SaaS, Cloud and subscription billing - looking back at 2009

It is hard to believe it is 2010, for those of us that have been at the SaaS game since the early days it's been a decade already. Where did it go?

Last year turned out to be a turning point for the SaaS market.  The economic crisis provided yet another reason to move away from on-premise software and toward online services. The scale of some of our leading SaaS services such as Salesforce.com and Google Apps means outages are immediately reported and mainstream news. 2009 will always be remember for the financial collapse of the economy and the election of Barack Obama. However, in our market, 2009 will be known as the year SaaS became a mainstream delivery model. Yes, we still have many hurdles to overcome but as a legitimate software delivery model, SaaS and Cloud Computing have arrived.

Closer to home, 2009 was the year the cloud billing or subscription billing market was defined. We've been at the subscription billing game for over 10 years as a SaaS player. In 2008 we had a trickle of more mature SaaS companies with billing problems find us based on the marketing of our Telecom and ISP billing solutions. In 2009, a flood of SaaS companies from start-ups to highly success players came to us as the vendor community adopted subscription billing as it's defacto market segment.

Saugatuck, the premier SaaS analyst company, even did a complete study on the cloud billing space. It was nice to come out on top.

Here's hoping 2010 continues the momentum. It looks good so far.

Does Your Billing System Help or Hinder Sales?

A few weeks back I was chatting with a marketing executive from a multi-billion-dollar software company that operates around the world.  They’re very successful; let’s just leave it at that.   

When I asked him about his SaaS products and the company’s billing strategy, he seemed a bit surprised that there was even a question.  His response boiled down to “our CFO says we only accept customers that can pay for the full year up front”.  When pressed, he admitted that his company had declined customers that wanted a different payment arrangement.  At his company “billing” is a financial issue.  His competitors might see it as part of their go-to-market strategy but this guy’s CFO respectfully disagrees.   

In a competitive world, turning business down because your rigid accounting or ERP system won’t support a customer-friendly contract billing cycle is bad business.  It puts entire market segments out of reach and creates opportunities for competitors.  Imagine a cell phone company announcing that it would only accept customers that paid a full year up front because they didn’t have an automated billing system.   

It’s a back-office strategy that reduces workload two ways:  less work per customer combined with the added “bonus” of fewer customers.  It reminds me of the parable of the horse-drawn carriage driver who reduced his costs by feeding his horse a little less every day.  The strategy was successful, although just as he was getting to the point when he could feed it nothing at all, the horse died, with dire consequences for his business. 

Worthwhile customers come in many flavors.  Some customers need price certainty.  Others want to pay as they go.  If you have the flexibility in your back office to sell the same product to both, you have the opportunity to grow faster and make more money than your competitors.  Traditional accounting and ERP products weren’t built to support subscription billing.  Just ask your CFO.