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Reality Check: Is SaaS Really Unstoppable?

Joe Panettieri

February 18, 2010

2 Min Read
Reality Check: Is SaaS Really Unstoppable?

A recent Goldman Sachs report suggests the shift to SaaS is unstoppable. The Goldman Sachs data points seem pretty darn impressive. But a recent blog entry from Justin Pirie, titled “Don’t Kid Yourself — SaaS is F***ing Hard!” provides a timely reality check. I don’t endorse Pirie’s choice of words, which cross the line of business decency. But I do believe his reality check — and recommendations on SaaS profitability optimization — provide timely guidance to readers. Here’s why.

First, let’s start with the upbeat views. The Goldman Sachs survey, according to CNet, found that 58 percent of respondents always consider a SaaS option when making an application purchase decision. At total of 39 percent prefer a SaaS option, if available, CNet also mentioned.

Our own MSPmentor 100 survey results, published Feb. 10, revealed similar SaaS and cloud momentum among MSPs. Most MSPmentor 100 survey participants now offer some form of SaaS email to customers; and a growing percentage are introducing SaaS CRM and collaboration (i.e., SharePoint) solutions.

Reality Check

Still, profiting from SaaS isn’t easy. As Pirie’s blog entry points out:

“In the old days with legacy software, the big upfront cheques solved your  CAC problems. With SaaS you get paid monthly and if the customer doesn’t like it, they go away. So if you’re product doesn’t work for them, you’re in big trouble. That’s why SaaS is so F***ing hard.”

Again, I don’t condone Pirie’s language. But I do think he provides an important reality check. And he offers three ways to help SaaS companies begin to optimize their revenue streams.

Firstly- you need to get out of the building and build software that solves customers problems and they want to pay for. Then, you need to focus on Network and Ecosystem effects to truly differentiate yourself from Legacy software and create market pull, as Marc Andreessen would say.

Worth Examining

Third, Pirie offers an 89-slide presentation to help aspiring SaaS companies to more effectively monetize their services. My eyes typically glaze over when viewing most PowerPoint presentations. But I think this one is worth your time:

How to Optimize Your SaaS Revenue Streams – Rackspace SaaS & Cloud 2010

View more presentations from Lincoln Murphy.

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About the Author(s)

Joe Panettieri

Former Editorial Director, Nine Lives Media, a division of Penton Media

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