SaaS Vendors: Stop Thinking Like Software Companies!
Succeeding with an on-demand model requires ISVs to adopt a completely new mindset in order to avoid the commoditization trap.
By Lincoln Murphy, Sixteen Ventures
Jun. 09, 2009
It is called Software-as-a-Service, yet SaaS Vendors continue to focus on the first "S" (Software) and not the last "S" (Service). It is the Service that makes SaaS unique and differentiates it as a Business Architecture from Legacy (on-premises, deployed, etc.) Software. But taking full advantage of being a SaaS Vendor requires a shift in mindset; Stop thinking like a Software Company and start thinking like a Service Company!
By shifting your mindset in this way, the result will be better management of customer expectations, increased revenue, and an improved ability to defend your market position. The mindset shift is small, but is incredibly powerful and potentially game-changing for your company.
Service Companies Not ISVs
Unfortunately, as a SaaS Vendor it would seem the most logical thing for you to do is look to other SaaS Vendors or to Legacy Software Vendors for inspiration; to model your operations, marketing, etc., after. This is especially true if your executives come from Legacy Software or if your firm has Legacy Software products in addition to your SaaS Product. However, the best thing you can do for your firm is to stop looking to Software Vendors or other SaaS Vendors for inspiration, and to start looking to Service Companies like Accounting Firms, Professional Services Companies, Staffing, Payroll, etc.
The main advantage that service companies have as a model for SaaS Vendors to learn from, over Legacy Software vendors, is that service companies are in constant contact with clients. They are always able to find ways to make their customers happy or at least offer them great service; sometimes the results do not make customers happy, but the service always should.
SaaS Vendors have constant contact with customers just by their use of the SaaS Application. This is one of the key differentiators between Legacy Software and Software-as-a-Service, and is what makes a SaaS Vendor more aligned with Service Companies than Legacy Software firms. Through their Multi-Tenant Business Architecture, true SaaS applications not only provide the vendor with visibility and insight into how the customers are using the product, they can also see this across all customers at one time in aggregate. This is incredibly powerful and can be missed by vendors too focused on the core product by thinking like Legacy Software companies.
This improved visibility allows the SaaS Vendor to proactively address problems as they occur or to see where users are spending most of their time and focus on that area in their Strategic Product Development Roadmap. The Strategic Product Development Roadmap is broken down into tactical execution points that lead to the continuous improvement of the product, a key Value-add of SaaS over Legacy Software from the consumer-side.
Continuous Improvement
Continuous improvement of the product is a big part of the Value Proposition of SaaS for users. No longer do the users have to wait until the next version of a product, or do they have to install the next release, to be compliant in their industry, get the features they requested, etc. Unfortunately, many SaaS Vendors continue the traditions of the Legacy Software vendors, including a lack of Continuous Improvement, and for that they will not be as successful as they could.
Shifting your mindset to be Service-centric and provide a continuously improving product to your customers is required for SaaS Vendors, but those vendors must be adequately prepared behind-the-scenes. Without attempting to dictate a product development methodology, the fact is as a SaaS Vendor, you must be agile and nimble; able to not only react but be proactive in continuously improving your SaaS Application. The ability to support such agility, to be able to implement changes, bug fixes, new features, etc., on-the-fly, as a Service Company would implement changes with their clients, requires a system that supports this level of agility. Understanding the required agility early in the application architecture process will help you design a system that can fully meet the needs of the Service-centric SaaS Vendor.
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By shifting your mindset in this way, the result will be better management of customer expectations, increased revenue, and an improved ability to defend your market position. The mindset shift is small, but is incredibly powerful and potentially game-changing for your company.
Service Companies Not ISVs
Unfortunately, as a SaaS Vendor it would seem the most logical thing for you to do is look to other SaaS Vendors or to Legacy Software Vendors for inspiration; to model your operations, marketing, etc., after. This is especially true if your executives come from Legacy Software or if your firm has Legacy Software products in addition to your SaaS Product. However, the best thing you can do for your firm is to stop looking to Software Vendors or other SaaS Vendors for inspiration, and to start looking to Service Companies like Accounting Firms, Professional Services Companies, Staffing, Payroll, etc.
The main advantage that service companies have as a model for SaaS Vendors to learn from, over Legacy Software vendors, is that service companies are in constant contact with clients. They are always able to find ways to make their customers happy or at least offer them great service; sometimes the results do not make customers happy, but the service always should.
SaaS Vendors have constant contact with customers just by their use of the SaaS Application. This is one of the key differentiators between Legacy Software and Software-as-a-Service, and is what makes a SaaS Vendor more aligned with Service Companies than Legacy Software firms. Through their Multi-Tenant Business Architecture, true SaaS applications not only provide the vendor with visibility and insight into how the customers are using the product, they can also see this across all customers at one time in aggregate. This is incredibly powerful and can be missed by vendors too focused on the core product by thinking like Legacy Software companies.
This improved visibility allows the SaaS Vendor to proactively address problems as they occur or to see where users are spending most of their time and focus on that area in their Strategic Product Development Roadmap. The Strategic Product Development Roadmap is broken down into tactical execution points that lead to the continuous improvement of the product, a key Value-add of SaaS over Legacy Software from the consumer-side.
Continuous Improvement
Continuous improvement of the product is a big part of the Value Proposition of SaaS for users. No longer do the users have to wait until the next version of a product, or do they have to install the next release, to be compliant in their industry, get the features they requested, etc. Unfortunately, many SaaS Vendors continue the traditions of the Legacy Software vendors, including a lack of Continuous Improvement, and for that they will not be as successful as they could.
Shifting your mindset to be Service-centric and provide a continuously improving product to your customers is required for SaaS Vendors, but those vendors must be adequately prepared behind-the-scenes. Without attempting to dictate a product development methodology, the fact is as a SaaS Vendor, you must be agile and nimble; able to not only react but be proactive in continuously improving your SaaS Application. The ability to support such agility, to be able to implement changes, bug fixes, new features, etc., on-the-fly, as a Service Company would implement changes with their clients, requires a system that supports this level of agility. Understanding the required agility early in the application architecture process will help you design a system that can fully meet the needs of the Service-centric SaaS Vendor.
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