SaaS – Service as a Service
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SaaS, or Software as a Service, is a term that is becoming more popular at all levels of business, from Fortune 500 to entrepreneurial pursuits. SaaS is simply delivering the benefits of software over a network, typically the Internet, where the software is hosted offsite. The benefits of SaaS to a buyer are obvious - rapid deployment, guaranteed uptime, quicker release of additional functionality and access from anywhere. For the provider, SaaS has become something of the next holy grail. A successful SaaS provider can gain financial stability through a subscription contract pricing model that creates recurring revenue and, perhaps most impressive, the valuation of that company can increase exponentially from 6 to 7 times the revenue.
The Difference between Investment and Speculation
Let’s pull back for a second. What is the difference between investment and speculation? Investment is securing wealth by building solid, spike-resistant long-term resource allocation strategies. For business owners, that means creating, marketing, selling and fulfilling value that alleviates the pains of our clients. This strategy can be as sexy as the latest wiki concept, or as meat-and-potatoes as landscaping. In the end though, this strategy is about creating a business that drives an acceptable profit, year in and year out.
Speculation, on the other hand, is a roll of the dice. It is looking into the crystal ball and having a vision of something that has the potential to be profitable and, more importantly, rapidly grows the top line. The result is the ability to sell a business quickly for a high premium. But there is a downside: instability. Enter the dot com bomb - though it did create some spectacular wealth, it also created the most failed companies, layoffs and bankruptcies in history. The successful SaaS endeavor, then, will be like a balanced financial portfolio. That is, it will have a vision worthy of risk, passion and energy and it will have a service component that creates stability, reliability and customer loyalty.
It is no wonder that the technology industry—from small business to billion dollar companies—is dedicating its focus to finding, building, launching and tweaking a recurring "service" that is software/hardware driven while reducing human capital needs for future growth. As alluring as SaaS can be though, it is not a magic wand. SaaS does not exempt a company from the traditional (and fundamental) methods of running a successful business. In this age of global outsourcing and offsite service based technologies, some companies are quickly (and sometimes painfully) relearning the values of basic business and customer service. Without these, any SaaS solution will not have the "legs" to prove value over the long haul.
Basic Rule: People buy from people. Simply throwing a technology like SaaS at a problem will probably not solve it. While there is doubtless convenience in a quick online purchase or a text-message interaction, how many times have you been unable to find what you were looking for in a FAQ? Or, spent half an hour going through options in the dial-by-problem voice mail hell?
There is no better example of using technology as a band-aid than the American banking industry. By 2000, ATM and debit cards gave the consumer exponential flexibility, lowered the need for human capital and virtually automated the banking experience. But something was lost in the process. As banks began to rely more on ATMs, the branches suffered with fewer employees and locations, dwindling hours, and poor customer service. Some banks even charged more for using human-based services. Instead of making people happy by giving them more technological options, banks ended up alienating their customers with less human interaction. ATMs are great, but what do you do when there is a problem with your account? Now, a half-decade later, banks are investing in better customer service skills in their public facing staff, to the point of requiring branch managers to spend time each day in the lobby greeting and assisting clients. Initiatives like this have shown a marked improvement in client satisfaction, profitability and ROI.
The lesson to be learned is that no matter how efficient your technology offering is, you must know your potential clientele and be prepared to provide a "face" to your supporting service that enhances client satisfaction and loyalty.
The affects of this reality are that even with the best concepts and technologies, organizations will need many of the attributes of traditional business. A strong audience and specific sales force should facilitate the acceptance of serviced software beyond the early adoption stage. A management team must create clear and executable goals while providing metrics to focus the offerings, deliver the value point and drive profitability. Customer support will need to be tactile, giving the customer an appropriate level of service and comfort across electronic and traditional forms. As enamoring as the next SaaS idea coming down the road may be, without real "service" it will be short-lived.
Published: 04/2007
Author: Tim Phelan
| | Tim Phelan is co-founder of OmniVue Business Solutions and has been an innovator in the technology arena for the past 15 years. Tim's focus is on SaaS, Web 2.0 as well as internet marketing.
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