In SaaS, Do First Movers Finish Last?
Should you race to gain “first-mover advantage” in the software as a service (SaaS) market? Or should you sit back and learn from the early mistakes your rivals make? Before you answer that question, consider the situation at eGain Communications — which is celebrating its tenth year as a SaaS specialist.
A decade ago, most software hosting companies focused on the application service provider (ASP) model. But most ASPs failed because of a range of problems, from spotty broadband coverage to shoddy desktop and server software that required too much horsepower.
eGain: Still In the Game
Even so, quite a few companies emerged from the ASP and dot-com implosions, and survived to focus on SaaS. eGain, for one, is celebrating its tenth anniversary in the SaaS industry. Ten years in any tech market is an impressive milestone.
But eGain is not to be confused with Salesforce.com, the top performer so far this year in MSPmentor’s SaaS 20 Stock Index. eGain shares closed at about 90 cents each on June 24, down from a far-more-respectable $5 in July 2003.
Still, eGain’s customer service and contact center software appears to be gaining momentum. For the company’s Q3 ended March 31, year-over-year quarterly revenue jumped 64 percent to $8.8 million. And the company pushed into the black by delivering a $542,000 profit, compared to a $2.2 million loss in the comparable quarter last year.
Now let’s get back on topic: Did eGain benefit from getting into the SaaS market so early, or do first movers typically fail?
It is an interesting point you are raising here, but all companies can suffer from a downturn regardless of their deployment model. Whether you are on-premises or deployed from the cloud – if a better or cheaper product comes along, your marketshare, and ultimately share price, will suffer.
The Salesforce.com proposition is more comprehensive offering than that of eGain so it is not really a direct comparison. A more effective analysis could be made if you looked at another vendor in the exactly the same space that came to market later using the SaaS deployment model.
eGain’s proposition largely complemented already in-house CRM by extending them to offer self-service, knowledgebase management and process automation. When they first started an organisation could quite easily have deployed both Siebel and eGain without too much overlap. Overtime the on-premise CRM vendors extended their offerings to cover the value add that eGain brought to the table.
In contrast, the Salesforce.com proposition was to completely replace the on-premise CRM system. One of the reasons they have succeeded is because they thought so big. The SaaS model lends itself well to direct replacement of complex and cumbersome on-premise solutions and the TCO calculations would have easily have justified the move.
eGain sounds somewhat similar to RightNow, which has transitioned its software from in-house to self-service. The company hit a few bumps during the transition in 2007 but seems to be getting some momentum going this year.