Evolve or die trying: What’s next for SaaS
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In 1999, as if by divine intervention, Salesforce launched the first built-from-scratch business-to-business (B2B) software-as-a-service (SaaS) platform, introducing the technology world to an entirely new way of operating. Salesforce’s CRM platform freed businesses from expensive, unwieldy legacy software that failed to meet their needs, ushering in a new era of cloud-based services.
SaaS has served us remarkably well for more than 20 years. Coupled with low-cost offshore development and the fact that tech vendors no longer need to build data centers (thanks AWS), SaaS apps absolutely exploded in number, but circumstances necessitate change.
Two things tend to happen in a recession. Real innovation takes place: Microsoft was founded in a recession, as were payments juggernauts Venmo and Square; Uber, Airbnb, Slack and WhatsApp were also products of the last recession. Then there were game-changing inventions like the iPad. Even American staples like chocolate chip cookies and the game of basketball were created during tough economic times. Secondly, the companies with the least value fall away.
By re-examining the role of SaaS applications in our businesses at the present juncture, companies can get rid of costly subscriptions that yield minimal value yet maximize complexity while at the same time improve the customer experience — an imperative in a down economy.
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The existing SaaS model is broken
It may seem strange to think that SaaS is not functioning at max potential. After all, Gartner forecasts end-user spending on SaaS applications to reach $176.6 billion this year. With the need for innovation to move forward quickly and efficiently at the forefront, even greater emphasis is likely to be placed on SaaS offerings in the coming months. However, each SaaS solution represents an individual point that organizations must try to fit within a greater IT puzzle, and herein lies the problem.
It is estimated that enterprises with over 1,000 employees now use up to 177 SaaS apps. A good portion of these apps are customer-facing. This translates to a very fragmented web of customer touchpoints that the customer has to fight through to get anything done. As such, the customer experience suffers – and experience, especially in a downturn, is the holy grail.
Why experience matters
With the rise of the on-demand economy, consumers discovered just how simple and more enjoyable their lives could become with goods and services placed at their fingertips. We’ve leaned into being served and mobile technology specifically made this possible. COVID-19 exacerbated this trend as life became more contained. Delivery services, two-day shipping and entertainment became central to feeling like the world was a bit more under control during an uncertain time.
Simultaneously, experiences evolved into something more personal and more customized. From curated workout plans to connecting with personal stylists to conducting healthcare appointments online, everything has become about us, which is one of the magical components of modern technology. Our phones have become the command center of our lives. This type of catered experience is now the norm, it is expected. As such, companies have little choice but to improve upon and innovate around their customer experience.
During a period where buyers have options and as budgets become more constrained, decisions are based on who can meet their specific needs best. Experience is how companies will retain customers and add new ones; it is how companies will make it through the recession.
The evolution of SaaS
So, what does this have to do with SaaS? Customers don’t walk away from businesses talking about what joyful experiences they’ve had. They leave because they are frustrated, and the traditional SaaS model has created a very chopped up end-customer experience that lends itself to frustration. Today’s world, in which every customer matters, demands more. This is where application programming interfaces (APIs) come into play.
APIs have been around since the pre-SaaS days. They provide an easy way for information and functionality to move between partners so that developers can build on top of each other and connect the dots between SaaS systems that weren’t originally designed to talk to each other.
In a nutshell, they break down the barriers between SaaS systems. Sometimes referred to as the building blocks of the Internet, APIs were heralded for making applications more flexible and easier to work with; APIs helped apps do more. Now they can be applied to create a cohesive experience as well, enabling applications to connect and talk to each other in ways that make each more valuable.
Take the example of trying to navigate the average ecommerce or delivery mobile app. It’s easy to find where to buy stuff or sign up — there’s usually a giant button on every screen — but where are my returns? Well, that’s over here on another screen because that information comes out of the returns system. Then the conversation I had with the support agent when I complained is in a completely different part of the app because it comes out of the support SaaS system – even though it’s related to the return. And the half-off coupon they gave me as a result? That’s not even in the app because the marketing SaaS system sends emails. If I want to cancel my service? Best of luck finding that screen.
APIs make it possible for developers to shed the hard boundaries of SaaS and put the experience first, integrating necessary components into a single experience rather than bouncing the customer around. When sprinkled liberally over an organization’s massive SaaS ecosystem, APIs have the power to remove the friction that degrades the customer experience while simultaneously allowing developers to create features and benefits that delight users. The right combination of SaaS and APIs effectively draws people in with strong functionality and retains them with a strong experience once they are there.
Let’s look at that same mobile experience. If systems didn’t matter and customer data and app functionality had no limitations, what would the experience look like? As a consumer, I’d probably have one place to go for every aspect of my current engagement with the brand. I’d be able to scroll through my orders, returns, coupons, purchases, support tickets and wishlist as easily as I can scroll through the text messages on my phone — in one place, connected to each other where it made sense. As Steve Jobs said, start with experience and work backward.
The recession is a mechanism for reset. As companies step back and reevaluate their technology investments, will they think, “Are we truly differentiating ourselves in a crowded marketplace with our mega matrix of SaaS apps?” The resulting answer is probably no. Some of those apps need to go. By weeding out the pieces that are no longer needed or necessitate spend, companies will have an easier path to their cash conservation goals.
At the same time, by elevating customer experience outside of a single SaaS system and using the flexibility of an API-first model, companies will be able to dream up new and compelling experiences that differentiate them from low-cost competition. This is not only a more efficient use of resources, it’s a more effective one. It’s not easy for a technology vendor to go from being the sole owner of a key customer interaction, such as marketing or support, to a component of a larger blended experience, but it’s precisely the role SaaS apps need to accept to survive — especially in a downturn.
John S. Kim is the CEO of Sendbird.
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