A Lens Into The Future Of Enterprise Software

I’ve been working with our portfolio company Work Market for four years now. It’s been a real learning experience for me as enterprise and SAAS has never been my long suit. We were attracted to Work Market because, as their name implies, they use a marketplace model to help enterprises get work done. Specifically, they created and are the leader in the Freelance Management System market. We like software that has a network effect built in because it is harder to commoditize. A marketplace of freelance workers inside an enterprise software application seemed to us to be exactly that. And that has been true. But along the way we’ve learned quite a few other things:

1) Mobile matters, a lot. I mentioned in my What Just Happened post that mobile is starting to really impact the enterprise software business.

At Work Market, the freelancers want to get work, accept work, and close out work on their phones. So mobile app development has become a huge part of what the Work Market engineering team has to work on. At some point, the enterprise will likely want to issue work orders on their phones too.

2) Freemium and transactional business models work in the enterprise just as well as they work in consumer. Work Market has a free tier with a transactional revenue model for enterprises that want to try the system or plan to be an occasional user.

WM pricing

We know that “freemium SAAS” works well for horizontal enterprise applications like Dropbox, Slack, Google Apps, etc and I believe we will start seeing freemium SAAS models applied to vertical applications as well. We already are.

3) Enterprise applications must also be platforms if they want to scale into the largest enterprises. Salesforce is the poster child for this trend. They have become a very powerful platform and distribution partner for SAAS applications. But every SAAS application should have APIs that allow their users to plug enterprise software together. Work Market can talk to the other large applications that enterprises use for managing talent (HR, VMS, etc) and that is a requirement for the largest deals. It will soon be a requirement for all deals.

I am seeing a bunch of new SAAS companies get started whose entire value proposition is building on the open APIs that most enterprise SAAS products have released in the past few years. If you are in finance, or HR, or marketing, or sales, you are now using a host of SAAS applications to get your job done and a big trend in the market is new applications that tie all of those together (via APIs) so that you can have a single view into your workflows. This is the “platformization” of SAAS and it is upon us.

The big takeaway for me is that all the things we have seen happen in consumer web and mobile software are happening in the enterprise and the impact of that is already being felt. I am seeing it up close at Work Market and fortunately they got started recently enough that they have been able to take advantage of all of these trends (marketplaces, mobile, cloud, freemium, platform) as they go to market and build their business. That is, among many other reasons, why we recently led a growth round to help Work Market’s new CEO, Stephen DeWitt, scale into the freelance management system market opportunity that they created a few years ago.


Comments (Archived):

  1. pointsnfigures

    Yup. Exactly what JuvodHR.com is doing with their API. They were the first entrepreneurs to tell me it’s not necessarily about the software per se, but about the API’s and who you hook into, and who can hook into you.

    1. LE

      Their marketing is pretty good with the exception of the name. I have no idea how to pronounce that. My guess would be “jew vod” but I’m sure that’s not it.

      1. pointsnfigures

        That’s it. I agree, pretty bad name! But, they are older entrepreneurs and know what they are doing. Exited three companies in the past successfully. This is a huge problem they are tackling. Employee feedback and reviews. In some industries it has legal and unemployment compensation implications.

        1. LE

          But, they are older entrepreneurs and know what they are doing.Well they don’t know what they are doing with names that is for sure. And if it is pronouced “jew vod” they need to register and map jewvodhr.com to their site which they haven’t done. (Or use juvod.com which they don’t … not that that’s a suggestion btw..)By the way I get into this with Arnold from time to time. Of course you can succeed with a bad name. [1] But getting a good name doesn’t necessarily require as much money it requires some creativity and/or having a clue. And with a better name in theory they will potentially have a better exit.A patent by one of the founders explains where the name “juvod” came from, was something they did previously:http://www.google.com/paten…(Lot’s of other IP so it seems the only reason they choose this name is that it was something they started back in 2004 otherwise it’s meaningless.)Also trademarks on “t-shirts, hats, caps and head scarves”.[1] All else equal would you rather be tall and play basketball or be short and play basketball? Would you rather hike Everest with handicap or without.

