It’s always good to catch up with a ‘quiet’ vendor, one that doesn’t make a lot of noise but is quietly getting on with the job of building a sustainable business. Such was the case last week when I spoke at length with John Cheney, CEO Workbooks. “We may be quiet but we’ve been busy acquiring customers. We’ve taken a different strategy to others. We’re looking for referenceable customers in the midmarket part of the SMB space, working out where our sweet spot lays and being clear about what is really needed to fill certain white spaces.”
Workbooks operates in what most would consider the CRM space, one that is dominated by Salesforce.com. “There’s really only one way to compete against a Salesforce and that’s to ensure we do more for less.”By that Mr Cheney means that Workbooks is prepared to ‘touch’ the client to ensure full adoption. “Where a company wants a fairly vanilla approach to CRM then it is relatively easy to switch because we’re coming in at a competitive price point that Salesforce.com can’t really reach too easily. But what we find is that in order to reach all users, we need to offer process capability and that might well mean consulting with the client to work out what they can change within the business to fit what we’re offering and what we have to do to provide a solution that meets their needs.”
Deals and value
Workbooks estimates that its average deal rives revenue of around £5,000 per annum with an average of 9 seats. “I can make money at that on the current business model.” Workbooks uses a variety of marketing techniques and is constantly tweaking its own SEO to ensure it gets the best out of Google. Even so and using AdWords plus Google Marketplace, it believes the average qualified lead costs about £250 with a conversion rate of 1:10. That means each customer costs around £2,500 to acquire. Taking Workbooks average deal size, that direct marketing/sales spend is in line with industry averages that will usually vary between 45-65%.
I asked whether the average deal size combined with the relatively limited resources a company like Workbooks can deploy might make hyper growth difficult in the face of its much larger rivals: “We believe that in the UK alone there is a $1 billion opportunity for prospect to cash processing as replacements for ACT/Mazimizer and some Salesforce replacement. It is a massively fragmented market so yes, there is a communications issue for us but right now I am comfortable for where we’re at.” Even so, there is something of a chicken and egg flavor to this problem. Some customers are much larger than the average with some customers coming in at 30+ seats. That means others are smaller than the 9 average. The trick will be in getting enough of the 20, 30 and above seat deals to help fund an expanded marketing effort.
On price competition, Mr Cheney said that even with a fragmented market and many offerings, he sees almost no price pressure. “When you’re comparing with a Salesforce it’s not too hard but I come back to the offering – more for less works.”
Accounting?
While Workbooks is a SaaS play, the company sees no advantage to moving into the accounting market. “There is plenty for us to do in CRM but we can provide two ways links using Sagelink (as an example for Sage Line 50 accounts.) Accountants we come across seem quite happy to run updates in batches and in the businesses we are serving, that takes about half an hour once or twice a month. We’d much rather work with what exists while bringing the rest of the business on board.” Workbooks says it can always look to work with other SaaS/cloud players in the future but since Sage commands a good chunk of the market we operate in and for which there are not that many well known SaaS alternatives then it may as well work with what the market is using.
Updates and futures
The company is typically rolling out four updates a year – again something that is typical in this market. The next release will for example include an Outlook plug-in for contact synchronization with Microsoft’s email system. Looking forward, the company is driving its roadmap through collecting ideas at its ideas.workbooks.com site. “You’ll see that customers believe email marketing needs something of a refresh. That will get attention in the coming months.” Further down the line, the company plans a ‘lite’ version of its solution: “This is really about feeding the pipeline but also testing the appetite at the smaller end of the market where there is a need for sales force automation, contact and pipeline management and perhaps some help desk – but not with all the bells and whistles the larger business needs. It’s really a test for us.” Pricing has yet to be decided.
My take
I’m always interested in finding out how vendors think go to market is best realized. There is no single correct answer since much depends on the vendor’s perceived notion of what drives a particular market or segment. Mr Cheney and his team have long experience in building SaaS/cloud businesses so while their approach may seem cautious and conservative, I didn’t get the impression the company is in any hurry to radically change direction. “We’ve been a bit quiet that’s true but as I said, we’re concentrating on making customers successful and building that important roster of broad based company names that prospects can tap into. We’re more than happy with progress to date.” There is another view on this: the ‘M’ in the SMB market doesn’t have many accounting alternatives so the idea that a NetSuite or SAP Business ByDesign might swamp them is not something that needs be an issue in a segment worth $1 billion. When you consider that NetSuite is the global end to end CRM/accounting process leader in some segments and yet its current global sales are running at around $200 million, then it is easy to see why Workbooks does not feel threatened.
Whether it is luck, judgment or fortuitous timing is open to debate. But Workbooks is not the first company I’ve come across that is benefitting from Salesforce.com churn. Salesforce.com has created the SaaS/CRM market but its model doesn’t allow it to maintain strong touch points with the smaller business. Vendors like Workbooks can successfully come in and pick up the slack from relatively small numbers of customer who are not getting what they believe is the service they need from such a a large company. Working out a model that will scale with that ‘go to market’ strategy is much tougher. In the meantime, quiet confidence is always a good sign in a vendor like Workbooks. One to watch.
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