Benefits of SaaS

This post covers what I promised before - benefits and challenges in SaaS. Let’s start with good things first and look at the benefits of this model.

Benefits to ISVs

1. Revenue is stable and is not driven by new releases
2. Since the services and products are marketed and sold via internet (search engine based marketing, aggregators like JSDN), the entry cost for ISV’s is less (except for the infrastructure to deliver the service, where the ISV’s has options of partnering with specialist and pay them also in a subscription / usage based model). Allows entrants to compete with biggies.
3. Its easy to get your customer – customers will be willing to try and adapt your services at a faster rate than the traditional software as their entry cost is low.
4. Better knowledge of the customer - Vendor gets immediate and elaborate feedback on the way his application is used by the customer. Such information helps the vendors to understand and provide what the customer is looking for proactively.
5. No need to maintain multiple version of the product on multiple environments
6. Distribution of upgrades is not painful
7. Options for new revenue streams around infrastructure, complimentary software and other service offerings especially BPO

Benefits to Customers

1. Pricing is based on subscription / value based (My colleague Sagar is writing a blog on Software Marketing. He has posted an interesting article on software pricing, if you are interested to read more click here). Hence the customer need not pay any upfront license cost and rather align his cost with his annual budgets.
2. Less impact in IT: As there are no deployment and implementation needs, there is less impact in the IT infrastructure and support. .
3. Quick and Reliable implementation
4. Rollout the solution before buying – all services provide an extensive trial period where in the organization can rollout a solution and test them in real-life scenario before buying
5. No lock-in - Customers have the option of breaking the relationship and moving to a different vendor. Since there is no upfront cost and the cost is primarily subscription based, if they find a better service or low cost they can always move
6. No need to pay for bugs in the application – traditionally the customers after paying for the software, also pays for the bugs in the software in terms of maintenance and support fees. In the new model the cost of hosting, maintenance and licensing are not separated, customer only pays a fixed subscription fees.
7. This new model has created a level playing field, in which the software tools which were traditionally available only to big players (reason being huge License cost, lack of IT support and infrastructure) is now available for SMB’s too

I will stop here for this post. We will look at challenges later. In the mean time if you feel that we can cover some specific topics in SaaS, do let me know.

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