It is disheartening for me to type this out but I feel the insights into why my venture with Oracle did not work out would aid all future entrepreneurs and angel investors in planning and starting a similar business. The following post will detail how M.SaaS came to inception; how it flourished for a while, what missteps we took and ultimately why we decided to sell another software solution instead. I’d like to thank everyone who was there to support us during the hard times including our customers and most importantly our investors and our family members. This post is as much as an insight to what happened as it is a tribute to the good people I worked with as well.
A brief background on the business itself
M.SaaS was started with my passion for cloud computing solutions and the strong believe that as a team we could deliver much more than what was available in the Singapore market. Because I was involved and skilled in the CRM arena with Oracle CRM On Demand skill-sets, it was a no brainer that our organization would be a 100% Oracle CRM On Demand focused partner providing implementation services.
With SaaS and cloud solutions providing tremendous value to businesses at a price point significantly lower and without the long drawn implementation timelines that were a norm, I felt that we had a really good solution for the market.
At this point there were visions of achieving the equivalent of a top Salesforce partner (hey, if Salesforce partners were doing well, then why not Oracle right?). Do remember this was back in year 2009 when Oracle CRMOD and Salesforce was on par in its basic CRM solution offering.
We had it all planned out, with a pioneer team of 5 person with complimentary skill sets (there were highly knowledgeable team members in sales, marketing, consulting and programming). Funding was in place to last us a year or two and proper business plans with cost and revenue projections were prepared extensively.
Fast sprint, but slow marathon
Within 3 months of starting the business we landed our first deal which we worked directly with Oracle. The team was ecstatic and it was the best Christmas gift that I could have for the year 2009. I figured that since I was able to close a deal personally by myself within 3 months, think about what revenues we would bring in if my other 2 team members in charge of sales had the same success that I did.
Alas, that assumption was totally wrong! It took us another 7 – 8 months before our next deal came in and this time it was a drip in the bucket compared to the first one. I understand enterprise sales cycles take a long time but 7-8 months with no sales was really unexpected. During the 10 – 11 months, I had to fire 2 close friends and initiate a pay cut across the remaining team members to make sure our costs were kept in check. The feeling was bitter. I felt like I let these people down and one does not even keep in contact with me anymore from the day he left the company.
Change of Marketing Tactics
During the absence of sales, we tried every traditional marketing strategy known. We made cold-calls to nearly 1000 companies during the period, performed email to more than 14,000 contacts, took part in a CRM conference\expo (which I will never ever recommend to any startup even if you can afford it), attended joint Oracle marketing events and networked in any event that me and the other sales member could find. None and I mean none of them turned in a single viable lead or opportunity. At this point I really couldn’t believe that we blew nearly USD9000 on the CRM conference \ expo! No one to blame, we all took a calculated decision to try reaching out to the market rather than not even showing a blip on the customer’s radar.
The turning point to the ‘dry season’ of sales came when I finally decided to switch our marketing strategies. Instead of taking part in events, performing cold-calls with Oracle and doing email blasts, we would focus solely on search engine marketing, setting up a blog with information relevant to our potential customers and engaging a lead generation service company (basically shortcut to good content because all they did was have excellent CRM documents for people to download in exchange for contact registration details in which they pass to us at the end of the day).
The strategy worked well and within 2-3 months of our new marketing strategy, we were generating 10-20 leads in a month with a 10-20% opportunity conversion rate. Do note that though it sounds like a low conversion rate, each opportunity presented us with a deal size of around USD25K-35K which was more than enough for our company size if you could close at least 1 sale a month.
Good Steady Stream But No Flood of Sales
For the 2nd year, business was slightly better because we were closing a sale every 1 -2 months and the pipeline was filled with leads and opportunities. But with the sales projection we figured that even if we could close 12 deals in a year (1 every month which was quite a far –fetched idea with our team size, 6-8 deals would be more realistic), we would just break even for the year itself and still had the first year’s debt. Because we had a very understanding investor the 1st year was treated as an investment but I felt that a good business must be able to recoup the initial investment as well as cover its current operating expense.
You probably would be asking at this point, why couldn’t we take on more projects or hire more people to generate more sales? Good question, but at that point, increasing any sales person or consultants would result in higher costs and further destroy any hope of breaking even for the year 2011. Besides, we were fine with handling the workload, and we could not justify any headcount increase where there were no sales happening! I’ll explain why there were no sales despite my earlier comment on a fairly healthy pipeline.
See, the thing was that we had lost a couple of major key MNC accounts in early 2011 and had we been able to close it, I think that we would have still been going strong today. But I was glad that we lost these accounts because it made me realize one very important aspect in the business partnership with Oracle. The fact that partnering with Oracle allowed us no control in the company’s future or destiny!
