Fail story SaaS Helpdesk Small Business

    It all ended with Pivot. But we flipped the original idea.


    Pivot is a startup’s life phase in which, as a result of rethinking the experience gained, the business model changes. The extent of this change may vary. But most experts on a wide range of issues agree that there are no successful startups that have not made Pivot.


    Our ITSM365 project, having passed rethinking and changed positioning, was able to reach positive financial indicators sufficient for development without attracting investment money. This is not a great success, but already an occasion to share your experience. And their failures.
    This is what we will do under the cut.



    Do you remember how it all started...


    Back in 2001, in the glorious Siberian Ural city of Yekaterinburg, a remarkable company for the development of software for automating business processes, the company Naumen, appeared. One of the areas of business and, perhaps, the most successful, was and is the Naumen Service Desk solution, which is still well-known in the market of automation of IT processes.


    Naumen Service Desk was originally intended (although a separate interesting post can be written about the history of the solution) to automate IT service management processes ( ITSM \ ITIL ) in the Enterprise segment (IT service from 35-40 people). The product has been developing successfully over the past decade and has been confidently holding the leadership in the number of completed projects in the CIS for the past few years. Currently, Naumen Service Desk has expanded its scope beyond IT processes and successfully competes with major Western solutions, as well as receives “badges” of international level .


    Even at the stage of becoming a solution, we felt a need (in the form of numerous applications on the site, questions at various conferences, etc.) for a similar product on the part of the segment of small and medium-sized businesses. But, unfortunately, until a certain point they could not offer anything - Naumen Service Desk is an expensive product for this market segment (both in terms of the cost of software, and in terms of the time it takes to implement).


    These circumstances prompted us in 2010 to think about developing an ITSM solution for small companies.


    Smartnut


    Many companies need this class of software. Therefore, we decided not to make an abstract “software for ITSM automation”, but to select a specific niche and develop a specialized solution for it. We chose a niche based on the following considerations:


    1. The niche should be sufficient for this direction to bring tangible income (we did not have a goal to make this direction the main one, but to make it independent and profitable was necessary). At the same time, the niche should not have been too big to interest large international companies to do it (as we later realized, this was a mistake);
    2. A niche should be “understandable” for us. We must understand the problems and needs of the companies representing it. We considered and still consider the possibility of close interaction with its representatives as a prerequisite for choosing a niche and project success, both before the start, and during the development process and after the release of MVP .

    Based on these requirements, we have chosen a niche for small (the number of engineer employees up to 10-15) IT service companies (keywords: subscription service for computers, LAN laying, 1C support, etc.). The number of customers in pieces was estimated at about 10,000. And with a 20% "capture" of the market, we calculated as much as 60 million rubles per year of turnover (which fit into our original idea of ​​the "sufficiency" of the market).



    In June 2010, they started development, in May 2011 they released a closed beta version, in November 2011 they launched the service for open use, and in May 2012 they launched a paid tariff.


    But millions did not earn ...


    Fail


    At the time when it became clear that “we are doing something wrong” (August 2012), the situation was as follows:


    1. The number of companies that daily use the service in their work - ~ 180 pcs;
    2. The number of companies that also paid for this - ~ 30 pcs;
    3. The total turnover is ~ 60,000 rubles / month.

    It is good that we did not invest heavily in marketing and promotion (by the way, this cannot be considered a reason, see below).


    Reflection results further.


    Freemium model

    Our service allowed using the system for free if the number of accounts (support staff) was less than 5. There are 3 key errors here:


    1. Actually, the Freemium model itself. It can be used only if the number of representatives of the target market is measured in tens (if not hundreds) of thousands. In our case, the “top” rating was at 10,000 companies. In fact, only 16.6% of them became paying customers. By simple extrapolation we get that in the whole market there are only ~ 1600 companies ready to pay money for our service. This is not a serious business with our performance characteristics;
    2. Too generous freemium. We transferred to a paid tariff only when the company had a fifth employee in the service. As it turned out, most companies cost three to four. It's not even about the size of the company (in fact, 10 people can work in them). Just the maturity of the processes is such that access to the system, which records applications, is sufficient for the dispatcher, manager and a couple of “senior” engineers. Everyone else can be given tasks “orally”, the responsibility to fix in the comments to the application. This is not very convenient, but economical (yes, the financial condition of small business in the CIS is such that 2000 rubles a month is enough money to inconvenience);
    3. Wrong parameter for freemium. By this parameter, I recall, we had the number of employees. I strongly do not recommend using slowly growing parameters for freemium. The goal of any freemium is to lure and quickly transfer to a paid subscription. The number of employees is growing slowly. For all the time (from the moment the service was stopped), only 3 companies switched from free to paid tariffs. In our case, it would be more correct, as it seems now, to take the number of applications registered in the service as such a parameter.

