Sinclair Schuller posted a great article over at SaaSBlogs entitled: How can a SaaS ISV drive down sales and marketing costs? It’s an excellent post, and well worth the read as a precursor to this post.

One of the key assessments that Sinclair makes early on in his post, is the fact that many ISVs are not exploiting the potential of the SaaS delivery method. I totally agree. I think that many ISVs have yet to even come close to leveraging the value that the SaaS delivery method affords them.

SaaS as a delivery method provides ISV’s with a foundation for innovation throughout their entire business. It provides ISVs with multiple advantages and ways to differentiate and add substantial value to their business, not just their product offerings. Using the SaaS delivery method simply to deliver Regular Old Functionality (ROF) is a very sophomoric approach in my opinion.

Ben Kepes touchs on this topic here as well.

The first and probably greatest advantage is that SaaS ISVs have a network of users using the same product, all in the same place. Leveraging that network of users in multiple ways is one of the clearest ways in which SaaS ISVs can reduce their sales and marketing costs, yet many fail to do so.

So how can SaaS ISVs leverage that network? Im glad you asked
SaaS ISVs must create ways for their users to gain value from each other.

To have a SaaS offering and not provide ways for users to gain value from being in close proximity with other users at all times is like a conference, or user group meeting, or a community planning meeting packed with people that are all interested in the same things and all have valuable insights and experiences to share with one another, yet they are physically unable to speak or communicate with one another.

It makes no sense at all.

The value that each tenant of a SaaS application brings to the whole, should be realized by all others in some way, shape, or form. This is something that the SaaS ISV must make possible. This could be through direct communication with one another, by the application functionality improving based on the participation of it’s users, through benchmarks, sharing of data, etc. There are hosts of ways this can be done.

Here are some specific examples:

Aggregate Benchmarks - Sinclair uses the example of a ticketing system providing users with benchmarks related to most reliable hardware, etc. Allowing your users to define the metrics that are valuable to them, and then providing them with those benchmarks and statistics is one great example of leveraging the value of your tenant network.

To take this a step further, ISVs should put in place ways to connect users that are top performers in certain areas, with those that are looking to improve. This could be done via monthly webcasts where top performers talk about their processes and answer questions from other users, or through a blog or simple online discussion board/forum.

Depending on the type of application, ISVs could even enable users/tenants to interact with one another directly, from within the application. That way, if a particular user has a question while they are working in the application, they could find the tenant most knowledgeable based on the benchmarks, and ask them directly.

Sharing Data/Work - The ability to share data/work with other users/tenants is something that provides added value to users, especially in any service based industry where companies work with multiple partners.

A more abstract thought along these lines…

The ability to spread certain work/tasks across the entire tenant/user base, or for the system itself to recognize when the same tasks are being done by multiple users at the same time (or were done recently), and somehow aggregate that effort into something that could be applied globally could have substantial impact in certain verticals. Almost like a living, realtime knowledgebase.

Sharing of Configurations/Add-Ons/Customizations - Giving users the ability to share their customizations, configurations, add-ons and extensions, all from within the application itself is another value add that SaaS ISV’s can provide. Templates that have been created, themes, custom integrations, etc. All of these things leverage the network, and add significant value to an ISV’s core offering.

So how do these things equate to savings in sales and marketing spend?

Sinclair touches on one way - if you can build into your application lasting reasons for your users to have a vested interest in the growth of your userbase (such as many of the above examples), to want others to use your application as well, you can catalyze the most powerful and least expensive form of marketing - Word Of Mouth.

Sinclair’s graph outlines this concept very well.

Two additional ways that SaaS ISV’s can leverage the SaaS delivery method to lessen their Sales and Marketing expenses are:

1) Build a system for analyzing usage data, in order to produce custom, personalized marketing messaging.

For instance, data regarding a customer’s number of users, the functionality those users utilize most, the add-ons or features your customers do not have, etc. This information can be utilized to produce highly personalized and targeted marketing and service from within your application. I venture to say that many of the next generation SaaS apps will have a layer that is so tightly woven into the ISV’s CRM and support systems, that marketing and support/training will be far more efficient and targeted then ever before.

2) Make it simple for users to test out and add features and extensions from within the application.

Your users should be able to pick and choose what features they want to use at any given time, and just start using them. By allowing users to see what additional features are available to them, and even recommending them to them from time to time, based on the data you have compiled about their usage patterns, etc, you remove multiple barriers and hindrances to up sales.

I’ll try and post some additional thoughts on this topic, with some more detailed analysis.

I’d love to hear from some others regarding your experiences and ideas.

Tags: isv, Jesse Kliza, metricz, SaaS, saasblogs, salesforce.com

This entry was posted on Thursday, August 30th, 2007 at 11:29 pm and is filed under Business, Marketing, SaaS, Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.