Glassey On SaaS

Customer 1.0 = Customer 2.0

In a recent blog post, Gabriel Morgan described how today’s software creators need to be aware of changes in the software sales environment.  To do this, he suggested that a new type of software customer has evolved, “Customer 2.0”, who has different needs than traditional software customers (“Customer 1.0”).  Customer 2.0 he argues has the following characteristics:

•    Has optional purchase models (flat rate-based and consumption-based subscriptions)
•    Pays only for what they use when they use it
•    Adds features to the experience seamlessly
•    Expects upgrades to be free and continuous
•    Swaps providers easily
•    Has flexible software budgeting
•    Expects a rich internet application experience
•    Accepts ad-based features
•    Expects Self-service Problem Resolution and Service Management
•    Accepts internet/cloud based software that is not installed on-premise
•    Has data locally and in the cloud
•    Has a direct relationship with the Service Provider
•    Instantaneous purchase and activation

While I agree with much of Mr. Morgan’s thoughts on recent changes in the software landscape, I believe that there is only a single customer.  This customer bought software 10 years ago, then 5 years ago, and will buy software today.  In each purchase decision, the customer looks at four primary attributes:  macro functionality (what the software does), micro functionality (the user experience), performance and value.

I’ll briefly explain these now and then expand on them in the next couple of entries particularly as they relate to SaaS software:

-    macro functionality is the features and functions of the software or what the software does.  My word processing software must let me apply bold and italics in a variety of fonts, copy and paste, spell-check, and print WYSIWYG.  These are my minimum functional criteria when I’m evaluating word processing software, regardless of platform.

-    micro functionality refers to the look and feel of the software;  how it lets me do things;  how it responds when I’m performing functions.  For example, when cutting and pasting text in the old days, I highlighted the text, pressed the “cut” command (which made the text disappear), moved to the insertion point and pressed the “paste” command.  Modern versions allow me to highlight and then “drag and drop”.  Both methods are equivalent from a macro functionality perspective;  however many would argue that the “drag and drop” method “feels” better because you never lose sight of the text.

-    performance refers to how quickly the software responds.  This can be further sub-divided into how quickly it responds to a particular command (ie. print this report) and also how responsive it “feels”.  Are there delays when I grab something to drag and drop it?  When I move my mouse, is there an immediate visual cue, such as the cursor moving or a highlight bar changing?  Performance and feedback mechanisms aid tremendously in how comfortable the customer feels when using software.

-    value is the benefit received by the customer divided by the product’s cost.  Increase the benefit, increase the value.  Decrease the cost, increase the value.  Some software creators decrease the functionality of their product (which decreases the benefit and therefore the value) and then compensate by decreasing the cost to maintain value.  Customers are wise creatures indeed and are able to determine value very effectively – even without fancy formulas like this!

With that all said, I believe that Gabriel Morgan and I share much of the same understanding of the environmental changes in software.  But I prefer to be crystal clear that customers act the same regardless of whether they’re buying packaged software, SaaS software or a new car.  And it’s this crystal clear focus on the customer that will help software designers make appropriate product design and pricing decisions.

Hello, Again!

I last wrote in my original SaaS blog about 18 months ago.  Since then I’ve been on hiatus working on a couple of things (more on this below) and now I'm returning to  writing about the SaaS world on my new blog, “Glassey on SaaS.”

A quick recap:  to me, SaaS (Software as a Service) is roughly defined as software applications that run in a browser, are hosted by third-parties, and are paid for through some kind of usage fee (ie. a monthly service fee is one example).  There are many more nuances that deserve to be discussed more fully and I’ll discuss these in up-coming posts.  In the meantime, my very strong feeling is that SaaS applications, which are still in their early days, are here to stay and will ultimately be the way that most software applications are deployed and used.

In the time since my last post, SaaS applications have come a long way.  There's been a ton of investment and development activity in the SaaS world, lots more SaaS applications are available, and they provide an all 'round better user experience than they did a couple of years ago.  SaaS apps certainly haven’t hit Main Street yet, and I think there is a lot of work to be done before that happens.  In fact this will be the basis for several upcoming posts.  But they're clearly the first choice of Geoffrey Moore's innovators and early adopters and this is a critical step in the process.

So where have the last 18 months gone?  I’ve been working on two projects primarily.  The first was to get my MBA which I did through the Kellogg executive MBA program hosted in Canada by York University’s Schulich School of Business.  Great program which I thoroughly enjoyed.

The other project, more relevant to this discussion, was to put my money where my mouth is and create a SaaS application.  My team created a commercial-grade collaborative project management application called Projjex.  It’s in the market and being well received by customers.

Lots of lessons learned along the way, both from the design and development of a SaaS application, and also from the customer feedback.  I’d like to share these experiences and lessons with you in this forum.  If you’re a developer or marketer of SaaS apps, or if you’re a SaaS user or potential SaaS user, then I hope you will visit regularly and participate in the discussion!