Monday, January 23, 2017

Software as a service business - Learning from Salesforce.com

Software as a service business - Learning from Salesforce.com 
OfficeCentral is in the business category like Salesforce.com. Software as a service category.
See the following data for Salesforce.com:







I can see the following strategy from the trend:
1. The company focus on user acquisition.
2. The company spend almost all their available cash on customer acquisition.
3. Profit is not the target during growth stage. The company is loss making every year in the review.
4. The company value goes up with the user growth. Value = user growth. Company value is not calculated from company profit.
5. Investor value user growth over company profit during growth stage. 
 
The issues faced by  Malaysian companies doing Software As A Service business are:
1. They must operate within their available cash.
2. They must careful in balancing growth and profit. Malaysian Investor will look at profitability.
3. Can they get growth and yet achieve profit?
4. Will Malaysian investor invest when they see the company is not making profit?

Balancing growth and profit will result in slower growth.
1. They will focus on early adopters. This is easy. Focus on technology. Superior technology will get early adopters to come in. Normally the high tech companies are very good in doing this.
2. However the next stage is to get the EARLY MAJORITY to come in. They will only become customer when they believe the  company are already the leader in the niche, the product is the leader, thousands are already using the product, the company already strong, low risk decision.
3. The company need investment in Branding. Branding - cost money. However if no brand, cannot get the early majority customers. So if the company do not spend on branding, the growth will be slowed down.
4. The company need aggressive sales team. Building demand. This requires money.
5. The company requires strong marketing team. This need money.
6. With the need to keep profit, the activities will be small scale. The impact will be small.
7. Can we achieve sales  like Salesforce.com? ( Sales = USD6.0 billion)
8. Can we achieve valuation like Salesforce.com?   ( Valuation is USD50 billion) even with loss of USD460 million.

Can we build a company worth  like Salesforce.com? Can we build global customers like Salesforce.com?

The management must be able to handle this situation well. Hardworking, Creativity, Global vision, Global operation will be the base strategy.

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