Fail story of SaaS Helpdesk for small business

It was all over Pivot. But we initialized the initial idea.

Pivot is a stage in the life of a startup in which, as a result of rethinking the experience gained, a change in the business model takes place. The extent of this change may vary. But most experts on a wide range of issues agree that there are no successful startups that have not made Pivot.

Our project ITSM365, after rethinking and changing positioning, was able to reach positive financial indicators, sufficient for development without attracting investment money. This is not a super success, but it is a reason to share your experience. And their failures.
This and do under the cut.

Do you remember how it all started...

Back in 2001, in the glorious Siberian Urals city of Yekaterinburg, a wonderful software development company for automating business processes, the company Naumen, appeared. One of the areas of business and, perhaps, the most successful, was and is still known in the market of automation of IT processes Naumen Service Desk solution.

Naumen Service Desk was originally intended (although a separate interesting post can be written about the solution history) for automating IT service management processes ( ITSM \ ITIL ) in the Enterprise segment (IT service of 35-40 people). The product has been successfully developing over the past decade and has confidently maintained the leadership over the past few years in the number of completed projects in the CIS. Currently, Naumen Service Desk has expanded its use beyond IT processes and successfully competes with major Western solutions, and also receives international badges .

Even at the stage of the formation of a solution, we felt the need (in the form of numerous applications on the site, questions at various conferences, etc.) for a similar product from the small and medium business segment. But, unfortunately, they could offer nothing up to a certain point - the Naumen Service Desk is an expensive product for this market segment (both in terms of software costs and in terms of the time it takes to implement).

These circumstances led us in 2010 to reflect on the development of ITSM solutions for small companies.

Smartnut

Many companies have a need for software of this class. Therefore, we decided not to do an abstract “software for ITSM automation”, but to choose a specific niche and develop a profile solution for it. We chose a niche based on the following considerations:

1. The niche should be sufficient for this direction to bring tangible income (we did not have the goal to make this direction basic, but to make it independent and profitable — it was necessary). At the same time, the niche should not have been too big to interest large international companies to work on it (as we realized later, this was a mistake);
2. The niche should be “understandable” for us. We need to understand the problems and needs of the companies representing it. As a mandatory criterion for the selection of a niche and the success of the project, we considered and still consider the possibility of close interaction with its representatives both before the start and during the development process and after the release of MVP .
   

Based on these requirements, we chose the niche of small (number of employees, engineers up to 10-15) IT service companies (keywords: computer subscription service, LAN wiring, 1C support, etc.). The number of customers in the units was estimated at about 10,000. And at 20% “seizure” of the market, we counted as much as 60 million rubles a year in turnover (which fully fit into our initial understanding of the “sufficiency” of the market).

In June 2010, they started development, in May 2011 they released a closed beta version, in November 2011 they launched the service into open operation, and in May 2012 they launched a paid tariff.

But millions have not earned ...

Fail

At the time when it became clear that “we are doing something wrong” (August 2012), the situation was as follows:

1. The number of companies that daily use the service in their work is ~ 180 pcs;
2. The number of companies that also paid for it - ~ 30 pcs;
3. The total turnover is ~ 60 000 rubles / month.

It’s good that we didn’t invest much money in marketing and promotion (by the way, this cannot be the reason, see below).

The results of reflection on.

Freemium model

Our service allowed free use of the system if the number of accounts (support staff) is less than 5. There are 3 key errors:

1. Actually, the Freemium model itself. It can be used only if the number of representatives of the target market is measured in tens (if not hundreds) of thousands. In our case, the “top” score was in 10,000 companies. In fact, only 16.6% of them became paying customers. By simple extrapolation, we get that in the whole market only ~ 1600 companies are ready to pay money for our service. On this serious business with our TTH is not done;
2. Too “generous” freemium. We transferred to a paid rate only when the company had a fifth employee in the service. As it turned out, most companies cost three to four. The matter is not even in the size of the company (in fact, 10 people can work in them). It is just that the maturity of the processes is such that access to the system where the records of applications are kept is sufficient for the dispatcher, the manager, and another pair of “senior” engineers. All the rest can be distributed tasks “orally”, the responsible person should be recorded in the comments to the application. This is not very convenient, but economical (yes, the financial condition of small business in the CIS is such that 2,000 rubles a month is enough money to inconvenience);
3. Wrong for freemium parameter. This parameter, I remind you, we had the number of employees. I highly recommend not using slowly growing parameters for freemium. The goal of any freemium is to lure and quickly translate into a paid subscription. The number of employees is growing slowly. For all the time (from the moment of termination of the development of the service) only 3 companies passed from the free to the paid tariff. In our case, it would be more correct, as it seems now, to take the number of applications registered in the service for such a parameter.

