Case on trillion. In 2015, the SaaS market capitalization will reach $ 1 trillion
Now there are a lot of projects to create new collaboration services. Despite the fact that investors have already begun to understand the prospects of the SaaS market, there is still some skepticism, and if such a startup comes to an investor, you may hear: “Why is another thousand first collaboration service?”. It is necessary to clearly show that the market is growing and is ready to accommodate one more player. We are doing just such a service , and we had to prepare reasonable explanations.
The investor invests in the business, counting on the growth of capitalization, so you need to be ready to tell you about the market capitalization. It turned out that investors are people too and, like all people, are more interested in interesting stories about how product and market development will change the world.
In short, the market is very large, it is growing rapidly and you can enter it without fear. The total market revenue for 2003 was $ 3b, for 2011 - $ 12b. For 2015, Gartner predicts $ 21b. Cloud services are 40 times more expensive than profits, hence the market capitalization is $ 840b.
')
Many are skeptical about the forecasts of all sorts of Gartner and want to see the explanation on the fingers. Let's look at the so-called offline market. And not for the whole, but only for its part - the market of office programs and related applications.
Now the key player in this market is Microsoft with a market share of more than 90%. According to a Microsoft report to shareholders for 2011, over 100 million MS Office licenses have been sold. That is, the annual revenue is of the order of $ 200 x 100m = $ 20b.
Ahead the market expects a large migration of users of desktop / local solutions to the clouds. Already, the market for desktop products has ceased to grow and will soon begin to shrink. This is evidenced by both Gartner and Microsoft in their report, which now relies on SaaS. The same songs can be heard in the 2011 report from SAP, IBM and Oracle. We believe that in the next three years the market will collapse by an order of magnitude. And an order of magnitude over the next two years. Moreover, Microsoft has already missed the chance to enter the new market, taking advantage of the leader of the old market. Strategic blunders "melkomyagkih" well shown in the article Berkeley.
It turns out simple arithmetic. Most of the market will go to SaaS and shrink due to the fact that SaaS is cheaper. We assume that about half. We get: $ 12b (was) + $ 10b (increase due to offline segment) = $ 22b. Now it becomes clearer where Gartner got his numbers from.
We needed to identify key factors affecting market dynamics. The plan was to study a lot of market analysis reports and summarize everything in one tablet. McKinsey, BCG and others probably made a lot of good reports, but we could not see them. What we saw was similar to brainwashing about return on investment (ROI) through the introduction of SaaS and other things in the spirit of the game bullshit bingo. The most interesting information was found in reports and letters of large companies to their shareholders.
SaaS Market Drivers:
The reasons hindering the development of the market:
To understand the dynamics of SaaS, you need to understand what the market started with and what a first-mover user looked like.
In the yard in 2002. The business has recently learned how to manage their IT departments. Only there appeared a well-functioning corporate mail and a normally configured file server. In a serious business about trusting the clouds was out of the question. Logically, information security was considered the biggest potential disadvantage of SaaS.
On the other hand, in 2002, Salesforce scored the first 100k users. As a rule, these were small teams, or even single users, who had everything very unstable, information was constantly lost somewhere, and the system administrator was out of the question. That is, the service was not an alternative to an existing one, but created a new niche.
In a similar way, users and most other popular services. For example, Google Docs really liked the teachers. Now it was not necessary to send the document all the time by mail and be confused in versions. That is, the problem that existed software was not solved in principle.
In 2012, the landscape has changed. The standards of information security in SaaS in many ways overtook the independent capabilities of companies. Here is an article about this. However, the fear on the part of the business remains. Now this fear has more psychological, similar to fear of flights, basis. Statistics confirming that airplanes are safer than cars helps badly. And only the need to be on the other side of the ocean makes you board the plane.
In the end, investors are not interested in revenue, or even profit, but capitalization, which your company can achieve. What is capitalization? The simple answer “As much as 100% of the company’s shares on the stock exchange are worth it” is in fact useless:
The non-obvious calculation of capitalization is well illustrated in an article on Habré , where the author of modernstyle is surprised at about $ 100b equal to the capitalization of McDonald's and Facebook. (McDonalds: $ 24b revenue, $ 5b profit; Facebook: $ 5b revenue, $ 1b profit). Note that the stock price for Facebook does not yet exist, a hypothetical example.
