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Service-now.com Winning Battle Against HP, Sees Sales Soar

Service-now.com, an information technology support company in Solana Beach, said it has generated $20 million in revenues in fiscal year 2009, which ends July 1, following a record first half.

The business provides a “software-as-a-service,” or SaaS, platform for employees of large businesses looking for ways to cut costs.

“It’s been a perfect storm for us,” spokesman Rhett Glauser said by phone. “IT executives are looking for ways to squeeze costs out of their IT operations, and software-as-a-service is an ideal way to do that.”

Examples of SaaS are Amazon.com, eBay and Gmail.

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“Gmail is a great example. Instead of having an Outlook server installed in your business, you’re using everything over the Web,” he said. “We’ve taken the same approach with enterprise IT management software.”

The company has been going after Hewlett-Packard Development and BMC Software support customers, which use the traditional model.

“Our subscription license will be 80 percent of the maintenance license that the customer is paying for HP or BMC,” Glauser said. “We also guarantee that we can beat implementation time and costs. We’ve really kind of thrown down the gauntlet here and are challenging these guys head-on.”

Service-now.com, which generates revenue from subscriptions, counts more than 200 enterprise customers. Those customers employ 33,000 IT workers, who provide help desk functions for 2.5 million employees.

The company has 90 employees, up from 60-70 this time last year, and is still growing, says Glauser.

Its revenue grew 389 percent in the 2008 fiscal year.

Founded in 2004 by CEO Fred Luddy, a former chief technology officer with Peregrine Systems, the company has raised $7.5 million in two funding rounds led by JMI Partners of San Diego: $5 million in December 2006 and $2.5 million in July 2005.

The company has been cash-flow positive, which does not mean profitable, but indicates that a business is healthy, at least in the short term.

Forrester Research, a Massachusetts-based technology and market research company, forecasts that revenue from SaaS will grow from 1 percent of the $18 billion IT management software market in 2008 to 10 percent by 2013.

Typically, businesses pay out 20 percent of their software costs on applications and 80 percent on technical support.

“We completely flip that model,” Glauser said. “The customer no longer has to maintain it.”

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VMIX Approaching Profitability:
Another software-as-a-service firm, Carmel Valley-based VMIX Media, which provides an online video platform for news and entertainment Web sites, reported last week that its growth doubled in 2008 and it is on track to double growth again in 2009.

It says it is on target to achieve profitability this year and reported year-over-year triple-digit revenue growth.

VMIX, which provides back-end services for media companies such as Tribune, McClatchy and Lee Enterprises, charges licensing fees to customers. Its SaaS platform saves customers from having to maintain complex software applications in-house, according to CEO Mike Glickenhaus.

Its chief competitor is Massachusetts-based Brightcove.

“We believe we have a superior technology, but they’re a leader in the space,” said Glickenhaus, former owner of Finest City Broadcasting, which had three radio stations. “We believe we have as strong of a technology platform, plus a simpler to use system.”

VMIX says it has signed up new clients such as Toyota-Scion, Penguin Books USA, Burton Snowboards, the American Cancer Society and JVC Americas.

“Compared to doom and gloom out there, one of the exciting things for us is that we’re growing and expanding,” he said. “We’re hiring people.”

The business recently opened offices in New York and Atlanta and added personnel to its San Diego office. It counts 45 employees , up from 40 last year. Many are from local tech companies. Founders Terry Ash and Ian Miller were formerly executives at MP3.com. Other folks have come from Qualcomm, Kintera and The San Diego Union-Tribune, says Glickenhaus.

Since its founding in 2005, the company has raised $21.5 million in two funding rounds, in 2007 and 2005. Local venture firms Mission Ventures and Enterprise Partners Venture Capital participated in both.

VMIX recently added content to its platform , allowing clients to pull from other sources , and it’s starting to capitalize on advertising dollars.

“That’s a new initiative that began at the end of last year,” Glickenhaus said. “Sites we worked with needed help with content to make them stickier and more compelling for audiences.”

Clients pay a single fee based on their size.

VMIX has also rolled out a reseller program to reach non-media outlets. For instance, an insurance company might want to provide intranet videoconferencing.

“It’s an affordable solution,” he said. “We develop it, maintain it and upgrade it on a regular basis so they don’t have to.”

Send technology news items to Ned Randolph at nrandolph@sdbj.com.


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