The Challenges Are The Benefits For SaaS

The ability to sustain and grow a Software-as-a-Service (SaaS)-based company may not be much different than the ability of a Chef to sustain a restaurant. Consistency, reliability, and innovation are the keys. Those that can execute in these three areas will thrive. As a significant benefit, these components may also drive the success of SaaS on the whole over client/server-based enterprise software. Why?

As with any company, customer loyalty drives success. While managing and selling for a SaaS-based company, we would often think of our customers as if they were on a perpetual trial, constantly having to prove why we're worth it. When a typical enterprise software company sells perpetually-licensed software, once the deal is closed, the customer owns that software for all time. If you no longer need the software, or just don't like it, well... you're stuck. This means that due-diligence is critical before making a purchase both from your internal needs/requirements assessment standpoint, as well as in reviewing vendors. While the same applies for SaaS systems, it is to a much lesser extent.

If you don't like, or no longer need your Salesforce.com, Dovarri, Zarca, LoyaltyLab, Apptix, (or any other SaaS provider) system, well just cancel your contract. Try getting your money back from your Oracle, IBM, Siebel, etc. implementations. You may be able to cancel maintenance and support, but that's about it (and inadvisable). This places a tremendous amount of pressure on SaaS providers to constantly earn your loyalty - consistency and innovation are paramount. Furthermore, the impact of reliability is tremendous and remains a formidable challenge for SaaS providers. Salesforce.com's outages are just one example. And they are a public company with $100m in the bank! Most SaaS providers are start-ups with a only a bit of funding.

In the long-term, those SaaS companies that overcome these challenges will pose a formidable threat to traditional vendors. While my old biology professors would dislike the reference, it is a prime example of "survival of the fittest" in action.