There seems to be increasing momentum for companies to be formed around Software as a Service delivered in a self-service manner.
I think this is the future for the following reasons:
- More profits. With little or no sales staff, it’s more profitable to deliver software this way.
- Less risk. Without having to hire a sales staff, there is less risk of the market changing and you being stuck with an expensive, hard to manage sales force.
- Shorter sales cycle. Just about anyone can type in their information and sign up for your product if you’re charging under $100/mo for the basic service. Anything that involves a salesperson is going to end up costing a company at least $1000/mo, and that means a whole long drawn out multi-month sales process.
- Reduced competitive threat. If you’re a company delivering a $1000/mo solution to an enterprise, and a competitor introduces a substitute product at $100/mo, if the switching costs aren’t too high, you could lose them. Basically, expensive enterprise SaaS products are subject to “innovator’s dilemma” type attacks, particularly if switching costs are low.
- More learning. As a self-service SaaS, you’re likely to have more customers, which allows you to learn more from them and allows you to grow you business more quickly and profitably.
- Easier to implement. The commodity LAMP stack in software engineering is migrating up-market and the tools necessary to implement and run a SaaS model have become much cheaper than they used to be. A great example is payments processing – just a few years ago, there were no recurring payments processing/management companies, and it was a nightmare to manage recurring credit card payments. That has all changed with companies like Recurly entering the space.