          1. pointsnfigures

            Tall and quick. yes. You get no argument from me on names.

  2. Matt A. Myers

    Is it like Slack but for managing freelance workers? I don’t use Slack, don’t know a ton about it either, though feels a bit like that? Elance/Odesk + Slack? It certainly makes sense.I’ve used Elance/Odesk for years. There have been some improvements over that time, though the biggest drawback is the platform customer relationship management decisions. Odesk, which now merged with Elance, doesn’t consider blackmail to be a high-risk so they that kind of behaviour an be expected on those platforms.How does WorkMarket not fall into being incentivized to not allow such behaviour?

    1. fredwilson

      Work Market sells its platform on a subscription basis to enterprises who typically put all of their freelance work onto its platform. it is a very different model to Odesk and Elance

      1. Matt A. Myers

        Ahhhhhhhhh. Thanks for clarifying.

  3. William Mougayar

    That’s an interesting segment they’re in, i.e. self-managed contractors.On the lower-end you’ve got the elance and odesk, and on the opposite end you’ve got the full-service outsourcers, like Accenture et al. WorkMarket seems to be in the middle part of that market.I wonder how big is that segment, in relation to the others?

    1. LE

      I wonder how big is that segment, in relation to the others?You don’t have to wonder it’s huge. The question really is how do you acquire customers and at what cost through your marketing. You aren’t sending out salespeople for $499 per month. And they don’t post prices on “enterprise” offerings (I like that on the fly pricing model but it’s a long sales cycle..)A quick check shows they aren’t doing google adwords for “freelance management” or “contractor management” or “workforce saas”.Accenture is a much different offering on many levels:http://www.accenture.com/us…Would take a day just to figure out what is going on. Plus it’s like dealing with Oracle impossible to find out answers to simple questions to many irons in the fire.

      1. William Mougayar

        I’m curious because I know this market. I had direct experience in the IT outsourcing market as global head of corp marketing at Cognizant (Teaneck, NJ) for 3 years. I think it’s all part of the same continuum: Hire 1-2 contractors (eLance/oDesk)—> Hire lots of them (WorkMarket)—>Hire a firm that manages them (Accenture, Cognizant, etc.). I’m asking so I can learn about the shifts that are happening.

        1. LE

          (WorkMarket)—>Hire a firm that manages them (Accenture, Cognizant, etc.).So wait are you saying that a department at a company who starts out and gets their beak wet using workmarket, that if they are large enough they (entire company) end up with a firm like Accenture?

          1. William Mougayar

            That’s what happens with big O “Outsourcing”. Fortune 2000 company gives a contract to the big company, and that company “re-badges” some employees who end-up staying where they are, but they work for the outsourcer instead. And they fire some others too. And they replace some of them by workers in India, China, Eastern Europe, anywhere cheaper. Welcome to Outsourcing.

          2. LE

            Ok I think I get it.So the risk is that you become a source of talent that ends up getting full time jobs managed by someone else.In that case the good news is that large companies will typically abide by contracts. So if there is something in writing which says “don’t touch that” (w/o paying liquidated damages) the “workmarket” can collect money when that happens. (Depending on the contract and the specifics).My sister worked for a company and when she was hired away they paid a fee to allow her to do so. (Or something like that..) Kind of setup as a “try before you buy” situation.

    2. pointsnfigures

      Growing. Exponentially. It’s why the co-work movement is also growing.

      1. William Mougayar

        I’m assuming this has a correlation to the growth of that middle segment market that WorkMarket is in.

  4. JamesHRH

    Anyone who has ever managed a creative services supply chain has a plug and play mentality – ‘if this supplier goes off the rails, we will just change our AoR and get ourselves back on the rails.”Amazing to see this mindset leach into Enterprise SW.Really, really smart of Work Market to set up a customer relationships model that allows occasional usage – that’s exactly how most Enterprise buyers like to start out: nibbling.

