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SAAS - Where is the money, honey?

True, we are going through unprecedented era. There have been feelers that the US economy has been able to overcome the tide of recession. Goldman Sachs was able to report a profit (http://www.financialpost.com/news-sectors/story.html?id=1492381), this quarter, though they had to resort to usage of a $10 billion bail-out package from the US Treasury, as late as October 2008. This may lead to more banks trying to balance and juggle their financials to declare a profit, the subsequent quarters. So what does this have to do with SAAS? Well everything! Most companies who operate in the SAAS space have been failing to pass on their operational efficiencies to the client, leading to the client aggressively trying to cut the cost outlay for managing these hosted applications. Clients have evaluated switching over to a new vendor for the hosted application or have tried to bring in-house the functionalities delivered by these hosted applications. The SAAS players have aggressively tried to reduce the per user cost and has offered slab based bundling price to keep the exodus of their current clientele list.

Recently, I was discussing the financial scenario with a colleague of mine, who has started a SAAS firm in US. They operate in a niche segment and the business model used is to manage and to monitor the print capabilities of large publishing houses with remote soft-ware that can effectively manage the entire inter connected printers. The entire print and publishing capability is outsourced and the client just gets a monthly bill, just like a pay-as-you go telephone bill. The clients are delighted with the business model, and they obtain customized print features (gloss, texture of the print medium, color) based on the target audience. True the model seems outlandish, but the embedded software has been made by the best of brains from MIT and has the support from Venture capitalist that provides seed capital for such innovative ideas. The embedded software is able to manage and monitor the consumables utilized in the printing process. Yes, it is true that they have been able to break-even by aggressively collaborating with Small and medium business enterprises, Printing channel partners (GA/VAR – graphical arts value added resellers) and publishing houses. The participating partners are able to realize the benefits by focusing on their core business model and competency, while non-core processes are outsourced to the SAAS provider. For the particular SAAS firm the profits earned is in sub minimal level per copy, but when the volumes are huge, e.g. during elections, they do make a good amount to tide over the capital cost incurred in setting up the infrastructure. Additionally the SAAS firm needs to have a service oriented focus, i.e. Customer first, and the belief customer needs the best in terms of customized service always.

So where is the money, honey? It is definitely in SAAS, if you have used Innovation as the underlying factor while coming up with the business model and is able to deliver consistent value to your end-customers in terms of personalization and customization.


Great Article

Much appreciated for your response.

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