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Let the Data Set You Free!Presenters:
Lauren Kelley, CEO & Founder, OPEXEngine
Kelly Battles, CFO, Host Analytics
How to ask questions
Use the chat box
any time during the
webinar!
Later on during the
Q&A, dial 14 on your
dial pad to ask
questions via phone.
All About The CloudMay 24-26, 2011
The Palace Hotel, San Francisco
Join us for our 6th year at the world’s largest ISV cloud computing conference!
For more information, contact Rhianna Collier (rcollier@siia.net)
Why Apply– Increase Visibility before the Investment and Corporate Development Community – Minority Interest Growth Capital– Strategic Partnerships– Strategic Acquisitions– New Distribution Partners & New Channels– Potential Merger Partners
Deadlines– Companies that submit their application before April 1, 2011 will be notified by
April 15.– Companies that submit their application before May 1, 2011 will be notified by
May 15.
To apply, visit: siia.net/sppec/2011/apply
Upcoming Bay Area Meetings
Marketing as a Revenue Engine w/ Brian Kardon, EloquaMarch 16th, 2011, 9 am - 11 am PT, San Francisco, CARegister here: http://bit.ly/execinsight1
The Venture Capital Fundraising Process w/ Paul Bartlett, Rho Ventures
March 22nd, 2011, 9 am - 11 am PT, Palo Alto, CARegister here: http://bit.ly/execinsight2
What has EITF 08-01 meant for your Revenue Recognition Processes w/ Sujan Jain, NetSuite
March 29th, 2011, 1 pm - 3 pm PT, San Francisco, CARegister here: http://bit.ly/execinsight3
2011 Benchmarking Survey
This year’s survey will begin in March.
To reserve your spot and sign up for your individual report, visit:
http://bit.ly/2011benchmark
Survey Pricing:Free - SIIA Members under $10M in 2010 revenues$999 - SIIA Members over $10M in 2010 revenues
$999 - Non-SIIA Members under $10M in 2010 revenues$1995 - Non-SIIA Members over $10M in 2010 revenues
Performance thru Benchmarking
Lauren KelleyLauren Kelleywww.opexengine.comwww.opexengine.com
Your presenter
Lauren Kelley: lauren@opexengine.comFounder and CEOOPEXEngine
•Decades of senior management, sales, marketing and operating experience in US and Europe at Compaq Computer, Borland, Art Technology Group, Inc., etc.•Develop comprehensive operating and financial benchmarks – best data available for software industry for over 5 years•Deliver well defined industry comparables and analysis to senior executive teams and boards
Why Benchmark? Research shows the most successful companies use metrics and
benchmarking as a key management process and information tool. Leadership companies compare their performance with detailed
benchmarks to highlight specific areas for improvement and target areas of excellence for continued support.
Benchmarks are used to help set internal targets and provide neutral data to set performance expectations among the executive team.
Benchmarking highlights the latest changes in business models and help companies track to industry leaders.
Benchmarks are also used for positioning in the course of mergers and acquisitions, and in their growth path to or managing in the public markets.
OPEXEngine’s Annual Confidential Benchmarking Covers the small and mid-sized
software industry, both public and private firms
Companies input their data directly into our secure, on-line survey form where data is aggregated and blinded
5 years of software benchmarking, database of 50,000+ datapoints
Hundreds of software companies participate
Individual Company Report and 60+ page Software Industry Benchmarking Report
Software Management Today
It’s All about the Numbers – Especially for SaaS
First Stage – Manage CashNext Stage: Customer Growth
And reducing the cost of acquiring and maintaining each customer
What Benchmarks Matter Most for SaaS?