    1. Tehsin Bhayani

      And from the freelancer’s perspective, both for the physical work (seems to be more of) as well as for the digital work, I would imagine it allows the smaller vendor/freelancer to “get into the door” with some of these larger companies through a platform like this (sort of a wedge offering), and work their way up to a larger relationship. Am wondering if Work Market ties the enterprise of not sourcing the freelancer outside of the platform…

      1. LE

        Am wondering if Work Market ties the enterprise of not sourcing the freelancer outside of the platform…How would you enforce something like that? Point of going through any platform is that it holds people feet to the flame. Anyone can (and does) go out of the platform (example might be buying direct from an ebay seller). However if you do that you lose the “stick” that is the value of the rating that is exactly what keeps people treating you correctly many times. [1][1] Another way to put this is the contractor that you get that works for Lowes is not the same as the exact same company doing the work directly for you.

    2. Rick

      It’s a great approach to getting new technology for free. Take an “old-world” example… Say you have a software package that runs on the desktop. If you can get people to send you free source-code that enhances your package then you get free features. Also if you don’t like the source-code you can just take the idea and have your own programmers write new code to implement the feature. The larger the package gets the harder it is for individuals to create all the code that supports their small one-off feature..That’s what the WinOS did. It provided a way to create applications using a core functionality set. Then everyone who invested in writing applications for the WinOS were stuck using that OS. Unless they wanted to spend the time and effort to create an OS for their applications to run on. It’s called lock-in.

  5. Pat Clark

    We are seeing more of the “plaformization of SaaS” every day. It’s driving purchasing decisions. In the mid-market and SMB space, the first wave is departmental and already very much alive (HR, Marketing, Sales, etc.).

  6. Twain Twain

    Interesting because Lerer Hippeau Ventures, BuzzFeed’s Jonah Peretti and others invested in a freelance management system for remote female technologists:* https://www.powertofly.com/…For several years there’s been a move towards careers of a freelance, portfolio, flexible, remote type as people eschew being locked into the corporate model — sometimes because it simply doesn’t synch with their philosophies or, in the case of some parents, because they have families to raise and would be better working remote and freelance.

    1. fredwilson

      remote freelance is tricky because it drives down prices pretty dramatically if location is immaterialwork market focuses on on site labor because labor is not as commodified when location matters

      1. Twain Twain

        V. true.Also, the types of jobs WorkMarket focus on require the talent to be in situ. You can’t remote install and configure a router. You have to be physically there to handle it.When location is immaterial, you can find developers in Vietnam who say they’ll code you an entire app for $100 compared with US developers who will ask for $100 per hour. However, jurisdictionally, the remote Vietnam-based developers operate under different Quality Control & follow-on tech support & services standards.QC is probably a positive differentiating feature for WorkMarket too.

      2. LE

        work market focuses on on site laborAnswers my question as to how they were able to offer drug testing.I don’t think that the site is clear though in terms of only managing onsite labor (unless the ambiguity is, for some reason, intentional).

      3. freelancer

        Would love your take on the biggest risk for platforms like this that provide onsite contractors on 1099. This has repeatedly caused companies to get sued for co-employment. Google/oDesk and Fedex/drivers are recent examples. Remote freelancer platforms at least don’t have these risks because the biggest and most obvious factor ‘Location’ is not the client’s office.

        1. fredwilson

          you have to build compliance deeply into your service and comply with the rules

          1. freelancer

            The problem is the rules are currently vague and can be interpreted differently. This is the IRS form if a company plans to hire contractors onsite and is unsure of how to classify them http://www.irs.gov/pub/irs-…. and then the “The IRS will review the facts and circumstances and officially determine the worker’s status. Be aware that it can take at least six months to get a determination”Imagine doing this for all of a marketplace’s clients as each one is going to be unique.

  7. Elia Freedman

    Does transactional and freemium work because it allows a manager to purchase off an expense report? Seems like that would be a huge advantage for enterprise sales.

  8. Gregg Freishtat

    Think this is spot on and would go one step further and tie it to yesterday’s zero marginal cost thread. The enterprise Saas stack will undergo massive transformation now that data/processing cost are so low that new models will emerge that eliminate the need for multiple back end systems and interfaces. Not sure its all API based though – I suspect many incumbents like SFDC are at risk to be replaced with new platforms and models. Its what I am working on in any case…..

