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SaaS Design Principle #2: Use Modular Design to Enable Upsell and Upgradability

By June 21, 2011Article

Modular and reusable UI design systems have been shown to save development teams up to 85 percent in application front-end development cycles. This means reduced costs and faster time to market for any enterprise application.
For B2B SaaS, modular design plays an even more critical role. It can enable orders of magnitude increases in profitability. Let me give an example:
A company we work with had a very compelling piece of software for equipment asset management. However, all functionality in the application was bolted together. All configuration was in one area, all reports were in one area, all routing and logistics were in one area, etc. This meant the company was limited to selling their SaaS offerings as a single product at a single subscription price.
When the sum of the parts is more than the whole
Ideally with SaaS, you want is to be able to break your functionality into pieces that can be sold separately. The modular pieces become separate profit streams that sum to more than the profit from a single, monolithic SaaS. In the equipment asset management SaaS, for example, after redesigning the software using modular UI and functionality, the potential subscription revenue from the lowest standard plan to the highest modular plan for advanced business scenarios, could be 10:1 or greater.
Keep it simple to start
A second value of modular SaaS design is simplicity. Customers come to a SaaS with varying degrees of sophistication and immediate need. If there are pieces of functionality that customers don’t want or don’t understand, then you don’t want them to have to deal with it. You also don’t want customers to feel like they are being charged for features they don’t use. SaaS customers that are inundated with too many features simply say: “Oh this is just too complicated. I can’t deal with it. I will look for a different solution that offers only the features I need and costs less.” Keep it simple to avoid customer churn.
Modular design for SaaS based on use case scenarios
Building your SaaS as modular pieces of functionality addresses both creating multiple profit streams and keeping it simple. You design the standard SaaS offering using the lowest common denominator of high-value services (this version could be the basis for your freemium or trial version) and then offer additional services add-ons based on identified customer value.
On one end of the modularity continuum, you can sell everything as a catalog of mix-and-match components. On the other end (what we recommend), you can sell carefully designed packages for specific business scenarios that are determined from user studies and customer monitoring.
If your modules bundle high-value services for different business scenarios and are exposed/discovered at the right time, you will coax customers up the revenue ramp without incurring matching increases in cost of service. The end result is you are more profitable and customers are more satisfied/stable.
Modular design means faster introduction of new services and upgraded features
A third value of modular design is upgradability. Once you are delivering a solution as SaaS, you should be operating in a 90 – 120-day release cycle (as opposed to a one- to three-year release cycle for on-premise or Web applications).You need to maintain that rhythm to keep users engaged and keep your application competitive. Modular, reusable design lets you introduce new features very quickly. It also makes it possible to upgrade just select services or packages in the SaaS without having to impact other parts of the software.
Paul Giurata is a managing partner and lead solution architect for Catalyst Resources. His work focuses on the design of software for mission-critical solutions in cloud computing, SaaS, financial services and mobile.

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