SaaS Businesses Are Experiencing Radical Change. Don’t Fall Behind.
As difficult as it can be to look for silver linings during a crisis, SaaS companies have been among the biggest winners of the COVID-19 pandemic.
When lockdown measures forced businesses to move from offices to working at home, they needed tools to ensure the continuity of their business operation. SaaS companies have always supported remote work. Their software is hosted online, and customers pay to access, usually on a subscription basis. For customers, there are a number of benefits to using cloud-based software: device and location independence, fast access, lower costs and ease of use.
Becoming fully digital and automated is more relevant now than ever. Though these developments are not new, their rapid adoption is. The coronavirus has forced citizens to distance themselves from each other, which has compelled companies to dramatically speed up the process of adopting new work models. Just this spring, there has been a nearly 400 percent increase in the number of U.S. workers doing their jobs from home for at least part of the week (66 percent as of April of 2020, up from 17 percent in 2019, according to Clutch). As social and workspace distancing continues, founders are scrambling to shore up infrastructure, deliver services faster and prove to their investors that they’re equipped to gracefully navigate unpredictable, rapid changes.The fallout of this pandemic has demonstrated how quickly established ways of doing business can be updated when there is sufficient urgency. And that means SaaS is playing an even bigger role in progressive work life.
As a facilitator of modern work, SaaS will continue to grow. Remote work will become more widespread even as the effects of the pandemic subside, with some companies such as Twitter announcing that employees may work from home indefinitely. But apart from these new shifts, cloud-hosted software brings many advantages that have contributed to its growth even before COVID-19, and these factors will drive SaaS further ahead.
Although there are some popular solutions, there is still plenty of room to innovate and disrupt. That is why, as an early stage investor, I look at this field with particular interest and confidence to find out which companies have what it takes and are worth investing in. Great SaaS success stories both inspire and guide my decision making, and there are many role models from whom you can learn valuable lessons when building your own business. Let’s take a look at a few below.
1. Target What’s Missing
It’s one of the foundational principles of starting a business: Your new venture must innovate and go beyond what's currently on the market. Once they’ve established a foothold, successful companies never stop innovating. One of the most recognizable, top innovators in the SaaS space is Google, which offers a total of 137 cloud-hosted software products. These solutions cover a broad range of topics, from productivity software (Google Docs) to advertising tools (Google Ads). While some of these solutions are clearly aimed at business users, others also appeal to consumers. Through the breadth of its offering and the diverse audiences for its software, Google has built a solid user base — a feat it achieved by pursuing innovation as one of the cornerstones of the business. It’s one of the key determining factors that has fueled Google’s growth.
2. Think Bigger
In addition to innovating by thinking along entirely new tracks, successful SaaS companies also must dream big. They can do this by developing solutions that tie together many functionalities that could previously not be managed through a single interface, often integrating partners as well. This allows them to dramatically simplify their customers’ workflows.
Shopify serves as a perfect example. Today, it’s one of the world’s leading e-commerce solution companies, and it continues to grow. The secret to its success mainly lies in the comprehensiveness of its software: It offers an integrated solution for all aspects of e-commerce, from products and inventory to payment and shipping. What’s more, it serves a vast range of businesses, having gotten its start as a provider for SMBs before launching Shopify Plus to retain its enterprise customers who were outgrowing its initial services. By thinking bigger, the founders succeeded in creating a product that not only does one thing well, but does a whole range of things well, saving their customers money and time.
3. Emphasize Creativity
By prioritizing and enabling creativity, your software can inspire and empower your customers. However, some of the most successful SaaS companies adopt the same approach internally. At Zendesk, engineers are seen as builders, creators and free thinkers. This sort of corporate culture encourages fresh ideas and trying new things, and it has allowed Zendesk to create a huge variety of different products and apps for their clients.
The past few months have also shone a new light on software solutions that enable teams to collaborate creatively. The ability to brainstorm, develop concepts and bounce ideas off one another used to depend on a group of people sitting in one room. But the lockdown has necessitated new approaches, many of which will likely persist in a post-COVID world. While some new players such as Miro — a smart, online whiteboard — have been able to expand their market share, some of the major SaaS companies have also been at the forefront of this transformation. Alongside the Google example above, you’ll recognize Dropbox, which makes it easy to store and organize files, and Teams, another offering from Microsoft that’s competing directly with Slack. Across the board, the seamless integration of both local and cloud storage allow team members to work creatively, whether individually or as a team.
4. Embrace Change
While innovating, thinking bigger and fostering creativity are all important factors in a company’s lasting success, another decisive characteristic of successful SaaS companies is that they keep up with trends and change over time. Since the advent of digitization, product cycles and technological innovations have continuously accelerated. Even for established companies, keeping up can be a challenge — but it is absolutely crucial to stay ahead of the curve in order to thrive and build sustainable momentum.
Microsoft, a company that has been on the forefront of software innovations for several decades, has proven its ability to detect trends and to act early on. After innovators like Apple leapfrogged Microsoft, CEO Satya Nadella began relying on server capacity on the web and investing in Microsoft Azure, the company's cloud computing service, as well as in-house innovations in data analysis and artificial intelligence. Since Nadella took over in 2014, Microsoft has grown billions in stock market value. By moving its desktop productivity suites to the cloud, Microsoft was able to carve out an additional revenue stream. Its SaaS business is hugely successful with a growth rate of around 34 percent a year, according to Synergy Research Group.
5. Champion Delightful Design
Your software’s design, vibe and coolness factor can significantly boost your success. If users genuinely enjoy using your product, they will return to it over and over — and, crucially, they’ll spread the word. Slack is an exemplary role model in this regard. In function, it is essentially a traditional enterprise chat tool, with both group and person-to-person communication. The real distinguishing factor, however, lies in its design. This was an intentional choice from the get-go. As Andrew Wilkinson from MetaLab, the company that polished the initial rough design by founder Stewart Butterfield and his team, explained: “Most enterprise software looks like a cheap ’70s prom suit — muted blues and grays everywhere — so, starting with the logo, we made Slack look like a confetti cannon had gone off. Electric blues, yellows, purples, and greens all over.”
It’s a color scheme that Wilkinson describes as that of “a video game, not an enterprise collaboration product.” This, paired with a curvy sans-serif typeface, friendly icons, and emojis, results in a software that users like to use for the functionality as well as the experience.
The move to the cloud is in full swing, with no signs of slowing. Building a SaaS business now could put founders on a significant growth trajectory. By learning lessons from some of the most successful SaaS companies, they can benefit from these experiences and seize this unique moment in time.
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