SaaS Technologies

A Startup SaaS Company in Omaha and Pmarca

Posted on October 27, 2007. Filed under: Other, SaaS Technologies |

I’m a big fan of Marc Andreessen’s PMARCA blog. I and thousands of others greatly appreciate the time he spends to share his experience and wisdom so freely with so many. His early series of posts on The Pmarca Guide to Startups, especially Part 1: Why not to do a startup, are wonderful reading for any entrepreneur who is considering starting their own company. You have to be one part crazy, one part lucky, one part gifted, and many parts incredibly committed to take a company from an idea to something really special. I personally will never forget the day when John and I decided our best course of action was to jettison every single one of our original developers and start over. I’m not sure how well John slept that night, but I’ll always admire the courage it took for him to do this, and in hind sight, it was one of our best decisions.

A recent series of posts, The Pmarca Guide to Career Planning, is equally entertaining and insightful, but one little piece of Part 3: Where to go and why has been bothering me since I fist read it on October 3. Marc advises:

Go to the city where all the action is happening. For technology, at least in the US, this is Silicon Valley…

In my opinion, living anywhere other than the center of your industry is a mistake. A lot of people — those who don’t live in that place — don’t want to hear it. But it’s true. Geographic locality is still — even in the age of the Internet — critically important if you want to maximize your access to the best companies, the best people, and the best opportunities. You can always cite exceptions, but that’s what they are: exceptions.

In general, Marc’s point is a good one, especially if you’re giving “go west young man” advice to a young person who dreams of striking it big in their chosen field, which is what Marc is doing here. To a certain extent, this advice also applies to entrepreneurs choosing to start a new company. John and I recently had one of the wisest and most experienced investors in Omaha (no, not him) explain to us that while people is the most important criteria in his investment philosophy and generally this refers to the founders, the talent pool within the company’s location is an important part of this people criteria. He explained that even if we each had years of experience working for Disney and Pixar and came to him wanting to start a new animated movie studio in Omaha he wouldn’t invest since Omaha isn’t exactly full of talent in this industry.

If you’re an entrepreneur wanting to start a technology company today though, there is no requirement that you be in Silicon Valley.

Sure, if you already happen to be there, your access to technical talent may be better than anywhere else in the US, but in my career I’ve worked with brilliant technical minds all over the US — Boston, NYC, Philly, DC, Charlotte, Atlanta, Tampa, Chicago, Dallas, Denver, even, gasp, Omaha! If you want to go international, I can point you to good friends and brilliant developers on five continents from Hanoi to Wiesbaden to Pretoria to Sydney to Toronto. Without hesitation, in Omaha, Nebraska, I’d put our VP of Technology and Chief Architect, John Borders, and our head DAL and database developer, Eric Smith, up against any technical minds in the world.

Also, as I’m sure Marc would agree, technical talent alone doesn’t make a good member of a startup team. Attitude and effort are equally important. While no company is ever a democracy, a startup company must be a team. To succeed in the early days, each member of the team must be able to pull their own weight and earn the trust of their team members. There simply isn’t room for non-contributing managers in the early days and there isn’t time to micro-manage everyone.

Finally, I’m going to shamelessly plug Omaha. Perhaps when you think of Omaha you think of Warren Buffett and Berkshire Hathaway, Union Pacific, Conagra, Mutual of Omaha, and Peter Kiewit Sons. You should, these are all great companies. Do you know though that Newsweek has named Omaha a “top 10 high tech haven?” Do you know that Omaha ranks first in the country in millionaires per capita and golf holes per capita? Do you know that Omaha ranks 8th in the top 50 US cities in billionaires per capita and Fortune 500 companies? Do you think of Omaha every time you use an ATM card or a credit card? You should. Check out ACI Worldwide, First Data, and First National Bank of Omaha. Do you think of Omaha when you call just about any large company for customer service? Check out West Corporation and SitelTD Ameritrade, Gallup, infoUSA, PayPal, LinkedIn — all are either headquartered here or have a major operations center here.  Who knew when Lori and I moved here 5 years ago that I’d become such a fan of Omaha?  I guess I just like being right in the heart of it all…

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SaaS Powered BPO

Posted on October 24, 2007. Filed under: COBRA & Health Insurance, SaaS Technologies |

Jeff Kaplan writes an insightful blog on trends in IT services with a strong focus on SaaS technologies which I’ve subscribed to for some time.  This morning I found myself dancing a little jig when I discovered his most recent post “SaaS and Business Processing Outsourcing Converging,” because this is exactly what we’re doing at COCO Development.  I’ve touched on our business model in some of my previous posts, but I’d like to focus here specifically on how and why we’ve built our company to leverage a SaaS delivered application to provide business process outsourcing (BPO) services for our customers.