Not much people realize this especially first time entrepreneurs like me, it’s that when you are reselling someone else’s software you have no control over its pricing and functionality even when it’s a matter of life and death when making a sale. Some of the major problems I faced with Oracle on these were the following:-
- Very complex and sometimes absurd pricing mechanisms (we are talking about CRM here where Salesforce our main competition makes it relatively easy for you to pick a package). You don’t tell your customers that you are charging for web service operations and give them just one purchase option for the number of contacts you store in the system! The absurd one was that for its email marketing component, the next available tier was 100,000 contacts if you exceed the allotted storage contacts. What happens if you only need 10,000 or 50,000 more? Sorry dude, we’ve just got 100,000. Take it or leave it. Definitely not the best way to do business, I’m sure.
- Lack of functionalities. For a CRM product which is positioned as the main competitor to Salesforce, sometimes I scratch my head wondering where all the RnD is being spent by Oracle when basic features are not even there when they are part of Salesforce as a standard feature. As an example to show you what I mean, the Oracle CRMOD Service management does not even have Email-to-Case conversion and the ability to send out an email directly from the CRM system. We customize the application to fill in the gaps but when a customer looks at it, they would definitely prefer everything to come from a single vendor instead of resorting to customizations.
- Lack of pricing support. Although I know the reasons to this, I still would like to point it out for the others. Make a note that Oracle’s Application business is a dwarf compared to their main bread and butter database business. Oracle only gives significant discounts on mega deals. If you are targeting the SMB sector with Oracle, especially within Asia forget about deep discounts unless you are talking about 100+ or 1000+ user license deals. Case in point that when we were dealing with a major insurance firm trying to replace Salesforce, there was no pricing or functionality advantage which we could position. Come on, when you are dead clear that your product is not even up to par, don’t demand the same amount of money as the competitor when the competition discounts it deeply just to stay in the game, you are trying to replace them for god’s sakes! Toyota doesn’t sell its cars for the price of a BMW!
- Lack of marketing. If you compare Oracle to Salesforce, marketing is definitely not Oracle’s strength. Just look at Oracle CRM On Demand’s site compared to Salesforce, or compare Oracle OpenWorld to DreamForce and you will get what I mean. Once again, I’m always reminded by the fact that Oracle has a larger portfolio and they try to market the Oracle brand name instead of the individual applications. May not be a problem for Oracle, but when you are a 100% CRM On Demand focused partner like us, this can kill the business. When we meet customers they know Oracle for its database, and when we say we are here for the CRM, they would ask “Does Oracle have a CRM?” or “Is this a new product from Oracle?”. You see the kind of messaging and mind share that Oracle projects to the market?
So with the realization of the above and the fact that I analyzed our past opportunity close rates, lead to opportunity conversion rates and the reasons why we won\lost (I guess our CRM expertise were useful here), it dawned on me and the team that our success was very tied to Oracle as our partner and that if they are not successful, how could we be?
Besides the problems that we face constantly with Oracle’s strategy and product, there were also internal problems that we faced. I attribute this to 2 main items.
Firstly, we lacked good programmers\consultants. In essence, we only had my partner and me working on projects to keep the cost down. My partner took most of the technical workload as I had to juggle sales and the overall business operations as well. We tried to hire more people but it was very hard finding good people with a mix of programming and consulting knowledge.
Secondly, I have to admit my partner wasn’t as ‘motivated’ as I was in turning the business into a success. There was a stark contrast in our dedication to the business. Where I worked late till the night and early mornings, he stopped right on the dot at 6pm or a bit later (I guess you can say he maintains a good work\life balance if you want to look at it in another perspective). I treated the business as it was my life, but to him it was just another job. I think dearly about the business where he has more of a care-free attitude to things.
NOTE: Partner, if you are reading this or anyone who knows my partner reading this. This is not a complaint or an outburst to my partner. It is to highlight to others that when you go into a business with someone you know, make sure your attitudes and personality gel together, if not there will always be conflict in achieving your goals together. I hold my partner in high regard and treat him as one of my best friends and if you asked me if I would ever do the whole thing again with him on the team, I would.
I know that up till now, all of the above might seem like a rant on Oracle and having nothing to blame on ourselves, but these are business decisions and the above are only outcome of a decision that the team made. In hindsight, if we had the following accounted for, the situation would have been very different today and let the following be a good post-mortem to anyone starting a business, especially a business reselling software with value added services be it with Oracle as the vendor or not.
