According to Forrester Research analyst Ray Wang via Sandhill.com, integration ranks as the number one obstacle to SaaS adoption based on a recent survey.  This is consistent with what we are seeing in the market and is a quesition that every application company that chooses software as a service as their delivery model will have to answer over and over.  Time to production and realized value is not only important, it is the premise on which these companies operate and differentiate.  If you don’t have a good answer to this question, get one fast. 

If you are a SaaS company, this certainly has been sent to you a number of times by this point.  This was from Omniture CEO Josh James’ preso last week that I missed but have heard quite a bit about since.  Here’s Jeff Kaplan of ThinkStrategies take on that preso as well as the rest of the gathering. 

So, what is the magic number?  You’ll need the following numbers to find out:

1. Total quarterly recurring revenue for this quarter
2. Total quarterly recurring revenue for last quarter
3. Total sales & marketing spend for last quarter

How do you interpret it?  From Will Price’s blog:

The magic number ("MN") is a metric that can be used to tell you the health of your company from the perspective of growing monthly recurring revenue ("MRR"). It is a common mode metric to compare companies MRR scaled by sales and marketing spend. The MN provides insight into the effectiveness of previous quarter Sales and Marketing spend on MRR growth. Your MN will be penalized if the spend is wasted (bad marketing, bad sales execution), if your churn is high or if the market has issues (saturation, competitive forces). It also has a very high correlation with Q/Q growth rates so in general, high Magic Numbers are good.

Fundamentally, the key insight is that if you are below 0.75 then step back and look at your business, if you are above 0.75 then start pouring on the gas for growth because your business is primed to leverage spend into growth. If you are anywhere above 1.5 call me immediately.

I was fortunate enough to get a comment from Narinder Singh of Appirio on one of my recent posts about software as a service being different.  I have not met Narinder personally (yet) but did see him do a fabulous presentation with Salesforce’s Mark Benioff at the Pacific Crest Securities on-demand summit last week.  Here’s his post on it.  Appirio heavily leverages the salesforce.com/force.com platform and the joint presentation highlighted that usage.  It was really great to see an early stage company (and Narinder) share the stage with the Chairman and CEO of Salesforce.com.  Very cool.

I repeatedly heard this in various forms last week citing integration as both a sales obstacle and market limiter to software as a service adoption.  There are no shortages of tools to do integration with out there and a handful were on display at this event, but it still begs the question for all those SaaS application companies or even technology enabled services out there – do you really want to do the integration heavy lifting yourself?

Simon Peel, SVP of Strategy at Cast Iron, had a really great point during the integration panel discussion which I will paraphrase as "the applications have the value and we (integration solutions) are the enabler of that value."

Every SaaS customer has or will have an integration problem as the software application functionality is increasingly consumed by that customer.  Expectations are high for time to production and value given all the benefits that SaaS is suppose to provide.  You want to have deep (and renewing) relationships as an on-demand software company and getting the integration question right is essential.

This is a good Q&A post with Brian Jacobs of Emergence Capital.  Here’s a couple really compelling quotes on the difference between being a product company vs. a service company:

"A product business is transactional. You sell something, you get the money, and the relationship is over. A service business is about serving 24×7."

and

"You have to secure the renewal"

I had a great couple days in San Francisco at both the SaaS Summit and the Pacific Crest Securities On-demand Summit.  I’ll share some thought and feedback as a consolidate my notes and digest a bit. 

Loraine Lawson over at ITBusinessEdge continues to cover the issue of SaaS integration and her latest post adds some additional perspective to the issue as well as references a thoughtful post from Dennis Hall over at Pervasive Software on it. He lays out how extended sales cycles, implementation delays, and the challenges of integrating to legacy applications are the common pain points suffered by SaaS application companies as they face the integration hurdle.  As large enterprises embrace these on-demand applications and their usage becomes more ingrained in core operations, the integration question will have to be addressed.

Interesting write-up on the notion of a SaaS client or a "serviced client" via Phil Wainewright at ZD Net.  The line between pure on-demand and what takes place locally is blurry especially if you look at the capabilities of Adobe’s AIR announced this week or Microsoft’s Silverlight.  Makes me think of my post last year on the cycles of computing – centralize, decentralize, centralize, decentralize.  So what say ye Jim – ready to admit I may have a point here?

Update:  More on this and Salesforce.com’s take on AIR here.

I thought this article via SearchCIO-MidMarket was worth pointing out for a few reasons.  First, it continues to reinforce the buzz about using on-demand delivery for enterprise software. In this case the granddaddy of them all – Enterprise Resource Planning.  Second, it lays out a bit of skepticism both about the general rate of adoption as well as SAP’s bold forecast of 10k customers on their Business ByDesign offering by 2010. 

A recent SearchCIO-Midmarket.com survey found that although 22% of CIOs plan to purchase an ERP system this year, only 9% of those plan on a SaaS product and 15% plan on a hosted product. A full 52% plan to use a traditional on-premise product and the rest selected "I don’t know."

And third, lays out some of the obstacles to that adoption (via Ray Wang of Forrester Research) including integration.

"…the downright dismissal of SaaS as an ERP option is because of concerns over integration, security, cost, performance and lack of customization to a business’ needs."

On the integration front, recent landscape activity includes ERP newbie Workday (founded by Peoplesoft founder David Duffield) acquiring integration on-demand company Cape Clear.  While not a blockbuster acquistion by an industry giant, it does point to needing an answer to the integration question as an enterprise SaaS application company.

Good article by Mark Hall of Computerworld taking a look at the platform strategies of both Google and Salesforce.com.  I continue to believe we are seeing the natural evolution from a new delivery model for applications (SaaS) to one that will eventually be applied to every major category of IT.  Local Seattle on-demand database company Blist just raised $6.5MM on their march to make databases easier to consume and use.

Interesting announcement and coverage today (here, here, and here) from Bungee Labs about the public beta of a new version of BungeeConnect.  Essentially this is a pure SaaS application development environment for programmers. They are defining "platform-as-a-service" slightly differently than Salesforce.com as:

"a single environment for delivering the entire software lifecycle as a service to increase productivity, shorten time-to-market and reduce overall costs for enterprise-class applications."

…and pointing out that the Salesforce approach requires a plug-in for working off-line whereas they do not.  Is that the right approach?  I’m not sure yet but the Bungee folks point out that although "off-line access has been a high discussion point" the "developers" told them "that if they are building live apps with interact services they couldn’t imagine why they would want to develop offline."

The off-line/on-line debate is an interesting one especially if you look at how Google launched Google Gears almost a year ago to enable off-line usage of its on-line apps like Gmail and Google Reader because "One of the most frequently requested features for Google’s web applications is the ability to use them offline."  Maybe this is an application usage (end-user) vs. application development (developer) argument?