Comments on: Investing in SaaS Companies http://www.saasblogs.com/2006/07/07/investing-in-saas-companies/ Understanding the Software as a Service Revolution Thu, 09 Sep 2010 15:35:05 +0000 http://wordpress.org/?v=2.5 By: Jesse Kliza http://www.saasblogs.com/2006/07/07/investing-in-saas-companies/#comment-7 Jesse Kliza Thu, 28 Sep 2006 16:13:22 +0000 http://www.saasblogs.com/?p=49#comment-7 I like the last point made in the "business case for customers" portion of the article. The fact that SaaS builds healthier relationships between the ISV and it’s customers is somewhat of a silent, and not often talked about benefit of SaaS. The ISV invests time and resources to make the customer experience as smooth as possible, to retain clients, and keep their revenue stream strong. The customers recognize this, and it’s comforting to them. The healthier B2C relationships that SaaS builds, is also one of the key components that enables the SaaS model to appeal so well to the group within every industry, that was previously inaccessible to traditional software vendors, because it was simply not cost effective to serve them. Think about what the web hosting model did to propel business. It’s really a very similar concept. There was a time when only large companies could afford to have websites. They had the resources to purchase the hardware and bandwidth, to host their corporate websites. For a small company, this wasn’t feasible. At that time there was no Dell for small business…. there was no Dell for that matter. When the idea of providing the framework for smaller companies to have websites came about, that was when you saw countless new businesses popping up, with websites, and offerings, to fill specific niches, and an entire industry developed just to host their websites. The similarity lies in the fact that at one point in time, having a website was a luxury only enjoyed by large companies, and dreamed about by small ones. With SaaS, many different software applications (ERP packages, CRM packages) that are proven to provide great benefit and return to companies that employ them, will now become available to small companies that previously could not afford the initial upfront investment of purchasing them, nor the infrastructure to support them. We are seeing now, and will continue to see countless new software applications becoming available through the SaaS model, targeted to, and reaching, companies that were never before accessible through traditional methods. The relationship/comfort factor is again, in my opinion one of the key factors that is contributing to the SaaS model’s success. When you provide a service, you are forced to differentiate yourself from your competitors by the quality of service you provide, or your customers will flee to one of your competitors when they aren’t satisfied. With traditional services, we have grown to understand that, "If X company is terrible, I'll just switch to Y company." We do this all the time with phone services, insurance providers, etc. It's really only a matter of time before we begin to think of software the same way. I like the last point made in the “business case for customers” portion of the article. The fact that SaaS builds healthier relationships between the ISV and it’s customers is somewhat of a silent, and not often talked about benefit of SaaS.

The ISV invests time and resources to make the customer experience as smooth as possible, to retain clients, and keep their revenue stream strong. The customers recognize this, and it’s comforting to them.

The healthier B2C relationships that SaaS builds, is also one of the key components that enables the SaaS model to appeal so well to the group within every industry, that was previously inaccessible to traditional software vendors, because it was simply not cost effective to serve them.

Think about what the web hosting model did to propel business. It’s really a very similar concept. There was a time when only large companies could afford to have websites. They had the resources to purchase the hardware and bandwidth, to host their corporate websites. For a small company, this wasn’t feasible. At that time there was no Dell for small business…. there was no Dell for that matter. When the idea of providing the framework for smaller companies to have websites came about, that was when you saw countless new businesses popping up, with websites, and offerings, to fill specific niches, and an entire industry developed just to host their websites.

The similarity lies in the fact that at one point in time, having a website was a luxury only enjoyed by large companies, and dreamed about by small ones. With SaaS, many different software applications (ERP packages, CRM packages) that are proven to provide great benefit and return to companies that employ them, will now become available to small companies that previously could not afford the initial upfront investment of purchasing them, nor the infrastructure to support them. We are seeing now, and will continue to see countless new software applications becoming available through the SaaS model, targeted to, and reaching, companies that were never before accessible through traditional methods.

The relationship/comfort factor is again, in my opinion one of the key factors that is contributing to the SaaS model’s success.

When you provide a service, you are forced to differentiate yourself from your competitors by the quality of service you provide, or your customers will flee to one of your competitors when they aren’t satisfied. With traditional services, we have grown to understand that, “If X company is terrible, I’ll just switch to Y company.” We do this all the time with phone services, insurance providers, etc. It’s really only a matter of time before we begin to think of software the same way.

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