I’ve written before about two distinct approached to SaaS. SaaS/s – where the offering merely substitutes the incumbent offerings, and SaaS/v where the product adds a significant value into the mix. These two classifications, while admittedly fairly chunky, fall within the thrust of Clayton Christensen’s book “The Innovator’s Dilemma”, in which Christensen contends that there are two types of technological advance – sustaining and disruptive ones. These classifications, rather than focussing on technological change, rather look at customer perception – does the product in question feel like a whole new paradigm?
So how does this relate to SaaS?
Well in the land grab that seems to be going on with SaaS vendors, those that providing SaaS/s or sustaining advance generally have only one dimension within which they can differentiate themselves from the other offerings – price. It is for the reason that we’re seeing free beta trials, lowering price points and the like – they’re all levers to build a customer base for a product that doesn’t really disrupt the status quo – at least in the mind of the customer. (and please, once and for all can we stop saying that merely providing an application “on-demand” constitute disruption. Sure it’s handy, sure there are advantages but it’s an attribute, not a disrupter by itself).
So vendors drop their prices, their competitors follow suit and all of a sudden we’re in a race towards zero. It’s not smart and it’s simply not viable.
So what’s a business to do?
Well clearly a rationalisation is needed – despite the promise of the long tail providing almost limitless opportunities for vendors to provide a tailored offering to an almost limitless number of distinct verticals, the reality is that we’re seeing a significant amount of homogenisation in the SaaS for small business space – for every couple of dozen “me too” offerings there is only one offering that one could call disruptive form the user perspective – I sometimes wonder if sufficient analysis has taken place to really assess what user want and need, and what will really capture their imaginations.
Perhaps it’s time to look for the vendors that are providing truly disruptive solutions – when looked at through the market’s eyes.
Kelvin Hartnall has an interesting post where he does a deep dive into one SaaS vendor, Xero, and looks at whether they’re a disruptor or a sustaining innovation. What’s refreshing in his post is that, despite rightly pointing out that Xero (and SaaS accounting in general) is a radically different offering, and despite displaying the SaaS customer benefits that we all know about, Kelvin points out that “a sustaining innovation is not based on the actual technology but on how the market values the improvement”.
The post is interesting but strikes a discord when read in conjunction with the recent market acquisition data put out by Xero in which they report that close to 50% of new customers come from a history of no accounting software. Given that this is the case, it could be argued that SaaS applications that manage to convert significant numbers of users from paper based systems to web based ones is in fact disruptive.
For example, and without being privy to the data, I’d surmise that Google docs has a very low number of users who did not previously use some type of office productivity suite – this being the case it is a sustainer, true it moves people off MS Office and onto another product, but arguably doesn’t change the dominant usage paradigm.
So in a decades time which offerings do you think we’ll be able to look back and say were the disrupters of our time? Keen to hear your thoughts.