PASS (kinda) needs to die
I’ve been up to my eyeballs with my business recently and part of that has been about reflecting on scalable business models. A few folks have been keeping me in the loop around PASS and what’s been happening. My take on the matter is that PASS cannot continue with its current model, or even its proposed secondary model, and needs to do something more drastic — it needs to kill the business model and focus on securing its legacy.
PASS as a community organisation was set up with a pre-modern-internet model to support knowledge sharing for a specific technology and set of professionals. It fundamentally relies on big sponsorship cheques and charging community members a large ticket price to go to its premier conference. All so that PASS can cover its entire annual budget from the revenues raised by a single conference.
The key pieces of PASS’ budget for many is the three open community capabilities: local user groups, virtual user groups, and local conferences (SQL Saturdays).
I have previously written critically about how PASS spend money. I believe my conclusion that spending on average $10,000 a day to manage PASS’ activities is too high a figure remains valid (if not more so given the pressures of the Age of COVID.) At the time of writing, however, PASS’ business model and spending methodology remain unchanged and is leading to a slow decline. This crisis, however, has made the points about expenditure both vital and moot.
Reducing expenditures is a good way to improve cashflow temporarily, however, ensuring future revenue is more vital. How you generate revenue is the core of the business model.
PASS has done tremendous things for the SQL Server community. It created a premier conference where people got invaluable knowledge from experts. It helped local database professionals set up user group infrastructure like websites which were outside of the skillset of many group founders. They took on the SQL Saturday brand and helped support local leaders in running more than 1,000 conferences around the world. It has done incredible work and made an impact on a huge amount of lives.
Over the years it has been harder for PASS to secure attendees to their premier conference as new competitors entered the market and the data professional landscape has changed. This has made their situation tougher and has resulted in numerous cutbacks to community-capabilities funding and to the premier conference itself.
The conference model was being squeezed and PASS has struggled with solving this for a number of years.
Further, indirect competition has emerged around its open community capabilities. Community organisers are no longer a captive market as it has never been easier to get an online infrastructure for a user group. With meetup.com, eventbrite.com, sessionize.com, and website platforms galore they have options, and more and more organisers have been using these other tools. This is partly because PASS has been reducing budgets for these areas, so the feature gap is increasing. The other key part is the dramatic shift in how people engage with technical community content and groups: They now want a centralised way to access all the groups across the many technologies they have to work in these days. A siloed, closed source set of tools with low “foot-traffic” is not a good fit for organisers looking to grow their events.
Now COVID-19 has completely disrupted the large conference model, with some strong leaders in this space like O’Reilly completely exiting. Many believe that virtual conferences are probably here to stay. PASS has endeavoured to shift to this model, at least temporarily, as have many physical conferences. Making an in-person conference be an effective digital one is a huge feat and as Grant Fritchey states — it takes tons of work.
Unfortunately, they will have to face unrecoverable lost funds associated with their physical implementation, as well as needing to cover the costs associated with the virtual event. Analysis by Joey D’Antoni suggests the event may not generate enough revenue to cover expenses at physical PASS event attendance levels.
The pricing strategy to ensure commercial viability has resulted in a ticket price that many are baulking at. Achieving normal levels of attendance for the virtual event may also be tough when large companies like Microsoft have set their virtual ticket price to $0 and have produced a huge anchor point for prices in this space in the eyes of many of PASS’ attendees.
Large in-person physical conferences are not going to be viable for at least two years.
A secondary revenue stream from a Pluralsight-type of offering has been launched, however, it launched in the midst of controversy on their content acquisition strategy for it. Damaging the trust of instructors is a sure-fire way to limit your ability to acquire new content and another player in the data learning platform space, DataCamp, has seen this with the controversy around the sexual harassment of an employee by the CEO. This revenue stream being off to a shaky start, combined with entrenched competitors like Pluralsight, make this an uphill battle for cash.