  9. Barry Nolan

    ENTERPRISE SAAS BONUS MATERIAL: Brad Feld wrote a fantastic blog yesterday on The Illusion of Product/Market Fit for SaaS Companies. http://www.feld.com/archive

    1. David Clarke

      And David Skok’s piece on SaaS metrics is evergreen: http://www.forentrepreneurs…One random observation is that in enterprise SaaS, customer satisfaction is as important, and as elusive, as product/market fit. The closer you go to the core ERP transactions (HCM, payroll, financials, and related analytics), the more value you create. But keeping a smaller set (vs. consumer SaaS) of demanding customers happy enough to both renew and be reference-able is not for the faint of heart. On-premise incumbents are vulnerable in this dimension, as delivering customer satisfaction was never really part of their operating model and it’s a hard behavior to learn- or to fake…

      1. Barry Nolan

        Exactly David. There are two flavors of Enterprise SaaS – web based SaaS (freelancer marketplace) that have low friction and workflow integrated SaaS (workday), that are full of friction as they involve themselves in core business operations – and so need the full heft of sales, customer success, engineering to make it successful. Both have utterly different definitions of MVP, go-to-market, and product/market fit (whatever that is, at any given time)

    2. ShanaC

      thank you!

  10. LE

    This is one of those great SAAS’s that I never heard of. [1] I was thinking that this is exactly a solution that the building management company at our complex could use. I assumed this was targeted toward primarily startups or tech companies but was wrong (after taking a look at a few pages on the website).I saw this page and thought “hey they do that” a solution to a problem that I know we have at the complex:https://www.workmarket.com/…Also, I like the way the examples of their customers are are traditional businesses (Fedex, Quest Diagnostics, Walmart and so on). Not “trusted by” (insert a bunch of YC companies..)I’m going to forward this to someone who I think could use it. I’m curious on their take.[1] Somebody should put together a traditional “card pack” direct mail piece with one SAAS per card and blanket prospects (I’ve done this in other businesses and it works quite well to get leads).

    1. LE

      I said:I’m going to forward this to someone who I think could use it. I’m curious on their take.And their take is this:We have a program that we use to manage our contractors, it’s called Marks system and it is custom tailored for us. I don’t believe we are interested in changing anything at this point.http://www.marksystemsusa.com/However, that’s another great thing about getting a foot in the door with this type of SAAS. You really have to screw up (or lack a significant feature) to lose a customer. People stick with what satisfices and aren’t looking for incremental improvements or nominal savings. Especially when all the work to switch is on an employee who just wants to be able to get out the door at 5pm.

  11. vchamakkala

    Completely agree on all three points. Enterprise IT is being consumerized rapidly, with mobile leading the charge and here at Work-Bench we think 2015 is a big year for that.Freemium business models are an excellent point of entry into some of the largest organizations; follow-up by selling beachhead licenses into small departments = your land and expand strategy.On your third point, when I used to work at BofA screening startups for IT, understanding how new software integrates with other systems and open formats was one of the first things we looked for, pretty much a requirement to continue discussions.This year we’ll start to see more design hallmarks of big web players make its way into enterprise applications. Familiar things like the Facebook newsfeed, Tinder swipes, and commenting. Companies like Metric Insights, PathGather, Honey, and Abacus are all very interesting here.

  12. awaldstein

    Astute observations Fred.Been advising enterprise startups that even though enterprise sales hasn’t changed much in over a decade or more, marketing to the enterprise certainly has.Maybe what your seeing is that the sales process may be shifting as well.Good stuff. I love building brands to feed the enterprise supply chain.

  13. davidshore

    Is anyone here pricing the API calls for the revenue model, rather than offering a price per transaction or monthly all-you-can eat subscriptions like Work Market? Google Maps is an example – they offer their product free to consumers and free to app developers up to a point, then start to charge for API calls when the volume warrants it. I’m looking for best practices and recent trends for pricing API calls.

