Editor’s note: Raj De Datta is the CEO and co-founder of BloomReach. Follow @BloomReachInc on Twitter.
With the influx of information flooding the web – 90% of the web having been created in the last two years alone – web businesses are looking for ways to understand and use big data to drive their business. Just as SaaS and the cloud completely revolutionized the way businesses operate, so will Big Data applications (BDAs). BDAs are web-based applications that interpret and use massive amounts of enterprise and web-scale data to deliver more intelligent results for their subscribers. BDAs leverage the best of the cloud; they’re web-hosted, multi-tenant and use Hadoop, noSQL and a range of recommendation and machine learning technologies.
But the real question is – so what? So what if the underlying data structures use Hadoop or noSQL? No CEO of a major business gets excited about a value proposition around more scalable data structures. That’s where BDAs come in. BDAs don’t just repackage your data in a cool interface or offer productivity improvements in data scalability, they harness the world’s data to deliver you a better outcome – like more revenue.
SaaS was a different delivery model for enterprise software: available for immediate sign-up, it dramatically reduced integration costs, enabling try-before-buy, scalability and shared tenancy with meter-driven pricing. Salesforce.com started the cloud revolution by transforming the CRM industry and was quickly followed by the SaaS-ification of every category of enterprise software (Taleo/Successfactors for HR, Netsuite for ERP, Omniture for web analytics). SaaS both increased the market size for business software (by enabling mid-size companies to buy at a lower cost of entry) and delivering a better ROI for bigger businesses. But it did not do one important thing–it didn’t change the functional capabilities of the core application. Salesforce didn’t add CRM features for businesses vis-a-vis Siebel – it simply made it easier to adopt and cheaper to maintain.
Big data on the consumer side of software is well-understood – Google, Amazon.com, Facebook. In a recent keynote speech at Cebit, Amazon CTO Werner Vogels noted that when mistakes have been made, it’s because there isn’t enough data to back up a recommendation. All of these are applications that get stickier, smarter and more valuable as more users and data pour into their core engines. Now, we are seeing the beginning of enterprise BDAs, and they are the future:
BDAs are inherently better than their SaaS equivalents because they have all the delivery model benefits of SaaS, plus a network effect in the data being collected. Unique data, put to work for each customer, is an asset that creates network effects over time for both subscribers and for the application provider. These days, there is so much more data outside the enterprise than within it, that the notion of re-packaging an enterprise’s own data for analysis and workflow seems quaint.
BDA companies create value differently than SaaS companies. BDA companies are built by teams of people with a strong background in large-scale systems and machine learning / data mining (like my co-founder Ashutosh Garg). They will also be valued differently than SaaS companies. While both sell into enterprises, BDAs deliver much more value per dollar spent, because each acquired customer adds data to the engine, which in turn improves the service for all its customers. Markets typically value SaaS companies on three basic metrics: Customer Lifetime Value (higher LTV is better), Cost of Customer Acquisition (lower CCA is better) and Rate of Growth (higher is better). Certainly, most SaaS companies have a great growth rate. But BDAs will have higher LTVs (because value/customer is higher and churn will be lower) and lower CCA (because of network effects; consider the CCA for LinkedIn to acquire a new recruiter now, versus five years ago).
The BDA revolution is just beginning. If we were building CRM again, we wouldn’t just track sales force productivity; we’d recommend how you’re doing versus your competitors based on data across the industry. If we were building marketing automation software (Marketo, Eloqua), we wouldn’t just capture and nurture leads generated by our clients, we’d find and attract more leads for them from across the web. If we were building a financial application, it wouldn’t just track the financials of your company, it would compare them to public filings in your category so you could benchmark yourself and act on best practices. Every category of software will have a BDA leader (some may be current SaaS companies that adapt or acquire).
Like anything in technology, the next new thing doesn’t mean the old things go away. Oracle and SAP are still big companies but Salesforce.com is the newest $20 billion behemoth. The new kids on the block will be BDAs.
Hello BDAs, Goodbye SaaS.