The 10 Laws of Cloud Computing

Intacct has the distinct good fortune to be backed by some of the smartest and most successful venture capital firms in the world, including Bessemer Venture Partners, Emergence Capital, Sigma Partners, Split Rock Partners, and Sutter Hill Ventures. Individuals from most of these firms sit on the Intacct Board of Directors and provide active guidance in shaping our future. All of these firms have extensive experience building successful cloud-based companies and they are often willing to share this knowledge. 

One example of this is Bessemer Venture Partners. They have recently posted a series of blog entries looking at their updated 10 Laws of Cloud Computing. These “laws” align well with how Intacct views the space and they provide great guiding principles for any cloud business to follow. Here is a quick look at Bessmer's 10 laws, including links to the full posts and a few details about how Intacct follows these laws.

Drink it, live it, love the cloud. Use your own product, and that of your customers, partners, and peers. To understand the cloud revolution, you have to be a part of it. You need to understand the issues, challenges, and opportunities with cloud deployments – starting with your own. At Intacct, we use our own system to run our business and have more than a dozen cloud-based systems in place. 

Employees are now powerful customers themselves, and not just through their managers. We’re witnessing the “Consumerization of Software” so focus on ease of use for SaaS, and “developer citizenry” for PaaS and IaaS. At Intacct, we are constantly focused on making our system easier to use. In fact, our VP of Product Management recently contributed an article to CITEworld on the Consumerization of Business Applications.

For most of the last two decades, major software vendors such as SAP, Oracle, PeopleSoft, Microsoft, JDA, and others have pushed the concept of an “integrated” software suite on the market. With cloud computing, the pendulum is swinging back forcefully in favor of best-of-breed applications. Intacct often preaches about the value of going with a best-in-class set-up and we've designed our applications to easily integrate with other systems – enabling our customers to choose the systems that work best in their organization. 

Law #4: Grow or Die
Growth rate is often the biggest driver of valuation multiples in both private and public markets. Investors, employees, and partners aren't buying into your current company as much as they are investing into some future version of your business, and growth rate determines the size of the business, at that future period. At Intacct, we've consistently delivered outstanding growth. In our last quarter, we nearly doubled our new customer bookings compared to the same period a year earlier. 

After surveying hundreds of leading public and private Cloud Computing companies, 5 key “C” metrics now rise above the others as essential top level performance indicators: CMRR, Cash Flow, CAC, CLTV, and Churn. Intacct monitors these metrics on a consistent basis – given Bessemer is an Intacct investor, this should come as no surprise. 

Hyper-growth is the goal of most aggressive cloud CEO’s, but how do you know if your sales and marketing investments are ultimately “profitable”? The answer to this question can be found through measuring your Customer Acquisition Costs and the CAC Payback Period. Intacct often looks at these metrics to determine ways to improve the business. 

You’re a cloud business, so by definition, your sales prospects are all online. Savvy online sales and marketing is a core competence (sometimes the only one) of every successful cloud business. Intacct leverages several online sales and marketing vehicles, including social media marketing, search engine optimization (SEO), search engine marketing (SEM), email marketing, and others. In addition, we leverage Marketo as our marketing automation system. 

The only acceptable reason to lose a customer is death (bankruptcy) or marriage (acquisition). Every cloud company is in the service business, and therefore your customer service can be the difference between failure (churn) and huge success via high retention and upsells. Intacct has a strong track record of customer satisfaction and loyalty, with very low levels of customer churn. 

Law #9: Culture is Key
Bessemer has enjoyed the privilege of backing hundreds of companies throughout our rich history, and the one single determinant of success above all else is the quality of the team and how well they work together. This not only applies at the early stages when we may first get to work with a founding team, but also to the extended team that they hire as the company grows. Intacct has twice been named a “Bay Area Top Workplace” – a distinction based on an independent survey of employees. 

Understanding the cash flows of your business – including gross and net burn rate – is critical to survival in the early days and critical to your dominance in the long term. There have been many promising cloud startups that stepped on the gas too early and were wiped out as a result. 

As the Bessemer team points out in a “bonus law,” nothing is absolute and it is certainly possible to ignore one or two of these core tenets and still succeed. That said, these laws provide a great foundation for companies looking to succeed in the cloud. 

Learn more about cloud computing and cloud financial applications at one of our upcoming educational webinars. Be sure to connect with Intacct on our various social media channels, including Facebook, Twitter, and LinkedIn. To network with other people interested in cloud financial applications, join the Intacct Cloud Accounting group and the CFOInsights group on LinkedIn.


Image courtesy of FreeDigitalPhotos.net.

0 comments:

Post a Comment