SaaS products & enterprise software
In 2016, 38% of companies used SaaS for the majority of their software needs. That rose to 86% by 2022, shifting the focus of B2B software investment to Customer Lifetime Value (CLV).
Source: AppDirect, https://www.appdirect.com/blog/10-b2b-saas-companies-that-crushed-their-growth-goals-and-how-they-did-it.
© Shahadat Rahman
Are you investing in CLV or ROA?
SaaS products are all about the end users, which is not always the customer, and are generally assessed by Customer Lifetime Value (a leading indicator). Enterprise technologies, such as process management systems, are driven by the technology itself and usually assessed on Return on Assets (a lagging indicator).
High-volume SaaS products originated in the B2C start-up space, enabled by advances in internet connectivity and open-source languages. They rewrote the rules on usage-based pricing and proved the market willingness to rent, not buy. Low barriers to entry drives innovation, and successful SaaS products differentiate through continual feature improvement based on incessant user feedback.
Long before SaaS, installed B2B enterprise technology was the primary source of software-driven revenues. Typically monolithic in nature, end-user feedback is not a strong driver because customers are typically locked in (due to high switching costs): the focus is on exploiting existing code and driving revenue through licensing and paid-for systems integration.
B2B SaaS is now replacing installed enterprise software in many industries, driven by a lower cost of adoption and the same B2C user-focus we all now expect.