As I said earlier, the SaaS and Extended Enterprise trend alignment are good factors, but there are some additional strategy points that I would like to make, which offer huge prospects for Concur’s growth.
Concur is very well-positioned to sell its services to not only enterprise customers, but also Small Medium Enterprises [SME]. Now, to fathom the importance of this opportunity, one needs to look at the history of software companies and their at large lack of success in penetrating SME.
But even before that, ask yourself the question, why is SME important? Well, for one thing, there are 25 Million of them, with an enormous spending power. To give you an example of a software company that successfully penetrated SME, I would point you to Intuit (INTU). Intuit has a market cap of about $10 Billion, on a 2006 revenue of $2.3 Billion. Microsoft has unsuccessfully attempted to buy this company in the past, with the single objective of entering the SME segment via a killer app (small business accounting software).
Few other companies have managed to penetrate SME through other killer apps / niches, Autodesk (ADSK) being one that I mentioned earlier. ADP and Paychex in payroll processing are very successful companies that cater to SME in form of killer app “services”, as is Salesforce.com in Customer Relationship Managent [CRM].
In Concur, I see yet another killer app delivered as an On-demand, Software-As-A-Service (SaaS) model, that SMEs would find useful. The delivery model and the pricing structure is also aligned with SME purchase dynamics, as is the sales channel.
Typically, since SME sales have small Average Sale Price [ASP], the viability of the model depends entirely on being able to “close” these deals on the phone. The deal sizes do not support actually going in person to close a deal. Concur’s solution is simple enough, and its value proposition obvious enough to convey, such that deals CAN be closed on the phone. Thus, the 25 Million SME customers can be reached through an efficient Telesales channel that is both high reach, as well as profitable.
So, one of the questions I would keep asking Concur’s CEO is what percentage of his business is from SME customers? Today Concur has 5000 customers. They have just acquired Gelco, which adds another 1200 customers. But the delta between 6,200 and 25 Million is large, and what it tells me is that there is a humongous open opportunity to tap into.
On a somewhat more tactical point, once the Gelco integration is under control, the second question I would ask Steve is around their partnership with Salesforce.com (CRM). Salesforce.com has put together one of the absolute best channels and eco-system programs in the SaaS industry, especially with its AppExchange initiative, whereby, partners can sell their applications to their customer base.
Salesforce.com’s primary customer base of sales people are the most active travelers and expense report filers in the corporate world. Salesforce.com has over 30,000 customers, all of whom should also be Concur prospects. I would ask, in what timeframe and at what rate can this base of customers be penetrated by Concur.
In summary, Concur is a great execution opportunity, and if Steve Singh and his team can pull this off, the company can become another Salesforce.com / ADP style success story.