Felt like sharing some thoughts on SaaS with you today – those who already know something about SaaS won’t learn anything from me here – and I’m willing to learn if you’re in the mood to comment. But those who are discovering what Software as a Service is might find something to take away.

1) SaaS doesn’t equal ASP, and conversely

Many people, mostly entrepreneurs, use the expressions ‘ASP’ (application service provider) and ‘SaaS’ as if these 2 concepts meant similar things. Which isn’t the case actually.

• ASP is an IT infrastructure access mode that refers to accessing applications located on remote servers. In other words, ASP architectures are client – remote server architectures where the server is more distant to the client than in ‘usual‘ client – server configurations.

• SaaS is an entire new business model that can be assimilated to OnDemand, or pay-as-you-go software. Nothing to do with IT architecture stuff. With SaaS, one may either rent a service (a service based on a software) monthly or only when the service is being used, for instance.

In short, SaaS is a business model thing whilst ASP is an IT infrastructure architecture thing. Btw, I find the use of the term ASP obsolete whilst mentioning SaaS just rocks at the moment (see 5)).

2) Sell service, not software!

It’s hard for me to say so, I spend my time promoting software. But if you sell service, you’ll speak to functional executives and if your solution addresses a sound need – the you’ll close deals. If you just sell software, then it’s likely that you’ll get to talk with the CIO team and things might get a lot tougher for you if you’re not 100% clean on a number of things including accountability, traceability, confidentiality, accessibility and security issues. Functional execs meet with a handful of guys like you on a yearly basis whilst CIO teams meet hundreds so they’ll naturally be more selective.

In other words, SaaS sells better when presented like a service, so don’t mention software at all when selling to clients. Allow your clients to try your service for free with no down investment (low entry barriers) for a while, then pay when they’re satisfied, and leave if they find your service doesn’t match their expectations anymore (low exit barriers).

3) Treat your clients as partners, not clients – keeping in mind that some will be more equal than others…

Treat SaaS clients like partners: let them suggest new features for your product road map, and tell them you will integrate these features for all your customers without having clients pay more for it than they currently do.

4) Understand your client’ organization and adapt your pricing structure: target local P&L rather than global B/S

If your client is a decentralized organization, go for a pricing that involves all different entities (eg profit centers) so that you don’t impact the IT budget (no balance sheet investment) but all the local profit center expense accounts rather (billing demultiplication makes you invisible to corporate cost cutters in case of a downturn).

5) SaaS is a current VC buzz word

For something like 9 months now, venture capitalists have all become all crazy about SaaS. I, and they, know it’s just a buzz word, a cosmetic thing – but it works so what can I, they do? You’ll score points if you mention SaaS during your pitch – and loose them if you mention ASP as well in the same presentation.

Nota Bene: chart from Fred Chong’s top blog.