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I am a big fan of Software as a Service, but it frustrates the hell out of me to see industry pundits over-hype it without really understanding it. Here are 3 killer (in the bad sense) half-truths about SaaS:
1 – SaaS is simpler, easier to implement than On-premise software (see update at the bottom)
2 – SaaS is for the SMB market
3 – SaaS is bought, not sold, it’s the end of Enterprise Sales
Let’s examine them in detail:
1 – SaaS is simpler, easier to implement than On-premise software.
The only part that’s absolutely true is the technical installation, which the customer no longer has to worry about with SaaS. But we all know that this is a fraction of a typical implementation. Implementations are all about business process and training, hence the difficulty / duration / cost of an implementation depends on the complexity of business and the size of the organization – these two tend to correlate with each other.
It just so happens that all SaaS solutions so far have started (and many stay) at the SMB level, so they are simpler not by virtue of being SaaS but by their target market’s needs.
2 – SaaS is for the SMB market
Yes, traditionally all SaaS started with Small Businesses, but that does not mean it may not move upstream. Salesforce.com and several HCM applications have proven technical scalability, but they offer partial / departmental functionality.
I am a strong believer that in 4-5 years most software developed will be SaaS, and that in 10 years it will be the predominant method of “consuming” software by large enterprises – but I can’t prove it. There’s no empirical evidence, since there has not been any Integrated Enterprise SaaS available so far. The closest to it is NetSuite today (but it’s still SMB focused), and SAP’s Business ByDesign tomorrow. In fact despite SAP’s official positioning, driven by market focus and current limitations (functional and infrastructure), I believe that SAP will use BBD to learn the SaaS game – i.e. BBD will be a test bed for a future Enterprise SaaS offering. But we’re not there yet.
(longer discussion here)
3 – SaaS is bought, not sold, it’s the end of Enterprise Sales
Hey, I’ve said this myself, so it must be true (?). Well, it depends on the position of the sun, the constellation of the stars, and several other factors, but mostly the first two we’ve just covered.
SaaS for very small business: that’s the clear-cut lab case for the click-to buy pull model to work. In fact in this respect (sales model) I believe the business size is the no.1 determinator. Some solutions will have to be configured and may even require pre-sales business process consulting. This inflexion point will clearly be higher for functionally simpler solutions, like CRM and lower for integrated business management systems, like NetSuite or SAP’s Business ByDesign.
Once you reach that inflexion point, you’re in a more interactive, lengthier sales process, and that’s typically face to face. At least that’s what we’re conditioned to: but it does not have to be that way. That will be the subject of another post – to come soon.
Update: Ben Kepes challenged #1 on his blog, and to some extent I have to agree. My post here is continuation of a discussion we started at the virtual SAP Marketing Community Meeting, and my mind-set was still business process software, e.g. CRM, ERP..etc, but I forgot to specify that. Instead of replicating the argument, why don’t you read my response to his response at Ben’s place.
Zoho, best known for their Web-based Productivity (Office+) Suite today released Zoho People, a feature-rich On-Demand HRMS – Human Resources Management System. For the product introduction please read my previous post, while here I focus on business analysis, specifically on what this move means to software sales in general.
Today’s product announcement signifies a departure from what Zoho has been known for so far, in a number of ways. Their primary reputation is being the best Web-based Office / Productivity Suite provider – People is clearly a process-driven, transactional system with “enterprisey” features: organization levels, work-flow, permissions…etc.
It’s not an entirely new field for Zoho though, as their CRM solution has been gaining traction for years now – both in terms of new customers as well as converts from the market leader. (See chart with full list of Productivity and Business Apps). As a matter of fact, I’ve often stated calling it CRM is an understatement: with Sales Order Management, Procurement, Inventory Management, Invoicing it’s really more of a mini-ERP. Add to it Accounting and HCM and Zoho can come up with an unparalleled Small Business Suite, which includes the productivity suite (what we now consider the Office Suite) and all process-driven, transactional systems: something like NetSuite + Microsoft, targeted at SMB’s, perfectly rhyming with Zoho’s stated objective of becoming the outsourced IT for small businesses.
