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The SaaS business model changed the software business for good, by providing the following advantages:
- Accessibility: SaaS software can be accessed 24/7 from any device via the internet
- Operational Management: SaaS software requires no installation, manual updates, or traditional license management
- Cost-Effective: SaaS has no infrastructure/hardware costs(zero CAPEX expenses) and flexible payment methods such as pay-as-you-go models
- Scalability: Enterprise SaaS can easily scale a solution to accommodate changing needs(usually)
What has happened in the last 20 years in the world and Cloud SaaS software?
Many businesses have popped up over the last 20 years to take advantage of this business model and promised the above outcomes as a result. Some examples of this are Salesforce, Servicenow, Workday, etc.
But simultaneously, the user of this software has evolved and has different expectations from both On-premise and SaaS software. We live in a world where everyone is used to getting what they want, whenever and wherever. This has led us into an era of higher expectations when it comes down to business interactions– we expect things won't just happen but instead be effortless!
Delighting Employees and Customers is Hard
The new expectations of consumers are challenging for businesses, which must now be able to satisfy both their customers and employees. Though it may seem like an impossible feat at first glance—delivering satisfying interactions with each group being granted easy access to tools they need? But this is something that many companies struggle heavily with today; especially when you consider how quickly technology has evolved over recent years.
How is The Cloud Promise Broken?
- First-generation SaaS providers were successful in reducing the burden of buying, provisioning, and managing on-premise infrastructure.
- However, they largely mimicked on-premise applications with the user experience.
- SaaS was supposed to make users’ lives easier by empowering them to better serve their customers and employees.
- In its ideal form, SaaS was meant to be quick to implement, easy to use, and inexpensive to maintain without the need to hire teams of expensive consultants who spend months testing and installing complicated software in order to realize its value.
- It was supposed to give users the ability to find data quickly and work seamlessly with other users to solve customer issues.
Why is The Cloud Promise Broken?
Legacy/First-Generation SaaS software has broken this promise due to the following:
- First-Generation SaaS is not purpose-built to meet actual users’ needs
- First-Generation SaaS is expensive with a high total cost of ownership
- First-Generation SaaS has a prolonged time to value(big sales and implementation cycle)
- First-Generation SaaS is not accessible for companies of all sizes(Mainly focused on huge enterprises)
How is this promise going to be a reality?
The cloud promise is actually getting fulfilled by a few key new generation SaaS businesses. Some of the examples are Asana, Amplitude, and Freshworks.
Asana is a work management platform that helps teams orchestrate(organize & plan) work, from daily tasks to cross-functional strategic initiatives. Asana is critical for business success and powering a competitive advantage for their customers. They have a strong moat with network effects and switching costs along with a strong vision, culture, and team.
Learn more about Asana in the following Deep Dive:
Amplitude is empowering customers to make data-driven product development decisions and is set up for success with an innovative team, culture, technology, and strategy.
Learn more about Amplitude in the following Deep Dive:
Freshworks builds products that make it easier for businesses to delight their customers and employees. Their powerful software delivers the modern functionality and capabilities businesses need while being intuitive and easy to use, rapid to onboard, agile, and affordable for organizations of all sizes. They have an incredibly differentiated culture, team, mission, and strategy that I believe will lead to huge success.
Learn more about Freshworks in the following Deep Dive:
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Thanks, take care.
Chet @ Modern Growth Investing