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Monday
Jul132009

Partnership 2.0: Complementary SaaS Application Pricing Models

We are starting to see something interesting happen in regards to the focus and scope of SaaS application offerings. I'm talking about the premise of doing one thing well, rather than trying to do everything - which is pretty much what SaaS vendors try to do.

To complement all this, SaaS vendors are keen to support integration, through open API's, widgets , and loose-coupled partnerships with other SaaS applications. It's almost a de facto buying requirement that a SaaS offering has an architecture and a vibrant community to enable customer's to mash-up solutions.

However, these loose-coupled partnerships don't yet appear to extend to include a commercial pricing model that might foster even greater take-up.

Let's look at this from a customers perspective. If I start putting together a mash-up of various complementary SaaS applications, the costs start to ramp up - $20 + $30 + $25 = ..... Indeed, those all-in-one solutions may start to look better value, even through are likely to be less effective overall - which isn't better value after all.

From a SaaS vendors perspective, I can't help feeling that they very much like the idea of complementary partnerships to help boost adoption of their offerings. After all they need to sign-up those subscribers and keep them subscribed - one of my favourite dimensions about the SaaS model.

However, I've not seen much evidence in regard to supportive pricing models. It's kind of still that SaaS vendors are loathed to see their price undermined, they still want their share of the pie sustained. From this last statement, you'll know where I'm going next - the bigger pie argument.

Let's go back to a customers perspective and look at a scenario. I want a solution, I have choices: (1) Purchased/Install Software, (2) All-in-One SaaS Application, (3) Mash-up SaaS applications. I'll add a split to (3) - (3a) to cover open source, (3b) to cover commercial.

Rather than go into a complete comparison over all the choices, I just want to highlight one aspect. There are so many good tightly focused SaaS applications that I could certainly assemble lots of mash-up combinations. The open source ones, including all-in-ones, will certainly not have to consider much the up-front costs, but the commercial combinations will certainly start to see how price becomes a factor.

If your one of these SaaS vendors, would you not want help mitigate some of these factors to increase the slice size of your sectors pie and help customers select your combinations?

If this a line of argument that may make some sense, then how do we practically rationalize the split or value the contribution of each party? Certainly, you can't easily amortise individual physical hosting costs, but from a logical functionality perspective overlaps can exist - ironically because of tighter integration.

The key perhaps is to examine value components across a wider system perspective - as if it was an all-in-one, then try and price it at the premium end of the competitive options - since it will likely be much better - if it isn't then that's a bigger worry!

This isn't going to be easy, each SaaS vendor has to make their model work on it's own, but a trick is being missed if complementary SaaS vendors who are using loose-coupling partnerships to boost their profiles, don't start at putting together some imaginative pricing models to back this up.

To quote an old marketing adage - customers have wider choices than just product A or B, including do nothing.

 

 

Tuesday
Jul072009

Services 2.0

Whilst the use of 2.0 this and that appear all over the place, indeed Services 2.0 was mentioned two years back, and is being successfully pursued by Appirio, what we are trying to address at Coherence Design really is a niche version exploitation of the disruptive changes afforded by SaaS and Web 2.0 approaches under the banner of Services 2.0.

The service model needs to evolve to meet the challenges and opportunities presented by SaaS ISV's and their growing customer bases.  The opportunity is that these vendors strive to make their offerings simple, focused, and easy to use -  they don't see services as fitting into their modus operandi (method) of doing business. It almost grates with them on several fronts, but they are beginning to see the value, if they are to scale and keep the breadth of their customer base happy & subscribed!

Some folks do need help, since any system needs to be based on a process it is trying to support. Skills such as business analysis, design, configuration, and the Daddy of them all - introducing change, still apply to some degree or another.

The challenge and a cornerstone for Services 2.0 is the ability to do this very efficiently. Generating the need for substantial services is not the game in town any more. Rather, it's one of packaging and tailoring re-usable knowledge to get the job done fast and at a price compatible with the SaaS application pricing. It takes minutes or seconds now to provision the IT, you can't be waiting too long for an actual in-service solution to be launched.

There is also also much more opportunity for iterative working, any services person will tell you that 'client's rarely know what they actually want'. Get something up quick, then evolve it. The gotcha is that mistakes can be made if you don't know the big picture - knowing enough about the business context of use or what can be done with the features and functions. Hence you need some friends and a good old fashioned service focus culture.

Friends is quite apt, since sociable aspects fit well into building relationships up, down, and across the value chain. An such Services 2.0 providers needs to be well connected and since they work for their client's (both up and down the chain),  I also see some advocacy included in the mix.

I think we'll be seeing more re-intermediation going on. SaaS has been seen as a keen exponent of dis-intermediation, the ability to cut out the middle man and go direct. This has been effective, but holes are left to be filled by new players with approaches that are better suited for all parties.

The possibilities are only just emerging, value-add services, like software, is not the preserve for those with deep pockets any more.

But beware , channel partners, have in the past, been notoriously fickle - they liked big bucks, everything set-up, and low risk. Choose you friends wisely, you'll need one of a newer breed of Services 2.0 providers.

 

 

 

Thursday
Feb052009

SaaS Early Adopters & Mainstreamers

As head of a professional services practice for information management software company back in 1998, I distinctly remember having a 'discussion' with the then CEO about how great it would be if we didn't have to install and support our software on our customers site. I said 'why don't we host it here, it will save a lot of costs and hassle', he said - commercially - it will never catch on.

Well, ten years later and I think we are starting to see that SaaS, via ASP on the way, is rapidly approaching mainstream. Indeed, it can be said that the last down turn in 2002/3, really help SaaS get a foothold, so I can image that our current economic woes will finally push this model fully into the mainstream.

For early adopters the explosion of web apps and SaaS offerings is like a kid in a candy shop - truly amazing, but one that can get overwhelming. I confess to spending too much time finding, playing, and lusting for 'the next one'. Whilst natural selection will happen, low barriers to entry will always mean that the early adopter community will be able to satisfy their cravings for a long time to come.

Classically, Geoffrey Moore's, Crossing the Chasm, speaks to the jump that technology must make from early adopter to mainstream. The metaphor of the chasm is apt since there can be quite a difficult gap to get across. A significant factor in this is due to the different personalities of early adopters and there mainstream brethren - Mars and Venus style.

The blueprint to crossing the chasm includes getting your product to smell, taste, and be mainstream. A term used in this vocabulary is 'whole product'. This is when you have all the other pieces of what the customer actually needs nicely packaged and ready i.e. services, support, training, and reference implications. Absence of these for early adopters is not a problem, but it is a warning sign for those risk adversed mainstreamers.

So, one could conclude that SaaS needs to understand these principles and apply them - Salesforce.com could arguably be following this plan. Different delivery model, but essentially the same gig.

However, maybe the mainstreamers of today and tomorrow, are evolving and have more early adaptor traits than we might think. I'm betting that we need a new category of adoption, one that fits better our present age. Of course this isn't a new topic Alex Iskold blog Rethinking 'Crossing the Chasm' cira 2007, makes similar and more points along the same lines.

I'll be exploring this theme more. Angles on this include following some aspects of the classic approach to going mainstream, questioning if some aspects are less applicable these days, or even if you need to go mainstream at all.