Devdutt Yellurkar (at CRV) and I were comparing enterprise software war stories and notes on SaaS opportunities (he did CRV’s recent investment in ZenDesk).
The enterprise software business model is a tough one. Large organizations frequently need custom features, and with project investments of millions or tens of millions of dollars, companies expect the solution to fit their operations and processes. As a result, many enterprise software companies were more like professional services businesses that happened to have some software, than the other way around.
But there’s an interesting angle for SaaS: the lower price points make organizations more willing to accept the feature set “as-is”, and adapt their business to the software. If the hosted software costs (say) $10k/year, it’s hard to justify $500k of customization work.
This drives another effect: SaaS offerings can focus on the core features that actually get used. Many enterprise software solutions turn into bloatware: the feature set evolves to an aggregated super-set of all possible customer features. Worse, after the purchase decision, many customers end up using a sub-set of what they originally thought they needed. This is why the product manager’s job is hell: the product has 100 features, only 40 matter to any given customer in the sales process, and only 10 get actually used.
Agreed. And there is an even worse version of this, the let’s build a completely custom solution for which there are plenty of great, already available, free solutions for 95% of what I need. While I talk with new hire candidates, I hear countless tails of building custom content management system to drive web site, application. No good answers yet to my standard, “Why?” question.