This is really a very good example. In order to deal with it, you need to study the manuals on investment Warren Buffett. Briefly: the less capital assets a company has with the same profit, the more expensive it is. Why? Because assets are needed for business. Assets are aging, and you need to buy new ones, and new ones will be more expensive due to inflation. And in general, the more a company has tangible assets, the more clumsy it is. The same with the staff: the more the company needs employees to achieve the same profit, the more the company depends on the global trend of salary increase. Human labor is constantly becoming more expensive. McDonalds needs to invent a thousand optimizations just to keep the existing shareholder value. Facebook just needs to double its revenue to beat McDonald's in profit. And the cost of an FB is not $ 300b precisely because many people doubt that FB can increase revenue to $ 10b.
Between annual profit and capitalization, you can establish certain ratios. For each market / industry / sphere / business model, this ratio may differ. What should it be for SaaS? Take for example Salesforce: profit - $ 0.5b, capitalization - $ 20b. The ratio of 1 to 40. Someone will argue, say that this is the best example. No, not the best. Here's another: 37signals with a BaseCamp product. Their company is not public, there is no market price. But just take a look at the numbers: 1 million users and 20 people on staff. The ratio of profit and capitalization should be higher than that of Salesforce.
For the SaaS market by 2015 we have: $ 21b * 40 = $ 840b. Of course, this estimate, and a rough one. But it’s better to understand that this market is very valuable. There, as many as 5 Gazprom are buried. Take it - I do not want.
The figures obtained before, in fact, represent an extrapolation of existing trends. They do not explain how the interaction between people will change due to the development of SaaS. This is exactly the area in which it is allowed to invent beautiful fairy tales. If you have an interesting fairy tale with a happy ending, the investor will definitely appreciate it and even dream with you if there is no embarrassing public around. Clouds and SaaS are huge markets. We are confident that in the next five years 1001 tales will come true, with the result that the picture of the business world will change dramatically. Let's tell our fairy tale.
Surely many people thought: during the work we constantly create duplicate information. We copy everything: letters, text documents, spreadsheets, pictures and engineering drawings. We, in the Rizzoma team, believe that copying is a superfluous action. The point is NOT in excess disk space, the point is that copying itself is a waste of time, and besides, each copying potentially entails an error.
Now jointly editing technology is actively developing - Operational Transformation. The essence of the technology is that now for the server it does not matter from which user the changes will come before. Users can work asynchronously. What does it mean? For example, this means that users may simply not notice the Internet shutdown for a couple of minutes. It also means that you can slam the laptop in the middle of a sentence, and then lose it on the road, then buy a new one and continue writing an unfinished sentence.
Consider an example: an engineer is preparing a drawing. In the process, a colleague connects and asks a question about the diameter of the pipe, does it right in the drawing, directly next to the image of the pipe. Right there, near the pipe, colleagues can discuss their questions. There you can assign a task and report on the implementation. Exactly the way our ancestors worked with paper drawings. What does such a scenario contradict? In our opinion, nothing. Exactly and will be. This format saves a lot of correspondence, it is clearer, and, most importantly, the result of the discussion immediately remains in context - the revealed knowledge is not lost.
After it becomes convenient to work with a team with one copy of a document, the document will quickly grow in volume and swell. Interface developers have long been prepared answer: Zoom Interface. Jeff Raskin (the initiator of the Macintosh project and one of the most famous usability gurus) draws the following analogy between comparing the zoom interface and the classic interface we are used to. It's like walking through a maze with a map, and without a map. In the first case, you see the entire maze, and you can determine where you need to go. In the second case, you need to fold each time and only after turning you see what the next step you can do. This is how most of the interfaces that we know are arranged. Zoom-interface is already used in the user interface to interact with a huge amount of information in online maps and navigators (for example, Google Maps).
* * *
As a result, even a very large project can be easy for newcomers to understand, who can first see it as a whole, then go deeper into the necessary details, familiarize themselves with the current state of affairs on the interesting part of the project and immediately get involved in the work.
Operational transfromation is already working stably in several services, for example, in Google Docs. An active development of the ShareJS opensource is underway, in which our team participates. Take the code and let your service keep pace with the times.
So far, we have seen the zoom interface in collaboration tools only in the Prezi presentation creation service and the MindMap services. Zoom-interface in text documents can be viewed only in Rizzoma .
PS The main idea that we wanted to convey in this article is that the market for collaboration tools is very large and open to new players. If you know one user who finds your project useful, then in the global market you have at least one hundred thousand potential users - it’s OK to start.
And even scary, if you started with an incorrect idea, then users will help you to correct. A valuable for society result of your project will be that collaboration will be more convenient and more efficient.
The investor invests in the business, counting on the growth of capitalization, so you need to be ready to tell you about the market capitalization. It turned out that investors are people too and, like all people, are more interested in interesting stories about how product and market development will change the world.
