By Allan Maurer

RESEARCH TRIANGLE PARK, NC –Moving SciQuest from a public company offering an online business-to-business exchange to a private one offering software as a service saved the company, says CEO Stephen Wiehe. The company was named the “Best Business Turnaround” in the 2008 American Business Awards – the Stevie Awards.

SciQuest was recognized for the company’s strong financial performance and an inspiring success story that started in 2002. Once an online marketplace selling lab equipment and supplies, SciQuest was reinvented that year to become a leading provider of on-demand eprocurement solutions.

Wiehe, one of 40 speakers and panelists at TechJournal South’s Internet Summit in Chapel Hill, NC in November (http://www.internetsummitevent.com), says the company actually made the switch to on demand software “A little by accident.”

“I would love to say I woke up in the middle of the night with an idea I drew on a piece of paper,” Wiehe says. But it didn’t happen that way.

Hired in 2001, Wiehe saw that SciQuest’s business model was not working, although it was trying to solve a real problem. Many large pharmaceutical companies were still struggling with e-procurement. “We felt we had assets we could refocus,” Wiehe says. “We thought we could build the technology to solve the problem.”

Another alternative the company looked at was shutting the company down and returning the cash to shareholders, “But there would not have been that much cash to return,” Wiehe notes.

By accident, not design
The company decided the best way to meet the market need would be to build its software on a common server and distribute it that way. “It was by accident, not design,” Wiehe admits. “We were trying to solve a problem.”

Analysts tell the company that it became one of the first companies to offer what is now commonly called SaaS, or hosted on demand software.

By using open source software components, the company was able to build a customized solution for smaller markets then add to it. “We were able to deliver software at a much lower cost point than Microsoft, Oracle or others with their expensive licenses,” says Wiehe.

Prices coming down is always a good selling point.

While a lot of companies are trying to take their traditional software products and switch them to SaaS today, Wiehe warns they’ll face numerous challenges.

Not all challenges obvious
“Some challenges are obvious, others not so obvious,” he says. “Obviously, you have to support a lot of usage on the platform. Not so obviously, you are an outsourced IT provider. You have to meet their specific requirements for how you support and maintain it. We regularly meet with the CIOs of our customers who want to understand things like how we back up the data.”

The companies have policies on how often back ups should be performed and how their software is maintained and they look at how SciQuest compares and contrasts to their processes, Wiehe says.

Another concern customers have is keeping their data private. With a multi-tenant architecture, keeping users in their own data is a complex problem, he says. “Some companies give every customer its own database, but that’s expensive and complex. So, you have to work hard on how to segment data so there is no way Glaxo can see data from Amgen.

Another concern is security. “We have a tight integration to a company’s system and feed their accounting system off of ours. So you have to put in a lot of thinking time up front and figure out from day one how you can be trusted.”

Then, there is the question of upgrades, whether a company can schedule them or gets them when they are released.

Finally there’s uptime. “Customers have to be able to use it 24/7,” says Wiehe. “There are a lot of things you have to do to be successful, and if you don’t crack the challenges, it will keep from being a good SaaS company.”

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