LucidEra Shuts Down Operations

Late last week, software-as-a-service (SaaS) business intelligence provider LucidEra announced to its staff that it would be shutting down its operations by the end of June. Later that night, "friends and colleagues" in the industry received an email from LucidEra executives regarding an update in contact information. Monday morning, analytics solution provider Good Data released a brief statement unveiling a program that would "offer existing LucidEra customers [six free months] access to [Good Data's] innovative on-demand analytics service." In this release, Good Data was among the first to spill the news: "LucidEra," the release read, "is offering to sell its intellectual property after almost four years of operations."

By late Monday evening, LucidEra had yet to release an official statement, and had not yet responded to inquiries from CRM magazine.

Jeffrey Kaplan, managing director at consultancy ThinkStrategies, tells CRM that he spoke with a LucidEra representative Monday morning. Kaplan says that he had suspected there was something going on with the company after he received two separate emails from LucidEra executives last week.

"They were running into problems with longer sales cycles because of the economy," Kaplan says. Unfortunately, he adds, as those sales cycles grew ever longer, the start-up's investors grew increasingly impatient. "They couldn't afford to keep their doors open in those circumstances," he says.

According to Kaplan, a LucidEra representative he spoke with characterized the roots of the company, founded in 2005, as being firmly in the "SaaS 1.0" era. This group of technology innovators had to "build a lot of their own architecture, delivery capabilities, and software-development resources," Kaplan explains. Companies starting today can leverage platform-as-a-service capabilities and computing power from vendors such as Salesforce.com and Amazon.com, greatly reducing costly upfront capital investments and ongoing operational expenses. "[LucidEra] got caught with the heavy overhead," Kaplan says, "and they weren't going to continue to invest." (In its most recent round of financing, in August 2007, LucidEra secured $15.6 million in Series B funding led by multistage technology venture capital and growth equity firm Crosslink Capital.)

According to Dyke Hensen, chief marketing officer of SaaS BI competitor PivotLink, LucidEra's go-to-market strategy was also part of the problem. LucidEra's solution was targeted at sales departments, which is only a segment of PivotLink's customer base, and relied on data primarily from Salesforce.com. As a result, Hensen says, "it was a finite application focus that didn't give them the breadth of market to go after, so their market potential was smaller."

Like Good Data, PivotLink plans to reach out to LucidEra customers, Hensen says. In addition to providing its technology for free, PivotLink intends to make freely available a migration plan for any LucidEra customer's specific reports in a cloud-based system. Moreover, PivotLink plans to honor LucidEra customer contracts in terms of monthly payments. "We're trying to make the transition and that continuation as painless as possible," he says. "If I was the VP that depended on that information, that's what I'd be looking for...[not just] another technology."

Kaplan reports that potential buyers had nosed around LucidEra last week, backing out of the potential acquisition after failing to find compelling answers to the questions endemic to this type of situation:

• Would the acquisition make us any more successful than LucidEra had been?; and
• Do we need to buy the company in order to acquire its assets, or can we obtain the property through an auction?

Kaplan says that LucidEra closing its doors in no way suggests the demise of on-demand business intelligence. "It's a natural part of the evolution of any marketplace," he says, an evolution accelerated by today's tough economic conditions. "This is not an indictment of BI," he says. Other SaaS companies have failed, he adds, and those failures have not destroyed the SaaS space.

Hensen certainly agrees, asking that the marketplace rally around this "unfortunate set of circumstances," to support the continuing growth of SaaS BI. "It's not the greatest news for any of us," he says, before adding that "companies want to stay with SaaS."

Boris Evelson, principal analyst of business intelligence at Forrester Research, earlier this year published a report ("BI Belt-Tightening in a Tough Economic Climate)" defending the BI imperative. Though he recognized the impediments brought on by economic pressure, Evelson argued in the report that BI is still a top organizational priority — and that SaaS BI is extremely helpful, particularly when you "can't wait for or afford an in-house solution."

Ironically, a Wall Street Journal article on Monday — "Tech Giants Ramp Up Their Online Offerings" — highlighted efforts at vendors such as Oracle to provide online solutions, driven largely by consumer demand. Nevertheless, Kaplan says he still expects to see more vendors close up shop, and though he remains a strong advocate for SaaS solutions, he admits that too many SaaS BI failures will understandably cool interest in this space.

Hensen claims that LucidEra's demise does nothing to shake his own confidence. PivotLink announced 100 percent growth in new sales bookings in 2008, expanding to 6,000 customers, and in February of this year, the company secured $10 million in a round of Series C venture-capital funding led by StarVest Partners. "This is a chapter that will pass," he says. "I'm still very bullish that [SaaS BI is] the right thing to do. It's an appropriate place for SaaS technology."

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