Earlier today I was emailing with an entrepreneur seeking advice. After a few emails back and forth about pricing he asked if he could charge more to customers who got to use the latest version of the software. Wow, I was taken aback as we’re talking about a Software-as-a-Service (SaaS) application where all customers should use the same version. That got me thinking about some of the most important aspects of a SaaS startup. Here are a few key tenets of SaaS:
- The application should have a multi-tenant architecture where all customers use the same version of the product on one or more shared databases
- Product enhancements and fixes should be pushed on a frequent basis
- The most important word in software-as-a-service is “service” and not “software”
- Customer acquisition costs and on-boarding costs should be appropriate for the monthly/annual fee
- Churn should be studied as closely as sales and marketing
SaaS is a phenomenal business model once it is up-and-running but presents its own unique set of challenges. Entrepreneurs should understand these key tenets of SaaS and work to incorporate them into their startup.
What else? What are some other key tenets of SaaS?