9 Topics to consider if you are building a SaaS company.
Entrepreneurs today are flooding the marketplace with first-generation enterprise software, delivered through a Software-as-a-Service (SaaS) business model. Enamored with the success of Salesfor ce.com and prodded by Venture Capitalists (VCs), these budding entrepreneurs are making bold claims of changing the world and beating up big established players, simply because they deliver much of the same functionality through a SaaS business model.
Unfortunately, a SaaS-flavor version of enterprise software is simply not enough for long term success.
The secret is out, SaaS is a delivery model that major software vendors are already exploring, if not pursuing aggressively, because of the inherent benefits to customers. Consider investments in the past 12 months by Microsoft (Office Live), BMC (BMC Patrol Express) and Business Objects (Crystal Reports XI) to name a few.
Certainly, some entrepreneurs will get lucky. They will develop a first-generation SaaS model of software in a mature market, and yes, some of the “big guys” will elect to acquire these new start-ups for a healthy price. However, to become a company long term, requires a sustainable business model, real customers and revenues, which necessitates differentiation to be competitive.
At Klir, we founded the company as an ASP in late 2000. Our Company was inspired by the vision of delivering IT management solutions through a SaaS model. We have certainly made some mistakes along the way, but some good bets too. Set forth below are nine (9) topics that SaaS vendors should consider as their business evolves. I’ll be exploring these topics over several months on this blog and invite your comments, wisdom and feedback.
1. Do not attempt to match feature for feature – you’ll lose. Enterprise software companies built features to satisfy the appetite of every user. As a SaaS product developer, find the hungriest users and build the features they need to accomplish functional requirements (the 50-80 percent of product that everyone uses), then concentrate product development on SaaS-enabled capabilities (which cannot be matched by enterprise software).
2. Build meaningful features that can only be accomplished through a SaaS product version – the big guys can’t match it. Specifically, consider capabilities that would be valuable to a highly distributed enterprise or user group. This may include collaboration capabilities within a broader online community or user forum to publish best practices or templates.
3. Leverage meta-data and expose it to your users – everyone loves relevant data. The value of the data across your user base is significant, and the big guys can’t do it (since data resides inside customers’ premises). With large amounts of data, math is your friend – you can employ traditional statistical analyses or develop custom algorithms. Maintain privacy, but consider exposing aggregate meta-data and analytics that reflect industry trends.
4. Invest in your User Interface and make it “Dick and Jane” easy to use – the big guys aren’t so appealing. Consider the simplicity of successful consumer-based applications such as Google or Amazon. Business application developers can learn a lot. Note to self: AJAX is not a bathroom cleanser, but a programming language that equates to sex appeal in a Web interface.
5. Provide a personalized user experience. Whether it is “MyYahoo” or “MySpace”, consumer sites have taught us that users love to personalize their experience. Get it right in your business application and provide not only look and feel personalization, but customizable views and sorting capabilities.
6. Deliver now – you have got to be faster than enterprise software. Any SaaS product should deploy in a day (for a typical mid-sized company). If OLAP integration is an adjective to describe your architecture, good luck. It is all about speed to demonstrate your capabilities (e.g. Salesforce instant access to remote field sales personnel).
7. Be responsive to your customers - Enterprise software will be 12 months behind you. Engage your customers, solicit their feedback, build an advisory board, and readily adjust product roadmap priorities to reflect customer requests. Timely improvements, will win the loyalty of your user base.
8. Pricing: think nuts, both squirrels and elephants eat them. Gain an intimate understanding of your operating costs, and price your SaaS product to preserve margins while delivering value to your clients. Most business will analyze SaaS offerings over a three-year term versus enterprise software. Serve nuts and the squirrels will arrive; elephants will find you by following the commotion caused by squirrels.
9. “S”ervice is the most important letter in the acronym SaaS. Enterprise software developers go on vacation for two weeks after an 18-36 month product release cycle. The first two weeks after a SaaS product release is the most important two weeks for your Company, you have got to deliver. Now the work begins.
nice - good to see you calling out the we were an ASP angle.
Posted by: James Governor | October 05, 2006 at 07:09 AM