Business opinion, thoughts, impact of business on our society and vice versa

Paypal was one of the first online payment services and had a great start but over time lost the edge. The company seems to struggle with their internal administration and adjusting their business processes to meet customer needs.

Company Background
Paypal has 160 million customers
Their support centers work shifts and deal with approximately 60,000 support cases every day.
Over 1,000 support people handle on average 60 calls per day.
You cannot email or use other ways of communication than phone, fax or post.

Support team
To deal all day long with frustrated customers is not a very pleasant job, so fluctuation is rather high and the level of competency very low. It takes on average three calls to find a competent person. Some customers suggest you don’t use a case number as you don’t want to get back to the same person.
Most of the support calls are very low level issues with routine answers, nothing special, simply based on lack of user help and a pretty confusing system administration (a user voice nails it: “This is done by a bunch of engineers and never reviewed by business people”). Many functions are even unclear to the internal teams. Support staff admits it is not very intuitive if it is anything other than pushing the pay now button. Everybody can read that in great detail in thousands on public complains.

Customer Experience
People still really like the product. Some even donated a website like This Link Lots of discussions with thousands of valuable inputs that – as it appears- non of the paypal people ever read. Paypal instituted a feedback form that customers are asked to fill out after each and every support case. Even so many people probably are too angry to even bother, some do, I did. But that source of customer feedback evaporates in the dysfunctional organization.

More Market Research?
Now the latest hit was that I received an invitation to participate in a survey – yet I have to be “elected” to join. However I get $200 if I participate after I am elected. But it looks like I have to drive to Mountain View to do the in person interview. A “market research institute” actually is doing the gigg. I don’t want to know what that cost in total.

So here is a company that has free feedback from millions of users and thousands of cases but just doesn’t bother to care – instead pays a research institute to create yet another source of feedback?

Paypals Social Web Presence
There is a paypal account on twitter, mainly tweeting “please follow us so we can DM you” – 63 updates, following 123 people
There are hundreds of paypal groups on Facebook from paypal fans to paypal frustrated customers
There are 18 groups focusing on paypal on LinkedIn with over 3,000 members
There are paypal customers on MySpace and many other sites, the feedback is priceless.
Yet paypal seem just not to care.

Even internally people know what the issues are: A support person inside paypal (very nice and very professional) “…I know, we asked numerous times to fix those issues but nobody seem to listen”.

How to actually fix the problem
Social Media for Paypal could become a life saver. Not as a marketing gigg but to improve and fix a dysfunctional operation.
1) At first a company team would aggregate and distill the customer feedback using established assessment methods and available reporting tools.
2) Then develop a customer supported advisory board and rigorously execute – fixing the top issues.
3) Tackle more problems and just grind through the list from top to bottom.
4) Ask the folks from “paypal sucks” groups and sites to HELP.
5) Using the, by then established, processes to figure out how new features need to be developed (co-creation)
6) Get feedback in a structured way through groups and networks rather than through useless questionnaires
7) Create forums where customers help customers, supported by maybe even less but better educated paypal support people

Non of the above has anything to do with sales or marketing – just building a better company.

Who Is Responsible?
Is this the responsibility of Dickson Chu Vice President of Global Product and Experience? Or is it Ryan D. Downs Senior Vice President, Worldwide Operations? Or is it Scott Guilfoyle Senior Vice President, Platform Services? Or Barry Herstein Chief Marketing Officer? Philipp Justus Senior Vice President, Global Markets, responsible for growing the company? Everybody has his/her fair share.

But No, Scott Thompson, the President is the one who need to engage his executive team in a cross functional initiative to fix the dysfunctional organization.

Social media is not a cool marketing gigg – it is a strategic engagement to react to the major changes in our society reflected by changing customer behavior and an ever more demanding market.

Axel Schultze Axel Schultze MyXeeSM
Social Media Academy

I get more and more of the very same question: “Axel, I finally decided to get into the social media thing, do you have some advice?”

OK – too long ago I started from scratch, so everybody please chime in and add to it.

1) Give your engagement a purpose (other than just trying it out or selling something). For instance: You may want to learn more about your customers, you may want to help others in an area of your expertise, you may want to know more about your partners, you may want to learn what issues your customers have, you may want to learn from others about an area where you feel you are rather weak… Again don’t sell and don’t be as boring as “expand my network”.

