There seems to be a battle going on right before our eyes. The opponents are the traditional software vendors, the ones who have been selling you software with expensive licenses attached – I won’t mention any names – and software-as-a-service vendors who want you to switch to an Internet delivery model for a smaller but ongoing fee.
Now for the million dollar question. Who’s winning?
It’s hard to say. The traditional software market still engulfs the SaaS market by billions of dollars in sales. However, growth percentages show SaaS providers out in the lead. I guess the jury is still out.
But let’s talk about your business. How will your business fare if you don’t switch to the SaaS model? My guess is it will fall behind in the competitive landscape.
One of the criticisms against SaaS is that it is more costly in the long run. Compare purchasing a multiple-user license of a product for $5,000 – that’s a one-time fee stretched out over several years – to a monthly fee of $25 per user for a competitive product. You have 25 users. That means in 20 months you will have paid the same amount of money that you’d have spent on the traditional software. But how’s your cash flow?
As a start up company, that $5,000 might mean a lot more to you than $250 per month. In terms of profit and cash flow, it could kill you. On the other hand, the $250 per month could mean more money in your pocket right now, money that you can use for research and development and marketing. That could mean more cash flow in the long run and therefore a longer time in business.
At a time when you need money the most, SaaS can actually be your best model and your best friend. Plus, as you grow you’ll receive much more benefit from your ongoing services and pay only for what you use.