- We should have gone with Salesforce or another vendor which had a better marketing strategy or at least one that was aligned with our business model and vision of servicing the SMB markets. When you are architecting your business revenues on one single solution, you can’t afford to create or popularize the brand itself. Your vendor that you choose must do that, and when you go to the market, an easily recognized brand is 100 times easier to sell than something which does not have credibility. In our case, Oracle did not have as much marketing as Salesforce and the credentials of local customer references for Oracle CRM On Demand paled in comparison with Salesforce.Because we were focusing on implementation and customizations services, the product HAD to have good branding and functionality. Think of it as if you are a car reseller, would you rather sell a Japanese made Toyota or China made Chery (assuming if you are even aware of it).And to add insult onto injury, Oracle CRM On Demand couldn’t compete with Salesforce in terms of depth and breadth of functionality. There was a point where I emailed Dennis Howlett of ZDNet Irregular Enterprise and Constellation Research fame on his thoughts of Oracle CRM On Demand, he was kind enough to provide me a reply in which he gave me some business advice and mentioned he wasn’t impressed and the solution was akin to like ‘lipstick on a pig’.
- Do not spend anything on traditional marketing needs! I know this depends on the context but for us selling CRM, had we focus less time, money and resource on cold calls, events and live person seminars; we probably would have saved a whole bunch of money and put them to better use. The worst decision we made was spending on the participation for the CRM conference \ expo.If we had started on the get-go with our online marketing efforts such as paid search results, blog, registered whitepapers and the online lead generation service, we probably wouldn’t have to go through the no sale period of 7 to 8 months. Another thing of course, related to the first point is that if your vendor is doing relatively well, there should be a steady influx of inbound leads to your vendor which would then be channeled to you according to your capabilities as a partner.
- We should have chosen to go with a CRM which would offer both on-premise and SaaS options. Although I have no doubt that SaaS is the way of the future, fact is that 30-40% of our prospects which we rejected could have been turned into potential deals if we just offered them an on-premise option. The business reality in Asia is that business owners and IT managers still have little exposure to SaaS or cloud solutions, and some just have the traditional mindset that as long as the data resides within my network it is safe (yeah right!). My advise here is that halfway through the business is 30-40% of your prospects are asking for the same feature or functionality consistently, make sure you look into it and make it available to them.
- We should have chosen a niche to focus on, but then again we were limited into what focus we could provide due to the nature, limitations and extensibility of the core product of Oracle CRM On Demand. This again ties back to going with the market leader if you are a reseller or developer make sure that they offer a rich integrated platform for development.
- Go with the market leader. Going with the market leader gives you another key advantage, a larger audience of potential customers. This is a typical developer decision wherein if you had the choice, always go for the bigger and more established platform (i.e. iPhone App Store vs Android Market Place). In our case, we took a calculated decision in thinking that since there are less partners for Oracle CRM On Demand, it also means that we have a higher chance of being a privileged partner (in which we did become the key partner in Singapore). However, what didn’t occur to us was that perhaps the lack of partners also meant the lack of customers? There has to be a reason for that didn’t it? Again, as I have mentioned, this was a calculated decision because when we started the company we found Oracle CRM On Demand and Salesforce to be on par and hence reasoned that we could take market share from Salesforce partners if we offer a competitive solution at a lower price point. By now, you know how that turned out because since 2009, Salesforce has just blasted the doors out of Oracle CRM On Demand in terms of standard feature offerings.
Well certainly not the ending that I wanted. More than 2 years of my life was put into nurturing the business in which I hoped that it could grow into a focused systems integrator in the field of cloud CRM. And though my family remains supportive, I can’t help but think that I have disappointed them. However, with the invaluable experience, I am now steering the business into a new direction with NetSuite and a new team (another post for another time).
With the lack of control that M.SaaS had in dealing with Oracle, I realized that Asia does not have a lot of software companies doing well as compared to the US. Another realization is that there is very little ‘young blood’ in the enterprise software business. Perhaps that is why we don’t see as much innovation as compared to the consumer space. Hence, if I were to join any company in the future it would ideally be one that has or intends to develop its own software to address a market.
I myself, am 27 this year and I started dabbling in enterprise software with all those stuff about ERP, SCM, CRM, BI across the 6 years that I have been working with the software industry, and if my memory serves me right, I usually see people my age only either in either pure programming or consulting roles. I would like this blog to reach out to the younger audience to get them excited about the significant changes software can bring to their work or business.
I hope that this post would help all the future entrepreneurs who will be considering a business reselling software or building on top of another platform. In future posts, I will be sharing business insights on how to run and start a small business like what I’ve did with M.SaaS, keeping in mind which pitfalls you should avoid and the successes which you may possibly recreate.