May 2015

The Ultimate Startup Guideby

Part 2: The Game-Changing Trends in SaaS

Prepared by Meagan Crawford, Internal Economist at PeoplePerHour

SaaS, or Software as a Service, is radically transforming conventional software tools for micro/SMEs by diminishing transaction costs, increasing market �exibility and providing cost e�ective outsourcing solutions to IT. Unlike any other time in history, micro/SMEs have a level playing �eld with large enterprise and Fortune 500 companies through early adop-tion of a myriad of SaaS solutions, which are enabling massive e�ciency gains in areas such as: ERP, CRM, BI & HR solutions to name a few. Unlike conventional software models that command large upfront costs in addition to an annual maintenance fee, SaaS is based on a subscription model and is typically a fraction of a percent of the perpetual model. For investors the next generation SaaS is commanding 5X compared to conventional software companies that observed 1.5X, the market potential for SaaS platforms is enormous and only just beginning to be tapped into.

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The Game-Changing Trends in SaaS

What is SaaS?

SaaS, or Software as a Service, describes any cloud service where consumers are able to access software applications over the internet. The applications are hosted in “the cloud” and can be used for a wide range of tasks for both individuals and organisations. Google, Twitter, Facebook and Flickr are all examples of SaaS, with users able to access the services via any internet enabled device. –Interoute

The Key Bene�ts of SaaS:

Lower Costs: SaaS applications level the playing �eld by providing micro/SMEs tools that had been �nancially inaccessible up until recently. The SaaS ecosystem is built on predictable monthly license fees (subscription model), and usage based pricing models.

Flexibility and Ease of Deployment: The on-demand SaaS model enables micro/SMEs the �exibility to scale and deploy one business application at a time, while testing the applicability to the business case, and the added bene�t of service termination with zero switching costs.

Standardized solutions: Improved management of key business areas: micro/SMEs who have lean, unde�ned procedures have greater optionality through standardized industry verticals i.e. accounting, sales tracking and invoicing leading to greater operational management.

On-Demand Mobile Workforce: The rise in mobile supported SaaS platforms such as CRM enables micro/SMEs to input and access sales data on-the-go, encouraging users to stay remotely connected, increasing productivity outputs.

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Global SaaS software revenues are forecasted to reach $106B in 2016, increasing 21% over projected 2015 spending levels at 30% CAGR from 2013-2018 vs. 5% growth for overall enterprise IT. –Goldman Sachs, 2014

WAVES OF SAAS PROGRESSION:

Mainframe Computing Personal Computer Network Enterprise Websites Rich Internet Applications

DARK AGES 1984 2001 2008

Batch & transaction processing

Batch & transaction processing

On-promise enterpriseapps e.g. CRM, ERP

ASP hostedenterprise apps

SaaS enterpriseapps

Evolutionary Timeline

App

licat

ion

Com

plex

ity CRM

Human Capital

Management

Financial Functionality

Marketing

CRM

Emailing

Data Protection

Project Management

O�ce Suites

27%

26.2%

19.8%

4.4%

13.3%

9.3%

2

3

4

5

6

7

8

10 or more

35.9%

11.3%

8.9%

7.3%

2.0%

2.0%

1.6%

6.1%

£0

£1-25

£50-100

£100-250

£250-500

£500-750

£750-1000

54.0%

14.9%

8.9%

4.0%

2.4%

3.6%

1.6%

A breakdown of SaaS categories used by PeoplePerHour users

The average number of platforms used by PeoplePerHour users

Average SaaS platform spend by PeoplePerHour users

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0

20

40

60

80

100

120

140

160

180

2013 2014 2015 2016 2017 2018

24% CAGR2013-2014

PaaS (21% CAGR)

laaS (13% CAGR)

SaaS (33% CAGR)13%

13%

59%

44%

41%

15%

SaaS Most Highly Deployed Global Cloud Service by 2018

Source: Cisco Globa Cloud, Index, 2013-2018

High-Growth SaaS Categories:

1IT Management Applications: IT is increasingly recognizing that cloud solutions can save money and allow workers to focus on what is important to them in areas of core competency, business value, and di�erentiation.

2ERP & Supply Chain: ePurchasing/eProcurement, have greatly shifted over to SaaS in new product categories like services procure-ment, automated spend analysis, supplier network services, and supplier risk and performance management.