In short, the market is very large, it is growing rapidly and you can enter it without fear. The total market revenue for 2003 was $ 3b, for 2011 - $ 12b. For 2015, Gartner predicts $ 21b. Cloud services are 40 times more expensive than profits, hence the market capitalization is $ 840b.
')
Where are the numbers from?
Many are skeptical about the forecasts of all sorts of Gartner and want to see the explanation on the fingers. Let's look at the so-called offline market. And not for the whole, but only for its part - the market of office programs and related applications.
Now the key player in this market is Microsoft with a market share of more than 90%. According to a Microsoft report to shareholders for 2011, over 100 million MS Office licenses have been sold. That is, the annual revenue is of the order of $ 200 x 100m = $ 20b.
Ahead the market expects a large migration of users of desktop / local solutions to the clouds. Already, the market for desktop products has ceased to grow and will soon begin to shrink. This is evidenced by both Gartner and Microsoft in their report, which now relies on SaaS. The same songs can be heard in the 2011 report from SAP, IBM and Oracle. We believe that in the next three years the market will collapse by an order of magnitude. And an order of magnitude over the next two years. Moreover, Microsoft has already missed the chance to enter the new market, taking advantage of the leader of the old market. Strategic blunders "melkomyagkih" well shown in the article Berkeley.
It turns out simple arithmetic. Most of the market will go to SaaS and shrink due to the fact that SaaS is cheaper. We assume that about half. We get: $ 12b (was) + $ 10b (increase due to offline segment) = $ 22b. Now it becomes clearer where Gartner got his numbers from.
Simplicity for the user - the main driver of the SaaS market
We needed to identify key factors affecting market dynamics. The plan was to study a lot of market analysis reports and summarize everything in one tablet. McKinsey, BCG and others probably made a lot of good reports, but we could not see them. What we saw was similar to brainwashing about return on investment (ROI) through the introduction of SaaS and other things in the spirit of the game bullshit bingo. The most interesting information was found in reports and letters of large companies to their shareholders.
SaaS Market Drivers:
- low threshold of entry - less settings and settings
- you can do without your system administrator
- short product development cycle - service evolves quickly
- less sales costs - quick access to the global market
- difficult piracy.
The reasons hindering the development of the market:
- concerns about information security - will erase or steal
- lack of good internet
- in some countries, clouds are prohibited for state organizations (in Moldova, for example, the prohibition indirectly results from other restrictions).
To understand the dynamics of SaaS, you need to understand what the market started with and what a first-mover user looked like.
Lack of alternatives is the best cure for fear.
In the yard in 2002. The business has recently learned how to manage their IT departments. Only there appeared a well-functioning corporate mail and a normally configured file server. In a serious business about trusting the clouds was out of the question. Logically, information security was considered the biggest potential disadvantage of SaaS.
On the other hand, in 2002, Salesforce scored the first 100k users. As a rule, these were small teams, or even single users, who had everything very unstable, information was constantly lost somewhere, and the system administrator was out of the question. That is, the service was not an alternative to an existing one, but created a new niche.
In a similar way, users and most other popular services. For example, Google Docs really liked the teachers. Now it was not necessary to send the document all the time by mail and be confused in versions. That is, the problem that existed software was not solved in principle.
In 2012, the landscape has changed. The standards of information security in SaaS in many ways overtook the independent capabilities of companies. Here is an article about this. However, the fear on the part of the business remains. Now this fear has more psychological, similar to fear of flights, basis. Statistics confirming that airplanes are safer than cars helps badly. And only the need to be on the other side of the ocean makes you board the plane.
High capitalization with small capital
In the end, investors are not interested in revenue, or even profit, but capitalization, which your company can achieve. What is capitalization? The simple answer “As much as 100% of the company’s shares on the stock exchange are worth it” is in fact useless:
- First, bargaining on the stock exchange is very cool for a company. What to do with those who do not bargain?
- Secondly, why on the stock exchange is such a price?
The non-obvious calculation of capitalization is well illustrated in an article on Habré , where the author of modernstyle is surprised at about $ 100b equal to the capitalization of McDonald's and Facebook. (McDonalds: $ 24b revenue, $ 5b profit; Facebook: $ 5b revenue, $ 1b profit). Note that the stock price for Facebook does not yet exist, a hypothetical example.
