Cloud is on the rise. No doubt about it. With cloud comes SaaS. I have already said that, these are two most important things to watch out for in 2009. But question is - have we really understood SaaS? From business point of view, I mean.
Let us study couple of Something aaS models we can find in current world.
Telecom - I think telecom companies have correctly understood this model. You pay for your usage. There is some basic monthly rental to cover wiring, instruments, infrastructure cost. But main thing is if you make a call, you know how much you will have to pay for it.
Roads - In India, when you buy a vehicle, based on your vehicle type you pay some road-tax. Irrespective Of whether you ever drive the vehicle or not you have to pay that tax. Almost all roads are free to drive on once you have paid this tax. In special cases, say some high speed highway/freeway you want to use, you have to pay for it before using. If you are going to use it every day, then you get subscription models.
Now the last statement, bold, above is very interesting. Models they offer you is - 1 time use, return usage, weekly/monthly subscriptions.
The way we are implementing SaaS for computer applications, provide me with only monthly subscriptions. Take example of Zoho pricing, all it provides me is various slots based on number of users for each of the application on a monthly basis. Same is the story with LinkedIn and many other SaaS business model implementers.
This is not what SaaS is. Period.
I will call this as rental model for software applications. You are paying rent. You pay it, whether you actually use the application or not.
How to implement SaaS for these applications?
Identify the bold point features your application provides. If you take example of Zoho projects, it is free for one project. USD 12 per month for upto 10 projects. Now I dont know how many projects I am going to have. Say I start with 1. Now when I acquire another project, I need to shell out 12 USD per month for that one project. If I acquire another 8 projects, then they are free. For 11th project cost again is USD 8 per month. So the point is, there is no defined cost for one project.
Now such models create a BIG entry barrier for a small company like mine. This is the reason I do not use Zoho despite liking their products. If they would have given me something like 3 USD per project. It would have reduced entry barrier for me a LOT.
Let us see second example of LinkedIn. Now linkedin for professional users, charges some fixed fee. I am small time entrepreneur who needs these special features once in 2-3 months. Where I really need to connect with some one who is not in my network and I need that In Mail feature for that. But I will not take professional account, as I don’t need this feature all the time. So why not just ask me for 2 USD (say) for every feature request.
You can have rental schemes too, along with such fine grained pricing structure. If over a period of time I notice that subscribing to rental schems is going to reduce my cost then I will.
I think such feature based model is the REAL SaaS business model. So if you do not have it, dont call it SaaS.
Ideas, Misc
cloud, Linkedin, Pricing Model, saas, Zoho
