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2015 Predictions for SaaS Business Models

2015 is fast approaching and it will be a big growth year for software and SaaS companies. Here's OPEXEngine's predictions about how SaaS business models will evolve in the new year, as well as Nicholas Negroponte's always insightful thoughts about future trends.

December 15, 2014

CFOs Aren't Overly Sharing Types

I recently attended the 12th Annual MIT Sloan CFO Summit, which, as always, was great. The title, the Future Forward CFO, articulated the theme that CFOs have moved from reporting the past to helping shape their company’s future. A CFO’s position has grown beyond reporting accurate financial statements and historical analysis to proactive strategic planning, and essentially replacing the COO in overseeing on-going company operations. The CFO should be right in the middle of the strategic conversation within the company; s/he has the analytical staff and deep understanding of the nuts and bolts of the business model in order to take a more proactive role.

November 25, 2014

How Professional Services Gross Margins Are Impacting SaaS KPIs

Professional services for many SaaS companies have become an important way to on-board customers, keep customers satisfied with the product and using more features of an application or service, making it stickier. As one CFO recently said, professional services are definitely a churn-reducer. SaaS companies, particularly high growth, venture-backed firms, are pricing professional services as a loss leader, at cost, or even below cost. We have been seeing negative gross margins on professional services from some companies.

November 12, 2014

What SAAS Performance Management Can Learn from Six Sigma

Borrowing from the basics of Six Sigma, keep the following in mind as you define and manage your SAAS performance management and benchmarking.

October 27, 2014

U.S. Software Industry Shows Strong Revenue Growth & Renewed Focus on Investment

The private U.S. software industry is experiencing its biggest revenue gains since the recession, and both private and public companies are renewing their focus on investment in order to gear up for further growth, according to a study announced today by the Software & Information Industry Association (SIIA), the principal trade association for the software and digital content industries.

July 18, 2014

SaaS Benchmarks - The Devil's in the Details

Tracking performance metrics like monthly recurring revenues (MRR) and contracted monthly recurring revenues (CMRR), customer acquisition costs (CAC), renewal or churn rates, and customer lifetime value rate (CLV) is critical for driving growth at successful SaaS companies. None of these metrics are GAAP metrics, though, and there is no auditing of the numbers. Many companies do their best to follow definitions for these metrics from research on the web, anecdotal discussions with peers, and with investors or board members. The devil is in the details, however, in making sure the data truly represents the metric as intended. In addition, it is important to understand how SaaS benchmarks are defined when comparing one company’s non-GAAP metrics against those from another company.

May 21, 2014

Aligning the CFO and CEO

Last week’s “Deciphering Finance” conference in Irvine, California, organized by the SIIA was a great forum for sharing best practices among Finance leaders and peer networking. I thought one of the many useful sessions was the discussion between an experienced CEO and his CFO which captured some of the key issues in that relationship. Here’s a summary of the discussion.

May 6, 2014

SaaS Benchmarks – Security and Performance Costs Drive Up Cost of Revenue

Security and performance investments, among other items, are driving up Cost of Revenue for SaaS growth companies. The ultimate goal of a subscription business model is to reduce the cost per subscriber and increase profitability. That does not mean, however, that cost ratios follow a smooth downward trend as revenues grow. 10 years after Salesforce.com went public in 2004, we are seeing that SaaS COGs may trend upward, and hit several plateaus along the way. Security and performance investments are two major drivers of the increasing costs experienced by most of the leading SaaS companies today.

April 8, 2014

Growth & Changing Face of U.S. Software Industry

Annual Study Finds SaaS Driving Largest Revenue Gains, and Indications of Growth Outside Silicon Valley, Massachusetts & Other Traditional Tech Centers. Small and mid-sized companies in the U.S. software industry are thriving in the post-recession economy, with software-as-a-service (SaaS) firms consistently experiencing the greatest revenue growth and hiring expectations, according to a study released by the Software & Information Industry Association (SIIA), the principal trade association for the software and digital content industries.

October 17, 2013