Posted by: Rachael King on December 14, 2011
By Ari Levy
Jive Software’s initial public offering this week sparked a debate over the meaning and merits of “cloud software.”
As a decade-old company that got started when business software was delivered in packages, Jive didn’t start selling Web-based subscriptions until 2007. About 60 percent of its business is now in the cloud. Clients use their software to collaborate with each other and customers.
The cloud model is cheaper to operate, allows for faster product updates and is better at collecting large amounts of data. Companies like Salesforce.com and SuccessFactors, which SAP agreed to acquire this month, are completely Web-based and valued more highly by the public markets on a price-to-sales basis than Oracle and Microsoft.
At the close of trading today, Jive had a stock market valuation of $859.5 million, or 12 times revenue over the past year. SAP paid 11.7 times sales for SuccessFactors, while Oracle has a ratio of 4.1 and Microsoft’s is 3.
“There’s just one problem with Jive trying to ride the coattails of SuccessFactors and other cloud company valuations: Jive is not cloud,” says David Sacks, founder of Yammer, which also provides social-networking software to businesses.
If you believe Jive’s pitch, it gets the best of both worlds. The company competes for customers that are pure cloud and comfortable having all their data hosted off-site. Yet, it can also sell to more highly-regulated companies in health care and financial services that need dedicated servers and aren’t ready to make the move.
“We’re not religious about it,” Jive CEO Tony Zingale said in an interview yesterday, after ringing the opening bell on the Nasdaq Stock Market. “We let customers choose.”
Taleo, like Yammer, prefers not to offer the choice. Its software, which competes with SuccessFactors in delivering talent management software, is for companies that are in the cloud or quickly migrating. Trying to deliver products the old way would just slow it down, says Jason Blessing, an executive vice president at Taleo.
What about security and privacy concerns? Those are overblown, he says. Taleo sells to the U.S. Department of Justice, and it doesn’t get much more sensitive than that.
“Security issues have almost faded completely into oblivion,” he says.