Cash from operations MRR and CMRR New customer growth rates Cost per customer to acquire new customer Cost per customer to maintain a customer Cost of product/cost of hosting Omniture “Magic Number” Average contract value per customer Average upsell per customer LTV Churn:
Customer renewal rate (as a percent of customers up for renewal)
Dollar renewal rate (as a percent of total $ value up for renewal)
Tracked by OPEXEngine
Customer Profitability Metrics for Private SaaS
$18,790
$1,606
$44,000
$68,700
$11,370
$98,022
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Customer AcquisitionCosts per NewCustomer(m)
CustomerMaintenance Costs
per ActiveCustomer(m)
Average ContractValue per
Customer(m)
<$10M
$10M-$50M
Revenue Growth Driving Mrkt CapsFINANCIAL DASHBOARD
OPEXEngine
Company CNQR KNXA N RNOW SFSF TLEO ULTI
Fiscal Year 2010 2010 2010 2010 2010 2010 2010
($000s)
Market Cap (priced as of the period end date)
$2,624,770 $493,441 $1,594,300 $818,225 $2,141,273 $1,131,300 $1,317,922
Recognized Revenue $292,936 $196,353 $193,149 $185,522 $205,926 $237,275 $227,811
Recognized Revenue (Prior Period)
$247,596 $157,669 $166,540 $152,687 $153,054 $198,412 $196,579
Revenue Growth / Prior Period 18.3% 24.5% 16.0% 21.5% 34.5% 19.6% 15.9%
3 Year Revenue CAGR 31.4% 1.5% 21.2% 18.3% 48.1% 22.8% 14.6%
Short-Term Deferred Revenue (This Period)
$44,358 $76,052 $75,827 $90,350 $219,868 $99,396 $71,808
Deferred Revenue as a % of Recognized Revenue
15.1% 38.7% 39.3% 48.7% 106.8% 41.9% 31.5%
Mean Analyst Revenue Estimate (Current Year)
$429,591 $279,204 $270,501 $262,461 $326,949 $344,766 $322,746
Private/Public Operating ExpenseFINANCIAL DASHBOARD
OPEXEngine
Company CNQR KNXA N RNOW SFSF TLEO ULTI Private SaaS
Fiscal Year 2010 2010 2010 2010 2010 2010 2010 2009
($000s) (ave. in $000s)
Recognized Revenue $292,936 $196,353 $193,149 $185,522 $205,926 $237,275 $227,811 $15,778
Total Cost of Revenue as a % of Recognized Revenue
28.0% 34.9% 31.9% 29.7% 27.4% 33.1% 43.6% 41.8%
S&M Expense as a % of Recognized Revenue
32.8% 24.5% 48.1% 42.8% 48.1% 28.4% 25.6% 62.4%
G&A Expense as a % of Recognized Revenue
13.2% 24.7% 15.1% 10.1% 17.5% 18.5% 8.7% 28.0%
SG&A Expense as a % of Recognized Revenue
46.0% 49.2% 63.2% 52.9% 65.6% 46.9% 34.3% 90.4%
R&D Expense as a % of Recognized Revenue
9.6% 6.1% 18.1% 10.9% 19.4% 18.3% 18.5% 24.9%
Total Operating Expense as % of Recognized Revenue
58.0% 65.3% 81.3% 63.7% 81.1% 69.5% 52.8% 115.3%
Key Insights for 2011
On average, SaaS companies getting to profitability around $25M instead of $50M as a few years ago
Important to compare your company to peers with similar sales model
A number of prominent and varied SaaS companies expected to IPO
Relatively shallow data in public companies filings is useful, but boards and analysts are looking under the covers at key metrics
Participate now in the 2011 software benchmarking survey SIIA Members: free if under $10M revenues;
$999 for companies over $10M Non-SIIA Members: $999 if under $10M
revenues; $1995 for companies over $10M Go to www.opexengine.com to find out more
information“At T2 Systems, we migrated our customers to the SAAS business model in 2005. Since then, we struggled to find key benchmark data that we could use to determine the quality of the Company’s financial metrics. OPEX Engine easily filled that void for our team by providing us with key data points ranging from customer acquisition costs to revenue per employee. OPEX is one of our most important strategic planning tools.”
Jim Zaloudek, CFO, T2 Systems, Inc "The data and benchmarks in OPEXEngine’s Confidential Software Benchmarking Report are not available from any other source and covers both private and public software companies with a variety of business models. The report and data are extremely well put together. I highly recommend OPEXEngine’s operating benchmarks to
any software executive of a large or small company.” Charles Gerlach, Director Business Operations, Oracle
© Host Analytics, Inc. 2010 Company Confidential
Metrics-driven Corporate Performance Management
(CPM)
Kelly Bodnar BattlesCFO, Host Analytics, Inc.
© Host Analytics, Inc. 2010 Company Confidential
Agenda
• Introduction• Evolution of Financial Roles• Metrics-driven CPM
– Application evolution– SaaS benefits
• Impact of Getting this Right• Wrap up
© Host Analytics, Inc. 2010 Company Confidential
Background and CPM-Related Beliefs/BiasesBackground
Engineering UndergradJP Morgan Banker
McKinsey Management Consultant
2) The “I finally figured out what I want to be when I grow up” years “Operational Finance…”
IronPort Systems EE #49Cisco EE #198,234Host Analytics EE #51
Beliefs/Biases1) The “Keep Your Options Open” years “The generalist with an expensive education!”
HP Corporate Development/Strategy
MBA2 – Importance of rigorous fact based decision-making
1 – Trained to be a data hound
1 – Let the data set you free
2 – Finance is in a unique role as “keeper of the data”
3 – Our challenge is to evolve our role
© Host Analytics, Inc. 2010 Company Confidential
The Evolving Role of Finance
SaaS and CPM can be key
enablers
© Host Analytics, Inc. 2010 Company Confidential
Successful CFO’s
The most successful CFOs will enable decision making not only through the
delivery of timely and accurate information in context,
but also with an appreciation of the type and level of decision risk associated with each alternative scenario under
consideration.
