Three Types of SaaS Value

There are three types of long term saas value, datastore, communication, and critical timesaver

Posted by Tejus Parikh on February 25, 2015

One of the things I've had to learn as CTO is how to categorize the value of the product. I've come to realize that the value of the sale is somewhat distinct from long term value to the customer. Within the SaaS ecosystem, the sale is often if the product can solve a problem. Long term success of the engagement depends on whether the product does solve the problem and the product falls into one of the buckets below.

Datastore

Is the application a system of record for some inherently valuable piece of data? Salesforce is a great example of a product that's real value lies here. While the product does provide some automation and collaboration, the reason customers do not churn for something shinier and fancier is because the most important data to one of the most critical business teams is housed here.

Dropbox is another great example. There are dozens of file storage tools. However, once the organization has bought into one the effort to move the data often makes any switch a negative ROI.

Communication

Github and Slack are applications that store a lot of data, but their real value is easy they make it to communicate about that data. Like file sharing services, there are dozens of hosting services for Git repos. Unlike file sharing services, switching between them is trivial, due to the inherently distributed nature of Git. The reason we use Github is that the system provides the best way to collaborate and make the life of every developer on my team easier.

Same for Slack. We're not short on communication tools, but Slack brings all the different channels into one place and makes it every easy for our different teams to talk about it. Slack is not the system of record, the data exists in other places, but it's ease of use has made it an essential part of our workflow.

Critical Time-saver

Some apps have value by being there when you need it. Litmus is the perfect example for me. It's $80/mo. Our team only works on emails maybe once every three months for a few days. You could argue that we're wasting money, but on those days that we're trying to create a new email Litmus saves so much time and frustration that it's completely worth it.

FullStory is another great example. I don't go and look at every user session. My engagement with the product is pretty low. However when I get a crazy bug report that makes no sense, FullStory is the most valuable tool I have to uncover the truth. The value is so much greater than the cost that it's almost a no-brainer purchase.

Different customers, different needs

Some of my team members might disagree with my categorization of these tools. What's important for a SaaS provider is that each buyer views your product as having one of these three core value centers. The more the maker of the product can do to emphasize the core value center, the easier it will be to reduce churn and differentiated from unfocused competitors.

Original image is CC-licensed [original source]

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Tejus Parikh

Tejus is an software developer, now working at large companies. Find out when I write new posts on twitter, via RSS or subscribe to the newsletter: