Archive for the ‘Cloud Computing / SaaS’ Category

An entertaining video that was brought to my attention by 10Yetis. You get the gist after the first couple of minutes, but it’s worth watching the whole thing.

For more cloud humour, see this cynical explanation of the cloud using an analogy of the Cloud Cafe. I’m still not sure what the sweeties man was all about.

When I started KashFlow I thought a SaaS business would be a relatively simple affair in terms of what the costs would be and where the income would come from. Things never pan out exactly as you expect.

So here I’m going to share some numbers with your from our performance for 2009 and some of our strategy.

If you’re starting or growing a SaaS business then it might be useful for you. If you’re a customer or partner then it’ll hopefully give you an insight into what we’ve been up to and what our plans are.

The 2008 numbers for comparison

In 2008 we turned over around £250k and made a very small profit. We were based in a cheap office in Essex and there were only around 4-5 staff. A quick look at my blog from the beginning of 2009 shows we started the year with 2,500 customers.

The 2009 headline numbers

We ended 2009 with well over 5,000 customers and turned over around £500k. So essentially the business doubled in size.

Despite the extra income, we didn’t make much more of a profit. There are now nearly 17 of us in the company and we’ve ditched the office in Essex and have a lovely place in central London.

Revenue split

Only 60% of our income in 2009 came direct from end-users that pay us monthly subscriptions for using the main accounting software.

The remaining 40% came from the partners that we work with via our Partner Programme. These are mainly accountants of which we now have over 220.

A few percentage points of the revenue is from our add-on automated PayPal accounting service.

Where’s the money gone?

Of the £500k we brought in throughout 2009, close to 60% went on salaries and sales commission, about 7% on rent and the remainder is made up of lots of little expenses like hardware, desks, staff training, utility bills and coffee – lots of coffee.

Our phone bill for the year was close to £8k. We have an 0800 number so we pay for all the inbound calls, but the bulk of this was actually outbound sales calls to accountancy practices.

What surprises me is how little we spent on marketing. Far less than 10% of our total expenditure. And a sizeable chunk of that was on a single exhibition.

Growing the eco-system

A big part of our strategy is growing an eco-system around our accounting API.  This has grown a lot in 2009. We started the year with less than 10 integrated applications and now have well over 20 with many more on the way.

Really Simple Systems CRM have just started beta testing their integration and we have some cool stuff in the works with Receipt Angel.

The only hiccup we’ve had is with our FreshBooks integration. They were understandably unimpressed with the orginal version of my blog post announcing the integration because it had a sentence that pointed out one of the obvious reasons for integrating – that you could migrate entirely from FreshBooks to KashFlow if you needed a full accounting system rather than just a great invoicing app. So they decided not to list us on their site with all of the other apps that are integrated with them.

Having other applications integrated with us brings a number of benefits. We get exposure to the customer base of the integrated app, our existing customers get more benefit and KashFlow becomes a more compelling offering for potential customers.

It also helps to ensure customers stay with us. We don’t believe in vendor lock in so make it very easy for customers to leave us with all of their data  if they want to. If they’re using a number of applications that all feed accounting data back to KashFlow then it’s one less reason to leave us.

We”re continuing to add lots of new functions to our API so developers can deliver more usable products to their customers.

Our iPhone app is on the way very soon too. I promise!

White Label and Resellers

We’ve quietly launched a white-label version of KashFlow already and you’ll see a couple of well known names (including a FTSE100 firm) releasing web-based accounting software this year that is actually KashFlow under the hood. We’re also working hard on the reseller channel and getting some great (poncy buzzword alert!) synergistic partnerships up and running.

Resellers in other territories

We’re not currently planning on actively marketing in other countries – there’s still plenty  to do in the UK market. But we’ve been approached by many companies that want to resell KashFlow in all sorts of countries from Iran to UAE and the US, Canada, New Zealand and Australia.

It’s something we originally shied away from. Localising an accounting package isn’t fun. If you’re planning a global SaaS business now go with CRM instead of accounting!

But with the necessary localisation work now done, we’re about to finalise agreements  with resellers in two foreign territories.

Needless to say, we expect great things from these partnerships.

What I expect for 2010

We have a good office and plenty of room to grow in to. The expensive hiring of experienced people is done too. So I’m not expecting our fixed cost to increase by much. Although a lot of our new costs were only brought in towards the end of the year, so expenditure will increase in 2010.

We may need to increase our infrastructure costs if our user base continues to grow as it has for the last few months. We now average over 60 trial sign ups every day and we’re working hard on converting those into paying customers at higher and higher rates.

With everything we have going on, I’ll be disappointed if we don’t more than double our turnover to significantly > £1m this year.

So given I expect to double income and keep expenses relatively flat – what to do with the excess money?

We’ll probably start by hiring more developers. It’s important that we continue to innovate and add the new features our customers are asking for.

We’re also already on the look out for an addition to our support team. The vast majority of our new customers come from word of mouth referrals, and this is largely down to the great job the support guys do. So investing in support staff brings in more business.

We really should also be spending a lot more on marketing. People I speak to are always surprised at how little money we actually spend on marketing considering our relatively high profile in the accounting software space.

So it’s exciting to think what we could achieve with a solid marketing plan with some money behind it. The goal is to become the default choice when it comes to accounting software for small business and startups.

I hope that this was useful to someone besides the competitors that seem to be multiplying like rabbits!

Today we have released integration with web-based invoicing application, FreshBooks.

By connecting FreshBooks to your KashFlow account you can automate the copying across of invoices and customers from your FreshBooks account to your KashFlow account. If the FreshBooks invoice is paid this will also be copied across or if the invoice is paid at a later date then you’ll be able to apply that payment, along with all of the details, to the relevant invoice in KashFlow.

It even maps your items in FreshBooks to your Sales Types in KashFlow. If you update an invoice in Freshbooks that’s already been copied to KashFlow then this is identified and you’re given the opportunity to copy the changes across.

Why?

There are a number of reasons you might want to do this. You may want your historical invoicing and customer data to sit alongside the rest of your accounting information and then keep it in synch for the future. This integration allows you to easily copy across all of your existing data into KashFlow

Or you may want to use FreshBooks specifically for your invoicing (it’s very flexible and we have a lot to learn from them) and have that data automatically feed into your accounting system.

Alternatively, you might want to allow one or more of your staff to enter invoices and customers but not view the rest of your accounting data. If this scenario you can give them access to a FreshBooks account and set up KashFlow to pull across invoices, customers and payments. Whilst only allowing yourself to log in to KashFlow and view all of your data..

Pricing

We don’t charge any extra for the integration and you can integrate up to 5 individual FreshBooks accounts with a single KashFlow account. FreshBooks itself offers free accounts with some restrictions on the number of clients you can manage but they also offer paid-for accounts with higher limits.

To get started just log in to your KashFlow account, click the Settings tab and select the “FreshBooks Integration” option.

If you don’t yet have a KashFlow account you can get one for free, with no obligation, for two months. Registration takes two minutes. Click here to register.

If you’re in the web-hosting industry then you have no doubt heard of WHMCS.

It’s the absolute cream of the crop when it comes to automated billing and client management and support. Whilst it’s suitable for (and used by) many other industries that want to give their clients a combined billing, management and support  interface, it’s gained a lot of traction in the web hosting space.

We like to be associated with the “best of breed” and a lot of our customers use WHMCS so getting integrated with them was a high priority for us.

At first we tried to use a third-party development company who turned out be totally incompetent and ended up taking our money and running (Note to lawyers of BoostPlatform – it’s not libelous as we can prove it!).

In the end we worked directly with WHMCS themselves and they’ve developed an add-on for their software using our accounting API. It copies across all customer and invoice/payment data from WHMCS and keeps KashFlow updated with any new payments and customers. All very simple and slick, but will save our mutual customers a whole load of time and eliminate the possibility of human error in manually copying over data.

The Addon is free of charge, so go take a look at http://wiki.whmcs.com/KashFlow_Accounting to get started.

We’re quickly getting lots of new applications integrated with KashFlow. One of the problems we’ve run up against is the sheer number of different e-commerce systems out there.

Those like OpenMindCommerce and and EasyWebstore are easily dealt with – just go to the vendor and work with them to get the integration done. But what about the likes of OSCommerce, ZenCart and Magento where there is no central company to talk to?

Enter CarryTheOne. CTO first started as a simple proxy service between OSCommerce and KashFlow. For a small monthly fee it will take your customer and sales data from OSCommerce and enter it directly into KashFlow for you. I initially thought the “small monthly fee” would be the killer. You’re already paying an ongoing subscription fee to use KashFlow – do you really want to pay another company for the additional services? It would seem I was totally wrong. Businesses are happy to pay the small fee because of the huge amount of time it saves them. CTO have grown and grown and grown and have some very impressive numbers.

As well as OSCommerce they also now support  KashFlow integration with CRELoaded, OSCMax, Shopify, ZenCart and Magento. and there are another half dozen in development.

As well as adding more ecommerce applications on the left side of the jigsaw above, they’re now also adding more accounting applications on the right-hand side of it. Each new application they integrate with, on either side of the equation, hugely increases their potential (and actual) customer base.

A very nice business that I’m sure will just grow and grow and grow.

I suspect as SaaS becomes increasingly popular without any agreed API standard, we’ll see more businesses like Carry The One springing up.

A number of KashFlow customers have got in touch recently to tell me about an email they received from Sage.

