as part of the Navatar Slumdog Developer Contest with exciting prizes. Don’t worry if you miss the launch at the User Group events, though – you will still be able to participate in the contest by registering at http://www.navatargroup.com/slumdogcontest.html.

Have questions or suggestions? We’d love to hear from you.

The Navatar team.

Check out my paper, Ten Common Mistakes Architects Make When Building a Force.com Application, at the developer.force.com site. It provides several recommendations and best practices during critical stages of initial decision-making, designing and developing. These recommendations come from our own experience in building very complex products and apps on Force, including Navatar’s Financial Services products, and I’m very confident that you will find them useful.

You can also download a pdf copy at http://navatargroup.com/download1a.php?download=10MistakeWhitepaper.

As always, would love to hear your thoughts, as well as any additional advice you can offer from your own experience.