How Complex Can SaaS Offerings Get?

Feb 14, 2008 by Sinclair Schuller

It’s common place to equate Software as a Service with CRM, HR, or other “business function” style implementations. Although these implementations are not simple by any means, they generally do not require the computational rigor of an offering that performs complex mathematical analysis or photorealistic 3D rendering. In fact, it’s rare to hear that a company is pursuing this sort of “non-traditional” SaaS offering.

A recent discussion across two blog posts (this one and this one) sparked an interesting discussion about the viability of the SaaS model in the computer assisted design (CAD) space. The discussion revolved around issues like data access and security, but an important takeaway is to highlight that discussions are cropping up regarding application types that were traditionally considered “desktop only”. We see people discussing CAD, and even Adobe talking about bringing Photoshop online.

It’s my opinion that almost any application can be brought online these days, and that making those applications work well is a problem whose solution is rooted in good software engineering. SaaS offerings need not be restricted to applications that serve only horizontal business functions, but can branch out into non-traditional verticals such as CAD. I would even go as far as saying that in many cases, online versions may “out feature” and “out value” desktop counterparts. Take CAD for exampe: can every architecture and design firm afford servers that can perform photorealistic rendering? Probably not, but you can bet that a SaaS provider along with a massive render farm can give that sort of value to anyone on earth.

Do you feel my take on this is too agressive? Is it too early for traditional “heavy” client offerings to move to the SaaS model?

 

read more

How to Incentivize Upgrades in SaaS

Jan 17, 2008 by Sinclair Schuller

In my previous post, I discussed pricing strategies for SaaS offerings. To summarize, my proposed strategy is to put profit-generating emphasis on upgrade/feature add-ons tacked on to your core offering and not on your application’s core recurring base price (which could lead to an unnecesary adoption barrier). This begs the question: “Ok, Sinclair, that sounds swell but how do I convince people to add features or upgrade to a paying plan from a demo or freemium model?” The best way to answer this is to tackle it from your customer’s viewpoint, which is generally driven by the question of “What do I get for upgrading or buying this upgrade?” What your customer is really asking is whether or not spending more money is worth it. Implicitly, your software as a service customer is analyzing what sort of value the upgrade will yield and comparing it to your proposed price.

 

Using this, what should your goal be if you are trying to provide incentive to upgrade? Focus on the blue part! Your customer will consider purchasing the extra functionality a “no-brainer” if the perceived net gain is significant. Generally, you can accomplish this one of two ways: lowering the feature cost or creating the upgrade/new functionality in a way that raises the ceiling (Value to Customer) significantly without inflating cost to service or sales and marketing (S&M) costs. I would generally shoot for the latter. I’d venture to say that generally, adding a small amount of extra effort on the R&D side or focusing on creativity in your extra features can inflate (justifiable or otherwise) the sense of value your customer extracts from a feature. When planning for-sale SaaS offering features, focus on things that require little to moderate effort and cost, but that can yield significant value. This will give significant upgrade incentive to your tenants by boosting net gain.

 

read more