SaaS Network Effect – Get it or get left behind
A little over 3 years ago, there was a great series of posts (here and here) around how SaaS companies make money that led to input from Sinclair here on SaaSBlogs, and myself on my own personal blog at the time. The discussion ended up with examples highlighting that a pure SaaS delivery approach provides far more benefit and strategic advantage to an ISV, than just what’s seen on the surface. It’s not just the MRR, the ability to address the longtail of a market, etc, etc.
SaaS provides an opportunity for ISVs to create something far more valuable than just software functionality that’s delivered online. It provides them an opportunity to become the center of their industry by leveraging the “SaaS network effect” – but it takes creativity, scale, and the right architecture to support it. (both business and literal software architecture)
Just yesterday, Max Bleyleben of Kennet Partners blogged about the aquisition of one of their portfolio companies FRSGlobal to Wolters Kluwer. He made a great statement about this notion that leveraging the SaaS network effect is something that ISVs should be doing, as it provides much more value to the ISV above and beyond the surface level benefits of SaaS that everyone talks about:
“The first wave of SaaS companies moved traditional enterprise applications (eg CRM) onto a hosted platform. The next generation combines delivery of software functions with proprietary content — eg domain databases, analytics, benchmarking data. Without unique content, most SaaS businesses will be commoditised away. FRS had worked out how to codify statutory regulations in 40+ countries into useable, actionable templates that banks could use to manage compliance. Most important, however, FRS’s domain experts around the world continually maintain this content, effectively providing ongoing ‘compliance insurance’ to customers.”
My favorite part of his statement? – “Without unique content, most SaaS businesses will be commoditised away.”
Who Gets It?
Companies like Salesforce.com with their purchase of Jigsaw, and Freshbooks with their quarterly report cards are two examples of companies that get it. The great news is, there’s still so much innovation to come in this area!
How are YOU leveraging the value of your userbase/domain specific data, to differentiate and deliver added value? What other SaaS companies do you think are doing this well?
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Another example is Sage Software’s Billing Boss (http://www.billingboss.com), which is an online invoicing solution. Fitting into the SaaS model, they are an online solution, accessible on a per use basis through an web interface. They have also bridged into the mobile space, by providing ability for users to manage their invoices through the mobile phone and also accept payments through their phone.
Full Disclosure: This author has been compensated by Sage. I am their Social Media Consultant but I was using their product well before they contracted me.