How To Recognize Key SaaS Software Differences

The Inevitable SaaS Market Segmentation Evolution

The majority of SaaS business software manufacturers have yet to deliver market specific business solutions for commonly recognized customer markets. For the most part, SaaS solutions still trail the media and marketing hype, the industry is still in its infancy and many SaaS manufacturers view the global customer market as a single, giant green field selling opportunity.

This lack of market recognition and customer segmentation is not to be unexpected when compared with prior business software evolutions. When the earliest mainframe and host-based business applications became ready for customer acquisition, the primary customer targeting was not based on company size, customer market, geography or industry, but instead on who could afford the purchase price. With the release of client/server business applications in the early 1990’s, the vendors’ targeting was across the board from start-ups forecasting big growth or small clients desiring to upgrade from LAN-based business software to the largest of companies seeking to replace rigid and monolithic mainframe applications.

With both of these prior platform evolutions, the technology initially took precedence because at the outset few vendors delivered business software which empowered customers with the technology. However, as more software manufacturers leveraged the new technology, all of the vendors had to demonstrate value beyond just the technology to remain competitive. In both prior eras, the vendors recognized that information system goals, requirements and constraints ranged along an identifiable continuum which could be segmented by company size, vertical market, geographic location and other strategic variables. To remain competitive, vendors had to both leverage the new technology and meet the specific business needs of identifiable markets. Ultimately, the host-based and client/server business application providers honed their solutions for specific market segments, industries and/or geographies.

SaaS applications are now entering the migration phase once traveled by their mainframe and client/server predecessors. Early SaaS pioneers boasted the SaaS delivery model and not any particular benefits or capabilities of their own SaaS applications. Think ‘No Software’ – a successful brand which speaks to the demise of on-premise software, however, does nothing to promote the vendor’s CRM application among other SaaS CRM applications which also deliver the benefits of the SaaS model. SaaS solutions are no longer the renegade new thing consumed by just early adopters. They are becoming the norm and adopted by the early majority. While several of the largest client/server software manufacturers continue to drag their feet in an ill-advised effort to protect their cash cow revenue streams or at best spin weak SaaS solutions as a defensive tactic, many start-up and more forward thinking providers have released credible SaaS solutions that replace the client/server stalwarts and bring new competition to the on-demand market place. With this new credible competition, SaaS software manufacturers will be forced to abandon their generic all-things-to-all-people commodity-based sales approach and instead refine their products to meet the specific needs of explicit markets. There are fundamental business and systems differences among small business, middle market and enterprise customer organizations. SaaS vendors who continue to push the same CRM application to a 10 user company, 100 user company and 1000+ user company will become sidelined by the competing SaaS vendors who better cater to the business and information systems needs for each customer market. Just as the client/server era solutions eventually refined their products to more closely align with customer needs and became recognized for the small business, midmarket or enterprise markets which they best support, so too will SaaS solutions.

Continue on to review SaaS software scope and breadth differences