SaaS

JavaScript as the Web’s Integration Fabric

Ten years ago, I never would have predicted how JavaScript (code to make things more dynamic in a web browser) hosted on third-party sites would become the core integration method for the front-end of the web (see The Three Types of SaaS Integration). In hindsight, it makes sense that interactive elements and analytics would be decoupled from much of the content so that companies can deliver best-of-breed solutions for a variety of functions. Now, tag managers like Segment and Google Tag Manager have taken it one step further and decoupled the loading of JavaScript on a per-page basis to a system that uses JavaScript to load other JavaScript (very meta).

Many popular webpage features are loaded via JavaScript that comes from a third-party, including:

  • Web analytics
  • Forms
  • Live chat
  • Comments
  • Pop-up prompts that ask for an email address
  • Site search
  • Dynamic content

Going forward, look for this trend to continue and more functions on the web to be delivered via third-party JavaScript. More sites will deliver real-time personalization and richer, higher quality experiences in a seamless manner via third-party products. JavaScript is the web’s integration fabric, and growing in importance.

What else? What are some more thoughts on JavaScript as the web’s integration fabric?

API-First SaaS 2.0 Single Page Apps

Two of the core components of SaaS 2.0 products are actually related: API-first platform and rich, responsive user interfaces. Ever since Gmail made the first mainstream Javascript-heavy web experience that feels more like a desktop app, developers have been building open source platforms to make that type of “Single Page App” easier and faster to build. Single Page Apps reload only the portions of the screen that have changed, instead of the traditional way which refreshed the whole screen. And, these Single Page Apps work best against REST APIs, the same APIs that make a product API-first.

Now, there are powerful Javascript libraries like Angular (MVC framework backed by Google) and React (view framework backed by Facebook) that are popular with strong developer communities and a long list of additional open source projects that plug in nicely. By having quality, proven open source platforms, more apps are going to adopt them thereby applying more pressure to the legacy incumbents. The incumbents are going to have an incredibly hard time modernizing. Just like many software companies couldn’t make the transition from on-premise to the cloud, many SaaS companies aren’t going to be able to make the transition from SaaS 1.0 to SaaS 2.0, and it’ll be most apparent in the user experience.

Look for Single Page Apps to be a defining characteristic of API-first SaaS 2.0 companies.

What else? What are some more thoughts on API-first SaaS 2.0 Single Page Apps?

The Three Types of SaaS Integrations

Continuing with last week’s post titled Integrations as Key for Next Generation SaaS Success, there’s a critical point that was missed in that not all product integrations are created equal — not even close. For SaaS 2.0 startups, catching up to the depth and variety of integrations of the incumbents is one of the major challenges. When thinking through integrations, it’s important to understand the three major types:

  • Native Integrations – Integrations that are developed in-house to send/receive data as well as call remote functions and expose additional internal functionality are native integrations. Native integrations are the most valuable as the quality is typically higher and the SaaS company is committed to maintain them.
  • JavaScript Overlay Integrations – Integrations that are done via a Google Chrome Extension or JavaScript to override the user interface of a third-party app are UI overlay integrations. A common example is the industry of Chrome Extensions that add functionality to Gmail through the user interface and not the API.
  • Middleware Integrations – Integrations that are written and maintained by a third-party integration platform to connect two disparate apps are middleware integrations (e.g. MuleSoft or Zapier). Middleware integrations can be more expensive and/or slower depending on the APIs of the products being connected.

When thinking through the integration landscape, it’s important to understand that there are a variety of integration types and they aren’t equal.

What else? What are some more types of integrations with SaaS products?

SaaS 2.0 Companies Often Resegment an Existing Market

Continuing with yesterday’s post Examples of SaaS 2.0 Companies, there’s an important point that requires more explanation: SaaS 2.0 companies often resegment an existing market. Meaning, they go into a market that has plenty of credible incumbents (like Calendly with scheduling software) and offer a novel approach to a known opportunity (better user experience, better product modularity, better pricing flexibility, better integrations, better APIs, etc.).

Critically, this is best executed in existing markets. If it’s a new, unproven market, SaaS 2.0 often doesn’t work because new markets need armies of sales people to get the new type of product in front of a buyer that’s never used it before. One of the key benefits of sales people is that they help orchestrate the sale and initiate the change management in the customer’s organization. Change management is hard and sales people help create the urgency to make it happen.

SaaS 2.0 products, typically being self-service, are best resegmenting an existing market where the value is known and the incumbents deliver an outdated customer experience.

What else? What are some more thoughts on the idea that SaaS 2.0 companies often resegment an existing market?

Examples of SaaS 2.0 Companies

After talking about the The Next Generation Competitor to Every Public SaaS Company, it’s clear a better name for it is SaaS 2.0 companies. SaaS 2.0 companies are API-first, have rich, responsive UIs that are more conversational in tone, have approachable pricing models that are more flexible than the incumbents, and have a modularized platform so that customers can purchase only the features they need. With this definition in place, several people have asked for examples of SaaS 2.0 companies:

  • Intercom – Customer communications platform that’s one of the fastest SaaS companies to go from $0 to $50 million in revenue (see notes on Intercom’s growth)
  • Groove – Simple help desk software with a passionate following (read their blog)
  • Calendly – Schedule meetings without the back-and-forth emails (an amazing product!)
  • CallRail – Call tracking for data-driven marketers
  • MailChimp – Beautiful email marketing

Look for more SaaS 2.0 companies to emerge that reimagine the entire experience in a new, more personal approach.

What else? What are some more examples of SaaS 2.0 companies?

Software Contracts in the Age of SaaS 2.0

Continuing with yesterday’s post Software Contracts and Traditional Business Practices, a friend was skeptical that contracts would be less common in 5 – 10 years as so many software company business models are dependent on it. Yes, most existing companies that require them now won’t make the shift, but plenty of next generation upstarts will. Software contracts won’t go away but more options like the following will be offered:

  • Annual Prepay – Pay for a full year in advance and get a 10 – 20% discount off the monthly price. This is effectively an annual contract with an incentive attached to it.
  • Month-to-Month with Setup Fee – Instead of a long term commitment, vendors will offer the option of a setup fee that helps recoup some of the customer acquisition and on-boarding costs.
  • Annual Contract with 90-Day Out Clause – While this is still a contract, the customer has the option to leave within the first 90 days of signing, providing more flexibility to ensure it’s the right fit.

Look for more pricing and term flexibility from SaaS 2.0 startups. SMB customers will come to expect it as part of the next generation experience.

What else? What are some more thoughts on software contracts in the age of SaaS 2.0?

Software Contracts and Traditional Business Practices

As an investor, I like seeing portfolio companies have their customers sign annual (or multi-year!) contracts and get the benefit of cash flow predictability (including prepayment) and customer commitment. In exchange for doing a longer customer contract, the vendor company can invest more in the customer acquisition process, the on-boarding/implementation process, and on-going customer success and support.

As a buyer, I dislike contracts as the needs of the business can change (need to cancel or downgrade — not possible), the vendor can provide poor service or a poor product experience for a period of time and there’s no recourse, and product usage can fluctuate (Slack is famous for only charging for users that actually use the product, not all users in the system). No contracts and more flexibility to adjust spending (specifically, spending less during certain months) is more customer-friendly.

Over time, as more next generation SaaS companies emerge, and there’s more comparable competition in the market, I believe we’re going to see more SMB software vendors not require contracts and have more flexible business practices that better align with how users want to buy. This will be a slow transition but expect it to be mainstream in the next 5 – 10 years.

What else? Do you think SMB vendors requiring annual contracts will be continue to be the norm?