What is Saas?
Have you ever heard about Software-as-a-Service (SaaS)? This is a part of IT industry, in which vendors deliver so called “on-demand” software. Lecturer Robert Barcik is going to take you through all the essentials of this lucrative business area. In recent years, many companies have proven how the lucrativeness of this field. On the other hand, we can observe high failure rate among SaaS start-ups. Why is this happening? What is it that these start-ups should do better?
Knowledge from experts
While creating this course, we have not only reviewed tons of materials that have been written about SaaS but as well, we interviewed 13 SaaS companies. Some of the interviewees described for us how they failed, while others told us some of their secrets and how they succeeded.
Content and Overview
Course starts with absolute basics - defining what SaaS is, and how this field emerged. The course will later on proceed to advanced topics such as Business Metrics or Lean Start-Up Approach as these belong under SaaS-specific business strategies.
At the breakthrough of millennium the so-called “DotCom Era“ occurred. As a side effect, many Information Technology (IT) companies had created an investments bubble and when it burst, the whole industry faced a crisis. IT vendors needed a new business models to regain the trust of investors. The SaaS field was naturally created and gradually specified since then.
In the Software as a Service (SaaS) model, the vendor owns and operates the application and the database, owns or leases the hardware, and manages security and upgrades. The customer owns the data and accesses the application via the internet with a web browser, usually for a peruser subscription fee. Pure SAAS vendors prohibit access to the code base for customization and instead offer configuration.
According to the research, approximately 60-90% of startups that attempt to create Software-as-a-Service product fail. These fail to recognise and acknowledge the specifications, such as product scalability, within this field. Hence, it is absolutely crucial to get a clear grasp of these and followingly apply SaaS-specific business stretegies.
For decades, most mainstream approaches to startup development has been referred to as a traditional approaches as they share many similarities in ways of thinking and methods. It is “push” approach where a company creates some product and attempts to push it to the wide market. Once this is done, the company starts to receive a feedback from a larger pool of customers and works on improvements of the product. This is no longer effective as the Lean Approach takes place. What is it?
The Lean Approach "...advocates creation of rapid prototypes that test market assumptions and uses customer feedback in an effort to evolve the design faster than more traditional product development practices." (Ries, 2011). This clearly is the “get out of the building” approach that can be rather described as customer development, whereas potential customers are brought to a large extent to the development process.
Why should an entrepreneur strive for creating a Minimum Viable Product (MVP)? It is due to several reason. Firstly, investor will be willing to fund such product. Secondly, early adopters will be willing to purchase such product. Thirdly, it will be the product that will allow the vendor for Validated Learning (next module).
Steve Blank in 2013 clearly stated that if an SaaS vendor is about to succeed, he/she needs to perform a Validated Learning. This is a rather continuous process in which one executes an initial idea and later on measures it to validate the effect. There exists something called a Feedback Loop, which is a simple tool that allows vendors to do so.
When developing an SaaS product, vendors have to adopt Agile methodology instead of the old waterfall approach and with that prioritise: (1) Individuals and interactions over processes and tools, (2) Working software over comprehensive documentation, (3) Customer collaboration over contract negotiation, (4) Responding to change over following a plan”. Students will walk away with the understanding of why this is important.
SaaS business is about the scalability of the product as well as about its growth. Not only the investors but as well the founders themselves require strict measurements of how successfully the company is doing. The students will walk away with basic understanding of what it is necessary to measure.
Successful SaaS companies try to go deeper and develop a specific metrics that will more accurately grasp their individual business. The underlying justification for this is that these companies should try to create some sort of “early warning system” that will indicate when things are not going as they should. Preferably early enough so that vendor can take appropriate corrective actions.
It is the right time to try selling our SaaS product. First decision that we will have to make is about Product Trial. We want our customers to be able to try our product before we ask them to pay for it and for that, we can either adopt the Freemium or the Free Trial model. Secondly, we will need to develop pricing. Pricing of SaaS products is very specific and requires a creation of so-called Pricing Plans. These are not easy to develop as they need to follow so-called Value Metric.
Robert Barcik is a co-founder of MeanThat, the educational platform that helped more than quarter million students to learn efficiently. In 2014 he got inspired by KhanAcademy and created his first own videos and after placing them on YouTube he reached a global audience in a heartbeat, all eager to learn! Several universities and as well MBA students from all over the world started to use the videos for their lecturing.
With this, he jumped the educational train and in the upcoming months became a university lecturer and developer of Flipped Teaching with a focus on Marketing, Organisational Theory and Business. Along with that, Robert is a Business graduate and Data Analysis student at Swedish Dalarna University. Here, he cooperates with the educational institutes to promote an innovative ways of teaching.