Software-as-a-service provider Phase 2 International will team up with IBM to bring Big Blue’s Lotus software suite, previously aimed at larger enterprises, to the hard-to-reach small enterprise market.
Phase 2 CEO Kevin Doherty says that although solution providers servicing the midmarket have been clamoring for this type of solution, working through pricing negotiations and hashing out delivery models has been an arduous process.
“It’s taken us seven months to work through some of the issues around delivering these products,” he says, but the end result is a win for both companies.
“IBM’s Lotus is a really full-featured, secure and mature set of software, but the price point’s usually too high for SMBs who are our customers. IBM, on the other hand, had no product suitable for those small and midmarket customers,” Doherty says.
Many solution providers Phase 2 worked with were offering a managed hosting approach through IBM, whereby they purchased Lotus suite and then delivered the solution to customers. But Doherty says the upfront investment was a stumbling block for many solution providers who couldn’t gain ROI on delivering the services that way.
“We knew that to be successful in this SMB market we had to be able to deliver Lotus via a pure SaaS model, with a lower price and also include support,” he says.
Doherty says when Phase 2 initially floated the idea to its solution providers, they began seeing interest from customers significantly larger than Phase 2 was used to. Where Phase 2 previously averaged 50 to 75 seats per customer, Doherty says customer interest was increasing from customers with 500 to 1,000 seats.
“This gives both companies access to a market we really weren’t playing in before,” he says. “We concentrate on the SMB software base, targeting the sub-1,000 seat market, which makes up about 80 percent of businesses in America. IBM does offer their own hosted services, but their minimum was 1,000 seats,” he says. Trying to reach a compromise that would allow both companies access to this lucrative market wasn’t easy.
IBM and Phase 2 are planning a soft launch this week, and will begin offering the Lotus suite for general availability April 8, 2009, Doherty says. Already, solution providers and customers are lining up.
“We’ve had customers coming to us as far back as a month ago asking for access to these applications,” he says. “We’re really encouraged by the response, even with the economy the way it is, and we’re proud of where we’ve been able to get to from a cost and performance perspective,” he says, though he could not divulge pricing information at the time.
Doherty says he believes offering the Lotus suite will help Phase 2 double in size by the end of 2009, despite cautious spending by IT organizations and uncertainty about the global economy.
“We have about 4,000 clients right now, and while we’re not as large as, say, Salesforce.com, we have doubled in size since August or September of last year, and we’re poised to do it again by the end of this year,” he says.