Monday, January 19, 2009

SaaS not a panacea

Over the past year or so, I came across a number of young and less young entrepreneurs who seemed completely infatuated with the concepts revolving around or arguing for a "software as a service" (SaaS) model, as though SaaS would solve all of their business challenges in a miraculous way.

So you thought all you had to do was offer software online and that's an easy way to remove all friction, increase your profitability by having customers do all or part of the work and never have to go visit users? Many people I meet seem to be under the charm of the SaaS fad. Many see it as an enabler for them to be a viable business. While there are merits to SaaS, its benefits are exagerated and in some cases the invocation of SaaS comes at the expense of rigorous business design.

So here's my take:

  1. SaaS is not a panacea that will address all the issues revolving around your business model, your pricing, your distribution and your support to real customers

  2. as a business buyer you'd better assess carefully how much of your stuff you actually want to entrust to online resources whose viability is yet to be demonstrated and which can be discontinued or frozen without notice (see Google's recent announcements, e.g. on Jaiku or their Notebook). Actually the consequence of this is that you do need trustworthy and financially sound partners who operate such tools like for example Salesforce with AppExchange

  3. if you're going down the SaaS path as a business (which makes a lot of sense in many cases), you're likely to need a hybrid approach with at least some of the functionality residing on the user's machine, very much like Evernote does, and that has to be factored into your model because you're likely not going to get away with the assumption that you won't need any support or releases of updates to end users...etc.

  4. irrespective of the form of implementation of your idea, you still need to put yourself in the shoes of your customers, to understand their needs, think as they think, feel as they feel, do as they do and be compassionnate about their current frustrations to be able to design a better experience. SaaS is not necessarily your answer and in any event, if you seriously design your customer experience, you'll have to take into account new kinds of needs such as online training, online support, remote sales...etc

  5. legal issues are often disregarded in a very strange manifestation of carelessness: if you offer or use a SaaS solution, you do need to care about the jurisdiction and the legal constraints pertaining to data ownership, privacy, copyright, service level, authorised usage...etc. And in fact legal matters could be a serious friction in our sales efforts especially if you're targeting industries that have a tradition of discretion, secrecy and prudence like private banks, retail banks, investment banks, fiduciary and domiciliation companies, family offices, accounting firms, law firms...etc.

SaaS is all fine and good. Permanent beta is great. The network becoming the computer is brilliant. All the new stuff going on in the field of computing services is just very exciting. However none of it is panacea and it is by no means a license not to design, structure and manage your business in a careful and diligent manner. There's no free lunch.

As an aside, this latest wave makes me feel the passage of time given
that this is my first direct personal experience of an old concept
making a comeback under a different name: a few years ago the fad was
called Service Bureau, ASP (for application service provider), grid
computing and Software On-Demand (with Salesforce, Google Apps, Amazon
and and IBM leading the way). Interestingly, the big guys are still
around with relevant offerings irrespective of the way they're
presented (ASP, On-Demand, SaaS or the next fashionable acronym).

1 comment:

  1. Businesses objectives in acquiring a loan is to ensure that business operations continue till the revenues of the business ensures sufficient cash flow to cover operational costs. Working capital loans are ideal for companies or pursuing a new ventures or to cover short term cash flow problems.
    David from http:/ the Get a Business Loan site