The Economic Downturn and SaaS Companies - Part 2

While attending the excellent SIIA On Demand conference in San Jose, there was a lot of talk about surviving the economic downturn as a SaaS company.  Many of the points in Part 1 of this blog were discussed (somewhat gratifying) but a more fundamental question was posed.

Are you selling oxygen?

Can companies breathe without your product?  Is your SaaS product a true "need" for businesses to succeed or is it a "nice to have"?  When companies look to trim costs, which column will your product fall into?

In stronger economic times, companies that sell "nice to have" products can grow and prosper.  In down markets, purchasing companies will cut the nice to have products to preserve margins and cash, while keeping those mission critical solutions.

As SaaS companies looking for success in a down market, we need to ensure that we are selling products that are critical to our customer's business success.  Here are several things to focus on:

1. Marketing must emphasise those elements of your products that keep companies running.  Do not promote ‘cool' features; stress the core features that will help drive costs down or revenue up.
2. Product value must be quantified and provided to our product champions.  Ensure that product champions within enterprises have the tools to defend it against the forces of rationalization.  Often the decision to cut will have nothing to do with the department that uses and loves your product. The decision likely comes from the finance department but a strong dollar oriented argument can stay the execution.
3. Think sticky.  Focus energy on integration and engagement with key clients such that the switching costs grow greater than the option to cut or downsize.
4. And ultimately, if your product is not oxygen to your customers, change it or find customers who breathe your particular type of air.