Are services part of SaaS?

by Arthur Lawida

Managing Partner

Once you get past a simple SaaS application and into a broader SaaS Solution, it quickly becomes clear that software as a service is not enough. Often, people decide on SaaS Solutions because they do not have (or want) the in-house expertise to run all or part of their technology deployment. Just as often, they want to outsource all or part of their business operations as well.

This makes a great case for service companies like SaaS Accelerator getting involved to deliver needed services within the SaaS solutions they deliver.

As an example, one of the focus areas for our company is eCommerce. Ecommerce solutions delivered on a SaaS platform like Vcommerce often require several other applications to fit the requirements of an enterprise solution. Search, analytics and customer relationship management are all often required to be integrated into the platform to meet the client's business requirements.

From a services perspective there are several areas of engagement that should be considered to assist a client with a complete solution. Customer service, online marketing, product merchandising, merchant accounts, and supplier selection are all areas that we have seen client's need assistance.

The interesting question is where does the responsibility (and opportunity) for finding and recommending these services lie? Certainly, part of the responsibility lies with the SaaS vendor, especially if they are either early in their development efforts or fielding a Platform as a Service. In the end the business responsibility is with the client but we believe there is a significant opportunity for services companies in this space. Unlike the SaaS vendor, service companies have a core competency in the delivery of services and have the capability and opportunity to develop and deliver true services around each SaaS solution mash-up. If a services company focuses on delivering all of the services around a particular SaaS solution, the upside becomes a deep and integrated knowledge of that solution area leading to more value for the client.

Teamed with the client and the SaaS vendor, these services start to make a more compelling case enterprises to consider an enterprise SaaS solution because they can solve both their technology and business challenges in one package.

SaaS Knowledge Innovation

by Arthur Lawida
Managing Partner

At first glance, companies usually consider SaaS solutions in order to reduce implementation and operational costs. The TCO of a SaaS solution should be less because the core operational costs are spread across all of the tenants.

While this alone is a very good reason to consider a SaaS solution, I think the best reason for a company to consider SaaS has more to do with leveraging the shared innovation that becomes inherent in the solution over time.

At one level, this innovation is in the technology. When tenants ask for enhancements to the core technology, all can benefit and share the costs. When a client asks for a core enhancement, the SaaS vendor must analyze the usefulness to the other tenants. Depending upon the result of this analysis, the cost to the client who requests the customization can range from the entire cost, if it is not likely to be a shared innovation, to completely free if the SaaS vendor feels the innovation will significantly enhance their core offering. In all cases, this ends up in a negotiation based upon functionality delivered, time to delivery and cost.

What is often overlooked by the market is the deep knowledge and wisdom that becomes collected at the SasS vendor across both vertical and horizontal markets served by their solution. This experience can be an extremely valuable asset to a new tenant, especially if they are entering a new business area or sales channel.

Whether it is an eCommerce solution or an HR solution, the SaaS vendor is likely to have seen practices develop over time that it can share with the new client in a way that does not violate the confidentiality of the other tenants. This kind of knowledge, gained from actual operating experience, means each new client doesn’t have to make the same mistakes everyone else made and over time will become a vital differentiator between SaaS vendors and premise based solutions. The key is that unlike traditional software companies, SaaS vendors must operate their client’s businesses and this provides a significantly faster feedback mechanism to drive further innovation into the shared platform.