Implications of a SaaS Business Model

Many software vendors are considering whether they should move to a SaaS business model, if they haven't already done so. But the SaaS model may not be right for everyone.

For one thing, as Mike Seckler so succinctly points out in a recent interview with Phil Wainewright on ebizQ.net, the move to a SaaS model means changing from a software (product) business to a services business: "...Folks misunderstood what was required to deliver software-as-a-service. They thought it was just delivering the same applications they had always built but with a web front-end and with someone hosting the application. But in reality, it required really rethinking the whole business model of software and realizing that you were no longer a software company, you had to become a service business."

Sucessfully delivering a SaaS service requires operational excellence (since the vendor is now also a hosting provider) as well as development and productization skills. Ultimately, you are delivering a customer solution, not just a product. This is a fundamental mindset change.

So, if you're considering the transition to SaaS for your software, make sure you've done your upfront homework on how that change will impact your business model. For more information, take a look at our section on software business planning. Software Marketing Advisor also offers business model review and business planning consulting services.