Traditional software companies won’t fly in the clouds
Microsoft’s recent launch of its Azure platform made me consider again whether they are likely to succeed in moving their whole business to a new model. Something that has interested me for quite a while is how hard it seems to be for traditional software companies to succeed with their ‘Cloud Computing’ efforts. There are at least two problems.
The first problem is that simply building the technology and getting the whole company (and their partners!) committed to the model is always going to take a while: educating technical staff in new architectures that can scale massively with all the implications that has, delivering applications on a new platform which was foreign to those staff, building systems for which over-the-web delivery isn’t just a bolt-on – it’s the whole point. Significantly being a player in the new world seems to require a conversion to open principles – whether these are the adoption of open standards for data transfer or open architectures. Compare, for example, Google’s approach to that of Microsoft: Google even have a team endearingly called “the data liberation front” whose role it is to make it easy to move data away from their software.
I think a second problem is more significant: that a move to the cloud brings with it a change of business model – from licensing software for the duration of that software’s useful life to a different model based on paying for what is used. Those companies in the ‘traditional’ camp have large direct and indirect sales forces which are comfortable (and paid to succeed in) selling software on a single, up-front payment. Contrast that with cloud computing where the model is that you pay for what you use: this plays havoc with those sales teams’ traditional pay structures. Incenting those sales staff to move to a new model without cannibalising their existing installed base and deferring valuable cashflow may be just too hard: effectively these companies have to build a whole new business in parallel with their existing one and manage the inevitable conflict between the two businesses and channels.
It will be interesting to see if any of Microsoft, Oracle or IBM ever get to the point where a majority of their revenue is from software delivered as a service. Of the three I suspect IBM has the best chance given their history in renting Mainframe operating systems and software. It seems more likely to me that other players, led by Google but including a host of new entrants which are unencumbered by adherence to a traditional software model, will dominate the cloud computing space.
Workbooks was founded on a conviction that applications are best delivered from the cloud so that for our customers there is “no hardware, no software, no hassle”. Who will our competitors be in five years time?
Raising Angel Funding via the Enterprise Investment Scheme
As you may have seen from our recent press release we successfully completed a 2nd round of funding for Workbooks, raising another £2m in Angel finance. This takes the total amount of funding we have raised over the last 2 years to £4.1m.
As I spend a lot of my time talking to other owners of UK businesses, the topic of external funding comes up quite a bit in discussion. The question that comes up most often is – How did you raise the money?
So let me provide some answers.
How did you raise Angel Finance?
Simply put, we were able to identify a group of ‘high net worth’ individuals (Angel Investors) who believed that our vision and business plan is compelling and as such were prepared to invest their cash.
Also the UK Government helps quite a bit through the Enterprise Investment Scheme.
The EIS Scheme is a Government scheme to promote investment into UK Business. If your business qualifies under this scheme(and many do), it provides tax incentives for investors including 20% Income Tax relief, potentially 40% Capital Gains Tax (CGT) deferral relief and any gain that is made from the investment will be completely free of Capital Gains Tax.
So if an investor is investing £100k, they can claim back £20K in income tax relief. If they have any capital gains bills to pay the HMRC, they can defer up to another £40k, so the cash flow impact of investing £100k can be as low as £40k. This combined with the potential of significant tax free returns can be very appealing to angel investors.
(Editors Note: At Workbooks we provide SaaS CRM systems not tax advice so best you get your own & speak to a professional advisor)
Where does an Angel put their money?
When we founded the business back in 2007, the credit crunch hadn’t really taken hold. So when it hit, one of our concerns was how easy would it be to raise investment money during the recession.
However the collapse of the banks created some very interesting issues for high net worth individuals: All of a sudden keeping all their money with high street or investment banks seemed a lot more risky than ever before and the current returns were not attractive to say the least . So many of the Angel investors we have spoken to over the last 12 months have been much more willing to look at EIS qualifying investments as an alternative home for their money.
Whilst we are big fans of the EIS scheme here at Workbooks, I would like to see it extended and some of the rules relaxed to make it more effective.
For example there is a limit of £2m which can be raised in any one funding round. I have no idea why it’s £2m, I would have thought £10m would be much more sensible. That way not only start-ups, but medium-sized businesses looking for additional investment would benefit. Especially now, when trying to get any bank to part with cash is pretty tough.
Clearly having tax incentives from the government isn’t enough on its own to get Angels to invest their money. You need a compelling story too, but using the EIS scheme can be a real benefit.
Workbooks Roadmap – latest
As part of our strategy of being open and transparent with customers and prospects, we like to make our product development roadmap as public as possible.
This strategy isn’t without its challenges, not least the fact we are always responding to customer requirements and, as such, the roadmap continues to change.
That said, we have now developed a roadmap structure which allows us to commit to certain new features, whilst also giving customers some visibility of what else we might develop over the next 12 months.
