Being in the installed enterprise software world for a decade and the cloud/SaaS world for over five years now, there are massive internal differences between these two types of startups. The business models are inherently different, and should be viewed as such, even though both are full scale software companies.
Here are some of the massive differences between installed software and cloud/SaaS startups:
- Installed software companies typically provide releases every 3 – 18 months whereas cloud/SaaS startups push releases multiple times per day creating a different dynamic around time-to-market and scope of functionality
- 10% – 20% of engineering efforts for installed software companies are for debugging issues that are network or environment specific compared to cloud/SaaS companies that control all aspects of the data center hardware
- Installed software vendors often have more lock-in and higher switching costs compared to cloud/SaaS vendors due to the heavy customization and internally managed servers
- Getting the majority of the lifetime value of the customer up-front with installed software makes it easier to cross the desert to profitability, but creates lumpier quarterly revenue and predictability compared to cloud/SaaS startups with recurring revenue
Installed software and cloud/SaaS startups have massive differences, and startups should think through the pros and cons of each.
What else? What are some other differences between installed software and cloud/SaaS startups?