But even if we completely excluded freemium, we would not become millionaires. According to subjective estimates, if we turned off the free tariff, we would increase the number of people paying 3 times, but would reduce the average bill by 2 times. Those. by the time of the inevitability of changes in the project, our revenue would not be 60,000 rubles a month, but 90,000.

Market size

Let me remind you that the “top score” in units is 10,000 target customers. Upon receipt of 20% of the market, we would receive 60 million rubles of annual revenue. This is not bad for “one of” business lines. But, firstly, the actually solvent out of 10,000 is much smaller, and the average check is different from the planned one. And secondly - to occupy 20% of the market is possible only in a very mature and low competitive market. If the competition could still be called non-deadly, then the market cannot be called mature.

Lyrical digression. Investors often like to say that a project must have a “billionth” market. Of course, this is necessary for them in order not to be scattered over trifles (even if your project returns investments, but on the “millions” scale it is not interesting). This is also needed for the startups themselves . For a couple of years, the appetites of the team will grow. Earn a million will not be very interesting task. Judging by myself - such decisions also influenced the decision to change direction in the project. To focus on the direction, which, if successful in 3-5 years, will bring 60 million rubles a year of turnover - not the best idea.

Solvency of small businesses in the CIS

About many things I will not say. She's short. People save on everything. The main task is to survive. There can be no optimization of processes, development, training of employees, increase of competences and speech. Everything that helps to survive (read, increase sales) and everything that is inevitable (for example, a cheap opportunity to avoid communication with state bodies) works. All the rest is still doubtful.

ITSM 365 as Pivot

In the end, it was necessary to choose from 2 options:

• Completely stop any attempts to find an interesting niche in a small or medium business, close a project and do other things;
• Taki find such a niche. Let not in small, but at least in the average business.

In the end, we decided that we were abandoning small business and looking only at the middle and upper segment of medium business. In our terminology, this means that the automation object (the number of support staff) is from 10 to 30 people. This is how ITSM365 was born.

The service was implemented on the basis of an already existing platform, on which Naumen Service Desk was also implemented, which significantly reduced the cost of maintaining two code bases.

But the purpose of the article is not to tell about the new service (the purpose of the article is to tell about the file). Whoever is interested in the service will read it on itsm365.ru site or watch our promo video:

As a result, it became better. The monthly turnover has increased by an order of magnitude since the launch of the service (~ half a year) and is rapidly approaching a seven-digit number. Not a super success, of course. But statistically significant numbers.

That was not in vain ...

Invaluable experience is what remains after unsuccessful projects. Of course, we still have experience. But there is still something left.

First, focusing on the initially chosen niche, we created the Smartsourcing.ru community, which is slightly less than completely composed of managers of small IT service companies. The daily attendance of the community is about 1500 people. The community is alive - real people write comments and articles. It is really useful for the industry - a good means of communication and discussion of pressing issues. Although we did not earn money on it.

Secondly, Smartnut is still alive. We have stopped its development, but still support and respond to requests for technical support. At the same time, the service itself turned out so successful and simple that almost none of the paying users have “fallen off” since stopping its development (although there were transitions to ITSM365). And taking into account the "freebies", the total number of companies that constantly use the service in their work is more than 100. To date, we have no visible plans to "stop" the service.

findings

1. Pivot is inevitable. This is the norm;
2. The market for your product must be really large (more volume, which today seems “sufficient” to you). Thoughts on the subject “well, let the market not be large, but enough for us” it is better to discard. It suits you today so much, and tomorrow (in half a year, a year, two years) it will stop arranging both you and your entire team;
3. It is necessary to use freemium very carefully. No wide gestures or attempts to compete on the characteristic "who has more opportunities for free". Any freemium must be economically justified and calculated. And the number of customers in a selected market should be measured in tens or hundreds of thousands, but not thousands;
4. Small business in the CIS, for the most part - is insolvent, unfortunately. The main task of companies is to survive. There are no long-term plans for the development of speech. Will buy only the most necessary and what clearly helps to sell. If you suddenly want to run something about “optimizing business processes” for small businesses, think carefully;
5. Making narrowly niche services for medium and small businesses in the CIS at the moment is a very risky business.

upd .: After 2.5 years after writing this article, the ITSM365 service reached a payback with a turnover of several tens of million rubles a year, and the author of the article with partners set out to make a second attempt to develop a Helpdesk solution for small and medium-sized businesses. And, this time, everything went well. The project is self-sufficient and is actively developing. Meet: Okdesk .