This article is from WeChat official account:ToBeSaaS (ID: gh_66062ec0961b), author: Dai Ke, the original title: “Growing up, I became you? “, the head picture comes from: Pixabay

A few days ago I chatted with a friend, from software to SaaS, and finally from SaaS to software. This friend was originally doing sales in a software company, but I was fooled into doing SaaS sales. Finally, he told me that he wanted to return to his old software sales business this year. The reason is simple. He believes that SaaS sales are more difficult to do than software, and the revenue is also reduced by a lot; the problem is that the company has not made any money, and the overall is lost.

In fact, we talked about this topic last year: Is there a way out for software in a SaaS company? My answer is: this is basically a dead end. The reason is also very simple. For example, UFIDA, Kingdee, etc. have only achieved this level in the first few decades; A start-up SaaS company relies on software. Why can it catch up with them because it is SaaS?

I’m afraid I don’t even believe this reason.

Until today, many people still disagree with the distinction between software and SaaS. Whether it’s doing products, sales, services, or operations; doing it in a SaaS company or doing it in a software company, it seems that there is no difference to an individual. If you put SaaS in the guise of toB, software and SaaS can’t really see the difference from the outside.

So many SaaS companies have become software companies unknowingly. Of course, some have become software companies.

Actually, the two businesses that look similar on the outside are actually two completely different types of business; and the two businesses will not intersect.

In the past, we thought that SaaS would win because SaaS was less expensive to use than software; now it seems that this conclusion is untenable. Because, from the perspective of SaaS usage by foreign companies, the total cost of SaaS subscription services covering the same business may be higher than software.

Actually, If SaaS can eventually replace software, it is entirely because SaaS is more efficient than software.

Returning to the underlying business logic to look at efficiency issues, the efficiency of SaaS is a combination of efficiency in two dimensions. One dimension is the efficiency represented by the subscription income model, that is, once a sale is made, there is a continuous income, which can be regarded as the length of income. Another dimension is customer acquisition efficiency, that is, in the same time, the number of SaaS customers is more than the number of software contracts, which can be regarded as the breadth of revenue. This is also easy to understand, because SaaS does not require the complicated sales process and implementation delivery process of traditional software, so it is possible to improve efficiency.

Theoretically speaking, SaaS, which has advantages in both the length and width of revenue, is far superior to traditional software in terms of profit model.

However, whether the efficiency advantages of SaaS can be transformed into actual business results is conditional. At least SaaS must be done as SaaS, which is the most basic requirement of this business.

What will happen if SaaS is used as software?

First of all, from the perspective of length, a software sales model with a deal as the ultimate goal is likely to reduce the quality of customer acquisition. To put it bluntly, the probability of customer churn increases and renewal revenue is lost. Secondly, from the perspective of breadth, if SaaS adopts the same sales process as software, its customer acquisition efficiency may not be higher than that of software, that is, the average sales cycle is similar to that of software.

It can be seen that the loss of efficiency eliminates the profitability advantage of SaaS. In extreme cases, selling a SaaS is exactly the same as selling a software. But the most deadly impact on SaaS is the decrease in distributable income, because there is only one or two years of subscription income, not to mention the distribution and commission, even the operating cost can not be covered.

What is meant by using SaaS as software? Look at the picture below (Picture 1).

Figure 1

This picture can be said to be familiar to everyone, because the software business is done according to this logic.

Let’s look at the picture below (Picture 2).

Picture 2

Most people are not familiar with this picture. In fact, the business logic of SaaS follows the pattern shown in Figure 2.

Comparing these two pictures, we can see the difference between SaaS and software.

(1) Figure 1 is a typical logic for selling products, and Figure 2 is a logic for selling services.

(2) According to the segmented business assessment in Figure 1, it is easy to meet the standards at each stage, but the operating results may not necessarily meet the standards; while Figure 2 has only three assessment nodes. If all meet the standards, the operating results must meet the standards.

(3) The business process in Figure 1 has only one revenue point, that is, the end of sales; Figure 2 has two revenue opportunities, namely after acquiring customers and successfully retaining.

(4) The biggest difference between Figure 1 and Figure 2 is the customer acquisition process, or sales process; one is the SaaS customer acquisition process, and the other is the software sales process.

(5) The software business goal represented by Figure 1 is revenue; the SaaS business goal represented by Figure 2 is the simultaneous growth of the number of customers and revenue, and the conditions for growth are replication and scale. These two points are for software It is difficult to do.

Many people tend to confuse the business process and business process of a SaaS company. One is to solve production and business problems, and the other is to solve business and management problems. In almost every training session, a classmate asked me that the product development is not reflected in Figure 2. Are they unimportant? If the product is not good, it will be difficult to sell.

FromFrom a business perspective, the first target assessment point of SaaS is customer acquisition quality, which has both qualitative and quantitative requirements. According to traditional thinking, if the quality of customer acquisition is not up to standard, the product will be blamed. However, according to the business logic of SaaS, the quality of customer acquisition may not be up to standard, which may be due to product problems or other reasons such as customer acquisition methods. The idea of ​​solving the problem is that the improvement of the business process is driven by the business goal, and vice versa is not necessarily effective.

According to the software business model, it is easy to turn SaaS into software. For example, the sales process of software used by SaaS customers is to follow the software procurement standards in accordance with the software procurement standards; for example, in order to obtain more current revenue, the sales are acquiesced to sign multi-year service contracts and multi-year subscription fees are charged in advance; for example, to increase Revenue to do privatization deployment and so on.

It seems that if SaaS needs to be big, it can only be turned into software.

Loss is not a reason to make SaaS software. In fact, making SaaS software not only cannot solve the problem of loss, but may also put the company in an irreversible situation.

Due to the deferred effect of SaaS revenue, SaaS companies’ initial “losses” are normal; because of this, SaaS needs financing. However, if the business policy goes wrong, too much financing will accelerate the softwareization of SaaS. Restricted by efficiency, sales increase, customer acquisition costs will be higher, and money burn faster.

Actually, the result of doing SaaS is not the same as doing software “loss”.

To give an improper example, the SaaS business is like operating a chicken farm, and its business model is to make money by producing eggs. Obviously, in the investment period before the chicken can lay eggs normally, the chicken farm is “losing” in terms of financial income. But as long as there are no problems in the chicken’s growth stage, there is a chance of profit.

If the chickens are disposed of before they can lay eggs, this is quite a change in the business model, and there may be no profit opportunities. Under this circumstance, it will be meaningless to invest in the expansion of the chicken farm.

This example is to say that to do SaaS, there is no need to turn yourself into a software company.

This article is from WeChat official account:ToBeSaaS (ID: gh_66062ec0961b), Author: Dai Ke