2) Start on two places: let’s say LinkedIn and Facebook. Create your profile by:
– Adding a picture of yours, don’t make it too special amongst the 6 billion you are unique enough as you are
– Add your real name, your real background. No need to hide anything – it is out there anyway.
– Be open, the more information you provide the approachable you appear.

3) Social networking is about connections, conversations, exchanging experience… Invite all your friends from your address book to join you in your engagement. Don’t select only 5 or 10 – don’t be shy, you may be surprised who else is already there for years. So invite them all. If you are not comfortable to invite 1,000 – they only get an invitation from one – YOU. Don’t embarrass any of your friends, contacts or alliances by not connecting with them.

4) In the next few days you may be busy with confirming invitations, thanking them that they connect and asking them for their experience. They may have good tips for you as well. Keep the dialog over the next few weeks – make sure you leverage the connection for conversations – not just as yet another address book.

5) Now look for some groups with interesting topics or interesting people. Don’t forget your purpose by selecting the groups. Sign up with 2 or three, get familiar with the conversations. If you like it chime in, if not you may as well just leave the group. Once in the group: Don’t sell but just develop your skills and help others develop their skills with what ever expertise you may have. You will see others trying to sell something – don’t imitate (we’ll get to that later).

6) You are now a few weeks into it. You may wonder how much time you spend with no results. If that is the case: Your conversations or your network may have not been in line with your purpose. Or you may wonder how many wonderful and helpful people you met in such a short period of time – great – you are right on track.

7) The selling and doing business with those people almost reach the melting point. When can you go out and do business, sell something take orders….? Give it some more time. The social web is like a secret society you don’t get to the secret in the first few levels.

8) By now you may feel good about exploring other places and spaces. You may want to signup with Twitter and follow conversations that are in line with your purpose. Search for specific terms and check the people out. Also here, invite the people who are relevant to you and your purpose and follow them. Forget all the hype around getting thousands of followers. You are here for a reason – people who collected stamps in the past collect followers now – I guess you are not one of them.

9) Other places may be of interest: Create a little clip on your laptop and post it on YouTube, upload your presentations on SlideShare, store your bookmarks on Digg. You may find a few other interesting tools based on recommendations from friends. By now you do a lot of things and use a lot of tools based on recommendations from friends.

10) You are getting into the upper levels of the secret society. You learned a lot based on recommendations. You started tell others about your experience and recommend the tools to others. You retweet, write it to others on their wall… YOU NOTICE BY NOW: You never saw an advertising from LinkedIn or Twitter, you never received a cold call from any of the tools vendors you use. Nobody ever sold you something but you may already pay for some of the extras or reporting tools that help you follow your purpose. You may recognize: All it takes is recommendations. If somebody would have called you at home to use “Friends-or-Follower” you may have dropped it because thats the last thing you want.

11) As you join more groups you recognize the guys who ask hundreds of questions, answer the question right away and put a URL you should visit. Thousands of SEO and outsourcer try to sell you that way – and I’m sure like anybody else you just hate it. You reached an important point of understanding. Selling and advertising in the social web just doesn’t work. But you have this wonderful group of people who helped you and you helped them. And while you still want to do business, introduce your solutions and make a living you learned by now RECOMMENDATION is the currency in the business web. Recommendation = conversation, conducted by others. And maybe you experienced it already – other people recommend you and maybe even your business or products because what you produce or sell is helpful to somebody else.

12) You look back – probably 6 or more month passed by. You are proud that you made it through the maze of valuable and stupid information, through people you met and others you have known for many years. Your initial goals may be achieved and you feel good about the social web. Now you may take it to a whole new level – take your company and help the entire team to make sense out of all this. Make your team and your business partners a helpful hand to your customer base and your industry. Work with your customers and make them so happy that they RECOMMEND you. They can do that much better than you ever will in your life. When all the connections of all your team mates and partners recommend your products and services because they are helpful to others you become one of the top successful business person – without selling a thing.

Axel Schultze Axel Schultze MyXeeSM

How Teenagers Consume Media
the report that shook the City | Business |” ( This Link )

What is shocking to me: What pretty much everybody is talking about finally shook the British Guardian.