This is really a very good example. In order to deal with it, you need to study the manuals on investment Warren Buffett. Briefly: the less capital assets a company has with the same profit, the more expensive it is. Why? Because assets are needed for business. Assets are aging, and you need to buy new ones, and new ones will be more expensive due to inflation. And in general, the more a company has tangible assets, the more clumsy it is. The same with the staff: the more the company needs employees to achieve the same profit, the more the company depends on the global trend of salary increase. Human labor is constantly becoming more expensive. McDonalds needs to invent a thousand optimizations just to keep the existing shareholder value. Facebook just needs to double its revenue to beat McDonald's in profit. And the cost of an FB is not $ 300b precisely because many people doubt that FB can increase revenue to $ 10b.
Between annual profit and capitalization, you can establish certain ratios. For each market / industry / sphere / business model, this ratio may differ. What should it be for SaaS? Take for example Salesforce: profit - $ 0.5b, capitalization - $ 20b. The ratio of 1 to 40. Someone will argue, say that this is the best example. No, not the best. Here's another: 37signals with a BaseCamp product. Their company is not public, there is no market price. But just take a look at the numbers: 1 million users and 20 people on staff. The ratio of profit and capitalization should be higher than that of Salesforce.
For the SaaS market by 2015 we have: $ 21b * 40 = $ 840b. Of course, this estimate, and a rough one. But it’s better to understand that this market is very valuable. There, as many as 5 Gazprom are buried. Take it - I do not want.
Over the ocean
The figures obtained before, in fact, represent an extrapolation of existing trends. They do not explain how the interaction between people will change due to the development of SaaS. This is exactly the area in which it is allowed to invent beautiful fairy tales. If you have an interesting fairy tale with a happy ending, the investor will definitely appreciate it and even dream with you if there is no embarrassing public around. Clouds and SaaS are huge markets. We are confident that in the next five years 1001 tales will come true, with the result that the picture of the business world will change dramatically. Let's tell our fairy tale.
Surely many people thought: during the work we constantly create duplicate information. We copy everything: letters, text documents, spreadsheets, pictures and engineering drawings. We, in the Rizzoma team, believe that copying is a superfluous action. The point is NOT in excess disk space, the point is that copying itself is a waste of time, and besides, each copying potentially entails an error.
Operational Transformation
Now jointly editing technology is actively developing - Operational Transformation. The essence of the technology is that now for the server it does not matter from which user the changes will come before. Users can work asynchronously. What does it mean? For example, this means that users may simply not notice the Internet shutdown for a couple of minutes. It also means that you can slam the laptop in the middle of a sentence, and then lose it on the road, then buy a new one and continue writing an unfinished sentence.
Contextual problem solving
Consider an example: an engineer is preparing a drawing. In the process, a colleague connects and asks a question about the diameter of the pipe, does it right in the drawing, directly next to the image of the pipe. Right there, near the pipe, colleagues can discuss their questions. There you can assign a task and report on the implementation. Exactly the way our ancestors worked with paper drawings. What does such a scenario contradict? In our opinion, nothing. Exactly and will be. This format saves a lot of correspondence, it is clearer, and, most importantly, the result of the discussion immediately remains in context - the revealed knowledge is not lost.
Zoom interface
After it becomes convenient to work with a team with one copy of a document, the document will quickly grow in volume and swell. Interface developers have long been prepared answer: Zoom Interface. Jeff Raskin (the initiator of the Macintosh project and one of the most famous usability gurus) draws the following analogy between comparing the zoom interface and the classic interface we are used to. It's like walking through a maze with a map, and without a map. In the first case, you see the entire maze, and you can determine where you need to go. In the second case, you need to fold each time and only after turning you see what the next step you can do. This is how most of the interfaces that we know are arranged. Zoom-interface is already used in the user interface to interact with a huge amount of information in online maps and navigators (for example, Google Maps).
* * *
As a result, even a very large project can be easy for newcomers to understand, who can first see it as a whole, then go deeper into the necessary details, familiarize themselves with the current state of affairs on the interesting part of the project and immediately get involved in the work.
Operational transfromation is already working stably in several services, for example, in Google Docs. An active development of the ShareJS opensource is underway, in which our team participates. Take the code and let your service keep pace with the times.
So far, we have seen the zoom interface in collaboration tools only in the Prezi presentation creation service and the MindMap services. Zoom-interface in text documents can be viewed only in Rizzoma .
PS The main idea that we wanted to convey in this article is that the market for collaboration tools is very large and open to new players. If you know one user who finds your project useful, then in the global market you have at least one hundred thousand potential users - it’s OK to start.
And even scary, if you started with an incorrect idea, then users will help you to correct. A valuable for society result of your project will be that collaboration will be more convenient and more efficient.
Source: https://habr.com/ru/post/141375/
All Articles