A very interesting interview with Mike Seckler about growing, scaling and adding value in a SaaS business. He started Employease in 1996 and then later sold it to ADP. Read the entire interview here.
I was recently at one of the Startup Saturdays and couldn’t help but notice the number of students gathered to start something in the coming years. Everyone had more or less a unique idea and all of them were going to do it using SaaS.
Be it online collaboration, hiring, developing, CRM, billing - there is one answer for all your startup needs - Software as a Service (SaaS).
This article points out from a SaaS user’s perspective how these services have made life easier for us new age entrepreneurs as compared to our predecessors (basically people who started before the year 2000).
I am going to put in points that help organizations using SaaS models to startup cheaper and stronger:
1. Low cost of entry:
One of the most important reasons why SaaS is such a favorite with entrepreneurs. SaaS is delivered to organizations as a subscription model, usually billed on a per user per month basis. This means that the costs are granular in nature and are incurred only as long as benefits are achieved. This does away with the enormously large up front payments and massive annual license fees.
2. Low hardware costs:
Since the application is hosted by the service provider, investing in expensive infrastructure is no longer required. All large initial investments on hardware, licenses, databases, ongoing overheads of employing and training IT staff, software and hardware maintenance and upgrades are managed by the software vendor.
3. Multitenancy helps:
All SaaS services are built on a multi-tenant architecture, such that one software is shared on the server by many people. Multitenancy not only helps cutting down costs but also helps in pushing out bug fixes and feature releases in a more efficient way. So as an entrepreneur, you do not need to worry about upgrading your package to avail of that swanky new feature on the software.
4. Scalability:
Your organization starts with a few people and unless you are doing something wrong will always scale up. SaaS models are applications built for the mass market. Such services can be upgraded easily to accommodate extra users at a nominal extra cost. In fact for many services I know, if you upgrade to a package with more users over a longer period of time, the costs are much less than running it on a monthly subscription basis.
5. Easy to implement:
These software’s are on the web and do not require any installation, let alone any changes for your end users to adapt to. You just need to launch a web browser to start using the software. There would be times when you are required to add an extension but this is not rocket science and people in your organization can easily adapt to this. Also, the time required to setup services is negligible compared to ASP’s.
6. Predictability:
All SaaS models are based on pre-defined fixed charges and pay as you go revenue models. This makes it easy for a startup to predefine expenditure and also to prepare for unplanned usages. When you know exactly how much you would be paying for something for a year, it is easier to plan ahead and mobilize resources.
7. Improves focus on our core business:
SaaS strategy not only eliminates the need for additional IT infrastructure spends, it substantially takes the burden off your internal IT staff. With the SaaS advantage, your staff does not have to manage upgrades, troubleshoot problems for generic software applications. This helps the company to direct limited in-house IT resources towards more business oriented initiatives. These business oriented initiatives are the ones that are usually un-out-source-able and require the focus of internal IT teams.
So, if you are a startup and are looking to get a structure in place for your organization, I suggest starting with SaaS while focusing your internal efforst on your core business for greater profits.
This article has been contributed by Rizwan from SutraJobs.com
Jeff Kaplan Think IT Services, one of the prominent speaker on SaaS currently has written an interesting post on the maturation of SaaS Support. As people more their work online and use different types of services and apps, its going to more and more important for SaaS vendors to have a full-service support plan - email, phone, live chat, 30 days for free trials etc. He mentions:
“The success of on-demand services is predicated on the speed at which vendors can acquire new customers and the rate at which they can retain and grow these accounts. Put another way, on-demand service providers cannot afford customer dissatisfaction, abandonment and churn.”
Hence, support is going to be vital. At DeskAway, we currently provide email support (moving on to phone very soon) with personal replies to all our growing customer base. In order to build better relationships with people online (whom you don’t even meet) I am very interested and curious to see how the process of support matures within SaaS companies.
Read Jeff’s The Maturation Process of SaaS Support article.
Last year when we were launching DeskAway we were in a dilemma of sorts - should we price the service per user per month or should we price is per account per month? We wanted our pricing strategy to be very competitive and not come in the way of user adoption. Being a collaborative service, the more people logging onto DeskAway, the better value the company would derive from its usage. Also, the target market was the small business - they want something easy, cost-effective and yet powerful. Obviously, the pricing should justify the value it provides the end user.
Sinclair of SaaSBlogs puts it pretty neatly and I totally agree with what he has to say about this -
“The decision really boils down to understanding value acquisition from the customers perspective. In order to charge on a recurring basis, you need to be able to justify your pricing with a measure of the magnitude of value acquired by your customer along with value acquisition frequency. For example, if you’ve designed a very valuable piece of software that might be used once or twice a month by your customer in their business processes, odds are they would prefer to “pay per drink” rather than a recurring fee since theoretically you should be able to charge less in an absolute sense for that one time used instead of unlimited for a given month (they would generally be willing to pay a premium as long as total cost is lower than recurring fee models). However, if your offering has frequently recurring value acquisition from your customer’s perspective, odds are they’d prefer to pay a fixed fee at some frequency knowing that the firepower is available to them when needed and that cost is fixed but value acquisition has no ceiling.”
Hence, for DeskAway, it was all about giving unlimited users for all paid plans and have the business pay us on a monthly or a yearly basis. Simple, cost-effective and flexible - same as how you pay for your electricity bill every month.
Do you have any experience in pricing software?
SaaS is a new model of how software is delivered. SaaS refers to software that is accessed via a web browser and is paid on a subscription basis (monthly or yearly). Different from the traditional model where a customer buys a license to software and assumes ownership for its maintenance and installation, SaaS presents significant advantages to the customer.
SaaS is faster and a cost effective way to getting implemented. There are no hardware, implementation or acquisition costs involved to run the application from the customer’s side. It’s the responsibility of the SaaS vendor (us) to manage and run the application with utmost security, performance and reliability.
Since customers pay a subscription, they have immediate access to the new features and functionality. Unlike traditional softwares where upgrades would happen once a year or once in 6 months (with the vendor coming to your office with a CD), the SaaS vendor continuously pushes new updates, fixes to the application, which is immediately accessible by the customer. This reduces the length of time it takes a customer to recognize value from the software.
Since the software application is delivered as a service, its important for the vendor to focus on customer service and experience. Since this is on a subscription model, the vendor is judged on a month-month basis and the pressure to innovate or risk losing business is greater.
SaaS can be used by Windows, Linux, or Max users, providing true platform independence over the Internet.
Some examples of SaaS based services are popular email services like Gmail, Hotmail, CRM software like SalesForce, collaboration tools like BaseCamp, Zoho, Huddle, DeskAway etc. Basically, any service that you consume via the web is SaaS.