More shocking: There is no way to comment on this report. It is electronically “printed” with no way to interact. I have to admit I haven’t been on a news paper site for quite a long time and recognized that this seems still to be the standard.

At the New York Times you have to sign in to “recommend” an article. But also wait until all adds are loaded.

However on SF Chronicle you can provide a comment on pretty much everything. So why spend $200 Million on a new printing press?


Axel Schultze Axel Schultze MyXeeSM

Cisco, IBM, Walmart, Wholefoods, Starbucks and others invest millions in their social web presence. The investment is more on the human resource side than on systems. They don’t advertise what they are doing but they are moving fast.

The Social Media Academy provides some insight in this week’s complimentary webinar

– The impact of social media on businesses across all industries

– Identifying the largest pool of business opportunities

– Assessment of a company’s social ecosystem

– Developing a comprehensive social media strategy

– Creating a social media plan

– Reporting and analytics in social media – over 100 reporting tools

– ROI, resources and budget considerations

– Social media as a cross functional business accelerator

– Competing for mind, – and market share

– Building a successful social media practice

This Friday 4/24 – 9:00AM (PDT) Online conference (no charge)

As sad as it is, industrial media killed itself. It is NOT the Internet or technology for that matter that killed publishers it is the change of their business model from independent content circulation to advertising distribution.

A publisher used to make money by providing a given audience latest news, well researched and easy to consume. Readers paid for the news and publishers made a profit by balancing cost of news gathering and distribution with newspaper revenue. Rather simple model.

I explaind the shift in process here a few weeks ago:

About Newspapers
Read the Article at HuffingtonPost

Y is after X – it’s that simple. But Y is very different!!!!

97% own a Personal Computer
94% own a cell phone
75% of the college students have a social network account

About 76 Million are entering the job space right now.
Businesses better get ready to know about the power and connectivity of that generation. If you are not connected you are out.

This is my personal observation on our current economic situation. (2007)

We call an economic melt down “Recession”, when we don’t know the origin of the situation.

We call a Recession a ”Depression” if we failed to find the reason and continue the way we did in the past

We don’t know what we don’t know
The oil crisis or energy crisis had a name because we knew what the issues are. The Internet bubble had a name because we knew the cause and could deal with it. The current “recessive behavior of economy” seems unknown to many and have a real vague reason for some. It is pretty easy to point to the financial institutes who in turn point to politicians, and argue about interest rate definitions, manipulation of a free economy etc. But what do we say about the automobile industry and their issues? What do we say why HighTech consumption is declining? Why even consumer goods are declining before the “Financial hammer” was hitting? The list is as long as our Industry SIC codes.

Businesses around the glob will suffer 10% – 20% decrease in revenue. This causes layoffs and a dramatic increase in unemployment rate. Now this will really accelerate recessive revenues and a decrease in consumption and the spiral goes further down.

We don’t know the real origin of the revenue recessiveness
Why the layoffs in the first place? Because all we know is that consumption is going down. But too many don’t know why or have false assumptions. And hence a stimulus package would only absorb additional liquidity without helping “reform” our macro economic landscape.

Analyzing the details of recessive revenue
Try to buy a car. What is happening? You feel ripped off by that car dealer which probably has the worst reputation in the sales guild. A friend of ours found the perfect car. But the sales guy was so pushy and so aggressive that she left the store. It took another month until she found the equivalent car and be prepared through online research so she exactly knew what to buy, where to buy and what to pay. As a result she bought much later than she planned to. And so many of us have seen this same behavior with friends and with ourselves.

I tried to add an additional cable TV connection at another place. Not only that the customer unfriendly voice recognition system and out sourced call centers are rather incompetent, the available plans are so complicated and vary every day that I hung up and it took me two more month until I finally ordered it because I really had to. Just forget about some cool extras – many of us just buy what you absolutely need. And this is not because we have no money – but because we just don’t want to deal with those companies. Again you buy less and much later.

Try by a cell phone. The sales information, the plans and the sales methods are like 25 years old. Buy an Apple iPhone and you need to stand in artificially created lines to activate the phone to make it look more attractive. How can just a few weeks later people download millions of gadgets when only a few 20 per store can get activated? Better wait until the artificial hype is over and be treated as a welcome customer. Purchase delayed by 2-3 month.

