Companies to Learn From: Klir Technologies

I've given a couple of speeches recently -- and listened to many more -- on Software as a Service (SaaS). The topic is hot, so there's a lot of repetition: SaaS advantages over traditional solutions: easier adoption, faster development cycles, better feedback, and so on. The other oft-repeated theme is "traditional software is dead," with Salesforce.com and its "no software" slogan the usual tired example.

I think that perspective can obscure two important points. A commuinity of SaaS users can provide value to the community, and -- by virtue of being a community -- the users are easier to reach (and so more valuable) as a target market. That can radically alter the economics of software.

The search market is an extreme example. Google's users (both website builders and people who search) actually drive and tune the ranking of pages, which in turn makes searching more effective. The community of users is a huge target market, whose searching makes them accessible and valuable to advertisers. Advertisers are in fact paying for Google's huge investments in software and the datacenter infrastructure that supports it. As users of search we get an incredibly valuable, and expensive, software service for free.

I don't think this is limited to search and consumers. I think search is a specific case of a general pattern: software -- including business software -- can be subsidized by someone other than the people who use it the most. A couple of examples stand out: Rearden Commerce and Klir Technologies. Both Klir (IT monitoring) and Rearden (procurement) provide direct business value to their enterprise customers. However, both companies have found a way to make their user community valuable to other service providers: Rearden to the folks whose products are being procured (travel services for example), and Klir to the companies (like Cisco or Dell) whose IT equipment is being monitored.

I think Klir and Rearden can each teach us lessons for the future of Software, so I want to profile each one. This entry will focus on Klir, and I want to thank their CEO and co-founder James Maiocco, who kindly provided me with a good deal of background and insight on the company.

Klir Technologies provides IT analytics, with five distinctive characteristics:

1. The analytics are delivered as a service, without agents. Klir uses industry-standard interfaces for systems and application instrumentation. For smaller companies and most devices, this information is more than adequate and avoids the complexity and cost of agent deployment. Klir provides code to query the interface for every application or class of device that the service supports. That code is instantly available to all customers. Klir’s shared services, standard-interface, no-agent model allows it to implement support across its entire customer and prospect base for any new interface, within just a few days of that new interface appearing.
2. Klir’s service collects information from vendor support databases and industry publications, so when users receive a problem alert, the application can automatically retrieve relevant information, reducing the time it takes to identify and fix. This is an example of SaaS companies adding value to their offerings by federating information from various suppliers.
3. Users of Klir Analytics 3.0 (beta Sep 2006) can post, use and rate the practices of other customers. Proprietary data is stripped out of the “post”; but the rule set and policies can be directly browsed, copied and applied to another system. An example from a Klir blog:

…, perhaps you are not an expert on managing your Dell PowerEdge servers. Notwithstanding the fact that Klir can collects more than 100 metrics on Dell servers – what should you care about? What metrics are important? Fortunately, someone else in the Klir User community is an expert on Dell PowerEdge servers. Thus, you can quickly browse, identify and apply the best practices of another individual to your systems. Customize the dashboards, reports or alerts if you like. You can also rate, comment and see how many others have “copied” this same best practice to determine its value (same idea as a book review and comments on Amazon or Netflix).

The notion of sharing best practices is not unique:

· Dell’s Platinum Plus IT is similar but is targeted at larger enterprises with 100 or more servers. Dell offers a dashboard for IT managers to track problems and compare their results with other companies.

· Splunk, a San Francisco company backed by CA, lets system administrators search through data on applications, devices and services, then share their troubleshooting advice in a community wiki.

However, the immediacy of Klir’s offering – which allows one-click application of shared solutions – is quite distinctive.

4. Klir can be “skinned” and delivered by a third party. About half of Klir’s business comes this way from companies like Virgin Atlantic and British Telecom. Their goal is to have 80% or more of their revenue come from this approach. This reduces their cost of sales, while retaining all of the value of operational control and the valuable information placement capability described next.
5. Klir is also a precisely-targeted platform by which vendors can reach their customers. The Klir user experience is a drag-drop customizable dashboard built on Ajax, which includes data feeds delivering targeted web content from industry, trade and vendor sites. Vendors pay Klir to deliver relevant content directly to users of their products. This vendor-supplied information is like an ad with respect to its revenue opportunity, but unlike an ad, it’s viewed as high-value by both the vendor and the user.

To summarize, Klir demonstrates the “second order” benefits of a SaaS implementation. While we are all familiar with the SaaS advantages of rapid deployment and updates, and the appeal of “pay as you go” licensing, the value of a single, co-located community is less well known. In Klir’s case, this includes:

• sharing and reputation-based assessment of community practices, and the ability to subsidize costs with indirect revenue. Microsoft’s Error Reporting Service (based on the Watson crash analyzer) provides some of these benefits, but does not, for example, share customer best practices, allow user ratings, or provide targeted vendor feeds
• Providing vendors with high-value reach to targeted users and a way to cross-subsidize the software for users. For example, approximately 50% of vendor call center interaction is addressed by information already on the vendor’s website. Klir can proactively deliver that information directly to customers either experiencing a problem, or susceptible to it