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Thought Leaders in Cloud Computing: Pradeep Rathinam, CEO of Aditi Technologies (Part 2)

Posted on Thursday, May 3rd 2012

SM: Let’s double click down on each of the areas that you discussed. How much are you familiar with what’s happening in the world of small software companies – software companies, in general – using software-as-a-service to get out into the market with new solutions? One of the case studies that I have looked at quite closely is a company called Apptio that launched quite some time ago. It was one of the earliest adopters of Force.com, and the company released a contract management software product on Force.com and rapidly bootstrapped to $5 million plus in revenue. It’s a very nice case study in that a small company could bring a product to market without putting into it too much [money].

PR: We’re quite familiar, and we work with several companies. There’s a general [misconception] in this. I’ve worked extensively in the software industry. Prior to this, my role was as a general manager at Microsoft, running the ISV eco-system. The general [misconception] is that small companies sell to small businesses or mid-size companies sell to mid-size businesses. When you look at the sizes of companies, and you cross the $100-million threshold, that number narrows down to something quite small. I would say probably between 1,500 and – even north of 1,500, you won’t find many companies of $100 million. So, the bulk of the companies that are in the zero to $10 million or $20 million to $50 million ended up in the past with a strong enterprise model because they could charge enterprises a lot more and build out – except for the companies in the last five to seven years that basically started out of the gate with a SaaS enabled platform. They were a lot more competitive because they could offer a product to mid-market as well as enterprises in some fashion or other.

So, my view, as far as this is concerned, is the big shift in terms of the companies that are using platform-as-a-service are actually a lot of the traditional large companies, $50 million, $75 million, that have the old model there. They have a hosted or single-instance solution that they offer to an enterprise … and charge them a lot of money and upfront costs, installations, professional services, and they go out and implement those solutions. This is very different from the software companies that they wound around Salesforce.com or Force.com eco-systems. That’s where a large part of the Microsoft eco-system resides. You know, 70% of the Microsoft eco-system is in that space where they have a traditional solution. Any time they’ve started thinking about going in and building that into a SaaS platform, it requires a fundamental re-architecture. It’s re-platforming, and it’s very, very expensive. That’s the reason they’ve never been able to come out of that business model.

What the platform-as-a-service has done right now, from what Microsoft Azure offers, is a simple and fast way to provide some sort of pseudo-SaaS capability where with small changes, you can spawn multiple instances of your software and offer it in a hosted fashion and potentially change your pricing model from a big license fee to a pay-per-use solution or a solution that you can offer a pay-as-you-go subscription. That fundamental shift is where we’re getting a tremendous amount of traction with software companies. So, software companies that come to us right now, we offer them enablement not only on the technology side but also helping them through the business side, which basically, means that once you offer a solution in a SaaS format, your customers are expecting self-service, just like in the traditional Netflix or Amazon models. They want to create accounts. They want to go from freemium to premium. They want to do customer service. They want to do all of those things, building subscription management. It’s different in a SaaS world from what they were doing in the traditional world. So, we offer them an end-to-end service today as well as consulting to help them think about moving from the traditional model to the software-as-a-service model, one on the technology side, by using technologies like Microsoft Azure’s PaaS platform, but as well as on the consulting side, helping them understand how to think about integration with billing systems, etc. How do you think about customer management? What are the core aspects that you have to shift in your business model as a result of that?

It’s an industry in which change is inevitable. It’s just a matter of time until more companies have to start thinking about what they are going to have to do to go into that model.  Does that answer your question?

This segment is part 2 in the series : Thought Leaders in Cloud Computing: Pradeep Rathinam, CEO of Aditi Technologies
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