I spoke to three entrepreneurs in the SaaS space over the last one month: Sahil Parikh of DeskAway , an on-demand project management software, Sumeet Kapoor of SmilesERM, an on-demand HR applications software and Arun Dixit of Udyog Excise, a SaaS based application for helping manufacturing organizations compute excise incidence.
At the same time, I have been reading and researching the post of Mark Sherman on the investment opportunity in SaaS. I would strongly encourage SaaS entrepreneurs to download the slides posted by Mark – it would help structure your thoughts on the business opportunity. I must also add: please do read my comments and contact me offline to get my research notes, if interested.
The business models followed by the three entrepreneurs seek to exploit the “long tail” of enterprise software applications. As I have predicted in my January post, SaaS businesses are likely to succeed if they seek to exploit inadequately covered niche within the enterprise software landscape (HR, Project Management) or a niche within the business segment (financial compliance for the Indian SMB sector).
The business model that entrepreneurs should build will have to start from a definition of the opportunity they seek to exploit. I asked Arun Dixit of Udyog whether he sees substantial potential within the India SMB manufacturing sector and his answer was an unequivocal ‘yes”. His marketing and business would revolve around addressing the needs of this specific segment. However, if Sahil and Summet would like to position themselves as specific application providers then they should not constrain themselves in the Indian market.
At the same time, the important trend that I noticed from my research is the subtle shift away from the “application” to the “solution”. I would recommend that entrepreneurs study Rearden Commerce to understand this trend. It takes an application like Spend Management and spins it around to develop a solution for employees and companies to buy services. I think it is a great idea for SaaS entrepreuners to think of their businesses as solutions. For instance, can Sahil’s DeskAway be the default management solution to manage projects undertaken by temporary workers?
In order to achieve the necessary scale to even develop ambitious business plans worthy of VC attention, individual SaaS entrepreneurs will have to strike alliances. One type of alliance that entrepreneurs should seek to strike is with niche BPOs/KPOs. The HR and the Analytics areas have enough entrepreneurial mass within them to make possible a few alliances.
My message to SaaS entrepreneurs: this is a great opportunity, do not be afraid to think big!
Wednesday, August 08, 2007
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7 comments:
Thanks Sanjoy for thinking of us and your advice which makes a lot of sense.
In India, we have a huge potential market opportunity for business automation. The sobering fact however is that most of the business models that work in developed markets cannot help us unlock this market potential.
I think we can draw some interesting inferences from the mobile phone explosion. Mobile telephony had two distinct enablers . First, elimination of the cost and time in laying laying copper last mile; and second, a whole host of completely new application possibilities for the user that came from being able to contact and be contacted anytime anywhere.
In many ways SaaS has some of these characteristics. It has clear advantages on the cost and time side. I think the challenge is to discover so far unsolved problems for a segment of the market that today does not find it worthwhile to invest in currently available solutions.
Merely providing an affordable version of the existing solution for the same problem may not be enough.
One of the key factors in exploiting the "long tail" in SaaS market is going to be the ability of service providers to cater to more market niches, however small, over a period of time with no or minimal extra investment required in their applications, specific to those niches.
Adoption of some of the latest technologies and Web 2.0 concepts can perhaps help service providers achieve this. For example, if your solution can bank on the relevance of content to appeal to different niches, then the ability of your application to allow users to add user-generated content can make it relevant to more niche segments.
Using features that allow democratisation of content by letting users rate or rank and classify content can further increase this objective.
I reach here once again through Arnab's orkut and for a minute I thought that he was writing it. And then I thought it cant be he. And then I remembered.
Most of the stuffs you say goes over my head. But that doesnt stop me from trying to read still.
I am working with a VC who is interested in investing in India based SaaS companies. In case u hv any leads, please mail me at akshay.kalgutkar@gmail.com
Good day !.
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