Some of our technologies lend themselves well to a SaaS offering, he said. One example is backup, where you can already see an online capability with our Norton 360 service for the consumer market. If you have photos and digital content, you get 2GB online to back them up to our data center and leave them there.
Having dipped its toe in the water, the Cupertino, California-based vendor is now looking to expand its SaaS offerings into the small and medium-sized business market.
There, a backup service has the opportunity to replace the tape that gets put in the back of the boss’s car, Thompson said. Equally, if you’re an SMB, why should you manage an Exchange server? And why have a spam administrator?
Without saying which of these services will come first, Thompson revealed that some of them will debut this year. The fact that, in moving into SaaS, Symantec will also be moving into competition with the likes of Google did not appear to faze him.
Google, IBM, Microsoft, they all put their pants on just like we do, he said.
On the software licensing that remains his company’s bread and butter, Thompson said he is transitioning Symantec from the traditional model where, when someone bought a Norton AV or firewall box in a store we’d recognize 80% of the revenue up front and 20% over 12 months, to a subscription model in which we recognize all the revenue on the balance sheet and take it [onto the P&L] over 12 months, which means you get a better prediction of revenue. It also reduces the susceptibility of his top line to what he called volume vagaries over the course of the year.
The move from a licensing to a subscription model will ultimately bear fruit, but the transition is painful in terms of revenue performance in the short term, he acknowledged. He added that there were other circumstances beyond Symantec’s control that contributed to its poor performance in its fiscal third quarter, ended December 31, 2006, when non-GAAP net profit was down on non-GAAP revenue that rose 6%.
In the period 2002-2004 there were 100 medium-to-high-risk viruses, whereas in 2005/2006 there were six, so your revenue changes. The market for the company’s AV core products has changed, he argued, with the emergence of stealth attacks like phishing and fraud.
While moving the 30% of Symantec revenue that comes from the consumer market has been relatively simple (albeit painful), the enterprise side is more complex, because contracts can last anywhere from one to five years, with the norm being two. That said, the transition is underway there too.
I want to move the business to a more predictable basis, said Thompson, with the caveat that it won’t be 100%, but more than we had in the past. Pressed to put an ideal figure on how much of his enterprise revenue (i.e. the remaining 70% not from consumer) he would like to see coming from subscriptions, or as he calls it rateable business, he said 60%-70% would be ideal, and when asked how close Symantec is to achieving that threshold, not close enough came the reply.
