What if you had a complete book of the history of all sports results, and then went back in time? If you knew the winner of every Super Bowl, World Cup, Grand Prix, and every other game, all you would need to do is place a few strategic bets to become an instant billionaire.
If you are familiar with the movie Back to the Future, you might remember that this was the plot for the sequel. The antagonist, Biff Tannen, grabs an almanac of sports results left behind by the hero of the story Marty McFly, then steals the time machine to give the book to his younger self.
I think about this from my time at Siebel Systems. No company had reached a billion dollars in revenue as fast as Siebel or had as dominant a market position. Siebel was synonymous with CRM (customer relationship management). In 2003, it did not seem that anyone could dethrone Siebel from their lofty position on the upper right hand side of the Gartner Magic Quadrant.
Then three years later, Siebel was acquired by their fierce competitor Oracle, and a small upstart was starting to make waves in the CRM industry. This company was born in the cloud. They said heretical things like companies should not buy software. Their CEO even made grand proclamations about the end of software. Instead, you would rent the features you need from a server that lived outside of the corporate firewall.
The company I am talking about of course is Salesforce. By 2009, they reached $1 billion in revenue. Then in 2018, Salesforce pushed through $10 billion. By the end of their current fiscal year, they will have doubled revenue in only three years and are used by 90% of the Fortune 500. Siebel on the other hand is rarely mentioned.
Siebel laughed at Salesforce in 2003. Everyone looked at Salesforce like you would look at a mosquito or cockroach. Business Insider called the company an ant. Then the ant became a swarm and swallowed up the entire legacy software business model. Whereas the idea of going to the cloud to subscribe to software was alien in 2003, now you look like you have three heads if you buy general purpose business software and install it in your data center. If only I could go back in time and place a bet on Salesforce’s stock!
What Marc Benioff championed was not better software, sexier features, or a simpler user experience. Honestly, it took over a decade before it even could touch the level of sophistication in Siebel. What Benioff sold was the idea that software should offer freedom and flexibility. The means to do that was this novel thing called the cloud.
Nowadays we do not question the cloud. The shift from on-premise to cloud and the rise of cloud native companies has built a massive industry. Gartner cites that public cloud services will grow 23.1% in 2021 to $332.3 billion, up from $270 billion last year. The three biggest cloud providers (Amazon, Google, Microsoft) have a combined market cap of $5.8 trillion. And with only an estimated 4% of the world’s compute workloads running on cloud, all of these numbers will continue to climb ever higher.
You know all of this though. Most of you reading this post are already building or supporting something in the cloud today. Why do you need me to tell you about the cloud? What may not be as obvious an outcome of the cloud is that with the cloud, every company on earth has the opportunity to radically transform their business model.
I work primarily with startups, and the default choice since the late 2000’s was to build on the cloud. No one had the money or time for building and maintaining a data center. Many of the most successful SaaS companies in the world today started in the cloud, familiar names like ServiceNow, Workday, Atlassian, Twilio, etc.
The vast majority of tech companies though did not start in the cloud. Either they launched before the cloud was a reality or the nature of their business required on-premise software. Then there are companies outside of the technology industry that never saw software as a strategic pillar for growth and viability until COVID hit.
The starting point for these companies to move to the cloud was historically daunting. First, there was the massive shift from legacy systems to modern architecture. Second, the business model and go-to-market strategy had to shift in order to deliver this service to customers willing to move to the cloud and subscription provisioning.
One of my guests for my AWS Startup Show on Clubhouse shared the journey of taking their enterprise data lake product and delivering it as a SaaS offering to enable a whole new set of customers like early stage startups, to use the solution. Tomer Shiran, Co-founder and Chief Product Officer of Dremio, shared that key to their SaaS success was four fold:
Leveraging the experience of a decade plus of SaaS migrations with an organization that has the knowledge and resources to help. In this case, they worked with the AWS SaaS Factory team that knew all of the pitfalls to avoid and opportunities to exploit.
Accelerating delivery by reducing the undifferentiated heavy lifting. By building on AWS, they could leverage existing services such as AWS Glue and Amazon Lake Formation to speed development because these were battle tested technologies.
Realizing that delivering a SaaS solution is much more than a technology migration, it is an organizational and business change. Product engineering shifted their entire software delivery pipeline to fully automated CI/CD. They needed an SRE team and bolstered security staff. Sales, marketing, and customer service also significantly changed in order to support fully online customers.
Leaning on existing platforms to support go-to-market efforts. Since they built on AWS, they were able to use the AWS Marketplace as a frictionless, self-serve experience for AWS customers to try their software, bolstering their existing sales & marketing channels.
For tech companies that are already a few decades old or companies not in tech, the challenges of moving to SaaS are even more challenging. That makes it even more important to plug into an organization that can be trusted to smoothly guide the way.
Does every company really need to move to a SaaS model however? My contention is that every company in the coming decade will become ever more reliant on technology. Whether it is a farm, an industrial plant, or a professional services firm, success will depend on being able to deliver value to customers faster and more efficiently with less intermediaries. We can already see this happening in banking and insurance with cloud-first providers carving out more market share from the incumbents. Why? Because the cloud-first SaaS providers remove friction.
SaaS is on my mind since I am attending the SaaStr Annual conference in San Mateo next week from Sept 26 to 29. Not only will I be meeting with customers and learning what is the latest in SaaS trends, I will also share what AWS is doing to support SaaS, for example our recently announced AWS SaaS Boost, a program and set of open source tools to jumpstart the move to SaaS.
Let me know if you will also be in town attending SaaStr, or if you are interested in meeting up in San Mateo or San Francisco. Hope we can connect there in person within a safe, COVD-free environment!
In the meantime, are there any projects that you are working on that involves SaaS? How do you see the rapid transition to SaaS impacting what you are doing in your own work?
Mark Birch, Editor & Founder of DEVBIZOPS
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