Do you know that a very small percentage of SaaS businesses are profitable, including those that have been in the market since the SaaS model began?

Let’s pick the giant in SaaS business – Salesforce.com. Salesforce.com is undoubtedly one of the biggest SaaS company in the market with highest levels of market penetration almost in every vertical. Salesforce has been the forerunner for SaaS companies with amazing growth, and today has more than $4 billion in revenues, with more than 13,000 employees. However, all these superfluous hype don’t add up with the fact that Salesforce is still a loss-making company (reporting full-year losses down $232 million in 2014), which has $2.5 billion of debt on its balance sheet. Moreover, according to its latest annual report, the company doesn’t foresee profitability anytime soon.

For a SaaS company to be profitable it’s extremely important to see “product (Software)” and “business (Service)” as one single entity. SaaS providers have to stop using 2 different scales to measure their success – Technical success & Business success. When you measure these scales independently, each one gets its own agenda and doesn’t complement the other.

This is where the role of a SaaS technical architect differs compared to a typical solution architect. Traditional scope of architects was confined to provide the best solution for solving/achieving the product functionality. Architects were never worried about the selling or servicing part with the end customers. But this does not work for SaaS products, as it’s no more just software that is delivered rather the overall experience of using the software and its related services.

Therefore, SaaS architects will have to think beyond the functional design.  Following are some of the areas they will have to concentrate,

  • Adoption of product among new customers
  • Differentiate “real buyers” from trial leads
  • Automate customer on-boarding process
  • Reduce implementation time and cost
  • Reduce the load of support team
  • Self-diagnosing and healing capability

(Take a look at this blog comparing the old and new approaches for SaaS architecture)

If you analyze the above areas carefully, you will see that it either helps in getting more customers or minimize the cost of servicing the existing customers. This is exactly where the collaboration between business development and technical teams should happen to come out with ideas that can set them apart from the rest of their competitors.

In the upcoming blogs I will talk about some of the ideas and SaaS best practices followed in each of these areas that can result in changing a company from “Unprofitable SaaS Business” to “Unlimited Profitable SaaS Business”.

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