Want to book a vacation. Ohhh what a drama. You wait until you know it is really about time because all those offers are so complicated and since there is no such thing called travel agency who has some friendly local representatives, you order online – cheap – late.

Buy some new clothes. You only can get what the industry is producing right now, dependent of the season, dependent on surveyed fashion trends and based on regional aspects of their purchasing departments. So the selection is highly limited, optimized, maximized in accordance to some business process automation suggestion. You simply buy less.

Now buy food. Grocery store consolidation has reduced the product variety, quality has shrunk and with less consumption the personal is now less and cheaper. You buy what you find and many get fancy by going to WholeFoods and Trader Joe’s despite the higher price. But isn’t it interesting that the super expensive Whole Food is very successful?

I can go on and on and see one interesting pattern across the board – purchases are made later by approximately one or two month at least. A delay of 2 month or 1/6th of a year translates to 16% reduction in revenue. But that is only for the goods and services we HAVE TO HAVE – or believe so. Now add the other little things that we buy or not buy and never buy just because we are sick of the bad service that is provided. An over all revenue reduction of 20% for an economy that is used to think in 3 or more percent growth – that is RECESSIVE and if we don’t wake up it will get DEPRESSIVE!

Now think about the initial customer contacts:
Call a business and you will need to dial 2 – dial 6 – dial 7 – dial 1 then land at an  outsourced call center that hardly speaks English and only has a repertoire of some 20 – 30 questions. As a customer or prospect I just feel how much I’m worth to the company I try to contact. THAT CAN BE CHANGED – RIGHT?

Business Process Automation
BPI is one of the main topics of most companies. Business processes are so deeply optimized that as a customer or prospect I’m hardly playing any role. It’s all about the internal processes. The focus then includes quickly compliance issues, information flow, disclaimers and who can provide what information. At the end nobody can say anything. Corporations became so closed that again a business relationship is hardly possible. I’ve seen user groups collecting contact information from a vendors sales people to get in touch with them. It sounds unbelievable but even the customers can’t talk to sales people to buy updates (A still multi B$ telecommunication company). THAT CAN BE CHANGED – RIGHT?

Information Flow
While businesses make it much harder to get to relevant information, users are forced to dig through forums, blogs, communities to find information. The only information flow is mass emails, advertising, sponsored link with all the same – excuse me – bullshit nobody really want’s to read. I asked participants in an event “who trusts or even just cares about advertising?” all I got as an answer was a laughter. Still approximately 1 Trillion Dollar is spend in advertising and advertising related initiatives – unfortunately it’s no longer bringing any results. In general business simply lost the sense for their most precious good – customers. THAT CAN BE CHANGED – RIGHT?

Product Design, Production, Marketing, Sales, Support
We build products that are neither verified nor wanted by the market. And while customers scream about their needs in forums and user groups, producers are not even aware what they say. Businesses spend 3-5% on advertising that nobody cares anymore, they loose 3-5% of their profit right here. Sales is purely trained, and under such pressure to sell that it scares customers away. If purchase is delayed about a month translating to 8.33% reduction in revenue it often represents another loss of 4% profitability. Support is so underpowered and the leverage from knowledgeable users is simply ignored which cost another 2-5% profitability. And if we add all up our business in some cases looses even more than the average 5-10 but more like 20% soon. People get laid off to keep the company going – keep the status quo – which drives the company further down.

What on earth has all that to do with the “financial crisis”?
When businesses around the world loose their customers because the customers loose interest in those products and services, what has that to do with the prime rate? NOTHING. Why are a few companies thriving? Sheer luck? Absolutely NO. Can companies produce, market and sell products in a crisis? Yes, as long as we live, eat, move, search for new opportunities, create new opportunities, build more attractive products, provide better service, spend less on advertising nobody cares about and do what customers really are interested in.

For Even if you think – this is stupid, this is too easy, this is superficial, and I have absolutely no clue. Wouldn’t it make sense to improve your business anyway?

1) First off all re-architect your first impression:
– Stop the outsourced call centers and put less but well trained customer focused people on the phone
– Move your advertising budget towards customer relevant initiatives like blogs, communities, forums
– Seriously redefine your information policy – your shareholders rather have results than an over compliant closed company.