Earlier this year we offered our online accounting software for free to anyone that could send us a copy of their boxed accounting software. A little video on YouTube demonstrating the future of boxed software got over 27,000 views and really helped fuel our campaign.

Sage then launched a campaign offering small businesses 25% off their software if they trade in a competing product.

The interesting part is that on their site they list “examples of suppliers that we offer our trade in discount against” for Sage 50 Accounts and list a number of products including Quickbooks and MYOB. But the onlyweb-based accounting software they mention is KashFlow.

When we ran our offer we received loads of software, including lots of copies of Sage. The total “value” of the software was over £10,000. I’m willing to bet Sage wont attract a single KashFlow customer with this tactic.

They can’t be getting much interest in the offer or someone would have pointed out to them that their link to the Sage 50 Accounts product actuall goes to a page for Sage 50 Payroll.

If you’re an international company  planning a US launch of a product, the UK is often used as a testing ground.

But what to do when the UK is your main market?

Sage released a dire web-based (and I use the term loosely) accounting system called Sage Live in January this year which was pulled within in a month of launch due to security issues with it that were flagged up on this blog.

Sage own a South African company called Softline which in turn own a company called Pastel. Pastel have a wide range of accounting products for the South African market and I’m told by the accountants we work with that they’re actually quite good.

In May this year, Pastel launched “Pastel MyBusiness Online“. They’re still working on improving the product and haven’t pushed the marketing boat out in any big way just yet. The design of the site shows traces of coloured abstract shapes Sage are using worldwide in their branding. If you have 10 minutes to spare, you can watch this video presentation from the launch:

I’ve not taken a thorough look at the software (I’ll leave that to Ben Kepes), but from what I can see it appears they’ve written it from the ground up specifically for the web. It has a nice uncluttered  interface and is available on a monthly subscription of around £12 per month (14o SA Rand).

In terms of functionality it seems pretty limited, especially in comparison to the many features in KashFlow, but it does cover the basics.

I’ve written on this blog before that Sage can’t do SaaS in-house because a) it’s not in their DNA – desktop programming skills and mentality don’t transfer to the web and b) it cannibalizes their existing business model. My proposed solution was for them to have a separate company set up specifically for developing SaaS. Fund it well but leave them alone.

It seems Sage already have that in Pastel.

So the only question remaining – why aren’t Sage taking Pastel MyBusiness Online and pushing it to the UK market? It looks like a half-decent product, true multi-tenanted Software as a Service and not the half-baked approach they’re using for SaaS CRM.

I suspect the answer is simple. In a company the size of Sage the left hand sometimes doesn’t know what the right-hand is doing. Perhaps Sage aren’t even aware that they already own a capable SaaS development team and an apparently respectable attempt at SaaS accounting.

An article posted on the US site SoftwareAdvice  caught my eye today. What with world leaders meeting in New York to discuss climate change I thought it might be an opportune moment to look at the green credentials of web-based software and shamelessly re-work some of the numbers the original article highlighted.

Power Consumption

Let’s first look at power usage.

A typical multi-user, on-premise solution (ie, the old-fashioned stuff that comes in a CD in a box) would use:

1 x Server(7,000 KW/year) +
4 x High Spec Desktop PCs (400 KW/year each) =
A total of 8,600 KW per year.

A web-based solution like our online accounting software uses multiple servers. A Dell PowerEdge 2950 server, Rackspaces most popular server, uses 6,700 KW per year per server. So 13,400 in total.

As most of the data processing and number crunching takes place on the servers, much lower powered computers can be used by the software user. A Dell notebook perhaps using 120KW/year.

So if one customer replaces their on-premise software with our web based solution then their power consumption would be:

2 x Server (6,700KW/year  each) +
4 x Low-power Laptops (120KW/year each x 4) =
A total of 13,880 KW / year

How web-based software wins

OK, the green argument isn’t looking great for web-based software right now.

But web-based applications, or “SaaS – Software as a Service” solutions, can serve lots and lots of customers without the need for additional servers (unless you follow Sage’s Stupid-as-a-Service strategy).

So let’s scale the numbers up to 10,000 organisations. A tiny number considering there are somewhere between 2m and 4.5m small businesses in the UK.

For on-premise software it’s an easy calculation: 8,600 x 10,000 = 86,000,000 KW / Year
For web-based software you take the 4 laptops (120KW x 4 = 480KW) and multiply that by the 10,000 organisations to get 4,800,000KW / year and then add the servers (6,700KW x 2) to get a grand total of 4,813,400 KW per year  

Average Reduction in CO2 Emissions per company 

That’s a whopping saving of 81,186,600 KW per year from just 10,000 organisations moving from locally installed software to web-based software. Or around 8,000KW per year per organisation.

1KW hour of electricity produces an average of 0.43kg of CO2 emissions (varying dependent on how the electricity is produced). So 8,000KW saved equals 3,440KG less carbon emissions per year per company that moves to web-based solutions

The National Energy Foundation says that a bus produces 1kg of CO2 per 10 miles that it travels.

