IP Applications Company Blog

The SaaS industry has the potential to grow in an economic downturn. 

Large capital projects are the first casualties in an enterprise trimming costs.  SaaS offerings limit capital expenditure and IT infrastructure, offer fast implementation cycles, allow companies to limit and adjust licensing volumes.  SaaS is exactly the type of solution that can pass internal executive reviews when money is tight.  When SaaS companies compete against traditional software implementations, SaaS products should win these deals.

How should a SaaS company change its operations to reflect the new economic downturn?

There are many common operational changes that any company will need to make in an economic downturn; the points below are particularly key to a SaaS company:

1) Achieve cash positive business operations.  Rationalizing spending and eliminate that cash burn until the capital markets improve. If VC funding is planned in the next 12 to 24 months, manage cash to do without it.

2) Utilize partners and channels to expand sales.  The downturn will provide additional competitive advantage to SaaS companies over traditional on premise apps.  However, the downturn and the need to preserve cash make it difficult to expand a sales and marketing team to take advantage of the opportunity.  Partner and channel sales can provide increased reach with a success-based reward structure.  Ensure robust systems in place to track the revenue splits and provide transparency to upstream and downstream partners.

3) Purchase SaaS products.  Focus on core competencies and outsource or rent the rest.  Do not become a billing and e-commerce expert or build out a major data center; find other SaaS companies to purchase these products and focus limited resources on the most value - the core product.

4) Capture all revenue possible per customer.  Do not leave money on the table through inefficient or manually intensive billing and subscription management processes.  Ensure customers can add and upgrade products online, simplify the contracting process and ensure to entice additional revenue from existing clients.