The demarcation is stark enough that it will eventually divide the winners from the losers, and in the process define what customers come to expect from their SaaS vendors. And those expectations, in turn, will fuel a next generation set of SaaS vendors the likes of which were only just starting to see today.
Heres the line Im seeing that divides the current SaaS market into two essential components: SaaS as a pure-play alternative to on-premise, and SaaS as a value-added set of services that could never be replicated on-premise for love nor money.
Its this latter designation that defines where innovation lies, and therefore where customers, not to mention investors, who are interested in spending on innovation should place their bets.
The basic calculus for value-added SaaS looks like this: take some services that are already being performed in the enterprise, albeit in a non-automated or poorly automated way. Put them in the cloud, sign up a bunch of users, partners, and service providers. Then start accumulating data and services via the network effect of having all these stakeholders linked up, online and in real-time, and sharing data and processes.
Now figure out the value-added processes mostly on the analytics side that you can start offering due to your position as a data/process aggregator. And then take it all to the bank, in terms of new services for your customers that are slated to become must-haves relative to what competitors are doing in the on-premise and non-value-added SaaS world.
Ive got a couple of favorite examples, one in global trade services, the other in supply chain risk management.
The former, GT Nexus, offers tracking and analytics for shipments from the manufacturers loading dock in China to the store shelf in Pittsburgh. The companys value-add comes from its ability to aggregate information from logistics providers, manufacturers, retailers, customs brokers, and other stakeholders in the global trade business.
With all these participants connected to the GT Nexus network, a new customer is instantly in line to figure out different shipping strategies and costs, as well as track shipments, based on an information stream that stretches across a worldwide logistics chain.
The value-add should be obvious: No individual company could afford to amass the quantity and quality of information that GT Nexus can provide about the complex global logistics chain to each and every subscribing SaaS customer.
A second example comes from early stage supply chain risk vendor New Momentum. This is a company that is accumulating a tremendous amount of market data from well-known and not-so-well know public and private sources on the price, availability, and lead time of strategic and not-so-strategic electronic parts.
This data can then be used by customers to design new products, redesign existing ones, and otherwise keep track of potential parts shortages and other issues that could disrupt their manufacturing production plans.
Again, the value-add is obvious: many companies use a palette of similar parts, and need information on these parts as well as the vendors who supply them. A new customer can tap into this existing information base the moment they log onto the New Momentum SaaS system, and leverage a window into the parts market that is greatly enhanced by the cumulative value of all the other member companies information needs.