Sunday October 8th 2023 by socraticDev
Economics can make or break your SaaS(Software as a Service) product. How? Consumers will use (and pay for) your SaaS product as long at it's more affordable to them versus managing their own technological infrastructure to run their own software solutions.
The capability provided to the consumer is to use the provider’s applications running on a cloud infrastructure and accessible from various client devices through a thin client interface such as a Web browser (e.g., web-based email). The consumer does not manage or control the underlying cloud infrastructure, network, servers, operating systems, storage, or even individual application capabilities, with the possible exception of limited user-specific application configuration settings.
In 2023, SaaS is the expected method of software delivery. So it was in the 1930s, when IBM was the only game in town. IBM had "service bureaus"(sic) in many town where "customers brought their data processing needs [...] and came back later for the results". But technology evolved and in the 1950s, the economics changed in favor of smaller players such as New Jersey based Automatic Payrolls Inc. disrupted the way to deliver value to businesses. They created the payroll processing business by freeing businesses from having to maintain expensive IBM equipments and relying on their accounting staff oversee the toil of payroll work.
In a nutshell, what made sense last year might not hold water the next. Your business way of delivering software is just one aspect of your product. You will earn and keep customers as long as what you are offering them make sense to them economically.
QoS - two levers to strategically manage your SaaS product
QoS can make or break your SaaS(Software as a Service) product.
A SaaS product is composed of two principal elements: the software and its technological infrastructure.
Both can make or break your product!
Quality of Software
The software is the application itself. It contains the business logic and, perhaps, some Intellectual property. It is the "portal" to your systems. It could be an highly polished web application or mobile app. And it could also be represented as a set of APIs (Application Programming Interfaces) that open your systems to be consumed by your customers in a way they see fit.
Quality of software is a concept with multiple aspects:
|functionality||complete feature set, correct functions, appropriate functions|
|reliability||product maturity, available, fault tolerant, able to recover from failure|
|usability||easy to learn how to use it, accessible to people with disability, users are protected from their errors|
|security||authenticity, non-repudiation, confidentiality|
As a product strategist, you will understand and manage these various aspects of Quality of Software in order to attract and retain customers.
Quality of Service
"[Quality of Service] is a non-functional component which can be defined as the ability to provide different priority to different applications, users, data flows or to guarantee a certain level of performance."
Academic researches have stressed the difference between Telecommunications and IT Outsourcing (ITO) Quality of Service versus Software as a Service quality of service. A fundamental concept for Quality of Service is the Service Level Agreement (SLA).
|availability||proportion of time when every component of the system is operational and accessible|
|response time||how long does it take to process a request (in millisecond)|
|throughput||number of requests that can be processed per unit of time. this aspect is linked to scalability and it is an interesting aspect to monetize your offering by offering various capacities per price range|
|timeliness||the ability to meet deadlines(subjective to users)|
"Customers are at least as concerned about the quality of service as they are about the software. Indeed, for providers who use freely available open source software, quality of service is their only competitive advantage."
There is no such thing as "build it (your SaaS product) and they will come". Economics regulates your success and failure! Providing value to customers is the name of the game. Being first to market and having the monopoly over a niche remain still sound business strategies.
Achieving Product-Market Fit is your barrier to entry in the game. This mean that before hoping to be successful, you must validate that your business enters a good market with a product that can satisfy that market.
How do you do that? It depends on who you are!
A lean startup will start with an idea, lots of cloud computing skills, and a credit card. They will build a tight MVP (minimal viable product) and start putting it between the hands of customers as soon as possible. How? By "outsourcing" most of the infrastructure aspects to managed cloud services (serverless, authentication, storage, etc.) They gonna use their credit card to pay for infrastructure while putting most of their energy on the software itself.
When Product-Market Fit is achieved, they will identify their infrastructure pain points, assess various scenarios to address them, and start putting their efforts into infrastructure concerns. At some point, they might want to opt out of their earlier cloud services architecture and migrate to a better suited infrastructure.
Everything being equal, successful 21st century tech-business people learn what is not under their control (economics, technological evolutions) and what is (carefully managing Quality of software and Quality of service). They strive to keep a balance between Economics, Quality of Software, and Quality of Service.
- Martin Campbell-Kelly (2009), "Historical reflections: The rise, Fall, and resurrection of software as a service" IN Communications of the ACM, May 2009
- Lukas Burkon(2013), Quality of Service Attributes for Software as a Service