Tuesday, August 15, 2006

Chronicle of a Death Foretold (III)

or 'How to aSaaSinate your Business' (part 3) (view part 2) (view part 1)

The BizEye story is fictitious of course, but one that describes a possible scenario, though not likely in its extremity. Allowing the state of affairs to deteriorate to such a low level without management intervening at an earlier stage amounts to gross negligence. Such a company probably would not have achieved the state of prominence that they have in the market.
Still, it is worth looking at the various actions that were taken or neglected to be taken. This article is focused mainly on the technical and operational aspects, but it is worth noting that other bad decisions were taken at BizEye, which made the profitability of an on-demand offering even harder to achieve. They include an over-simplified pricing mechanism and lack of planning with other functions within the organization, such as finance, sales, and customer and professional services.

So, what could have BizEye Technologies done differently to avoid the dilemma that they are facing? Of course, they should have done their homework, better estimate costs and especially, raise the red flag at a much earlier stage. But beyond these obvious observations, there are a number of SaaS- pecific issues they should have tackled early on.

C-Level commitment
The switch to a SaaS model from an on-site perpetual model requires an understanding that it is not simply another delivery mechanism, but rather a paradigm shift. The company needs to align itself to start selling a service, rather than a product. (see Impact on the Organization)
The switch involves every organization within the company, and some departments will clearly push back the initiative. Being a strategic move, it is the CEO's perogative to make sure that the executive staff is on the same page and not just paying lip service. Without a commitment of all C-level and VPs, to work towards a successful implementation, any company will likely experience many of the difficulties that plagued BizEye.

A Pilot is just that
A pilot project is a inherent step in the process, unless the company is a pure SaaS player. This proof of concept should not cloud the minds of the SaaS champions. It must be limited in time and scope and have a sunset strategy. The pilot would be a very good time to test the concept, learn of the problems, processes and solutions and feed back into product marketing and R&D. These latter two should already have personnel dedicated to the next phase of a hosted offering, whether it is built into the product or integrated with existing application management solutions.

Think Big
Plan in advance a solution that will allow for incrementally scaling up of very large numbers, as that is the end goal of a SaaS offering. This does not necessarily mean large upfront investments, but it does mean having a path in mind that will not necessitate changes in the future of architecture, process or hosting solution. Nine times out of ten, the architecture and planning are geared for a 'proof of concept', with the champions saying that these problems are "good problems" that we will be happy to deal with, when they happen. By the time that happens they are not "good problems" any more, rather they may end up killing the business.

Technology and Automation
Since staffing is still the most expensive line item on your budget, incorporate technology and automation in every aspect of the operation. This includes automating processes like customer on-boarding and provisioning, delegated authority for every administrative activity, self configuration, automated billing, self healing infrastructure to mention but a few.

Bottom line: Economies of scale will prove very profitable when and if the business grows at an exponential rate of the staffing growth.

Automation and Delegation are a subject of a separate article that I will post in the future. Beyond all that has been written above, these are the crucial components that can make or break a SaaS business.

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