Why Klir Technologies Failed

With little fanfare, Klir Technologies folded its tent and ceased operations at the end of July despite plenty of analyst and media accolades prior to its untimely demise.

It is worth taking a moment to consider why this highly regarded SAAS (software as a service) and managed services vendor succumbed in a market that appears to be growing quickly.

Capitalizing on the rapid growth of on-demand services business, Seattle-based Klir sought to address companies' IT performance management needs via a SAAS solution. Although Klir had been in business since 2000, it began to attract analyst and media attention in 2006 when it adopted some of the best practices of the Web 2.0 social networking world to address longstanding issues in the IT management arena.

Klir recognized that traditional NSM (network/system management) platforms from companies such as IBM and Hewlett-Packard had fallen short of meeting the needs of IT managers in the same way that the legacy, on-premise enterprise applications from software vendors such as SAP and Oracle have failed to satisfy the corporate needs of many business users.

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Klir was in the vanguard of a new generation of SAAS vendors promising to deliver easier-to-deploy on-demand management solutions that would replace the overly complex and costly on-premise management platforms of the past.

A key ingredient of Klir's go-to-market strategy was giving away free, single-user licenses to IT managers to penetrate the market. This approach allowed IT managers to test Klir's capabilities without making a financial commitment.

This strategy followed the example of a similar tactic employed by a company in the 1990s, called VitalSigns, which was acquired by my former employer, INS (International Network Services).

Klir's vision went beyond simply giving away single user licenses in hopes of winning corporate customers. Klir hoped to gather valuable IT performance data from all its users that could serve as an industry benchmark that they could use to build industry best practice standards.

Klir's unique approach attracted more than just the usual analyst and trade press attention. By quickly building a base, or "community," of over 40,000 users, Klir also built an appealing target audience for many of the trade publications that have become increasingly starved for readers. As a result, Klir found itself in the envious position of entertaining various offers from publishers seeking to promote themselves on Klir's site. Typically, publishers would insist that a vendor like Klir advertise in their publications.

Klir's initial success also gained the attention of some major players in the market interested in adding Klir's functionality into their management platforms and harnessing Klir's community-building capabilities to expand their market penetration.

Despite all these attributes, Klir still failed to overcome three fundamental challenges that face most companies when "crossing the chasm."

First, Klir was unable to successfully convert the free, single-user license holders into paying customers. Second, its efforts to establish strategic partnering arrangements with the major vendors and resellers distracted it from the customer conversion process.

These distractions also prevented Klir from clearly distinguishing its SAAS capabilities on a functional level from a widening array of on-demand and traditional on-premise management alternatives.

Michael Treacy and Fred Wiersema's popular business management book, "Discipline of Market Leaders," advocated that successful companies can only succeed in one of the following three strategic areas:

- Operational Excellence

- Product Leadership

- Customer Intimacy

Klir Technologies was unable to build a track record of success in any of these three areas. Its demise illustrates that despite the intoxicating appeal of today's SAAS and Web 2.0 movements, the market leaders of the future must still adhere to many of the proven business principles of the past.

Jeff Kaplan is the managing director of THINKstrategies (www.thinkstrategies.com), a Wellesley, Mass.-based strategic consulting services firm, and the founder of the Managed Services Showplace (www.msp-showplace.com) and Software-as-a-Service Showplace (www.saas-showplace.com). He can be reached at jkaplan@thinkstrategies.com.