    But even if we completely eliminated freemium, we would not become millionaires. According to subjective estimates, if we turned off the free tariff, we would increase the number of paying times by 3, but would reduce the average check by 2 times. Those. by the time of the inevitability of changes in the project, our revenue would not be 60,000 rubles a month, but 90,000.


    Market size

    Let me remind you that the "upper estimate" in pieces is 10,000 target customers. Upon receipt of 20% of the market, we would receive 60 million rubles of annual revenue. This is not bad for “one of” areas of business. But, firstly, there are much fewer actually solvent ones out of 10,000, and the average check is different from the planned one. And secondly - you can occupy 20% of the market only in a very mature and low competitive market. If the competition could still be called not fatal, then this market cannot be called mature.


    Lyrical digression. Investors often like to say that a project should have a "billionth" market. Of course, they need this in order not to get sprayed on trifles (even if your project returns the investment, but on a “million” scale, this is not interesting). This is also necessary for startups themselves . For a couple of years, the appetites of the team will certainly grow. Earn a million will not be a very interesting task. I judge on my own - similar thoughts influenced the decision to change the direction in the project. Focusing on a direction that, if successful in 3-5 years, will bring 60 million rubles per year of turnover is not a good idea.


    Solvency of small business in the CIS

    I will not say much about this. She's short. People save on everything. The main task is to survive. There can be no talk of any optimization of processes, development, training of employees, enhancement of competencies. Everything that helps to survive (read - increase sales) and all that inevitability (for example, a cheap opportunity to avoid communicating with state bodies) - works. Everything else is still doubtful.


    ITSM 365 as Pivot


    As a result, it was necessary to choose from 2 options:


    • Completely stop any attempts to find an interesting niche in small or medium-sized businesses, close the project and do other things;
    • Taki find such a niche. Let not in small, but at least in medium business.

    As a result, we decided that we were abandoning small business and were only looking at the middle and upper segments of medium-sized businesses. In our terminology, this means that the automation object (the number of support staff) is from 10 to 30 people. So ITSM365 was born.


    The service was implemented on the basis of the existing platform, on which the Naumen Service Desk was also implemented, which significantly reduced the cost of maintaining two code bases.


    But the purpose of the article is not to talk about the new service (the purpose of the article is to talk about the fail). Who is interested in the service - he reads on itsm365.ru website or watches our promo video:



    As a result, it got better. The monthly turnover has increased since the start of the service (~ six months) by an order of magnitude and is rapidly approaching a seven-figure number. Not super success, of course. But statistically significant numbers.


    What was not in vain ...


    Priceless experience is what remains after unsuccessful projects. Our experience, of course, remains. But something else remained.


    Firstly, focusing on the initially selected niche, we created the Smartsourcing.ru community, which is slightly less than fully composed of the leaders of small IT service companies. The daily community attendance is about 1,500 people. The community is alive - real people write comments and articles. This is really useful for the industry - a good means of communication and discussion of pressing issues. Although we did not earn money on it.


    Secondly, Smartnut is still alive. We stopped its development, but we still support and respond to technical support requests. At the same time, the service itself turned out to be so successful and simple that almost none of the paying users from the moment its development stopped working (although there were transitions to ITSM365). And taking into account the “freebies”, the total number of companies that constantly use the service in their work is more than 100. Today, we have no visible plans to “stop” the service.


    conclusions


    1. Pivot is inevitable. This is the norm;
    2. The market for your product must be really large (more than the volume that you think is "sufficient" today). Thoughts on the subject “well, even if the market is not large, but we have enough”, it is better to discard. This volume suits you today, and tomorrow (after six months, a year, two years) it will cease to suit both you and your entire team;
    3. Использовать freemium нужно очень осторожно. Никаких широких жестов или попыток конкуренции по характеристике «у кого забесплатно больше возможностей». Любой freemium должен быть экономически обоснован и просчитан. А количество клиентов на выбранном рынке должно измеряться скорее десятками или сотнями тысяч, но никак не тысячами;
    4. Малый бизнес в СНГ, в основной своей массе — неплатежеспособен, к сожалению. Основная задача у компаний — выжить. Ни о каких долгосрочных планах развития речи нет. Покупать будут только самое необходимое и то, что явно помогает продавать. Если вдруг захотите запускать что-то про «оптимизацию бизнес-процессов» для малого бизнеса — хорошенько подумайте;
    5. Делать узко нишевые сервисы для среднего и малого бизнеса на просторах СНГ на текущий момент — очень рискованное занятие.

    upd .: After 2.5 years after writing this article, the ITSM365 service reached a payback with a turnover of several tens of millions of rubles a year, and the author of the article with partners went to make a second attempt to develop Helpdesk solutions for small and medium-sized businesses. And, this time, everything went well. The project has reached self-sufficiency and is actively developing. Meet: Okdesk .


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