2) Rethink your product / service / pricing model:
– Work with product management on more transparent pricing models – the old customer rip off didn’t fly
– Listen to your customers and simply build what they ask for – if you don’t do it someone else will
– Take green and social serious. It’s not a hype it’s what the majority of customers care about.

3) Redefine your corporate values (if you have any)
– Make the ones who pay you (customers) not silly Kings but seriously valued Advisors and Advocates
– Measure, manage and control customer reflection on you not by anonymous endless surveys but by tangible activities in your ecosystem
– As CEO erase “Shareholder value” from your list of priorities. Shareholder value comes automatically and for free if your customers are happy and buy more products. Instead make market relevance the one and only goal for your business. Market relevance is when more people consider you important, trustful and buy your products, services and buy into your vision.

I’ve never been in a real recession before, so I can’t tell if this one is different or if our tools and information flow is so much better that we can analyze the issues. But it is very obvious to me that if people are less motivated to buy, mostly disappointed with the resources and services the seller provides them, that consumption goes down.

Plausibility Check:
1) Personal Experience
look at the last 6 months where you as a consumer bought things whether it was a new or used car, stereo, TV, video games, phone services, homes, food, clothes, booked a vacation… what ever, how happy where you with the service, hoe easy was it to buy it, how compelling was the offer.
2) Influence
Now check: what or who were the influencing factors for said purchases, how important was advertising for any of them, how important were past experience, suggestions from friends or what kind of other influences would you name as important
3) Behavior
Try to remember what would you have purchased either faster or more of in the last 12 month if the offer would have been more compelling, if the producer or reseller would have been more trustful and if the whole business experience would have been more attractive. Whatever dollar amount you come up with from the last 12 month multiply it by 300 Million (US population) and you get the “Recession value”. For instance if you would have purchased stuff worth of $1,000 in the last 12 month as an average citizen – The “Recession Value” for the US economy would be 3 Trillion Dollar. A lot of tax dollars our country is loosing too.

Well – this is just a short and superficial glimpse into our super complex economic network. But hopefully enough to get you thinking “What can I do to create a better business experience for my customers, prospects and partners”.


I came across an interesting white paper put together by SaaS-Capital and ThinkStrategies: Understanding the Financial Implications of the SaaS Business Model.” It doesn’t need to be always Venture Capital.

Also I set down with a fellow CEO this morning discussing the implications of his highly engaged and emotional investors. Three investors own 52% of the company and have 3 different opinion what the strategy of the company should be. What’s left for the CEO and management team? Leaving the company.

Fortunately the market is shifting rapidly… alternatives grow equally fast.

Our society is experiencing one of the greatest evolutionary steps in human history

Society_1~3,000 BC. About 5,000 years ago for the first time mankind evolved into a society. Egypt was the birthplace of a society never seen before. Cities were built, trade was created and business developed like never before.

Society_2~ 1,800 AD. About 200 years ago mankind went through yet another dramatic change bigger and faster than any change before: Industrialization. Technology came into our everyday lives, transportation of goods and people around the world was all of a sudden possible. Financial wealth of an average worker was as great as a kings rich several hundred years ago. We doubled average live expectancy and cut work load in half. We created technology that wasn’t even part of the most remote fictions. In just 200 years we changed the face of earth more than in the 50,000 years before that.

Society_3~ 2010 AD. We already see early signs for yet another dramatic change. This time it is not trade development or technology but a major social shift. In the next 2-5 years our economy will be affected by that change more than through technology in the past. “Democratization of influence” accessibility to nearly “Omnipresent connectedness” and “Direct Access to Experience” (not only expertise) is providing our modern society a tectonic shift that, in my opinion, has an equal magnitude than our technology development a few hundred years ago. Almost everybody can gain “connections” that just a few years ago was a privilege of  the top educated people or best connected business executives just 5 years ago. We already experience that business negotiation on all levels change faster than many people realize. Our society is on the verge to yet another major change. This third major step in our new and emerging society is yet another major evolutionary development of mankind – we will recognize the magnitude in maybe only 10 or maybe 20 years from now.


I interviewed several channel thought leaders from within the SaaS industry and share the details in my other blog “Channel-Excellence“.