The new season pass is a Software as a Service model and will need to earn at least $5 million Annualised Recurring Revenue (ARR) to replace half the revenues earnt by the premier conference.
In a survey of SaaS companies, 38% were <$5m ARR. In the starting-out category (<$2.5m ARR) the ARR per Full-Time Employee was just $53k at the median and $100k at the 75th percentile. Assuming the management company dedicates its entire focus to being the best SaaS company it can be, its headcount is likely to yield less than $0.5m annual revenue in the first year. That also assumes that the current number of staff can be retained!
It is definitely not a short term way to cover lost revenue. This long term revenue play is occurring during a time of cash flow shortages (noted in the last available minutes: June 2020). The reserves of $1.2m (detailed in the March financial report) are also insufficient in relation to the current crisis.
PASS is very much at risk of not surviving.
Rightly, many of the people who have been helped by PASS want to see it continue as an organisation. Many are saying this can be done by effectively donating cash to the virtual conference. However, attendance is unlikely to even be at in-person levels as times are tougher for businesses and individuals alike. Training spend is, alas, discretionary spend that is one of the first things to be cost-cut.
Only 5% of businesses think their training investment and strategy will go back to the way it was. Fosway
Pragmatically, PASS’ business model is broken, and it will be too. So this leads me to the “kinda” in my title. Here’s what I think PASS needs to do to survive…
PASS needs to do away with being a conference business.
Right now the annual conference and the management company are the vast majority of costs for the not-for-profit organisation, however, if you ask most folks where the value is they’ll tell you it’s almost entirely in the open community capabilities. These — the user groups, the online events, the local conferences — are what need to be protected from bankruptcy actions and potentially being given up to creditors. How they should be protected is by essentially giving them away now.
Over the next 6–12 months, PASS should work on stripping back their costs to next to nothing and leveraging the dedicated #SQLFamily to help open source as much as possible whilst giving local groups all their data in case of a rapid closure. HaveIBeenPwned.com is going through a similar exercise of turning over a data-centric product to the public good, and it will be undoubtedly an excellent role model to follow for lessons learnt.
The ongoing network of support between volunteers is the best thing about PASS and it is the most cheaply and easily preserved part.
With the open community capabilities made truly open and given a future, PASS can look to their volunteer force and identify the way to make things more volunteer-managed, and in a truly remote-first way. We have a wealth of expertise in automation, line of business support & productivity, and more inside our community. We can help a much leaner central online team even continue many of the existing activities, although they wouldn’t be needed as much when focused on enabling grassroots organisation efforts.
The result of these changes is a not-for-profit organisation that is focused around growing the maintainership of open source technologies and infrastructure that supports their community in its overarching goal — sharing knowledge. With that model, PASS becomes an organisation that can use platforms like the Linux Foundation’s CommunityBridge to gain funding. This gives current sponsors and other companies with a vested interest in seeing PASS continue via a low-administration funding mechanism.
PASS will go on, user groups will go on, locally responsive events will go on, and a growing digital repository of knowledge around SQL Server and related technologies will go on.
Survival of core value (community capabilities) is what PASS should be seeking to ensure right now. The community capabilities have helped people globally access vital training without restricting it to the economically advantaged. It is truly amazing how many people PASS has helped. Ensuring this level of global impact can be sustainably supported going forward should be the most important part of PASS’ discussions about their ongoing existence. Not a big conference or centrally managed business model.
PS There is definitely a human cost in this. The management company derive most of their revenue from PASS. PASS being in dire straits is putting the livelihood of these people at risk and I am espousing that PASS initiate a significant round of redundancies very quickly to reduce their outgoings. As someone whose businesses have been hit by COVID-19 and other struggles whilst starting up, I know how tough it can be to layoff great people and it’s not a step that should be taken lightly. A key part of any strategy going forward to help PASS survive must include some support to help C&C staff, many of whom have been part of PASS team for many years, find new jobs. Monzo have been a great example of how this can be achieved.