The current roadmap is now published on our website at: www.workbooks.com/products/roadmap.html (here)
The roadmap contains two types of item:
- Committed items – these are improvements to the product which are committed to be delivered in the dates specified.
- Candidate items – these are improvements we would like to make, but currently haven’t committed.
Please let us know which of the candidate items you would like to see developed first, as we tend to prioritise new enhancements based of your feedback. We will be implementing an on-line voting system for customers, but until that’s ready feel free to email us at: pm@workbooks.com to let us know which enhancements (that aren’t already committed) you would like to see in the product.
John
Google Chrome – not as polished as we would like
As a vendor of web based applications, we take a very active interest in the development of web browsers.
Over the last couple of years we have seen Microsoft’s dominance of the browser market being challenged by the likes of Firefox, Google’s Chrome browser and Apple’s Safari.
This has been a very good thing indeed. When Microsoft dominated the landscape, little innovation was taking place. In particular IE6 and IE7 had very poor javascript engines. For those of you that don’t know, javascript is the underlying technology that enables us to develop rich User Interfaces (UIs) like Workbooks.com. Because the javascript engine in IE6/7 was slow, it meant that running and rendering more complex richer web pages took more time.
If you have ever used Workbooks CRM in IE7 and compared it with the performance in Google’s Chrome you will see Chrome is 10 – 20 times faster than IE7. The emergence of these new browsers has prompted Microsoft to raise their game and IE8 is a significant step forward, albeit still slower than the others. Competition really is good for the consumer.
So in general we have been a fan of these new browsers and Chrome in particular.
However our enthusiasm has been dented a little over the last week, because of Google’s strategy of automatically updating their browser without letting you know.
Google released Chrome 4 on the 25th of January, unfortunately the release also introduced a bug which stopped our users downloading attachments from Workbooks.com.
So we spent a whole day last week, developing a workaround, testing it and then releasing it to our servers.
As a software vendor I recognize that no software is perfect and dealing with bugs is part of life. However if Google took the same approach as Microsoft and actually asked you to upgrade rather forcing you, at least you could make an informed choice.
Clearly there is downside in allowing people to choose, because you need to support multiple versions for a longer period. However if Google is looking to replace Microsoft as the OS of choice, either their QA needs to get better and their release cycles a little longer, or they should move away from a strategy of automatically updating.
That said – in the round we still much prefer Google’s browsers to Microsoft’s and would still recommend it to customers over IE – until our view changes.
John
Getting Started
Welcome to our new Workbooks blog!
The intention behind this blog is to keep everyone up to date with the progress of our business and our products. We might also use it to occasionally pass comment on our industry and the world in general.
Let’s start by giving you the background on the company and the people involved. We founded Workbooks back in October 2007 at Jenny’s kitchen table over coffee.
Four of us got together with a view to building a leading SaaS provider of business applications for the SME market. You might ask why would anyone create a business that completes with industry giants like Salesforce.com or Sage?
The answer is we were very frustrated!
The four of us had previously founded a company called BlackSpider Technologies. BlackSpider was an SaaS provider of email security solutions and when we sold the company in 2006 (to SurfControl PLC) we had approximately 2000 customers and 90 staff operating in 3 countries. Having grown the company from inception we were frustrated at the lack of good business applications for small and medium size businesses.
Like many companies we have purchased IT systems for specific departments, Sage for accounting, Salesforce.com for CRM. These standalone applications quickly became ‘islands of information’ which caused no end of problems for the business. For example all our transaction information (purchase order, invoices, credit limits, etc) were in Sage. This was great for the accountants, but meant that the sales, marketing and support folks didn’t have access to the information.
The accounts department rightly didn’t want sales and marketing people logging into Sage where they could create invoices and post journal entries! But in reality the sales team needs access to some key pieces of information, such as credit limits and previous transaction history.
So if a sales guy wanted to see which how much a customer had previously paid, or if a marketer wanted to run a campaign based on purchase history the only way was to export data from Sage and import it into our CRM system. Then we had to try and ‘dedupe’ the data and the whole process became a real can of worms.
We wanted some joined up business systems which were targeted for the SME market. When we looked round the only products which were close were Oracle and SAP, however they came with a seven figure price tag and required a small army of IT staff to make it work.
So having sold BlackSpider in 2006 and having completed the 18 month transition period at SurfControl, we decided we could build an integrated suite of business applications that would be delivered online, so you wouldn’t need your own army of IT folks.
So here we are in February 2010, over two years later and having built Workbooks CRM and Workbooks Business, which addresses the problems I described.
We made our first sale back in May 2009 and have been rapidly developing our product’s capabilities based on the feedback of our ever-growing customer base.
We have had lots of good ideas from people on how we can improve Workbooks, so we now have a feature list as long as your arm. We are continuing to roll-out new enhancements about every 8 weeks, so if you are a customer please don’t hesitate to drop us a note about what else you would like and we’ll do our best to include it in a future release.
We have a release of the product scheduled for early March and I’ll provide more details on what’s coming with the next few posts.
John Cheney