By Allan Maurer
ATLANTA—Although the software-as-a-service (SaaS) space met with initial resistance years ago, it is now growing rapidly, says Astadia CEO Ernie Riddle. On the heels of a $7 million first round from Kodiak Ventures this week, Astadia plans to do some rapid growing itself, through acquisitions and hiring, Riddle says.
Astadia, the largest deployment partner for Salesforce.com, Eloqua, Xactly and other leading SaaS products, is negotiating to acquire a 100-employee firm that will increase its capacity outside the United States, says Riddle. The company expects to complete the buy in February.
Currently, Astadia employs about 140 people, two-thirds of them fulltime. Riddle says it has allocations out to hire another 55 people on both the technology and the sales staff.
“We’ve been in this business six years now and it literally doubles every year. We never had funding before, but it looks like this will have a lot of legs and frankly, this is a good time to invest with an outside capital partner and move quickly. I’ve been on some fast trains before, and this one is moving in the right direction.”
Salesforce.com drumbeat led the way
Kodiak, he adds, “understands the space we’re in well.”
Riddle says that 80 percent of Astadia’s business comes from ten industries that include financial services, telecom, media, technology, and energy. “We’ll be hiring sales engineers and people experienced in fast-moving verticals such as telecom, financial services and media,” he says.
Riddle says “the drumbeat” of Salesforce.com drove much industry acceptance of SaaS. “They’ve been at it six years and have been a pioneer of the concept in many ways. In the last 18 months they’ve added dimension to their product, expanding to include marketing and partner relationship management and more.”
Among other things, he notes, Salesforce.com has announced an open platform so that an integrator such as Astadia or a large customer can buy a seed from Salesforce then write code hosted and maintained by Salesforce to solve problems. “That’s causing a flurry of activity in the marketplace,” Riddle says.
“Our thought is to have a year of expansion and significant growth, write intellectual property around aps, do acquisitions and in not too many months look for a B round to continue growth. The thing that appeals to us about the SaaS model,” he adds, “is that it’s a subscription model that doesn’t require a major capital outlay on many projects.”
That’s good even in a downturn, Riddle says. “There’s more flexibility around a subscription model. It feels more comfortable to our customers.”
Nowadays, once skeptical CIOs are more supportive and receptive. “When we started, they were more neutral at best,” Riddle says. “They stressed the need for caution. They did not embrace hosting things off the premises. But in the last 18 months or so they’ve made the journey and see that this SaaS thing is a friend, not an enemy.” Part of that, he points out, is that SaaS companies have resolved security issues.
Riddle confirms what other SaaS firms have told TechJournal South, that in some cases, business owners or department managers can now make SaaS purchases, saying, “I’ll put that in my budget,” without going through the CIO.
However, “We encourage companies to include a rep from IT as part of everything in their business process,” Riddle stresses.
So far things are going quite well for Astadia. It was one of only 20 business services companies that made the Inc. magazine list of the fastest growing private companies in 2007, where it placed 83rd based on its 2,762.8 percent three-year growth rate.
TechJournal South’s report on Astadia’s funding: http://techjournalsouth.com/news/article.html?item_id=4539
On the Web: www.astadia.com
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