Comments on: SaaS Metrics – SaaSoNomics 101

By: Jim Geisman

Jim Geisman — Tue, 16 Feb 2010 16:29:04 +0000

This is great post, Mike. Indeed, all of these measure are important — some more than others.

But the important thing is not to *monitor* these measures but to *use them* to monitor the financial model. By doing so you can: 1). Document the assumptions critical to your business and cashflow; 2). Focus your spending on “moving the [relevant] needle(s)”

But most if not all of these measure are driven by decisions in areas where we find people are weakest: packaging and pricing. We find it useful to start with a detailed revenue model driven by assumptions about packaging, prices and volumes and then test how these assumptions affect the above measures. Detailed revenue modeling can minimize nasty surprises downstream.

This also points to one of the more subtle advantages of SaaS: You can fine tune the business and watch the response in (nearly) real time.

By: Trianz Blog » Blog Archive » Yield Management for Online Web Service Providers

Thu, 27 Aug 2009 20:21:58 +0000

[...] SaaS Metrics – SaaSoNomics 101 (Michael Dunham): http://blog.sciodev.com/2009/02/10/saas-metrics-saasonomics-101/ [...]

By: Brian Marsden

Brian Marsden — Sat, 07 Mar 2009 05:56:15 +0000

Good article and interesting reader observations. I am seeing some proven models where On-premise apps reach to a cloud app to fill holes for SAP, Oracle and Co. Integration and assocated costs seem to be a key area. Also revenue from labour based services that leverage the data are able to subsidise the technology costs.

By: Steve O'Neill

Steve O'Neill — Fri, 27 Feb 2009 22:25:32 +0000

This is well written, and very interesting. When I ran the Hosting Services department at a leading Learning Management company, our core product was enterprise software hosting, and we started evolving into semi-SaaS, and SaaS products. Knowning that there is a huge difference in these hosting models, I was surprised how much similarity there was in the metrics. For example, even in the enterprise hosting business (a recurring revenue model business), we routinely monitored such things as CMRR, Retention Rate, Average Deal Size, and 10 Largest Customers %. We struggled trying to achieve meaningful metrics for Cost to Maintain, Cost to Acquire, and Customer Lifetime Value Ratio, simply because of the difficulty of calculating these. Where the company stumbled was in taking this approach to the next level for SaaS – things like Cost to Acquire, Customer Acquisition Cost Ratio, and Software to Services Ratio.
What this highlights to me, is that while all of this is relevant to SaaS, much of it is relevant to any recurring-revenue model business, including traditional enterprise software hosting. And the delta between the two is very enlightening!
Can’t wait for 102!

By: Steve Reeves

Steve Reeves — Fri, 27 Feb 2009 18:57:09 +0000

We could have some really interesting discussions regarding enterprise software and SaaS

I spent 25 years selling the first and now two years getting a SaaS started.

Single instance SaaS isn’t going to get much traction in the enterprise market any time soon. Salesforce has done OK but SAP would laugh at anybody bragging about 50,000 users.

So they managed to get this far because CRM is a non-core activity for most of the enterprises. SaaS has been a really cheap way of them getting some visibility over the sales force. Cost has been the main enabler because so many of the big CRM implementations have been disastrous.

So the enterprise attitude toward non-core systems enabled salesforce to push out very limited capability software and win business with a different sales model – mostly dominating paid search.

As you rightly point out this approach will only take the company so far. If they want to get to the really big money they’ll have to spend a lot more on marketing/sales/support and then spend multiples of that on the software. They pretty much have nowhere to go, unless they rebuild the software up to SAP/Oracle standards and then adopt the traditional marketing/sales model.

We don’t want to be in the enterprise market – to be honest we could never afford to take on SAP/Oracle/Microsoft so it isn’t an issue.

Our view is we have to solve the cost of sales issue and we’ll do that by reducing the customers cost of adoption, and doing it for people who don’t have armies of IT support guys that need to be kept busy.

Building software that people will want to use at eye wateringly low cost, and finding ways of marketing it for free is a model already proven in the social networking arena.

Of course finding ways to make money doing it is another challenge but that’s where the fun is.

BTW I enjoyed reading the perspective of somebody who genuinely does understand the challenges of SaaS in the cloud.

There aren’t many around.

Steve

By: Robert Mayer

Robert Mayer — Thu, 26 Feb 2009 03:58:59 +0000

Great work – real thought and details, as opposed to regular blah blah

By: Beibei Zhang

Beibei Zhang — Fri, 13 Feb 2009 19:41:25 +0000

This is a great post. I’m doing some research on SaaS, and this post is very helpful. I look forward to reading more about SaaS metrics, and how SaaS companies can monetize.

By: Julie

Julie — Thu, 12 Feb 2009 17:45:59 +0000

Great post. One of my main interests in SaaS (cloud, whatever) is its relative staying power as a delivery vehicle. SaaS, along with other 2.0 technologies, introduces new and potentially significant risks and challenges for those of us in the records management field.

Before I get too far down the road of figuring out how to deal with the reality of SaaS at the enterprise level with regard to organizational records management, I want to make sure it’s not just a blip.

Am going to add your blog to my feed, so keep writing!

Julie