• March 1, 2006
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

SaaS: Opening the Hatch(ery)

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Software as a service is a pretty simple concept to understand--instead of a company installing an application to its own computers, it accesses and interacts with the vendor's servers. All the development work and maintenance happens behind the scenes as companies pay their monthly per-user fees. But traditional software developers can't just suddenly offer their applications on demand. There's a lot more work to be done. That's where the SaaS enablers come in. Companies like Bluewolf, Jamcracker, Navi-Site, and OpSource are more than mere Internet service providers or server farms; the best are full-service business hatcheries focused on taking care of the details so a vendor can focus on the software. There are three main ways in which enablers catalyze the SaaS reaction, according to Jeff Kaplan, managing director of THINKstrategies. "First, there's coding, both the actual development of products and the service package that makes it work," Kaplan says. Then there's the business model, a sometimes-difficult adjustment in switching from yearly licenses to a monthly trickle, and the actual selling process. "The best enablers are doing all they can with the first and the second, and more and more are assisting with the third." "It's not just a question of how many servers the customer will need," explains Mark Clayman, senior vice president of hosting services for Navi-Site. "We need to understand the product so we can advise a customer on what platform would benefit them most, and advise them on database choices, load balancing, security--even the patching schedule and pricing model." Both Clayman and Treb Ryan, CEO of OpSource, know there's more than just infrastructure to worry about. "Beyond that, we support the customer itself, teaching it how to focus on software while we focus on IT," Ryan says. "We consult on pricing, billing, sales compensation, revenue recognition, and everything else a company needs to succeed in this growing market." To this end, OpSource recently launched the OpSource SaaS Incubator program, which provides all of OpSource's core competencies to new on-demand vendors free of charge for six months. "By removing the financial hurdles and enabling software companies to prove the benefits of SaaS in a secure, risk-free environment, we are anticipating a sea change in the software industry that is nothing short of revolutionary," Ryan says. It's not the job of the enabler to say who will be served and who will not, for the most part. Rather, the motto is, "A rising tide floats all ships." The incubator is built on this principle. "Some of the participants will grow and become paying customers; the ones who aren't ready at the end of six months can stay on the Incubator for a nominal fee," Ryan says. "We live and die on the success of the SaaS concept."
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