There is a lot of blog chatter about SaaS business models, and VCs like Bessemer have done a great job distilling the key features of SaaS businesses into easy-to-apply rules. This stuff is great if you're building a SaaS business from scratch, but what if you already run a successful software company and now everyone is trashing your business model because it's not SaaS-y enough?
The truth behind all the SaaS hype is that most software vendors are still selling perpetual licences and deploying software behind the firewall. They need to adapt to the changing market and convert their business to SaaS or at least to a recurring revenue model that takes some of SaaS' best features. Nearly every US software company we know is actively going down this path, and more and more European companies are as well.
The benefits are obvious: more predictable revenues and -- in the current market -- a significant increase in valuation for the business. But the potential risks are obvious too: a huge cash hole when you shift revenues out, and potential confusion among your customers.
My partner Javier Rojas and I have pooled our experience with portfolio companies that made the transition to SaaS. The result is a short guide to the key success factors, which you can find on Sandhill.com here. SaaS is not just about subscriptions or multi-tenancy; other factors need to be considered in parallel: how to comp your salesforce, how to price your new contracts, and how to treat existing licence customers.
If you're an established, growing software vendor looking to transition to SaaS, come talk to us.