Cloud Computing is the way ahead, reckons enterprise marketing management (EMM) firm Unica, which is seeing growth in its on demand business even as its on premise licences slow down.
“We have been investing in building out a full set of on-demand capabilities for a little over a year now,” says Unica CEO Yuchun Lee. "We have been fairly successful in the market with our on demand products around web analytics as a technology area and also marketing resource management. We are pretty optimistic when we launch additional capabilities in this area, that it would match the demand in the market, especially for companies in this kind of environment where they’re more hesitant on shelling out larger capital expenditure.
“Most of this growth comes from drivers around on demand products, and most notably, our web analytics business is doing well. We are seeing improved competitive dynamics. We are getting invited to more competes. We are getting invited to larger competes. We are improving the way we engage in those competes and frankly, customers are actively looking for alternatives. We are proven that we have a proven technology with a scalable solution. We have reliable functionality and reliable services, and those are all things that the market welcomes at this point.”
It's a good time to be seeing this interest as the firm has been hurt by delays both in the signing of perpetual licence deals and the implementation phase for signed services projects. It recently reported a net loss for the first quarter of $4.1 million revenues down 8% to $26.09 million. More alarming was a 42% decline in perpetual licence revenues. Licence revenues for the first quarter decreased to $6.46 million while subscription revenues rose to $4.3 million from $2.7 million last year.
“The fastest growing segment of our business continues to be our subscription business, which is primarily driven by our on demand products. Similar to our international operations, we’ve added resources to our subscription business as we see the strong growth opportunity both during fiscal 2009 and even more so, from a longer term perspective,” notes Lee, citing a number of new subscription customers and those who bumped up the on demand spending. These include Ceridian, Citrus Online, Coastal Contact, Duke Energy, Fortis Bank, Lexis-Nexis, Loreal USA, the American Medical Association, Banque Saudi Fransi, Comerica Bank, Graves Communications and Health Care Insight.
“Although we still see cautious buying behaviour across the board, our on-demand solution requires lower level initial investment and lower level risk relative to perpetual licence solutions, which we believe will help our subscription business to continue to perform well even in a difficult economic environment," he adds. "Our growth in subscription revenue is being driven by our increased traction with our web analytics and marketing resource management solution. In addition, we are in the later stage of piloting additional on demand solutions that we plan to bring out to market during fiscal 2009.”
Full speed ahead?
It's clear that The Cloud is the future for Unica although Lee is quick to reassure customers that the firm will proceed with caution. “Our strategy is to not convert the business to a subscription or on demand business,” he explains. What we see in the market is that there is very strong need for technology that spans different spectrums of standardisation of processes as well as complexity and scale. In that different spectrum you need to have solutions that are well tuned for those companies that are highly standardised, for example mid market companies and some of the organisations that are at the departmental level. Those are highly standardised processes that can benefit from an effective service offering.
"Others though have much higher level complexity because of the customer data warehouse and data base they’re managing, in addition to the software applications. Then there are those that have a religious need and also organisational complexity to have the solution behind the firewall on premise. We think going forward in the next few years, a company that can address all of those different levels of complexity and different levels of standardisation is going to win in this market. Our view is that these are very distinct markets and we are not seeing major signs of conversion from one to the other. “
Softly, softly seems to be the approach. “We will continue to monitor our perpetual license business very carefully,” concludes Lee. “We have already reallocated resources from our domestic perpetual license business to our international operations and subscription business. We will continue to monitor demand in all areas of our business and will proactively shift resources to higher growth areas as needed. We will balance our short term decisions against our longer term strategy to ensure that we protect the business for the long-term and to maintain our track record of delivering profitable results and positive cash flow in any economic environment.”