- Bill McNee, Founder & CEO, Saugatuck Technology, Inc.
Today’s CFOs must balance ”traditional responsibilities with the ability to provide analytical truths and
points of view that shape overall strategy.”
- Brad Richmond, SVP & CFO, Darden Restaurants, Inc.CFO Magazine, December 2010
© Host Analytics, Inc. 2010 Company Confidential
Corporate Profit Improvements
Cross-Functional Process
Improvements
Evolution of Financial Applications
Dashboards and variance reports
Financial Consolidation and
Iterations
Budgets, Aggregation and version control
Tailored Excel Applications
or Finance
Applications 2.0
- > Improved Integration, Multi
Dimensional, Finance Only
1st generation 2nd generation Today - 3rd generation
Basic Excel or
Early Finance Applications
- > Basic and Discrete Process Improvements
© Host Analytics, Inc. 2010 Company Confidential
The SaaS Model - Context Setting
• Economic model (renewals) provides economic incentive for SaaS vendors to invest in customer satisfaction over the life of the relationship
• Delivery Model allows customers to be customers and vendors to be vendors over the life of the relationship as well
Creating, Distributing, Upgrading, Installing, Patching SoftwareCustomer Support, Business Systems staff
Disaster Recovery, Back up, Power, Hardware, Data Center, IT staff
Learning, Configuring and
Using the Application
ResponsibilitiesVendor
Customer
© Host Analytics, Inc. 2010 Company Confidential
How SaaS Makes a Difference
Performance
Right features
Driven
by
vend
or,
Tech
no
log
y ag
no
stic
Customization
EaseOf Use
Low initial costs
Low ongoing costs Fast, free access to latest
functionality/upgrade
Driven
by
vend
or,
enh
anced
by
clou
d
Real time customer monitoring enables continual and immediate customer support by vendor
Real time, integrated external content - Benchmarks, Drivers
Best people on the right problems
Integration of efforts and avoid silos
En
abled
by clo
ud
d
elivery
© Host Analytics, Inc. 2010 Company Confidential
Metrics-driven CPM at Host Analytics The ecosystem approach
CorporateMetrics
Weekly Monthly Quarterly
FunctionalMetrics
vs. Bu
dg
et
vs. Ben
chm
arks
Bookings, MRRPipelineCustomer CountCash, CF, AR, APHeadcount
Tren
ds/T
ime
ResponsesOpportunitiesWebsite hitsCustomer Portal ActivitySupport ticketsCustomer usage
Summary GAAP FinancialsCustomer ChurnDSO
Detailed GAAP FinancialsNPSPartner Count
Time to ActivateEmployee RetentionWin/Loss RatesProduct Mix
UptimePM UtilizationTicket resolution timeBug count
Wh
at are the key d
rivers for yo
ur
bu
siness?
Wh
at do
you
r stakeho
lders care ab
ou
t?
How frequently is helpful, practical?
Wh
at is the rig
ht
con
text?
Dashboards -> Ad Hoc Reports -> Financial Reports -> Report BooksWhat is the right format?
© Host Analytics, Inc. 2010 Company Confidential
Base Case Versus Benchmarks – HAI Example
How to choose?- Right companies, metrics, timeframe for comparison
Average Performance Across CRM, SFSF, N OpEx Engine Host Analytics BudgetSaaS Private
Financial Data 2 1 0 2010 Survey Financial Data 2010 2011 2012Total Revenue 16,770$ 33,458$ 65,265$ 20,399$ Total Revenue 3,534$ 10,482$ 21,419$ Total COGS 6,170$ 11,202$ 18,222$ 8,749$ Total COGS 2,766$ 4,619$ 7,060$ Gross Profit 10,600$ 22,256$ 47,043$ 11,650$ Gross Profit 768$ 5,863$ 14,359$ Gross Margin 63.2% 66.5% 72.1% 57.1% Gross Margin 21.7% 55.9% 67.0%
Research and development 5,611$ 11,849$ 12,758$ 4,396$ Research and development 1,814$ 3,332$ 4,571$ Marketing and sales 19,117$ 29,747$ 43,603$ 6,595$ Marketing and sales 7,002$ 13,600$ 18,754$ General and administrative 4,406$ 10,089$ 13,006$ 4,059$ General and administrative 1,815$ 2,545$ 2,923$ Other 2,552$ -$ (1,148)$ -$ Other -$ -$ -$ Total Operating Expenses 31,686$ 51,685$ 68,219$ 15,050$ Total Operating Expenses 10,631$ 19,477$ 26,248$
Operating Profit (21,086)$ (29,429)$ (21,176)$ (3,400)$ Operating Profit (9,863)$ (13,614)$ (11,889)$ Operating Margin -126% -88% -32% -17% Operating Margin -279% -130% -56%
OCF (9,986)$ (7,277)$ 3,579$ 1,855$ OCF (6,028)$ (6,981)$ (282)$ Cash 7,298$ 8,453$ 23,965$ 5,611$ Cash 12,213$ 5,232$ 4,950$
