Law #8 of Bessemer’s Top 10 Cloud Computing Laws and the Business Model Canvas –Leverage and monetize the data asset

I am now in the eight law in Bessemer’s Top 10 Computing Laws with an emphasis how to be able to monetize and utilize the data asset that the SaaS vendor is accumulating by users that are generating a wealth of information and all of this information is accessible for the SaaS vendor if the contractual agreement allows the use of this data. 

When reading about this law my memories from my youth crept to my mind when studying in the Swedish School of Economics in Helsinki (Hanken) where each student in the accounting/management accounting class had to analyze public financial statements from Finnish companies as part of the advanced classes. This analysis was then used to compare different companies in the same vertical and to create some base-line standards for analyzing and comparing companies. This analysis gave me a perspective on accounting and how it really works. This learning has helped me throughout my life and especially now as an entrepreneur. The power of cash-flow statements can’t be underestimated which has been a reality for many software vendors the last couple of years.

However, during that time (1984-1989), the data was stored in Lotus Symphony spreadsheets, so most of the analysis and data entry was manual and very labor intensive. Companies at that time were still using green screen terminals and only a few companies started deploying personal desktops, but laptops were still not on the market as far as I remember. The first real PC with MS-DOS that I used was Italian Olivetti with two floppy stations. I can’t believe how far we have come since then.

This law (#8) is a reminder to me of the changes in business models and how cloud can provide new business model opportunities for organizations. Ten years ago, the notion of “data asset use” was very rare and if you had the possibility to accrue information from companies in the same vertical, you had a tremendous asset in your hands. I know a company owner in the US that sold his company for a few millions by having collected financial data for financial institutions over time and then sold the assets to a larger company as part of an exit. Let’s view how this law impacts software businesses and business model canvas overall.

Law #8: Leverage and monetize the data asset

Imagine having access to a massive amount of data that your clients are generating in your cloud application. Image to have access to performance metrics for a given vertical market segment such as banks at large and their performance. Wouldn’t it be valuable for somebody to be able to compare banks with each other from different perspectives and maybe even sell this data to external parties? Imagine being able to service this through Microsoft Dallas service that enables developers and information workers to easily discover, purchase, and manage premium data subscriptions in the Windows Azure platform.  Maybe this collective information serves as benchmark information for other companies in the same vertical and enables these companies to compare how well the perform in their respective business?  The Bessemer blog entry gives examples of this kind of benchmarking by referencing the leading expense management software company Concur where companies in the same peer group can compare for example expense costs such as travel with other companies.

Another successful example is the company Mint.com that used to compete with Intuit Quicken by providing a free SaaS solution for consumers to track expenses automatically. The Mint story is very interesting; it was started by Aaron Patzer, Matt Snider and Poornima Vijayashanker in Mr. Patzer’s apartment. Two years later the company was acquired by Intuit for $170 million. The story is simple and amazing at the same time. The founders felt that it was too difficult to track personal finances online and that people had to spend far too much time in setups and entering data. The founders felt that once the Mint.com is linked to the credit card statements and bank accounts, most of the daily stuff should happen automatically. I found out about this service as part of my own research and decided to test it out. It is as easy as Mint.com claims and today I get updates from the system on regular basis. The business model that Mint had initially was to use the consumer data to propose better credit card deals etc. to generate leads for credit card companies etc. It is obvious that Mint.com became a threat to Intuit so they decided to acquire them. Mint.com success has led Intuit to replace Quicken Online product in favor of Mint.com. Let’s analyze how this law can be viewed from Business Model Canvas perspective.

Summary of our findings in respect to Business Model Canvas

This law (#8 of Bessemer’s Top 10 Computing Laws) can be linked to any of the nine Business Model Canvas building blocks. The success of any SaaS company utilizing data assets effectively will be based on:

1. How well the company can define its Value Proposition (VP),
2.  How well the information assets can be linked to a specific Customer Segment (CS)
3. How the company can generate revenue (Revenue Streams-RS) from these information assets.

This law extends the use of information that the SaaS vendor can utilize and gives a business opportunity for the SaaS vendor. This model has not been possible in the past as the data has typically been secured by the end user client organizations and their data centers.  Companies such as Concur, Mint.com and many others have identified the opportunity to sell information/service instead of selling software and I think this will be the key differentiator in many of the future SaaS innovations.  The time of having lots of features and functions in a software package might be over and people appreciate solutions that are easy to use and do not require lots of training to maneuver.

The SaaS vendor needs to have an understanding of the analytics behind the data in selected Customer Segment (CS) and this relates back to the need to have the right Key Resources (KR) and Key Activities (KA) that are well aligned with the SaaS vendor objectives.