The Corporate Organizational Structure of SaaS

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Recently, I had someone ask me how they might think about the organizational structure of their SaaS startup.

Here are some lessons I learned over my 25 years working on the operating side in what started out as small, private start ups (Oracle and Siebel Systems ) but turned into large companies – along with my experience working with many early and mid stage SaaS companies as an investor.

  1. Who the CEO elects to have as direct reports tells customers, employees, business partners, and shareholders what matters to her/him and what she/he believes is critical to the company to succeed. So, choose your reports carefully as you are signaling to a lot of people what is important to you.
  2. More layers between the CEO and the people who execute the business model can slow down decision making and reduce the speed of execution of the company. I have found that lackluster execution is what usually kills most start ups. CEOs are usually CEOs because they have excellent intuition and the ability to analyze data and make good decisions quickly. Relying upon others to “interpret” data and report on it may slow down and introduce sub-optimal decision-making (subjective decisions by lower level staff that may not be as experienced as the CEO or have ‘political’ agendas).
  3. The people who are responsible for executing the business model should be direct reports to the CEO. For a SaaS business model, this means the following:
    1. VP Marketing – responsible for the initial creation of revenue through demand generation (top of the funnel) and “future” revenue; revenue from future sales periods.
    2. VP Sales – responsible for delivering “in period” revenue via direct sales – inside and field sales
    3. VP Support – responsible for ensuring the product works as marketed/sold
    4. VP Service – responsible for implementations – if critical to the success of converting “contracted” MRR to “realized” MRR as projects are delivered
    5. VP Products – responsible for specifying a complete product that meets market requirements
    6. VP Engineering – responsible for building and delivering a complete product
    7. VP Customer Success – a “new” exec position critical to the SaaS model responsible for the bottom of the business model funnel – I wrote about this role previously in my blog . This role is responsible for making sure customers are happy and using the product every day (1 customer success rep for every $1M ARR is best practice). New products such as Totango are this function’s new “system of record” and the CEO’s window on usage metrics which is critical for renewals and reduced churn. You spend a lot of $ to acquire customers (CAC ratio), you need to make sure they stay as customers or the SaaS model falls apart.
    8. VP Finance – among many things, responsible for the accounting and collection of revenue
    9. Optional – VP Alliances/BD – if you need to interface with many different ISVs to deliver a complete solution
    10. Optional – VP Channels – if indirect sales is a key part of your business model

In my experience, a CEO and/or a GM,  should be able to handle 7-10 direct reports if each of those reports are A players and run their organization effectively.

In terms of process, what worked best for me as a divisional GM – modeled after successful executive staff meetings I was a part of – was a weekly meeting where each of my direct reports was required to cover what was accomplished the prior week and what was expected to be accomplished the following week — along with the usual review of revenue forecasts and financials.

Typically, for the forecast, we covered key deals for the quarter, and a WEB (Worst, Expect, and Best) revenue number and the critical elements required to achieve the forecast. By having all the functional leads in the room, we could quickly surface issues – product, deal terms, support issues, etc. – and collectively put together a plan of action to resolve them.

During each weekly meeting, as issues materialized, we generated a “resolution plan”, assigned owners and due dates and then reviewed the issues captured in the plan each week until they were resolved.

Each week at the overall Exec Staff meeting I attended, I covered the major metrics generated from my division’s weekly staff meeting.

These things worked for me so perhaps they will be helpful to you as you think through the optimal structure for your organization and its decision-making.

Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise

I, along with many of you, have been watching the evolution of enterprise internal collaboration products/companies such as Yammer, Chatter, Jive, and Cubetree over the years.

I was an early investor in Cubetree which was acquired by SuccessFactors and then became part of SAP when SAP acquired SuccessFactors a short time later. SAP has since renamed Cubetree to SAP Jam and it now serves as the backbone to SAPs collaboration strategy.

These products are supposed to mitigate – eliminate ? - the need for email within the enterprise and dramatically improve internal collaboration offering far easier and superior ways to capture and share information v. email/spreadsheets, etc.

However, if you can get the product managers and/or CEOs of these product/companies to speak candidly off the record, with rare exception, the adoption level of these products has been far less than the creators and the companies that purchased these solutions had hoped for.

Why? I have a simple thesis.

How Will Salesforce Adapt to the Next Platform Shift: Mobile Computing?

I posted an article on TechCrunch last Friday. The title of the article was “How Will Salesforce Adapt to the Next Platform Shift: Mobile Computing?”

The purpose of the article was to point out that every decade or so a new computing platform emerges. Market leading incumbents typically have the most to lose when these shifts occur and typically have the most difficult time making the transition due to legacy architectures and revenue streams dependent upon preserving the status quo.

Back To The Future….

I recently had the opportunity and pleasure to speak on a panel held at Oracle HQ in Redwood City, CA. It was a small conference – sponsored by Oracle – and attended by current Oracle ISVs to discuss the issues of converting and/or building a SaaS business. The panel was moderated by Kevin Dobbs with Montclair Advisors .

Joining me on the panel were Byron Deeter, a GP at Bessemer Ventures and Joel York, CMO at Xignite. I really enjoyed the panel members and the audience interaction and was reminded again just how bright the people are throughout Silicon Valley and how fortunate I have been to work in an industry where the US still continues to lead the rest of the world.

Tangible Small Business Results from Social Media

Cool infographic regarding small businesses and their use of social media. This demonstrates some tangible business value now being derived from leveraging social media sites.

How Small Businesses Are Using Social Media – crowdSPRING
Crowdsourced Logo and Graphic Design by crowdSPRING