| "Saas Bias" - We've come full circle |
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| Saturday, 05 July 2008 10:13 |
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I was in a fascinating meeting last week with one of the top three industry analyst firms, and was asked a question that really floored me. The context was that this firm has been doing a lot of consulting work lately with large heritage enterprise software vendors who are trying to figure out SaaS. I was asked a question along the lines of "Why do you think businesses are so biased toward buying SaaS solutions when their on-premises counterparts have so many more features." I answered the question by talking about how SaaS disruptively changes the software acquisition game - it drives the focus of the buyer to be about solving business problems and broadens the evaluation to include the full costs and risks of acquiring, installing and operating the system. So the old enterprise software feature checklist comparison becomes a much smaller part of the overall evaluation, and buying decisions become based on complete solutions for solving business problems rather than mostly on product features. Over the last couple of days I spent some more time thinking about the source of this question and the context behind it. I can imagine what it's like today to be a product manager of a mature product at a large enterprise software firm. You're whole body of experience is based around selling your 20 year old, highly featured products to the IT department. You've become used to selling against your competitors mostly on product features - because all of the vendors have basically the same architecture and business model, the way you differentiate in the end is on breadth and depth of features. And you are used to winning - you've been winning for a long time because you've got great products. You've always been able to fend off new upstart competitors because of your built-in feature gap - the cost to any new entrant to get to feature parity with your mature solution is prohibitive, after all you've been at it so much longer, and you keep implementing more and deeper features to keep widening your feature advantage. And then along comes a new SaaS competitor. You know in your heart that you've got more and more mature features, but something has changed. Your customers are starting to flock to the new upstart competition. It must seem unfair because this is driven by things that are out of your control - like SaaS's lower implementation and operating costs and risks, or the far lower acquisition and capital costs associated with SaaS, and these things are becoming central to the buying decision. So your whole world is being turned upside down - and how do you rationalize this - well it must be bias - the customers have become biased towards SaaS. To me this was a real tipping point kind of question. Just a few years ago, the idea of robust Internet-based applications that you could run your business on was a pipedream. No one would ever have asked about a bias toward SaaS. To have such a huge reversal today where the perception of the software establishment is that there is today an active bias in favor of SaaS - well that is just an amazing transformation and really speaks to the power of the on-demand model. |