olivergajek

Interesting article by Aaref Hilaly on “Why the next great SaaS company will look nothing like Salesforce,” distinguishing between Systems of Record (e.g. Salesforce, Workday, etc.) and Systems of Engagement. Where the latter take existing data and add value by making them available, integration, and analytics. And Aaref warns against trying to provide the next SOR and says that those franchises have been taken.

There’s a valid point there. Starting a new venture for e.g. wall-to-wall CRM would indeed be a bold undertaking.

But, and that is a big but, there are two wide open areas of opportunity here:

IT-poor environments that do not have the skill set to select and deploy a grown-up solution. They can benefit tremendously from a highly specific offering that gets the instant initial business value right and then grows footprint in a way that is manageable for the customer. Think of something like Shore, which starts out offering appointment management for very small businesses and then builds a more feature-complete CRM and analytics experience around that first, immediately valuable, functionality.

And while wall-to-wall SOR opportunities for the enterprise may have become limited, the game is wide open in those areas that have not been equipped with genuine SOR solutions. If you look in the e.g. HR, strategy, M&A, sourcing, planning etc. departments in the big enterprises, then 90+% of the IT stack is Excel and Sharepoint or some legacy ECM. There is a boatload of opportunity here for introducing new Systems of Record that support documentation, communication, and organization non-trivially. And where the products and companies that are successful will look a lot like Salesforce.

The rule of thumb here is: “Every spreadsheet shared in a business is an angel announcing another SaaS app still needs to be built.“

Some good advice here re annual plans for SaaS contracts. Reduce churn and attract higher-value customers. Makes total sense. 

Some additional observations:

Annual plans are not just good for the vendor, they are also good for the customer, as they provide explicit budget control without any mid-year invoice surprises. So expect customers to ask for them.

Find a mechanic to deal with uncertain demand projections. Either work with user bands (contract size increases as they cross a threshold) or annual all-you-can-eat plans that get reindexed upon annual renewal. 

Don’t fret too much about cancellation mechanics required by customer legal. If they want out they will get out. So e.g. 90-day total contract cancellation clause would be OK.

For those cases where the customer wants a choice between annual and monthly make sure that there is a significant uplift on the monthly pricing and/or position that as an “on request” offer that will be handled as an exception and/or construct a mandatory bundling with professional services such as training or a rent-an-admin service package. This will differentiate the monthly plan quite a bit and also ensure that you have the resources required to make the customer instantly successful. 

And once you have a fixed-price annual contract then most customers will want to pay in advance, as opposed to quarterly or monthly invoicing. So if you offer several invoicing options, don’t discount the annual prepay by too much, 2-4% are a good place to start.

Been a lifelong paying user of Instapaper. It’s just the best. When they asked people to pay (1 buck a month) I gladly did. Now Pinterest has taken over and it’s all free. Which sounds great, but then makes you wonder if and when they might have second thoughts and turn it off. Which would be genuinely painful if you have hundreds of archived links and it’s an integral part of your content consumption workflow. Better to start backing up and finding a second source, I guess.