Measuring the Profitability of SaaS
Last month, Bruce Richardson of AMR Research published a provocative commentary entitled, “SaaS and the Elusive Path to Profitability” that heightened the debate regarding the financial viability of the Software-as-a-Service (SaaS) model.
Bruce’s column elaborated on a presentation he gave at SaaScon 2008 entitled, “Balancing Customer Acquisition Costs and Elusive Profitability.” The talk was driven by a question which Bruce claims to ask numerous software and service companies on a regular basis: “Do you know how much it costs to win a dollar of new business?”
Not surprisingly, Bruce has found that most SaaS companies are losing money acquiring new business in hopes of gaining long-term profitability over the life of the customer relationship. This has always been the logic behind the ‘land and expand’ tactics which are at the heart of almost every SaaS company’s go-to-market strategy.
In order to make his … Read More »
Why IT Now Sees SaaS As A Savior
I predicted in December that IT would become more comfortable with Software-as-a-Service (SaaS) in 2008, helping to accelerate its growth over the coming months.
Here are some clear indications that my prediction is coming true,
SaaScon: CIOs from many big name companies, as well as smaller organizations, spoke about their positive experiences with SaaS and traded insights about how to take fuller advantage of SaaS to meet their end-user and IT management needs.
SaaS for IT: A growing number of major hardware and software vendors are offering SaaS solutions specifically aimed at the IT department. Although many of these offerings could be sold direct by the vendors as managed service solutions, they are being pushed through the vendors’ channel programs.
Platforms: While the initial platform plays in the SaaS market were aimed at software vendors and developers, the more recent initiatives by Salesforce.com, Bungee … Read More »
SaaScon a Milestone for the SaaS Movement
This week’s third annual SaaScon was more than just another conference. It represented an historic breakthrough for the rapidly evolving SaaS industry.
What made the conference so signficant was the nature of the audience, and stature of the keynote speakers and many of the breakout session presenters. While the originators of SaaScon–including myself as an original member of the conference advisory board–always envisioned the event as an important user-oriented conference, we were unable to achieve this objective during the first two SaaScons. We couldn’t find SaaS users willing to talk about their experiences and couldn’t convince IT/business decision-makers to attend the show. As a consequence, SaaScon just became another place for software vendors, VCs and others to talk about the state of SaaS. This year’s conference was a whole different story.
ComputerWorld’s events team deserves a lot of the credit for overcoming … Read More »
OpSource SaaS Summit Takeaways
Last week’s OpSource SaaS Summit was a milestone event for the on-demand services market on a number of levels.
The first SaaS Summit in Silverado in 2006 was a gathering of industry pioneers to discuss the potential of the on-demand movement. Last year’s Summit in Monterey was an opportunity to celebrate the growing success of the SaaS movement. This year’s Summit offered a chance to take stock of what it will take to scale SaaS to meet the needs of the mainstream market. The theme was platforms and web services, but the event also raised other issues.
With over 600 registered attendees, this year’s SaaS Summit was the largest vendor-oriented conference focused entirely on the rapidly growing Software-as-a-Service (SaaS) market to date. While Salesforce.com’s Dreamforce user conference is still the biggest SaaS event of all, OpSource’s SaaS Summit has represented the benchmark … Read More »
The Sales and Support Ramifications of On-Demand Services
I had the privilege this week of participating in an interesting webinar sponsored by Makana Solutions regarding the sales implications of Software-as-a-Service (SaaS) and other subscription services.
Tom Wilson, of the Wilson Group; Makana’s founder, chairman, and CEO Liz Cobb; and I discussed how the sales skills and processes differ in the on-demand services world from the traditional packaged product environment. Specifically, on-demand services come at a lower price-point which necessitates higher volume sales to be successful. This requires a transaction oriented sales process and telesales skills, rather than the long salescycles and highly personalized approach of traditional legacy software sales. Therefore, restructuring the sales process and retraining or restaffing the sales team is critical to transitioning to the SaaS and subscription service model.
Similarly, the support function also changes in the on-demand world. Rather than rely on technical support to react … Read More »
SaaScon Becoming Barometer for Broader Industry
In his latest entry on ComputerWorld’s SaaS Revolution blog, Eric Norlin shows how the evolution of SaaScon reflects the maturation process of the broader SaaS marketplace. I think his commentary is right on.
When we launched the conference a year and a half ago, SaaS was still an embryonic market opportunity. Although Salesforce.com had proven its viability as a business, and there was a proliferation of start-ups and established players entering the market, it was still unclear how far the SaaS movement would evolve. It was also a movement of greater interest to the market participants than to potential customers. As a result, a large proportion of the attendees at our first SaaScon event were vendor representatives trying to get a handle on the business opportunity.
Our second SaaScon produced a broader assortment of speakers from a wider variety of vendors, but … Read More »
Top Ten Reasons Why On-Demand Services Will Soar in 2008
Since the holidays are traditionally a time for people to take stock of the year past and offer their new year forecasts, here are my top ten predictions why the shift from packaged products to Software-as-a-Service (SaaS), utility computing and managed services will accelerate in 2008:
1. Services are Recession Proof: Escalating oil prices, the uncertain political landscape and faltering financial institutions beset with the aftereffects of the sub-prime lending debacle could mean a tough year for the economy. In this tenuous climate, consumer and executive confidence could decline, leading to an economic slowdown. As a result, many companies could hold back on their capital investments to mitigate their risks. The ability to adopt on-demand services on a pay-as-you-go basis will be a perfect sourcing strategy for businesses seeking greater cost-controls and flexibility.
2. … Read More »