Except… well, Zoho People is not a small business system. All you have to do is look at some of the organizational setup, or processes, like holiday, training, leave requests, company policies to realize that this system is ideally suitable for organizations with a few hundred employees and more. (The “M” in SMB, whereas most of Zoho’s focus has been on the “S” until now). So it’s a departure from Zoho’s traditional target market, and by its very nature it’s not a system individuals or small groups would just start to use in an ad-hoc manner. It’s a system to be introduced by HR for the entire company.
Bringing an enterprise system to the market typically requires a different approach, a coordinated marketing and sales effort, supplemented by consulting and support – i.e. all the extra weight that makes enterprise software “big and fat”. Yet Zoho just throws it out in the open, like they did with Writer, Sheet or any one of the dozen or so productivity tools. They have no clue how to market enterprise software! – one might say… and do they, really?
Simply announcing enterprise software without marketing and sales is certainly a risky proposition. Any startup that does with their main product is doomed to fail. Yet Zoho can afford an experiment. The new HCM system is just one product in their portfolio, in fact the entire Zoho portfolio is just a big experiment of the parent company, privately held and profitable Adventnet. CEO Sridhar Vembu repeatedly stated his mission is to commoditize software, delivering it to large masses at previously unseen prices.
There’s all this talk about how SaaS changes the economics of Software – pull vs push process, try-and-buy vs. the expensive enterprise sales process; but it mostly refers to the SMB space. The try-and-buy, self-serve model is almost unheard of amongst larger organizations and more complex software. It traditionally needs more cajoling and hand-holding. But why not break away from tradition? Why should all innovation stay on the product side? Zoho goes the extra mile to make the new system more “consumable”: screenshot tours, demo videos abound. Of course disruptive pricing does not hurt, either.
If Zoho People fails to gain traction, so be it: the company will likely focus on their main avenue of becoming the IT provider for SMB’s, integrate features from People into Zoho Business and CRM, and figure out how to crack the HCM market later. If, however it starts gaining traction, it’s a good signal to the entire SaaS industry: an indication that transparency, online information and help works, the try-and-buy model may just be feasible even with larger organizations, which, for the first time will buy Software as a Service instead of being sold to by pushy enterprise sales teams.
(Disclaimer: I am an Advisor for Zoho.)
Related posts: Between the Lines, Zoho Blogs, Deal Architect, Centernetworks, Wired, SmoothSpan Blog, GeekZone, Webware, Venturebeat, Web Worker Daily, TechCrunch, Business Two Zero, Irregular Enterprise.
Tax-time is soon upon us, and for millions of Americans that means buying TurboTax again. Fastest way to get it? Download from Intuit. Cheapest way to get it? Buy at Costco.
Not anymore. This year the fastest AND cheapest way is to download it from Amazon. Yes, Amazon entered the software download business, although initially the only available products are the different TurboTax flavors.
The traditional, box-sale page points to the download version, claiming you will “save time and money by downloading” software. Well, not quite. The downloadable version of each product is priced to match the boxed product+shipping charges. This is a missed opportunity, there are obvious savings from not having to manufacture, ship and store a tangible product, so they could afford to create financial incentives to move more customers to the download option. (Note: “they” means both Amazon and TurboTax maker Intuit, which also offers the box and download at identical prices.)
There’s one thing I really, really don’t like about this new Amazon service: before you can purchase anything, you need to download and install the “Amazon Downloader”, which in turn will download and install the actual product. Now, I don’t know about you, but I certainly am not buying software frequently enough to justify the need for a client, whatever benefits(?) this approach may offer. And of course once you install software, you know you’re in for a lifetime of endless updates…
If you ever need to download your purchased software again, it’s available under a new section called “Your Media Library.” As Mashable’s Adam Hirsch discovered, this is a lot more than just a listing of your digital purchases: you can list all purchases from Amazon and other sources, adding your items by simply scanning their barcode through your webcam, Amazon will convert and import the information automatically . There are a number of ways to share all this with friends, start discussions, tag items, subscribe to your friends’ collections via RSS, and follow what’s hot at any time.
If you think this is all similar to FaceBook’s Beacon, that’s because it is. With a significant difference: Amazon’s version is entirely opt-in.