Every US employer with 20 or more employees who sponsors a group health plan must comply with COBRA.  The law impacts about 650,000 US employers and their greater than 90 million employees.  Essentially, COBRA allows employees or their dependents who lose their health insurance due to one of several qualifying events to continue to remain on the employer’s group health plan for an extended period of time.  Because of (a) the complexity of the regulations, (b) the need to collect monthly premium payments from COBRA continuants, and (c) the burden of communicating regularly with the COBRA continuants, approximately 72% of employers outsource their COBRA compliance administration to a third-party administrator (TPA).  For the TPA, however, these challenges still exist, and are multiplied as the TPA tries to scale their business.  This is why no single COBRA TPA currently has a greater than 4% market share.  We know this from first hand experience, as our founder and CEO, John Jenkins, built the nation’s largest independent COBRA administrator, COBRA Outsourcing Company, before selling COBRA Outsourcing and founding COCO Development to revolutionize this market.

The Problem

We know from personal experience the pains in trying to scale a COBRA administration business. 

(1)The incumbent technology “solutions” on the market are outdated client/server systems with either (a) no web portal at all or (b) a kluged browser based GUI built on top of a 15 to 2o year old legacy system.  This means the bulk of the communication taking place today between the TPA and the employer and the TPA and the COBRA continuant is done by phone, fax, and email — requiring the TPA to maintain a large and costly call center and resulting in much duplication of effort and manual data entry errors.

(2)COBRA continuants pay about $24B USD per year in monthly continuation premium payments.  The vast, vast majority of these payments are made by personal check.  Furthermore, the COBRA regulations impose very specific rules governing whether payments are made in a timely manner to continue receiving coverage.  The postmark date of mailed payments is critical in determining their timeliness.  For this reason, COBRA TPAs cannot reliably depend on a traditional bank lockbox service to process these payments since no bank lockbox will integrate with the TPA’s COBRA system to check to see whether a payment is timely before depositing the check.  The result is that most COBRA TPAs hand open, hand enter, and hand endorse and deposit premium payments.

(3)Administering COBRA requires the generation and delivery of multiple pieces of formal, written communication with COBRA participants.  To date, the US courts have held that the only universally approved method for delivering this communication is via first class mail.  A fair sized TPA may generate a thousand or more letters a day, and this is with a smaller than 4% market share.  Unfortunately, the legacy COBRA systems on the market have no concept of optimizing their production of letters for use by a mail house, so most TPAs hand fold, stuff, meter, and sort their mail before hand delivering it to the post office.

SaaS Powered BPO

Communication, payment processing, and mail fulfillment — we solve all of these pain points through SaaS powered BPO services.

(1) COBRApoint is our SaaS delivered enterprise application for COBRA (and retiree)administration with unique, secure portals for the administrator, the employer, and the member (COBRA or retiree continuant).  All stakeholders have instant access to the data they need and the ability to communicate new information directly to the system of record.  Duplication of effort, manual errors, and call center volume are reduced significantly (we probably save a few trees too).

(2) COCO Payment Services provides a COBRA optimized (postmark date driven) payment processing lockbox service which is integrated directly with COBRApoint.  It is this direct integration with the SaaS system which makes the service valuable.  The fact that we can also accept credit/debit and ACH transactions through the COBRApoint Member Portal is another distinct benefit of an integrated BPO service and a SaaS application.

(3) COCO Mail Services automatically electronically delivers highly optimized letter files generated by COBRApoint directly to our mail house each business day.  In other words, when our customers perform an action in the SaaS COBRApoint system on Monday which triggers a letter, this letter is placed into the USPS mail stream on Tuesday without the customer having to do a thing.  In addition, the costs our customers pay for this service are far less than any TPA is paying currently due to economies of scale across our customer base.

So, why do we call our business model SaaS Powered BPO Services?  First, COBRApoint’s SaaS delivery model is what enables us to provide our BPO services.  If each of our customers were running their own local copy of the system behind their own firewalls, we could never efficiently provide our BPO services.  Secondly, while a web based, scalable enterprise application would revolutionize this $24B market on its own, it is our BPO services which dramatically impact our customers’ bottom line.  The efficiencies we drive through highly optimized automated processes and economies of scale empower us to provide these highly repetitive services for our customers at a fraction of the cost they are paying currently.  For these reasons, the BPO services are all our customers pay for — COBRApoint is free.

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    Mark Waterstraat

    VP Sales


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