SaaS Business Profitability – Build for the long tail and get the rest for free (almost)
The key takeaway from this posting is that if you focus on being lean and build SaaS applications with the lowest-profit customer in mind, then scaling up to midmarket and enterprise customers will give you more flexibility with regard to pricing, customization, and sales / marketing. This is a simple yet powerful message, and one that we have built our business around. One of the primary reasons for partnering with Coghead early on was that we understood the implications of Platform as a Service (PaaS) in changing the economics of SaaS application development and service delivery; by building SaaS applications on PaaS, we eliminated all upfront capital expenditures for IT infrastructure and were able to take our innovative, “Long Tail” niche applications to market quickly and for a fraction of the cost of traditional ISV development efforts. This in turn allows us to offer SaaS applications with deep functionality that automate common business processes to customers in markets that have traditionally been underserved by larger software companies. Because of Coghead’s unique multitenancy model, we can also provide our SaaS applications with tiered levels of customization based on our customers’ functionality and integration requirements…all at pricing levels that Mom and Pop shops can easily afford, even in tight economic environments.
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