According to Gartner 100% of new market participants and 80% of current vendors will have a SAAS (Software As A Service) or Cloud offering by the end of this year. The market has spoken and no matter what the detractors say – and many of them have valid points – Cloud is where it is at.
This is a bona fide paradigm shift that, in the case of traditional providers, takes the whole of the company to pull off. Let us focus on sales and the available revenue streams for the purpose of this post.
1- Subscription: This is the monthly rent customers pay for use of the service. Sellers may charge by the month or for months or years in advance and make the cash flow more positive in exchange for a multi-term discount.
2- Higher Tiers: Which obviously are more expensive as they come with more features like customizations or customizations’ capability, synchronizations or integrations out of the box or higher ceilings for number of users, data and more. A higher tier may even allow a customer to work offline!
3- Resale: Your partners can resell your Cloud service just like they sold your traditional software or service. Think about all the providers for Microsoft 365 (Office 365).
4- Platform Sales: Think about Facebook’s platform that features so many third-party applications and affiliates that they easily dwarf the mothership. Google and Microsoft do a considerably worse job of this than Facebook and hence derive less revenue from third-party partners than do Salesforce via its AppExchange or Facebook. While it could be a category of its own I will throw in advertising a la Facebook or Google here too.
5- Fees: Set-up fees, support fees, data download fees, diagnostic fees, integration services fees, image fees… the list is endless.
SAAS may be low on margin and may offer customers the ability to churn, but you are not subsisting just on subscriptions, are you?
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