SaaS vs. Traditional Software

I had a good week at Workday Rising, which I attended as a prospective customer. One of their themes was the power of all customers being on a single product and a single version of the product (currently all Workday customers are on Workday 29; I believe everyone will be moved to Workday 30 in early 2018).

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I want to compare a SaaS (Software as a Service) provider like Workday who uses this single platform model with a traditional software company who delivers software the traditional way, with multiple products for different market segments, and with each customer installing that software in their own environment and deciding on their own upgrade timeline. Let’s say each company invest 9 units of resource into supporting & enhancing their products every year.

Say a traditional provider has three products: product A is pretty basic, product B is more capable, and product C is the most capable (similar to Toyota making cars under the Scion, Toyota, and Lexus badges). Maybe that company originally developed product C, then they acquired a couple smaller competitors and renamed those products to product A & product B. The customers with those products were already happy on their products, so the traditional company kept the same core functionality & technology and has continued to add new features to all three products. All three products were built on different technology platforms, so all three products require a dedicated set of technical support & development people.

So the traditional company devotes 1 unit of resource to support (help desk, troubleshooting, bug fixes, etc.) each product and they devote 2 units of resource to improving each product with new features & capabilities.

Product Support New Development Total
A 1 2 3
B 1 2 3
C 1 2 3
Total 3 6 9

The traditional company is using 9 units of resource to support & grow their products, and customers of each product get to enjoy the new features that come from 2 units of resource of new development each year.

The SaaS company also invests 9 units of resource in supporting & growing their product that runs on a single platform in the cloud.

Product Support New Development Total
A 1 8 9

Since they offer only one product designed to meet the needs of all their customers, they save 2 units in support that can be devoted to new development, and all the new development resources are used to maximize the capability of their one product instead of being spread across multiple legacy products. The same 9 units of resource, but now focused on a single platform and with 4x the resource focused on developing & improving their product every year.

SaaS isn’t a magic bullet, and sometimes companies need the control of dedicated software installed on their own servers. But the SaaS model is clearly more efficient and is likely the best solution for most companies most of the time.

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