What is SaaS?

An interesting question when you see the answers! We’re in a SaaS workshop with members spanning the spectrum of Management, marketing, product development and management and technical. Check out the responses below to see some of the divergent answers.

 

SaaS is (vs on premise):

  • An Application or service
  • Services in the cloud
  • Scalable & multitenanted
  • Value add to the network – in that anaology that a shower and pluming.
  • Apps on tap – opt in and out seamlessly, scalable with me
  • Outcome vs features set
  • User vs owner of software – outsourced the responsibility, accountable for the outcome
  • OPX vs CAPX
  • A different billing model
  • Consolidation and integration – of standard features and functions or applications. The sum being greater than the parts
  • Pre-integrated done
  • Configurable  vs customisable
  • Technology agnostic
  • Used because the you USE it vs used because you bought it

 

And you? What do you think?

Its not about the technology, ok it is but not like you thinkā€¦

Well nothing like a confrontational title to stir up some interest. Thanks to Ben K and Bob for their comments.

As I stated, the “Is SaaS just Hype” post was deliberately provocative.  I think (and I’m hoping the readers got there too) it did make people stand back and think about SaaS in a new light. I stand by my assertion that as cool as SaaS is, if it doesn’t deliver business value, if it isn’t a good solution to a business problem, SaaS will fail.

Business is business at the end of the day, if you offer no value, have no uniqueness, can’t articulate a real reason for the customer to buy your stuff, you will go under. (no matter how alarge you are. If you can stand it and get past the first 3 stumbling minutes, check out the scene setting in this webcast by Debra Covey teaching the elephant to dance)

In this respect, this is Darwinism is in action. Not the much represented statement of “only the strongest will survive”. But rather that “the survivors are those who can best adapt to change”. As Bob points out, SaaS is a disruptive change. But only to Software companies, not to the consumers of Software.

So, back to SaaS and hype. I do agree with Ben Kepe’s about SaaS being an “alignment of technologies.

      –   Uptake of broadband (dodgy as it is in NZ) 
– The adoption of collaborative networking models 
– The requirement by business that value needs to be added 
– The mainstreaming of hosted services so that punters can understand the concepts "

 
But at the end of the day, these don’t really matter. And this is the point my mate Ben was trying to make. If you cannot make a difference to the customer, if you cannot articulate a good business reason for your customer to purchase your SaaS product it won’t matter how cool it is, which XML gadgets and widgets you plug into. That SaaS does provide benefits is real in some cases, but it like all technology brings its own technical challenges

Lets not forget, its all about the business. Technology is just the enabler.

 

Is SaaS just Hype?

I was chatting to a friend who does me the enormous respect of reading this blog (thanks Ben!). Ben does a lot of things well, but in my opinion, one of the things he does particularly well is being deliberately provocative. So when Ben through out the comment

“is SaaS real or is it just Hype”  & “I don’t agree with what you write, well that’s not actually true, I think you are nearly there with what you write”

I kind of stand back and listen. (you gotta agree comments like this kind of stop you in your tracks)

Ben’s main point was this. That companies that are buying SaaS aren’t in fact doing that. What they are doing is making sound business decisions, decisions that are right for them. They aren’t into the hype, they don’t really care how they get the outcome. They are just trying to meet their business needs, priorities and outcomes.

To this way of thinking, I guess I am nearly there when I said

“By choosing to go with the SaaS model, the CIO also has to do a sales job on the business. “here’s this new thing, it will be better than the old way and you will get that outcome and make / save  XYZ / be more productive / have better customer sat / retain your staff”. You will notice that the language above is the same language as the business uses,” 

And 

“None of this is new, and it’s certainly not rocket science, the channels that exist for SaaS companies are the same as any other software business.”…” My advice, look to how the traditional software companies did it, therein lies the gems of knowledge garnered through many skinned knees.”

Ben then walked me through two examples to make sure I understood. One being a small SME who has the choice to splash $500 (that’s a guess) on MYOB, install it run and populate it or buy Xero for $50 a month, that you can access anywhere and is backed up, always updated for you, secure etc. The second was of his current employer (who is a massive multinational), who take hosted applications from NZ, HR from Singapore, core financials from Europe, hosted email etc. In other words a large SaaS user who in no part of their business thinks that. What they do think is that for every application and business process that they have chosen, they have made the best choice for them.

At the end of the day isn’t what this is all about, business. And in that context, isn’t SaaS just another example of the IT industry creating hype to fuel its growth, IPO and funding needs?

Like I said, deliberately provocative. Thanks mate for keeping it real

SaaS channels and the VAR market

On the back of my previous post on SaaS companies profitability as well as some good analysis by Smoothspan about the costs of acquiring customers i’ve been thinking about the various channel models available to SaaS companies.

The general market perception (and some GM’s too if truth be told) is that SaaS is completely sold through the online channel.  This is blatantly untrue.

From the SaaS providers point of view that would be great. If the client found, tried, bought and self served themselves online, the cost of acquisition (excluding the marketing budget), provisioning and supporting a customer would be very small.

Salesforce.com for instance has a good segmentation model in place, they then pursue the clients in each segment with the appropriate cost channel. SMB’s are done through a mixture of small partners, telephone reps and online channels. Medium enterprise and corporate channels through a direct sales model and SI/VAR (which for simplicity I will just refer to as SI). The Smoothspan analysis proves one thing, the key to a SaaS companies profitability is matching the cost of acquiring the client to the value that they bring in.

Linking back to the SI market I think it’s erroneous to make statements like SaaS will be the end of SI’s. The reasons for this are many. As pointed out by Hari Nair, the on-premise model isn’t going to disappear. I believe my post about how a passionate belief in one approach creates extreme views still holds. The market reality is that clients will adopt a more moderate (and workable) stance for their business. SaaS will continue to successfully address point solutions, will creep into other business areas over time. SaaS will continue to require someone to recommend, integrate, configure and promote business change. Given that SI’s have been doing this for decades, they’re the logical choice to continue on.

I think more critical to SaaS companies is the yet to be clearly understood value of the SI in the ME / SMB space. You won’t be able to displace the SI in this space for one vital reason. In many instances, the systems integrator is the IT department for the client. They are the trusted advisor, in many cases the only advisor that a customer will turn to. 

Unless SaaS companies win over the SI with a compelling offer and support them in selling their software / service the SI could to torpedo every sale.( Phil Wainewright’s post about MS CRM play is a classic example of a SaaS provider (MS) getting this wrong.) In fact I would take that a step further. If you come across a customer who has such a trusted SI advisor, you will in fact be selling to the SI, not the end client. So if you don’t get the proposition right to the SI, you are wasting your time.

In terms of partner channels, the right mix of upfront and ongoing commission needs to be found. The upfront is to placate the sales person who is classically coin operated. While the annuity revenue (the nirvana of all business) keeps the CEO and shareholders happy. The annuity revenue streams also gives the SI a chance to revisit the customer, which if you have a portfolio of services is extremely important, as it would be nice if the SI sold more than one core component .

None of this is new, and it’s certainly not rocket science, the channels that exist for SaaS companies are the same as any other software business. They are all viable and potentially very valuable. The mix is the important bit.  

SaaS companies too will learn that it’s simply not financially possible to sell to every client. This in turn will mean that they will have to build robust partner channels. My advice, look to how the traditional software companies did it, therein lies the gems of knowledge garnered through many skinned knees. Mistakes you could avoid …