In many cities, you can nowadays rent a bike in a very convenient
way. You simply pay a subscription fee, and you can pick up a bike at
one of many stations, ride where you want to go, and return it to
another convenient location.
One of my colleagues recently moved
to Chicago and got a $99 per year subscription for unlimited bike rides
instead of buying a new or used one. Why? For him, it was
straightforward and convenient as he did not have to spend a lot of
money on a bike, get it serviced, or risk getting it stolen. If it
starts raining, he can leave the bike at the nearest station and get on a
bus. This is an excellent example of the Everything-as-a-Service
economy.
Most industries are going through a shift of revenue
streams from traditional one-time sales to products being provided “as a
service” and paid via subscriptions. It is not only happening to
digital products like Netflix and Spotify, but also in industries where
you can subscribe to physical products, such as razor blades, forklifts,
jet engines, and cars.
The software industry is rapidly moving
towards SaaS (Software-as-a-Service), which is transforming the way
software is delivered, managed, used, and purchased. Gartner defines
SaaS as “software that is owned, delivered and managed remotely by one
or more providers." In short, SaaS is a leased software maintained by
the software vendor.
SaaS: A perfect match for marketing and sales
The
most well-known enterprise SaaS application is probably Salesforce.com,
the leading CRM that boasts millions of users and more than 100,000
customers. Salesforce showed the world the benefits of the SaaS model,
and the trend so far has been that applications that support the sales
and marketing processes have been the first ones to reap the benefits of
the cloud.
One reason is that fast-moving sales and marketing
operations have much to gain from the flexibility and the
configurability of SaaS. SaaS cuts the time-to-value, allows for rapid
prototyping, and adds new functionality and configuration updates
without cumbersome and expensive upgrade projects. Another benefit is
that the continuous incremental updates make it easier for the software
vendor to innovate and quickly make the corresponding business value
available to all their customers so that they can stay in front of the
pack.
The benefits of the subscription economy
It
is hard to make an apples-to-apples comparison between SaaS and
on-premises. Some companies only compare the maintenance fee (typically
20-22% per year based on the up-front license cost) with the SaaS
subscription fee. Others forget to consider the total cost of ownership
of their on-premises investment, including upfront licensing fees,
hardware, network, backup, test and development systems, and the staff
that has to manage it all. Regardless, a large up-front investment in
software, hardware, and implementation makes it harder to switch if the
selected solution is not satisfactory or if a better alternative comes
around.
The SaaS subscription model is not always cheaper than on
on-premises with perpetual licenses, but it provides predictable costs,
even as you scale. Because the SaaS vendor is responsible for upgrades,
uptime, and security, your organization can focus instead on the
business aspects and get the most out of the software. Due to frequent
and incremental updates, you can enjoy new modern features without going
through costly and time-consuming upgrade projects with testing and
training. Companies that use microservices-based cloud applications can
more quickly and cost-effectively take advantage of other cloud
services, like AI and machine-learning tools, that would otherwise be
accessible only for companies with massive financial resources.
SaaS is the future of enterprise software
SaaS
is going to replace the on-premises software in its entirety over time.
If you are investing in new solutions, it only makes sense to consider
SaaS an option, especially if speed, flexibility, predictable cost, and
keeping the solution updated is important to you. In the highly
competitive, fast-moving world of marketing and sales, it should be.
Johan Boström, Co-founder and Evangelist, inRiver
