Integrations as Key for Next Generation SaaS Success

Continuing the thoughts on next generation SaaS with posts on Intercom as the Next Mainstream CRM after Salesforce.com, The API Economy, and The Next Generation Competitor to Every Public SaaS Company, one of the biggest challenges for upstarts is the lack of third-party integrations. One of the strongest network effects for SaaS platforms happens when hundreds of other products build integrations to connect data and processes (see Atlanta’s MailChimp). The more integrations a customer uses, the harder it is to switch vendors.

As expected, there are SaaS products that specialize in integrating other SaaS and installed products:

  • MuleSoft – Enterprise strength integration platform that’s heavily customizable. $2.8 billion market cap (NYSE:MULE). See notes from the MuleSoft S-1 IPO filing.
  • Zapier – Huge breadth of integrations in a do-it-yourself fashion. This should be the starting point for most people looking to connect apps.
  • Cloud Elements – Write once, connect to many middleware that’s a huge timesaver for more sophisticated custom integrations.

Look for cloud integration middleware to be a key part of the solution for next generation SaaS apps.

What else? What are some more thoughts on integrations as critical for next generation SaaS?

Intercom as the Next Mainstream CRM after Salesforce.com

Four years ago I offered up the idea that HubSpot would introduce a CRM and be in a great position to capture CRM marketshare in the post HubSpot as the Next Mainstream CRM. HubSpot has continued to execute well, is approaching a $400 million run-rate (NYSE:HUBS), and launched an excellent free CRM. Originally, I thought a tangential product in the marketing space would be in the best position to enter the CRM market as opposed to one of the solid CRM upstarts like Pipedrive and Insightly.

Now, after talking to a number of companies over the last year, I believe Intercom is in the best position to succeed Salesforce.com as the next mainstream CRM (see Quick Notes on Fast-Growing SaaS Startup Intercom from earlier this year). Intercom is growing at an incredible rate, going from $1M to $50M in three years. More importantly, the product is a customer communication platform to manage functions like live chat, in-app messages, email triggers, and usage analytics. Of course, customer communication platform and customer relationship management have one critical word in common: customer.

Look for Intercom to continue their torrid growth rate for several more years and introduce functionality to manage the entire customer lifecycle, including CRM. Salesforce.com will be paying close attention to Intercom.

What else? What are some more thoughts on Intercom as the next mainstream CRM after Salesforce.com.

Signs of an Last Generation SaaS Product

Continuing with the post The Next Generation Competitor to Every Public SaaS Company, one of the questions that came up is how to identify when a SaaS product has entered “incumbent mode” and shows signs that there’s room for new upstarts. Good question. We’ve all used a product that’s solid, but unchanged for many years, and know that it’s a last generation product.

Here are a few signs of a last generation SaaS product:

  • Pace of Innovation – New features come to a halt. Product polishing continues but substantial new features are rare. The focus is on profitably scaling sales and marketing.
  • User Interface / User Experience – Interface changes are disruptive and avoided. Newer UI/UX conventions, and tools like an Angular/React, aren’t a priority.
  • Contract Terms / Flexibility – Longer term contracts are required. Renewal details aren’t negotiable. The position of strength is flexed.

A last generation product readily shows its age. Staying up-to-date with a modern UI/UX and feature set is much harder than it looks. As companies grow and scale, continuing what’s proven takes precedence over innovation.

What else? What are some other signs of a last generation SaaS product?

The API Economy

Continuing with yesterday’s post The Next Generation Competitor to Every Public SaaS Company, there’s a key component of modern SaaS apps that changes the market dynamic compared to 10 years ago: APIs. Application Programming Interfaces (APIs) are how cloud applications “talk” with other cloud applications. Think about exchanging data, triggering features in remote applications, and generally interacting in an automated fashion — all made possible by APIs.

Now that most apps have usable APIs, connecting apps is far more common, and more importantly, the major apps don’t have to include the full breadth of modules natively. Instead, apps are more specialized and focused. Lock-in becomes less of an issue and there’s more competition throughout.

The API economy is at the core of another round of disruption. Look for this to play out in the next several years.

What else? What are some more thoughts on the API economy?

The Next Generation Competitor to Every Public SaaS Company

Yesterday I was talking to a very successful SaaS entrepreneur and the topic came up of when the next generation NetSuite replacement is going to emerge. NetSuite, an enterprise resource planning platform (think accounting, inventory, etc.), is incredibly powerful, but has an interface unchanged for 10 years along with a very difficult customization process. Taking the idea one step further, every public SaaS company already has several next generation upstart competitors building a product that is better, faster, or cheaper (pick two).

Here’s what every next generation SaaS winner will have:

  • API-First – In lieu of a slow, cumbersome API, the next generation has fast, elegant REST APIs that make connecting to quick and easy.
  • Rich, Responsive UI – In lieu of basic web interfaces, the next generation has rich, responsive interfaces that feel like a native app.
  • Approachable Pricing – In lieu of cryptic, talk-to-a-salesperson-only pricing, the next generation has straightforward, readily understandable pricing (see Zoom).
  • Modularized Platform – In lieu of a large, monolithic platform, the next generation is built on micro-services that allow for much more rapid development and cloud-native scalability.

Technology innovation goes in waves every 15-20 years and SaaS is no different. The next generation winners are already out there, just give it a few years and you’ll start to notice them.

What else? What are some more thoughts on the idea that the next generation competitor to every public SaaS company is already out there and building momentum?

2017 Internet Trends

Mary Meeker is out with with her excellent annual Internet Trends 2017 report. Mary has been publishing an influential annual report for many years, and this one doesn’t disappoint.

Here are a few sections from the slides:

  • Global Internet Trends = Solid….Slowing Smartphone Growth
  • Online Advertising (+ Commerce) = Increasingly Measurable + Actionable
  • Interactive Games = Motherlode of Tech Product Innovation + Modern Learning
  • Media = Distribution Disruption @ Torrid Pace
  • The Cloud = Accelerating Change Across Enterprises
  • Heathcare @ Digital Inflection Point

Want to know the major Internet trends? Go read the Internet Trends 2017 report.

Software 2017

Battery Ventures put out a great slide deck on the state of the software industry in 2017 as part of the recent CloudNY event.

Here are a few notes from the slide deck:

  • 18.3% expected compounded annual growth for SaaS companies over the next four years (compared to 6.9% for general software)
  • Software industry in the United States supports 10 million jobs
  • The Five Forces of Software’s Accelerating Growth
    • Existing software markets are growing over time
    • Software is infiltrating what were once niche markets
    • Software is displacing hardware
    • Every company is becoming a software company
  • 60% of organizations to increase spending on cloud applications
  • The global software industry is $500 billion per year
  • Continuing at a 5% compounded annual growth rate, software will be $1 trillion/year by 2030
  • Category kings consistently captured more than 70% market share
  • Tactical considerations:
    • Software innovation is now global
    • There are competitors in all segments of the market
    • Product now drives software sales
    • Network effects and ecosystems build moats and drive stickiness
    • AI and machine learning are enabling applications
    • Microservices architectures and rapid product delivery are now must haves
    • Culture is paramount and employee feedback is public
    • Find a wedge and change the market dynamic
    • Grow fast or die slow

Check out the slide deck on the state of the software industry in 2017.