SaaS - best business model!

I had an interesting chat today with Servicepower (SVR), whose software is used to manage field engineers and other mobile workers.

Servicepower has moved from an initial licence fee model to Software as a Service (Saas). Although obviously that introduces the frightening prospect of cannibalisation of revenues in the short term (because you're taking say £35k a year for three years instead of £100k all at once on an ILF basis), it's working out nicely for them. The recurring revenue run rate already covers 85 percent of forecasts for the year. That's good quality - most of the contracts are for three years, a couple for longer terms.

But there's another big benefit they're seeing from SaaS. The sales cycle has accelerated. (A historical perspective; sales cycled lengthened dramatically during the tech crash from 2001 to 2003 - and although the sector has seen good growth since then, the sales cycle itself hasn't got any shorter at most software firms still dependent on initial licences.)

One client apparently wanted to run a six month pilot of Servicepower software followed by several months of evaluation and several more of contract negotiation. Instead, SVR suggested a quick SaaS rollout. Result: sales cycle reduced from twelve months to three.

SaaS also forces software vendors to create software that can be deployed rapidly, since it is web native and uses open standards. Atlantic Global (project management software) recently managed a nine day go-live - remarkable for any ERP software. Not all implementations will be as fast, since customisation may still be required - but the onus is on anyone who still needs six months to roll out a piece of software to show why it is worthwhile.