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Is overfunding of startups creating a new tech "bubble"?



Latest SaaS Trend: Better Quality Than Commercially Licensed Software

By Steve Woods, CTO, Eloqua Corporation

Businesses that use software as a service (SaaS), where a software vendor hosts and operates an application for use by its customers, typically have pointed to the cost benefits of its use. Since they do not have to purchase expensive commercially licensed software and absorb the associated costs of deployment, maintenance, training and upgrades, businesses have felt that this is the primary benefit that makes this the better option for them.

Additionally, this has been an especially attractive model for marketers, whether they work as an outsourced vendor or are part of a company’s internal team. Besides the financial benefits, marketers who use a SaaS model for their marketing programs do not need to become IT experts and worry about the actual operation of the technology. Instead, they can devote their time and energy to doing what they do best: Generating leads and filling the sales pipeline.

While all these observations are true, there is a much bigger benefit and trend that has become much more prominent in the marketing community when it comes to SaaS models. The quality of SaaS software is much higher than the quality of traditional software. This has a direct impact on the effectiveness of marketing outreach and ultimately, the success of sales programs.

Consider that more and more, companies are recognizing that:
  • On a per unit basis, more of an R&D investment is put into a SaaS model. This is possible since all of the effort and focus is put into developing and supporting one version rather than there being a large focus on maintaining and supporting historical versions of the software.
  • There are fewer distractions for developers and they can strictly focus on making the product better. They do not have to worry about patches and bug fixes for multiple historical versions and point releases. Since this is the case, the energy and focus of the software vendor does not get sidetracked with the various issues of supporting multiple versions of software – licenses, patches, tech support, upgrades – and focuses solely on making the one version of the product the best it can be. While this is attractive to the vendor, customers are the ones who benefit the most from the resulting speed of enhancement and innovation.
  • SaaS models enable software vendors to be much more nimble and to make improvements much more quickly. Product teams can make bold innovations and engage directly with customers to guide the product and optimize it to best solve the business pain for which it was intended. Unlike licensed software, where the exact use cases of clients must be hypothesized on paper and then built into the product prior to release, SaaS software is able to build actual client learnings and feedback into the continued innovation of the product, investing in use cases that are most relevant to clients and not investing in use cases that are not relevant.
  • Related to this, the SaaS approach to upgrades affords enormous benefits to clients. Because the SaaS vendor assumes responsibility for upgrades, significant effort is put into ensuring that the software is maximally upgradeable. Configurations, rather than customizations, are used in almost all cases, which allows the client to take advantage of being on the latest version of the software without the expense, risk and effort associated with upgrading licensed software that is heavily customized through brittle code extensions.

Companies that may be resistant to using a SaaS model point to the fact that their IT departments are unable to build custom code into the software and adapt it to their specific needs. This method of mapping technology to business processes, however, has proven to create a long-term challenge in software management and upgrading. A better approach, and the approach SaaS vendors have invested in facilitating, is to ensure that the software allows the configuration needed to match your business process. With this approach, not only is the software better able to match your business processes out of the box, but it also upgrades seamlessly without breaking the brittle code customizations.

As you investigate licensed software, be sure to think through the longer-term implications for innovation, upgrading and configuration. Ask yourself the following questions: Are you signing up for an experience that relies on custom development for each business process you need to map to? Will you, after three years, be on software that is three years out of date and due for a major upgrade? Are your license fees being invested in innovation, or are they going down a black hole to support legacy versions of the software? If you answer yes to any of these, you should rethink your options to best serve your business.

As you hopefully look toward SaaS software, be sure to think beyond the clear financial benefits it offers and keep in mind the benefits it offers in terms of innovation, customer-centric solution focus, and long term upgradeability. Ensure that your SaaS vendor provides sufficient configuration to meet your needs for the long term by looking at the customers they have worked with for many years. If you can identify several dozen customers with similar business processes to yours, you will be in for a pleasant experience as you grow with the software and continue to configure it to your evolving business needs.

Steven Woods is the Co-Founder of Eloqua the global leader in demand generation applications and expertise. He has held the position of Chief Technology Officer since it was founded in 1999. Steven brings to Eloqua years of experience in software architecture, engineering and strategy. He is responsible for defining the technology vision at the core of all Eloqua's solutions. Steven’s insights into the application of technology to the sales profession have been key to Eloqua's consistent record of client satisfaction. He was voted Inside CRM's Top 25 CRM Influencers for 2007. Steven has also worked in corporate strategy at Bain & Company and engineering at Celestica. For article feedback, contact Steve at steven.woods@eloqua.com

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