When I saw Stefan Topfer’s explanation for the AccountsVision deal, I was puzzled. 100,000 users, not much movement in the number of supporting practices and very few ‘fresh faces.’ It didn’t add up. At present, Stefan is in Australia, seeding that market but I wanted an explanation. This evening, Stefan responded. I have summarised his response:
- Virtually all 118.000 current registered users are paid for. But not in the traditional way. Alongside the deals being done with firms of accountants, Winweb is seeding the market through ‘white label’ deals. Many of these cannot be discussed in the open, but they provide an extremely fast track ramp.
- Winweb can afford to do this because it is entirely self funded and the directors can determine the course of the business without financial penalty. Salesforce.com and NetSuite (for example) go to market consists of telesales/bag carriers/key account folk/traditional advertising/media used by every other software company. Recently, Erik Keller sounded a warning bell about SFdC’s 50%+ GSA spend. Now check Winweb’s model. A total marketing/advertising/sponsorship spend of <£50K in 2006 Not a penny to Google. An order of magnitude difference. Which is paying off.
- Where’s the money? The forums are deserted so maybe that’s not a useful resource? The secret comes in the array of Live Support services provided by virtual assistants. This generates a continuing and growing revenue stream. The company is under no financial pressure and is cash positive.
You can argue that Winweb’s model means it will never be another Sage/Intuit on the grounds it is not charging enough to generate tens of millions in revenue. I’ll return to the numbers another time but a casual observer should be able to figure a ballpark number. Just for fun, I’ve embedded a Zoho poll on this issue:
The total registered users is global but these are flea bite numbers. In the UK, there is the potential for 250K users per annum alone. The white label providers see Winweb as a way of marketing additional services they can then give away as a method of keeping their customers sticky. Think telco. The difference is that the service provider only has to facilitate access to the Winweb system. Underneath, Winweb is still managing the customer experience. Just like BT Workspace, BT Tradespace and SMBLive.
There are two big issues:
- Will the service providers understand enough to make promotion a priority? I’m meeting SMB Live’s CEO next week to find out more.
- What happens if registered users turns into live users at the same rate as on ramp? There simply are not enough professionals on board to service the training needs. I have some evil ideas about how that could be overcome although it has to be said, the answer is not entirely clear.
I would encourage Stefan to return to India/Malaysia and see if there are available resources that can service the rest of the British speaking world to a standard that keeps clients in good administrative shape.
I’m yet to be convinced the incumbents can operate this type of model under their existing structures. Recent talk among colleagues suggests that SAP should give consideration to hiving off the AIS venture. The rationale is that SAPs structure and culture prevents the kind of innovative thinking required to make a mark in the market. In Winweb’s case, I just don’t believe the resources or technical skills exist within the incumbents to make this happen without it being detrimental to performance. Hiving off or ring fenced investment could provide an answer.
This is not going to be a model that incumbents will wish to follow. It’s almost like looking at the Darwinian end game except no-one knows it. Whenever I think of Winweb and others, I’m drawn back to the image of the time when dinosaurs ruled the earth, gazing on in bemusement at the brightening light that was a meteor set to change history. The shrews survived and evolved.
In the meantime, I’ll continue to garner field reports.
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