The essence so far:
The SaaS Channel is finally coming into existence. It is not so much the traditional VAR and Reseller now moving to SaaS, but much more completely new companies that form a business specifically to fill the gaps of the SaaS industry. These catalysts do basically 3 things right – that truly enhances the value of the SaaS vendors:

1) They connect (integrate) multiple SaaS applications to a complete information infrastructure (Implementation Services).
2) They provide additional ongoing services including content creation, modification or improvement in very many shapes (Recurring Services Model) .
3) They help smaller local businesses to overhaul and improve their very individual business processes and leverage the fast to implement SaaS application to provide tools to actually service those improved processes (Consultative Services).

The SaaS channels are true catalysts to the SaaS industry. They work in a very different way than traditional VARs and resellers did – and exactly that is the value they provide. SaaS Catalysts accelerate the SaaS industry and will become a true cornerstone to our future.

Podcast has been in interesting topic for many people in the last few years. One person how ever took it to a new extreme: Eric Mattson. His own goal: Conducting 1,000 podcasts, interviewing marketers, innovators, entrepreneurs and other interesting people. I was number 68. Check it out.

Lot’s of discussions around the technology model (single tenant, multi tenant, hybrid model). Some say only a multi tenant architecture is a real SaaS play. I’d like to challenge all of us (at least the technologists) with some thoughts:

Let’s look at today’s multi tenant architecture. The easiest way to do that is to check out the literature which exposes the architecture for developers. What we find is a data model with the traditional hierarchy of an account, organizational structure and users. We find objects such as leads, opportunities, cases, documents etc. and we find some basic processes to manage those objects based on certain criteria or events. Every new tenant is bound to this architecture (which is well thought out) and is therefore able to use the application very quickly. All it takes is an underlying or overarching model that allows every tenant to use the model in some variations, add custom data fields etc. without interfering with other tenants. demonstrated that it works, is pretty secure and flexible enough to have many companies using the application and still have some freedom for customization. So far so good. As long as we continue to think in our boxed world (our companies’ 4 walls) that is all fine.

Now – outside this box: It’s no longer just the company but there are partners who deal with us, and also with other companies. There are suppliers who provide us with additional material, resources and other services. And oh – there is this thing called “customer”, in case you forgot – it is the entity that pays the bills (mostly). Customers deal with us, with our partners and of course also with other companies and competitors. And here is the challanging question: What role is the customer playing in this new multi tenant architecture based SaaS model? Today: None!

How will we integrate partners, customers and other constituencies into a meaningful information and process flow? It’s not a question of whether we will do it or not – but how and when. Multi tenancy still works inside the box – for one corporate entity. But as soon as multiple legally independent entities need to collaborate, we’ll hit the wall. Yes, we can use SOA, WDDX, XML and what have you, but we are back to square one – like in the previous stage of software we relay on interfaces, APIs and the big hope that it’ll work together. Of course it is much easier but still time consuming and risky. Architecturally Multi Tenant Architecture is a very economic model to drive efficiency and I don’t want to belittle it in any way – it is a major step forward yet we need a new model.

Rather than thinking from the inside out we have to begin thinking outside in. We will need to make it MUCH easier for customers to interact with companies and for partners to do business with their vendors and their customers. Suppliers need to be able to collaborate with all sort of customers without the need to interface all those applications with each other. CommerceOne failed by trying and others didn’t even get there. People asked me whether Tanooma will build interfaces to connect all the SaaS players. The answer is “no”. 400 vendors today – 2,000 in may be 2 years from now. And even if we would, it would still be an “internal vendor play” – it would still only represent the old way of thinking in integrations. So to build interfaces with all those companies would be the wrong approach. We all need to elevate ourselves and our respective technology to a higher model where we think and more importantly ACT outside our 4 walls. The challenge is to move from or skip a multi tenant architecture and develop a truly networked interaction model where tenants are no more an encapsulated entity but an organism like cell that is able to seamlessly interact with others: customers, partners, suppliers and must importantly: we need to begin thinking of the “user” not the “account”.

Creating this new model – or architecture may go beyond what a single company can do. It may be an “open mind project” (like opensource). It may even require cross technological expertise that goes beyond the knowledge of our own industry. I decided to start this in the next few days.