So by moving just one organisation to web-based software saves the equivalent of:

- 34,400 miles of bus journey
- or 13,760 miles in an Aston Martin DB9
- or a couple of return flights from London to New York
- or a lot of cow farts

Other factors

These calculations are very much “back of a fag packet” and only cover power consumption. What they don’t take into account are the many other factors.

No oil-based CDs to produce, no packaging or manuals to produce and ship,  less need to replace hardware (a very old computer can comfortably use web-based software),  more tele-commuting (so less travelling).

No stamps, envelopes or paper used or miles travelled by postmen to deliver invoices or statements as they’re sent by email. Even when you really *have* to send a hardcopy of an invoice, web-based postal services like ViaPost that integrate with KashFlow can seriously reduce the CO2 footprint.

I’m pretty sure I’ve just saved the world from global warming. But please don’t give me the Nobel Prize, it should go to Tim Berners-Lee (can you beleive he doesn’t have one yet???)

But seriously folks…

Even though my numbers may not be highly scientific, I still think there’s a very big green argument to be made in favour of moving towards the web-based model of delivering software.

It’d be interesting to hear thoughts from others that might have a better grasp on the numbers

It’s good to hear Sage haven’t been scared away from SaaS and the cloud after Sage Live, their aborted attempt at a web-based accounting app.

They’ve announced that their SalesLogix CRM system will be available as a web-based offering by early in 2010.

They say it’s a full-featured, ‘single-tenant’ cloud edition of Sage SalesLogix.  It’s a positive sign that they’re using “proper” cloud technologies, like Amazon EC2, to deliver the product. Their problems around Sage Live were irresolvable because they’d used an unsuitable middleware product (which they didn’t own) to deliver the application.

One big problem though. Single tenant? One of the biggest benefits of the SaaS model is that the software is multi-tenanted.

A “single tenant” system means there is an installation of the software for each customer. Indeed, Sage say that users can choose when to trigger an upgrade to the vlatest ersion of SalesLogix, rather than have Sage automatically upgrade them (what’s the betting this will be chargeable too?).

As well as not being ideal for the customer, it also creates problems for Sage themselves. This model of delivering software over the internet simply isn’t scalable, nor does it allow them to take advantage of (and reflect in their pricing) the ability to easily support the software knowing that everyone is running the same code.

All in all, it sounds like they’ll make a better go of it than they did with Sage Live. But it’s still a flawed strategy. For proper web-based CRM, see our partners here.

Perhaps by their 3rd attempt at getting into the cloud Sage wll finally grasp the concept in full.

Update: Good to see Philip Carnelley at TechMarketView agrees with me on the multi-ternnancy issue aswell as making some other very valid points. A saner person would argue that it’s me agreeing with him as he published way before me and our post titles are rather similar - but I swear I’ve only just read it!

Earlier this year I attended the Business Startup Exhibition in London. They were running an event based on the Dragons Den format.

Someone was pitching an idea for a web-based personal finance application. One of the “Dragons” tried to humiliate him and told him there was no demand for that kind of thing. The muppet was more interested in be a Simon Cowell mini-me than being of any use.  The person I was with dragged me away to stop me shooting my mouth off in defence of the would-be entrepreneur.

There’s plenty of demand for something like KashFlow but for the peronal finance space. Over in the US mint.com has been making great in-roads and taking big chunks of business away from the incumbent player, Intuit.

TechCrunch broke the news yesterday that Intuit are buying Mint in a deal worth £170m (£102m). A very handsome price for a company that isn’t actually making much money. The software is provided free of charge to the user and the company makes money by other means as mint.com founder and CEO Aaron Patzer explains in this video:

In the US, Intuit is a far bigger player in the accountancy software market than Sage, the UK leader.

Intuit “got” the SaaS concept long before Sage did (I’m still not sure they have) and have been successfully offering a web-based version of Quickbooks (US only) for some time now.

So where to now for Mint and Intuit?

Intuit say they’ll continue with the mint.com application and brand and put Aaron Patzer in charge of its personal finance group.

Patzer said part of the appeal to him of the deal was the ability to tap into Intuit’s resources, particularly on the marketing side of things. I can certainly relate to that.

I hope he survives the move from calling all the shots to being an employee. I don’t think I could!

But the question remains, where is the mint.com equivalent for the UK market? I don’t see one. The online accounting software space for small businesses is getting very crowded with a new entrant every month (I was only aware of 1 or 2 others when we launched). My suspicion is that one or two of them will re-position themselves as being a personal finance app in the not too distant future.

Update: @roanlavery on Twitter just informed me of the existence on Kublax, a UK equivalent of Mint. Very slickly presented and appears to be well funded. I’m surprised I’d not heard of them before.