Daniel Chalef is CEO at KnowledgeTree and has lead the company's transition from an open source software company to a cloud-based hosted environment. We asked Chalef what it was like making that transition.

FCM: You were an open source provider until recently and changed to hosted model. What prompted that change in strategy?

DC: We firmly believe in the cloud's ability to help professionals manage their business documents--and the processes around them. Customers, especially those in the mid-market, can quickly get value from the cloud because they are able to launch the service and start using it immediately with minimal configuration.

The cloud also means that we can economically deliver innovation to our customers. New functionality can be rolled out to our clients without disruption and in a timely fashion. When users recommend new capabilities they can see that reflected very quickly in the tool they use every day. And that's exciting for me.  

From KnowledgeTree's perspective, the cloud also allows us to scale and translate interest into customers, quickly. That's why we've seen huge growth in our cloud customer base in the last nine months.   

FCM: In our talk at info360, you indicated that you were going after mid-market companies. Why do think the mid-market is so underserved in this space?

DC: Fast-growing companies need tools to help them manage their business processes. As companies grow, they discover that existing processes, which may be ad hoc, are no longer sufficient. A document library is insufficient; they now need business-centric capabilities like workflow, alerts, and the ability to add metadata for a document.  

Also, many of these companies are globally distributed. And that adds an extra layer of complexity to their processes. Client/server models are just insufficient for distributed teams. Upgrading these on-site technologies to support global teams and new, collaborative use cases is often just too expensive. The cloud provides a simpler model for these users.

FCM: In our talk you also indicated that the mid-market had different needs from the smaller and larger customer. Could you describe those differences?

DC: Smaller companies need process tools that support efficiency and compliance objectives. They want to ensure that as they grow they can address increasingly sophisticated business processes for their documents. These companies are very comfortable with the cloud as a model for receiving services, especially because it simplifies adoption and roll-out. And it allows IT professionals to focus on innovation.  

Plus, these companies are major users of tooling like Microsoft (NASDAQ: MSFT) Office and Outlook. That means that the platform for collaborating on documents centers on these tools. The end-user at these companies wants to be able to implement without the solution quickly and simply without disrupting IT processes, and doesn't think in terms of cloud, SaaS, ECM, mid-market, etc. The end-user wants a solution that directly maps to the needs of his/her role. That's why KnowledgeTree integrates our document management solution with standard tools like Office--making collaboration simple for companies that rely on Microsoft products.  

FCM: What kind of challenges have you faced making a transition from open source to a hosted model?

DC: It is important for us to keep our commitment to on-premise clients. That holds true even as we build and are now seeing explosive growth with our cloud solution. Of course building a highly scalable, multi-tenant application was a challenge we relished.

For some companies making that transition to a subscription model is dangerous because of the "ramp of death". But we are fortunate to have a large customer base already on a subscription model that is committed to our solutions. 

FCM: How different is it for you as a company to sell hosted services versus an open source/services model from a sales and marketing perspective?

DC: One of the advantages that we've had has been that our customer base had transitioned to a subscription model for all of our solutions. That made the move to a cloud-model intuitive for our customers. It also avoided any disruptions to our business model and how we build our customer base.   

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