SaaS Benchmarking and the Importance of Diversity

This article is based on an interview with Lauren Kelley (Founder and CEO of OPEXEngine) about SaaS benchmarking, leadership, and diversity in the tech space. Click here to listen to the interview podcast, or read on for a summary of the conversation.

“When I started OPEXEngine, SaaS was just coming onto the scene as a major evolution of the software industry.” – Lauren Kelley

OPEXEngine was founded nearly 20 years ago when Lauren Kelley identified a need for reliable industry benchmarks in SaaS. In meetings with boards and management teams, she was asked the same questions about growth models, headcounts, resource allocations, and the operating metrics that subscription businesses should track.

That was the genesis of OPEXEngine, a platform where SaaS companies could share operating metrics in a secure and confidential way with dedicated professionals managing the data. Kelley cites two fundamentals of benchmarking: “You have to have a large enough pool of similar companies in a particular vertical industry and the data has to matter and be valuable.” 

Diverse perspectives challenge assumptions. Diversity reduces groupthink, biases, and fosters innovation. This episode speaks to the importance of hiring the best talent regardless of background, expanding your professional network to include diverse perspectives, and nurturing professional communities beyond your immediate team. Kelley uses the example of Josh James (CEO of Domo and Omniture), who advocates for diversity initiatives such as the ParityPledge.

We have included a preview of the interview below. The full transcript is available on OPEXEngine’s website.

Interviewer: To start off, I wanted to ask about how you entered the world of SaaS and benchmarking. How did you decide to pursue benchmarking as a business?

Lauren Kelley: It’s an interesting question. I was working as an executive in residence for an East Coast arm of SoftBank, who had invested in my last company, but I was at the point where I wanted to get back into an operating role.

I was interviewing at various companies, but I found that the typical scenario was for me to come in as an operating CEO to replace a Founder. So that meant I would be redirecting the expectations of the Founder who I was replacing, and then doing some restructuring in small companies. After downsizing large teams, after the internet crash, and after 9/11 and the next couple of years, I was just burned out on that.

I found that in every meeting I had with management teams and boards, I kept getting asked the same questions over and over again: what does good look like as the company grows? How would you shift resources from R&D and Product Development to Sales and Marketing? How do you build a scalable growth model and at the same time remain flexible and handle disruptions? And even just straight headcount questions, like how many people should a company of this size or that size have in each department (Sales, Marketing, R&D, professional services, etc.)?

Of course, because of the timing, I kept getting asked: what are the key SaaS metrics for a subscription business? How do you track if the company is growing properly when we don’t get all the money up front or when it’s buried in all these operating metrics? I kept hearing that. I was thinking it was crazy that there wasn’t an industry network out there to share operating metrics in a safe and confidential way; one with dedicated, professional people managing the data (instead of me looking on the Internet, jumping from one survey to another for information, or calling 10 friends in my network to hear what their numbers were and trying to cobble something together). That’s also a lot of work, although I like keeping up with my professional colleagues. Sometimes you’re in the middle of something or you have a board meeting coming up and your needs are immediate. You won’t always have the time to spend a couple of days or a week calling everybody.

Another thing: the point of benchmarks is to identify strengths and weaknesses, which starts a conversation within the company. If the benchmarks that you collect from various sources don’t really resonate or exactly fit your model – or if it’s not clear where they came from – they don’t have credibility. Then, the conversation gets off on the wrong track. I walked away from all of this and determined to build a safe place for everyone to share data confidentially, where we would validate your data and help walk you through the process. An environment where customers define their own cohorts to fit their needs based on either their current business model or something they are looking at.

That was really the genesis of OPEXEngine. I talked to numerous people in the industry and friends who were CFOs, CEOs, and investors, and everyone thought it was a good idea and it was needed. And they said they’d pay for it. The more I got into it, I realized there was a business there and it was something that I could do.

Interviewer: The company has certainly evolved tremendously over the past few years. Taking a step back, how do you think your background prepared you for OPEXEngine?

Lauren Kelley: I’m an odd duck in many ways, but one way that I may be a little different than some other people is that I’m both analytical and operational. I started my professional life after grad school as an international economist in Washington working on trade policy and tech trade negotiations, and I spent a lot of time in smoke-filled rooms in Tokyo. At the same time, I’m action-oriented and I like to get things done, so the pace of government was just too slow for me. Then I spent 12 years working in tech companies, building some rapid growth businesses (both in the US and in Europe).

I really like seeing numbers and data, and frankly, it saved my bacon a number of times when I had to make management calls that were counterintuitive or against the mainstream. Even though I’m operational, I look to data to make or validate or change decisions. I’ve been successful because of that, I think – even though I’m a woman in the tech industry, which as we all know is primarily managed and invested in by men. I’m just not the typical personality or big talker that you sometimes see with company founders, and I didn’t want to change my personality or values. It’s funny, my CFO – who I love and we’ve worked together for many years – always laughs and tells me I’m very Midwestern, so you can interpret that however you want.

I think my background prepared me for OPEXEngine because it plays to my strengths. There are many odd ducks in the tech industry, and I like that.

I really recommend that everybody read Ben Horowitz’s book, The Hard Thing About Hard Things. There’s a story in this book about hiring a head of Sales; first interviewing and then fighting to hire this head of Sales who just didn’t look or act like the typical stereotype.

Ben’s board, other management, and investors were all saying, “don’t hire this guy – he’s not the right person.” Ben stood up against everyone and hired this person, and because this person was very analytical, he was wildly successful. And look at where Ben Horowitz is today – go figure.

Interviewer: So you speak about being both operational and analytical and how that’s sort of been an asset to you in terms of decision-making. How does benchmarking reduce bias in decision-making?

Lauren Kelley: Loads of research has been done over the last 20 years in economics and some other fields about the bias in decision-making. Fundamentally, data levels the playing field. I think we’ve all sat in meetings where groupthink sort of takes hold, and sometimes in the wrong direction.

I’ve sat in many meetings where there’s a quiet person in the back who is saying the right things and pointing to the right things, but doesn’t get heard because of the bigger personalities. I think data reduces the over-impact that larger personalities can have on the decision-making process. It helps you make better decisions, which is what management’s all about. 

Our customers are typically in the finance department of SaaS companies, and they’re also usually not the biggest personalities in the room, but they have to work with the heads of Sales, the heads of Marketing, the heads of R&D, and the CEO to support and provide information to make the right resource allocations across the company. We’re all trying to make informed bets and protect against risk and downsize.

We could be buying a company, we could be building a new category, or we could be growing a company from one stage to another. Benchmarking data – if it’s used properly and understood properly – really reduces the risk of failure and it illuminates a financial roadmap. If you think of a “Google Maps” of: what’s it going to look like for me to get from here to there? Good, quality data that shows you what companies that look like you did and where they went is really helpful. It gives you information that you just can’t get anywhere else.

Interviewer: And as you were starting OPEXEngine, why SaaS specifically?

Lauren Kelley: I’d like to say that I did a review of all the industries out there and picked SaaS, but I think I was incredibly lucky. My last two companies were software companies, so I was pretty well-versed in the industry. That’s where my network of investors existed.

Continue to OPEXEngine’s website to read the full interview transcript.