  14. Peter Chang

    Fred, I agree with all your points. I would like to offer another lens to look at the problem and opportunity in enterprise software.There is a ton of friction in enterprise software. Both in terms of how companies find solutions and how they adopt solutions. The future of enterprise software belongs to products and vendors that eliminate the most friction.Mobile is a fantastic productivity booster. Products should make it easy for end users to engage anywhere anytime. Mobile enabled products significantly boost adoption/utilization. The future of enterprise software eliminates time and place frictions.Truly freemium solutions are significantly easier for companies to evaluate and buy. Freemium products directly engage users and validate potential value as the first step, which lines up everything else. The future of enterprise software eliminates selection and purchasing frictions.Platform solutions allow everything to work together. They create consistency between past and future enterprise software decisions. As you pointed out, the emergence of platforms based on super-integrating APIs is probably the most exciting new opportunity in enterprise software. The future of enterprise software aggressively eliminates lock-in and application silo frictions.I am a long time enterprise software entrepreneur. I think we are entering a new and dynamic era for enterprise software. Thanks for sharing your thoughts!

  15. Ronnie Rendel

    It’s not only that SAAS is taking over enterprise services, but rather that the enterprise is being redefined by services like Elance and Work Market. What is a “transaction”? It’s exchange of time (skill) and value for compensation (bitcoin?) Everything outside this “transaction” is in your parents generation’s concept of “job”.We’re scratching the surface of what’s possible in the new enterprise using existing (mostly freemium) application services.

  16. Si Chen

    This is great! I hope these trends will break up the old monolithic “enterprise software” and allow more smaller apps and services to be adopted on pay-as-you-go models in the enterprise market.

  17. Nik Bonaddio

    Looks like it’s come a long way – I only still see about half of my original front end code!

  18. MartinEdic

    I went into Search work by category section and only one category has any work in it. After looking at their pricing I think they have a problem. Companies like Blur Group, which matches freelancers, mostly marketing-related, with projects, took years to build a steady flow of projects. This was very sales-intensive and even now, with 50,000 registered ‘Experts’ the flow of projects is very slow (I know, I am registered with them as an Expert).However, for my Kavyar project I would be interested in potentially partnering with them to use their infrastructure. The Kavyar guys think they have a better way of reaching buyers of creative services.

  19. ShanaC

    The reason this is happening is that more people need companies to hold risk for them as they transact as employees/freelancers in a network. APIs allow networks and marketplaces to make it easier to bear the risk. Same thing with mobile. If both parties can’t control how the risk is located, then the midplace falls apart.The network and APIs an some cases means that the network itself is weak – look what dark pools are (the ability to make more markets elsewhere). This may not be a bad thing for labor however, or for employers, if the pooling is done right and everyone can swap easily.

  20. Chris Kurdziel

    Congrats – Stephen is an awesome guy (I met him back in his days working on Azul Systems). Excited to see Work Market keep rolling.

  21. Si Chen

    There’s a difference between software that’s designed for use by businesses and classic “enterprise” software of salesforce or SAP.What you’re talking about here is software for businesses as a service. It’s nice to see it doing well with a consumer-like freemium/pay-as-you-go models.Will a similar approach work with core CRM or ERP software? I’m hoping so — I’ve bet on it with our product — but the real hurdle is unfortunately still the need for customization. Can we ever get away from long sales cycles and high implementation costs if businesses want to have unique processes and need customizations?If someone thinks of a way around this, please let me know!!!

  22. Katie

    Thanks for sharing your observations. This article is great!We have created a Reddit for startup Founders. Could you provide any feedback on the product? http://www.foundernotes.comThanks!

  23. Kenny Fraser

    Good analysis and there is no doubt that mobile and consumer trends are hitting the enterprise. The big challenge for enterprise buyers of software is to make the business change stick so that they realise the benefits. Harking back to the Whole Product approach, handling this change is also an opportunity waiting for disruptive new entrants.

  24. CJ

    Servicenow is a big one in terms of enterprise SaaS, platformatization, and integrating across the entire enterprise stack. It’s nominally an ITSM platform but it can run HR, Facilities, and more. Definitely one to look at in the space. They’re on track to eat Saleforce’s lunch if they make a few moves correctly in the next few years.