3CRM & Productivity Applications: Desktop and collaboration applications are well-suited for SaaS. Their broad user base of employees, customers, and partners will make accessibility a must. Some CRM attributes that hinder SaaS adoption include a large amount of data, high security, and varied maturity of product.

4 Business Intelligence: BI solutions are moving rapidly towards full SaaS deployment

5 HR Software: the user-friendliness and accessibility of SaaS allows for easier collaboration across all levels and departments, eLearning is a rapidly scaling category.

6 Platform & Middleware Solutions: Performance and degree of customization are limiting rapid scaling however, governance, risk and compliance, application development, and storage have signs of slight movement toward SaaS

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The Game-Changers of SaaS

Zene�ts is a free, cloud HR platform that completely automates the admin work behind workers. Employers connect their payroll, health insurance and other HR systems (or set up new ones) in seconds so they can manage it all online, in one beautiful dashboard. That’s when the magic happens: Zene�ts automates 95% of the HR administration work so what used to take weeks—from payroll updates to employee on-boarding—now takes minutes. Zene�ts currently serves more than 10,000 small-and medium-sized businesses in 47 states, across nearly every industry. Zene�ts was co-founded by Parker Conrad and Laks Srini.

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• Zene�ts has signed up more than 10,000 companies across 48 states, serving over 100,000 employees.

• Zene�ts has an increasingly diverse customer base: In 2013, over 90 percent of customers were from California and over 80 percent were technology companies. Today, more than half of Zene�ts’ business is outside California and over half is outside the tech sector.

• Zene�ts closed more new business in just one month -- March 2015 -- than it did in the �rst 15 months of the company's life.

“There are millions of small businesses in the country that have been wasting countless hours every year juggling multiple HR systems and outdated technology. We are not just eliminating the paperwork; we are eliminating the actual work – making it easier for small businesses to manage and grow. With 5 million small businesses in the US, the market opportunity is huge, and we are moving quickly to go after it.”

Parker Conrad, Founder & CEO Zene�ts

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Intercom is a customer communication platform, one place for an entire business to see and talk to customers– inside their product, on their website, or by email. Intercom is integrated with live product data, so messages can be triggered by customer behavior. Using a single integrated platform for every customer interaction gives businesses a more complete view of each customer, allowing for more personalized and contextual communications.

• Founded in 2011• $31M raised• 4k+ paying customers

Vend became the world’s �rst-ever cloud-based POS system for retail, and has continued to lead the wave of second-generation SaaS companies in the years since. Vend is on the same growth trajectory as the world’s most successful �rst generation cloud companies – like Netsuite, Zendesk, and Salesforce.

• Vend is now the most global SaaS company in the world with revenue spread equally between key markets. No other company has this, which makes Vend very unique in the SaaS and POS space.

• Vend’s technology has been particularly suited to SMEs. It is inexpensive, well-designed, easy to use and implement, and allows small business owners to do it all – taking sales, tracking inventory, and running their entire business from a mobile device so they are no longer chained to their store, or their clunky cash-register.

• Vend has been in hyper-growth mode since it was founded in 2010, increasing its ARR by 100% each year. We now have seven o�ces and over 220 employees worldwide – and expect this employment �gure to double over the next year. Vend is on track to continue on a high-growth trajectory for the next few years (and beyond), through increased funding and investment, a customer base that has risen an average of 240% each year for the past three years

“As more retailers move their business to the cloud and take their brick & mortar stores online, we will see increased demand for solutions that provide a one-stop shop for businesses in a way that is �exible and can be tailored exactly to their needs. That could be either a platform containing numerous capabilities and plug-and-play options, or an ecosystem of add-ons that are easily integrated with each other. Companies that can provide SMEs with the ability to build their own unique enterprise systems, in a cost-e�ective and simple way, will be the ones who are most sought-after.”

-Vend

• 100+ employees• 1/3 of active users log in every work day• Revenue grew 5x in 2014

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Intercom 2014

Intercom 2014

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A special thanks to our contributors

Zene�ts Intercom.io Vend

In addition to a special thanks to

Nat Burgess of Corum Group

For Press Inquiries please contact: Head of PR Aylish Jarvieaylish@peopleperhour.com

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