Several discussions I had at SaaSCon reinforced my opinion that the value proposition of SaaS for small and medium businesses (SMBs) is quite different than the one for large enterprises.

SaaS or nothing

For SMBs the proposition is often “SaaS or nothing”; i.e. not having the IT capabilities to run enterprise software in house, the alternative to SaaS is no software at all. No wonder many SMBs see that as a very appealing proposition.

In the larger enterprise space, it is not a “SaaS or nothing”, as often the enterprise has either already the capability in house or could “technically” create it in house. For them it is more around “why source it from the cloud instead of having it on premise”

Integration

SMBs (again, not having a big IT environment in house) have a much lower appetite for integration. As you can imagine, if you have nothing to integrate with, the value of integration is highly reduced J Of course, eventually integration among multiple SaaS providers will be a requirement for SMBs but many are still enjoying the novel experience of enterprise software (even silo-ed) to ask for more. I will dare an analogy with marriage here. When you are in your honey moon, you are too excited about the prospect of your new life with your wife/husband to think about what comes after it.

For enterprise customer the “honey moon” is long past… they are thinking much more about how to put the kids through college, retirement plans and hope that the few extra pounds gained in the last decade will not become an health problem J What I am trying to say is that the “maturity” of concerns for a large enterprise customer is much higher. The integration concern of larger enterprises being big “I have 486 core application and several thousand integration points in my IT environment” said a Fortune 100 CIO in a panel the other day, the value prop of SaaS has to accommodate that.

Customization

Customization is another big difference between large enterprises and SMBs. Again, akin to the integration argument, the requirement of deep customization for SMBs is not very big. I have not talked to many mom and pop’s shop, veterinary clinics, 20 people event companies etc. wanting to modify the data model, change the business process or adapt the UI to their long term brand strategy… why? Because they don’t have a data model, they have not codified their business processes and any web site with a nice green line on the top and a menu on the left will do (see Frontpage templates for that J ).

Just to preempt a likely question or comment, please note that I am not saying that SMBs will not end up having the same degree of sophistication in their requirements (in terms of integration, customization etc.) than larger enterprises, but realistically today, they are too happy to get access to software to play “hard to please”.

 

Simplicity

Simplicity is a clear feature for SMBs, the old saying “learn to walk before running” (or something like that J) applies here. If you never used a CRM system, a SaaS loyalty system or a SaaS collaborative environment such as Office Live, you want the features to be self discoverable, intuitive and not too many at once.

When you have an army of power user s in a large enterprise with more sophisticate taste, simplicity (or lack of more advanced features should I say) is a hurdle. “What I cannot  pivot around all the columns of my opportunity pipeline? I have been able to do this for years with the previous software?!…”  

 

This list is of course not complete, but if I was pitching a SaaS solution I would stress lower cost of entry and simplicity (backed by a “try before you buy”) to SMBs and I would stress shorter implementation times and simplified management through SLAs while preserving deep integration and customization to larger enterprises (this implies that you do have an architecture allowing tenant specific integration and customization)

I suppose what it boils down to is that for more mature SaaS customer the value prop is around enabling composition, for “entry level” customer is more around ease of use and cost.

What do you think?