SaaS 3.0: Big Data that Delivers

by Scott SandellOct 18, 2012

Have you heard of BloomReach? They’re building something big—big data marketing applications, to be exact—and today they announced a $25 million round led by NEA with return backers Lightspeed and Bain Capital Ventures. And while I suspect this company will become a very big story in its own right, this investment also feels like part of a bigger story for NEA, and I’d like to share it.

When we invested in just under a decade ago, our thesis was that the ‘hosted software model’ would be a disruptive force in the CRM industry, with the potential to expand to HR, ERP and analytics. (It seemed ambitious at the time, truly.) In any case, it was a watershed moment for NEA—we had caught the first wave in the next cycle of computing, a transformation even bigger than the shift from mainframe to client-server: cloud computing.

That first wave – call it SaaS 1.0 – revolutionized the delivery of software. It made software easier to adopt, cheaper to maintain, and more beneficial to a broader range of businesses. It was a big deal. But it didn’t change the way the core application functioned.

Enter virtualization and the decoupling of the hardware and software layers, which paved the way for the next iteration of SaaS (and a host of startups focused on optimizing different layers of the stack—especially networking, storage, and management). Now both software and hardware could reside in the cloud, with flexible data structure and scalable architecture setting the stage for “SaaS 2.0” companies like Workday.

If Salesforce created SaaS 1.0 by leveraging the existing web and enterprise technologies "off the shelf" to build their application layer, Workday invented SaaS 2.0 by re-inventing all those off-the-shelf technologies. Workday built its own data layer, its own memory management, its own tool set, presentation layer, and integration engine. The advantages are profound, and position Workday to build the entire enterprise application suite in the cloud at the same time they integrate with the applications enterprises already have in their data centers.

That cloud-based infrastructure, coupled with consumer behavior patterns and online business models, has spawned a sprawling sector known as “Big Data” to mine the massive amounts of user data being collected. To date, the noise around big data focuses heavily on storage and analytics. These are big opportunities, no doubt, but they leave a lot on the table in terms of what’s possible.

Cue big data applications (BDAs): with BDAs it becomes possible to interpret and apply, in real time, massive amounts of web-wide data efficiently and intelligently. We can harness the power of machine learning and recommendation engines to make software adaptive. This is well understood on the consumer side—e.g., Google, Amazon, Facebook, LinkedIn—and now it heralds a seismic shift for the enterprise, and yet another redefinition of SaaS as we know it.

With marketing insight that both scales and adapts quickly, BloomReach is bringing the power of big data directly to the bottom line. Its web relevance engine (WRE) enables cloud applications to capture consumer demand across marketing channels and dynamically adapt websites to provide optimal traffic and conversion lift for web marketers. In short, it’s the holy grail of online marketing.

A skeptic (who will remain nameless) said, “Ah, but machines aren’t really good at that.” Then he saw what BloomReach has done. And he said, “Wow. You’ve built a machine that really does that.”

We’re thrilled to partner with Raj, Ashutosh and the team on the BDA revolution, aka SaaS 3.0. NEA came early to the Software-as-a-Service party, and in many ways, it feels like we’re just getting started. That's right.