Posted by: drmiw | November 21, 2008

Four ways to a successful SaaS business

As mentioned in my previous post on Software + Services, David Mitchell, Ovum’s Senior Vice President of IT Research in the UK listed four ways to a successful SaaS business, which I’ll address here with Extrasys in mind.

1: Be industry specific

This is particularly good advice. In the past we targeted SMBs with the same marketing messages, and that’s not very effective when you have a product that is not trivial to explain. So at the end of last year we held a series of value proposition workshops to work out which industries our product is best suited to and that approach is now bearing fruit.

2: Have an intellectual property portfolio to gain margin in IT services

With competitors springing up everywhere in the SaaS market, prices for hosted services have fallen quite dramatically in the past couple of years, and margins are much smaller than they were, so it is indeed important to be able to develop skills and tools in house to add value to commodity products. The Extrasys team are constantly innovating, improving and learning, and we provide our customers with a range of services beyond application hosting from business modelling services through to bespoke software solutions, using industry best practice methodologies.

3: Have a portfolio of services, but don’t give too many choices

I think it’s important to give potential customers relevant options, including alternative solutions to your own, but when you get to the bidding stage those options should be reduced to one or two. It’s all about listening to the customer and solving their problems if you can, and that applies to any sale of a technical solution, SaaS or otherwise. Our sales team has been well drilled in simple techniques for requirements gathering and our technical team do the rest.

4: Focus on customer benefits – time to net cash

Return on Investment (ROI) for SaaS, and IT in general, is notoriously difficult to quantify. With SaaS the initial savings are through the capital that would otherwise have been invested in hardware and software systems, but also in the people required to support those systems. Even then there may be no cash saving over a three year period, say, but if you take into account the benefits of outsourcing enterprise-grade IT to experts, while you focus on what your business does best, then the returns are potentially great. Nevertheless, it behooves the IT supplier to demonstrate real ROI in cash terms, short term and long, especially in the current economic climate.

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