From 1 Million to 100 Million SaaS users in 5 years

I guess we all pretty much agree: The SaaS Industry will grow fast. How fast – we will see in 5 years from now. But a few interesting indicators show where this all goes:

1) Investors
On conferences publicly and in individual conversations privately we hear it over and over again: “We will invest in SaaS but we will probably do no more investments in traditional license software”. For investors it is the recurring revenue model but also more and more the underlying technology. I may be totally off – but I can see more investments into SaaS in the next few years than into Internet in the crazy days. Why? When the railroad boom slowed down with it’s crazyness in the old days – the real investment started in building the transportation infrastructure.

2) Technology
When it comes to Rapid Software Development, SaaS certainly outperforms any other software model. Deploy it now – get feedback – fix it on the fly – mature to a product that is not build for an audience but actually with an audience. SOA, Web Services, open source are just a few key ingredients to build a software so fast that no other technology can compete on a time to market scale. With the speed comes more variety and more diversity.

3) Economy
SaaS is cheap – period. Even so we all hear from the legacy software maker that SaaS is more expensive in the long run – I just hope that who ever says that has a calculator handy. We all agree that the actual software and hardware cost is less than 40% of the overall IT spend. And we also agree that a SaaS vendor is able to split their operations cost amongst 1,000 and more companies versus only one IT organization. Enough said.

4) Popularity
SaaS is simple in the first place and vendors have an unparalleled interest to keep it that way. This will motivate less computer savvy users or industries to investigate software and IT solutions. SaaS will go way beyond application software. Any kind of Tools, Games, Hobby and Entertainment Solutions will get into the market. Manage your wine cellar online, keep your library online and get additional information about the author, play games online and develp your identity and earn points in a new gaming world, begin not only filing your TAX online but actually interact and communicate with your insurance and everybody else in an online home office infrastructure where you find all your documents even if your home burned down.

500 Million PCs (our todays installed base) will use SaaS partly or entirely one way or the other. It may be 100 Million already within the next 5 years.

2006 may become the most important year for the Software as a Service industry. I recently heard people talk about “Hardware as a Service”. Wouldn’t it be cool to get a washing mashine in a HaaS (Hardware as a Service) model? We enter an annual contract and pay $25 per month. If it breaks, it will be replaced, if a new model comes out we’ll get it. And how about our $20,000 home theater for $690 per month? If we wan’t a bigger and better one – no problem! And may be our….

Seriously – our economy will change. Leasing and full service leasing will morph to Hardware as a Service as Software as a Service makes further progress. It will be an exciting yet very challanging development for most of us.

When I initiated the development for a first “software service” based application in 1997 using ColdFusion 1.5, I had no idea of the development of this industry. It was just ment to interact with our 4,000 resellers in 20 countries and client/server software was obviously not the right way to go.

In 2001 I founded BlueRoads, one of the early Software as a Service companies and the first with an enterprise class architecture in mind. The company experienced great success, grew in market awareness, customerbase and usage. Many other Software as a Service companies where founded in the meantime. I watch over 200 today.

Now – I’m working with some very interesting people (also SaaS pioneers) on a next generation Software as a Service solution and will continue to help this new business to grow fast.

We hear it all over the place – the enterprise software market is dead. With two players left: Oracle and SAP, nobody will want to compete with them. So, bad times for enterprises, if you don’t want to choose between those two. Well – there is a new world how ever: OnDemand Software Service (OSS) or “Software as a Service” (SaaS). Is it like the 70’s where IBM, Bull, DEC, Amdahl… ruled the world until the PC came out?

SaaS for the enterprise is on it’s way – simply because enterprise users like anybody else want the simplicity, the fresh way of how developers look at software, the ease of update, functionality selection and also the omni presence of such software. And as the enterprise doesn’t go away Enterprise Software will be redefined.

SaaS for the Enterprise means that application structures, security requirements, integration aspects and interaction model need to be taken care of. BlueRoads for instance was the first company working on those questions. “APN” the Active Participation Network Architecture was the first step to answer questions around structure and architecture. The VSI Technology (Virtual Single Instance) was a first step to answer the security requirements. APN enabled APIs was the first step to think of large scale integration technologies. And the “Zero Training UI” was answering the user interaction model questions. At least there is a beginning.