COGS % Revenue 36.8% 33.5% 27.9% 42.9% COGS % Revenue 78.3% 44.1% 33.0%R&D % Revenue 33.5% 35.4% 19.5% 21.6% R&D % Revenue 51.3% 31.8% 21.3%M&S % Revenue 114.0% 88.9% 66.8% 32.3% M&S % Revenue 198.1% 129.7% 87.6%G&A % Revenue 26.3% 30.2% 19.9% 19.9% G&A % Revenue 51.4% 24.3% 13.6%Other % Revenue 15.2% 0.0% -1.8% 0.0% Other % Revenue 0.0% 0.0% 0.0%
COGS % Total Spend 16.3% 17.8% 21.1% 36.8% COGS % Total Spend 20.6% 19.2% 21.2%R&D % Total Spend 14.8% 18.8% 14.8% 18.5% R&D % Total Spend 13.5% 13.8% 13.7%M&S % Total Spend 50.5% 47.3% 50.4% 27.7% M&S % Total Spend 52.3% 56.4% 56.3%G&A % Total Spend 11.6% 16.0% 15.0% 17.1% G&A % Total Spend 13.5% 10.6% 8.8%Other % Total Spend 6.7% 0.0% -1.3% 0.0% Other % Total Spend 0.0% 0.0% 0.0%
FY "T-N years to IPO" HAI Budgeting Period
© Host Analytics, Inc. 2010 Company Confidential
Other Examples
• Business case for every material decision– What is the right threshold?– Advanced tools can help find the most
profitable path• discretionary initiative modeling
– Don’t forget the qualitative factors and the human element as well
• Smart data– Linked benchmarks– Macro economic indicators linked directly as
drivers into budget process– Process best practices
• Currency rate upload/automation, spread codes etc
© Host Analytics, Inc. 2010 Company Confidential
Things to Consider• The KISS Principal
– “Keep it simple stupid” especially when just getting started– You don’t need a PhD in Statistics to make this work
• Just do it– It doesn’t have to be perfect – Launch, iterate, learn, adjust
• Automate, link when possible– Scalability– Data integrity
• Single source of truth (SSoT) is key– Less thrashing, more time spent on problem solving
• SSoT needs to be accessible broadly– Virtual feedback loop– Builds trust
• “2 heads are better than 1” – don’t forget to collaborate– This is a X-functional discipline lead by finance, not a siloed
finance effort
© Host Analytics, Inc. 2010 Company Confidential
Host Analytics at a Glance
• Integrated CPM Suite– Budgeting– Consolidations– Reporting– SEC Compliance
• SaaS Delivery Model– Low TCO– Fast ROI– Rapid low cost
implementation– Access to latest
functionality
• World class support and services
Our CustomersOur Solution
© Host Analytics, Inc. 2010 Company Confidential
Recent Aberdeen Survey ResultsWhat can happen if you get this right…
• Survey of 200 CPM users• 30 Host Analytics customers participated• HAI customers were the ONLY respondents who
equaled or surpassed best in class in CPM benefits/results
© Host Analytics, Inc. 2010 Company Confidential
Challenges Late and inconsistent excel data Long, long meetings Adjustments mid-year very hard Sales forecasting accuracy
Solution A single source of consistent data Budgeting now takes half the time What-if scenarios and ad-hoc reporting 12 month rolling forecasts
Results Confidence in their data Meetings are dedicated to decision-making Self service reporting Finance understands the model behind the
numbers No involvement from in-house IT staff $1M in inventory reduction
through better forecasting
“Before, we were lucky just to get the numbers. With Host Analytics we get the numbers and the whole story.”
“Budget meetings are now about the business, not about the integrity of information.”
- Mark Cohen, Vice President of Finance and IT, Thule Vehicle Accessories North America
Thule – Specific Customer Case StudySound familiar?
See recent Computer World article featuring Thule and HAI entitled, “Why some companies are ditching their spreadsheets” for more detail
© Host Analytics, Inc. 2010 Company Confidential
Conclusion
• Promoting fact-based decisions throughout the corporation is critical in our evolving role
• The Cloud and CPM tools will help you realize the value– Turn data into information, benchmarks– Elevate the role of finance quickly– Add rigor and trust into financial
processes without increased overhead– Expand collaboration across the
corporation without increasing associated infrastructure
© Host Analytics, Inc. 2010 Company Confidential
Thank You
Q&A
Dial 14 to ask a question or use the Chat Box
Thanks for attending!
The recording link will be distributed via email.