SaaS has become a transformative technology solution and
over 20 percent growth, making it a $46.3B industry. During the last 10 years, companies like Salesforce, Dropbox and LogMeIn have become incredibly successful B2B organizations and even household names. As startups continue to enter the space in search of a piece of this growing market, these businesses can learn a few lessons from the successes of existing SaaS companies.
Just as we throw around acronyms like “IBM,” it’s easy to use SaaS as a word and not remember its origins. SaaS stands for “Software as a Service” — but many newcomers in the SaaS space will start as a Software as Many Services. Many businesses that do so will fail, as being a jack of all trades but a master of none is an ineffective way to carve out a niche in the market.
Before LogMeIn offered meeting services and remote customer support, the company did one thing: allowed users to get to their computer from anywhere. Similarly, Dropbox has now integrated with Windows, iOS and Linux and can be used for enterprise cloud storage, but its origins were far simpler: allow a user to save files to the cloud from any device. Instead of taking on the world, successful SaaS companies have found a single need, addressed it and then built from there.
When a SaaS company launches, it is easy to focus on the here and now — what needs to happen to stay afloat this quarter, or even this month. However, as companies find success, this mindset must change. It’s crucial to have a growth strategy relevant to the level of success achieved. If a SaaS company a year after launching doesn’t have a plan for the following year, the company can easily become too shortsighted and fail.
The freemium strategy has worked for businesses like Spotify, Dropbox and Slack, which saw incredible growth as users tried them at no cost and later converted to paying customers. However, offering a product for free and hoping it will spread like wildfire isn’t a marketing strategy. If no one knows about your product, how will they know where to find it or what it does? Even if the product’s functionality may speak for itself, people can’t try it if they haven’t heard about it.
As much success as freemium strategies have brought certain businesses, SaaS companies cannot sustain themselves if all users focus on the “free” part of freemium. In fact, it may be best to limit the number of freemium users until there have been enough conversions to continue supporting free use of the product. Simply put, if sales cannot support the number of free users, your SaaS company won’t last.