What is SaaS and why you should you care? by Dennis Stevenson | May 12, 2009
By now I think much of the computerized world has heard of the expression "SaaS". Many people know that it stands for "Software as a Service" and has given rise to many other acronyms which end with the "aaS" string. But as an ISV, do you really know what SaaS means?
For the last year I've been converging on a SaaS solution in my job. Not there yet, but I see it more and more all the time. I've been exposed to a lot of the concepts that go into SaaS (I'll bet they aren't what you think they are) and I've read a lot about it in terms of blogs. The picture is coming into focus.
Some parts of SaaS are pretty easy to understand. But other parts are hidden and will jump up to bite you in the butt if you don't pay attention. I've compiled a list of items that really bear consideration if someone at your work has rushed into your office and said something like... "SaaS is recession-proof! We've got to do it!!"
SaaS means you think you can sell your system architecture.
At the end of the day, it does mean you think your system architecture is so good that you can sell one version of it over and over and over again and meet the needs of multiple customers and all their requirements. Think about that for a minute. How muchconfigurationdo you have to to to make your software work at a given client? Do you have to tweak it one way for Client A and another way for Client B?
SaaS comes with a pretty big boast that says "we can cover all comers with one installation". There are ways to fudge this rule, but it still holds pretty true. One version of the application has to be able to handle the full scope of all requirements in one go.
SaaS means you think your software is pretty well decoupled.
Similar to the point above, changes in one place can't have a big impact in lots of other places. One configuration can't preclude other configurations. Clients have to be able to co-exist without even knowing that the other exists. This requires a fair degree of decoupling the different components and layers from one another to create flexibility.
SaaS means you think your software quality is pretty darn good.
It's one thing to let the entire marketplace get different glimpses of your software. You can always patch and update one client's version if they find a specific bug. But to let the entire marketplace comment on one version is another matter entirely. It means that every client has to know about every bug you fix - because you are going to deploy it to their environment too. It means that you have the ability to keep up with the demand of fixes that everyone finds - and continue to innovate and enhance the product.
Managing both maintenance and development can be a tricky balancing act. The more you deploy, the more there is to maintain. It gets progressively harder. And of course the broader you deploy the solution, the more you have to respond to.
SaaS means you know how to run a hosting operation.
Hosting an application is very different than developing it. You can't let your engineers manage this for your. You need a new center of excellence. It's a new skill, a new way of looking at the world and the requirements. It's a whole new set of processes - backups, disaster recovery, maintenance windows, intrusion detection, database tuning and monitoring.... There is a whole new business side there - and a new technical set of considerations to get over.
SaaS means you have an effective support organization.
When there's a problem or a question, typically in a SaaS environment, there is no one between you and the end user. So you have to make sure that you have a way to track issues and get them resolved, communicate with the clients and engage the support engineers to get stuff that's broken fixed. Oh, yeah, and all of this usually happens with a clock ticking because you've had to issue Service Level Commitments to your clients. If you don't get it done soon enough, you might end up paying them. That's bad for business.
SaaS means you don't get big cash infusions.
Selling on-premise software tends to result in very lumpy cash flow. Big checks when the deal closes. When you begin to switch it over to SaaS, the lumpiness smoothes out and become more recurring. But if your business model consumes big chunks of cash, then you could end up with a cash-flow nightmare.
SaaS means you have to revise your value proposition and marketing strategy.
Now you have to get people to make recurring payments. They have to stay connected to the value that goes with that payment every month. So your marketing messages all have to change. The approach to the market has to be about how it's even better for them to pay you to operate the solution and just make it available to the client to use - like electricity. Some people may not be very comfortable with that, and you'll have to overcome that resistance.
I'm not trying to say that SaaS is a bad deal. But if you look at what I've just described, just about every part of your company will have to change....
- Software engineering
- Customer Support
- Technical Support
- Operations
- Marketing
- Product Management
- Finance
SaaS is a lot more than just saying "we'll run the software for you." It's a fairly comprehensive shift in how your clients interact with technology - and how your company provides value. And yes, you have to figure out how to price all these different components.
Before you try to slap on a "SaaS" label to one of your current software products, make sure you are clear on what SaaS is really all about.