Episode 180 | The Benefits & Drawbacks of SaaS (for Users and Founders)
[00:00] Mike: In this week’s episode of Startups for the Rest of Us, Rob and I are going to be talking about the benefits of SaaS. This is Startups for the Rest of Us: Episode 180.
[00:15] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:23] Rob: And I’m Rob.
[00:24] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
[00:28] Rob: Well, this one will come out when we are in Vegas at MicroConf. So I like you haven’t really gotten anything done in the past week because we’re just wrapping up a bunch of final details so that’s really my only update. For folks who are MicroConf, looking forward to seeing you.
[00:42] Mike: Yeah I’m kind of in the same boat as you are, just wrapping up stuff at MicroConf and I do have to say I am really, really looking forward to my camping trip/ vacation after MicroConf is over and not necessarily because of all the work and stuff going into MicroConf there’s lots of other stuff going on too but I really just need a vacation.
[00:58] Rob: Yeah and you’re going unplugged right? Like into the desert or something?
[01:01] Mike: I’m going to try and turn everything off.
[01:06] Rob: We’re going to be talking about the benefits and drawbacks of software as a service and choosing that for your app and whether you choose that over desktop or mobile or other things. Now this came about because I was listening to bootstrapped.fm with Andrey Butov, Ian Landsman and episodes 35 and 36 they had some long discussions about how Saas is potentially overblown or over hyped that it’s not applicable for everything that it’s not applicable for everything that it’s overused in some cases and all that stuff.
[01:34]The people are kind of defaulting I think in the broader startups basis especially people are not really – the big funded companies are really going towards the recurring revenue and the SaaS stuff. So it got me thinking that there are some cases where it’s a really good idea and there’s some really good reasons to go with SaaS and at the same time there are some really poor implementations of it and there are some times where you shouldn’t go after SaaS. And so that’s what we’re going to be diving into today, the benefits and the drawbacks. And to kick us off, what we really wanted to do is kind of define what SaaS is. The further we got into it, even you and I have maybe a disagreement over certain apps like is Dropbox a SaaS app or is it a cloud app? These are the five classifications I have.
[02:15] First is software is a service. Right? This is a SaaS app. These are things like Sales Force, Bid Sketch, Mailchimp, HitTail, Kiss Metrics. They’re web apps that live on a single server. They have multi-tenant data bases and people come and pay a recurring typically monthly or an annual fee to access the web app. So it’s basically a hosted web app. The next category is a desktop app. So this is Photoshop, an FTB client, just WinZip, all the stuff we think of as running in the desktop.
[02:45] And then the third category is server apps. So these are things that also run on a local computer. They aren’t necessarily a desktop app in the way that we think about it so it’s something like maybe MYSQL or exchange server or even think about FogBugz, not the on demand version but the one you download and install. WordPress is the same way. If you got a wordpress.org you download something, you install it on a server so it’s not a SaaS app but some people seemed to be confused and think that any time you have a web app, even if it’s downloadable that it’s Saas and in this case we’re saying it’s not.
[03:16] And then the last couple categories, one is mobile, IOS, android apps, the other ecosystems. And the last one is cloud. And I was putting things like Dropbox or Amazon S3 or Amazon’s cloud player in this thing that I don’t consider SaaS because the core interface is not a web interface.
[03:33] Mike: I guess I was just thinking because I mean we were discussing whether Dropbox for example, should that be considered desktop app or should it be considered a SaaS app? And obviously you came back with this third category that’s kinda a cloud app. And I think kind of differentiating it makes a lot more sense than specifying it as strictly a desktop app or a SaaS app. But I look at something like Dropbox and I say well, I guess in some ways I am paying for the software but really I’m just trying to synchronize my files back and forth. So I use the free version.
[04:02] So to me, I don’t think of it as SaaS because I don’t pay for it. I don’t know if I really think of that as SaaS and I think that’s more because of the web interface I’ll say but like S3 for example, that’s online storage so yes that’s a subscription model but I don’t necessarily think of that as SaaS. That’s more like hosting fee if that makes sense.
[04:22] Rob: So you are agreeing of pulling these out of the SaaS category into something. I called it cloud and it seems like these things, a lot of them are storage based and the recurring fees – Amazon doesn’t have a recurring fee. It’s usage based. It’s not a flat recurring. Dropbox does have a recurring fee.
[04:40] Mike: Yeah. I don’t think I have a problem calling Dropbox a SaaS app of some kind.
[04:44] Rob: Is it SaaS or is it desktop?
[04:46] Mike: Like I said, I think putting it in its own category because it kind of bridges the divide but because you do install it on your machine but there’s components that operate out of the cloud without those it would be kind of useless.
[05:00] Rob: Yeah and see that’s how I see the difference here is that if you install Photoshop or you install just a simple desktop Microsoft word, something that installs, I know they all have these cloud components now that had been retrofitted in but you could use them completely offline and there’s no drawback to it whereas you can’t use Dropbox or Amazon S3 or Amazon’s cloud player which is their music service but the core thing is that you can stream it from anywhere. So that’s why I’ve created this fifth category of cloud that I want to kind of differentiate between what we’re talking about today which is SaaS. Right? And these are two different things.
[05:34] Mike: the one thing I would point out though is for something like Dropbox, they do have a local LAN sync so you don’t actually need the cloud for it.
[05:41] Rob: Right.
[05:41] Mike: I think that’s why it’s so confusing as to how to categorize it because they have this LAN sync where even if you’re completely disconnected from the internet, you can still sync between two different machines.
[05:52] Rob: Right.
[05:52] Mike: So at that point it’s a cloud and it’s like well, kind of. It’s over the network but it’s not necessarily outside. When you look at something like that I mean from Dropbox’s perspective, you would rather people do that because then the data is not hitting your servers more than once or people aren’t hitting your servers.
[06:09] Rob: Yeah. No. I bet 99.9% of Dropbox users are not using that and the real Dropbox that I guess I’m referring to here is the one that needs the internet that use the bone of the benefit is that you don’t have that local, if the building burns down, you don’t worry about your data.
[06:27] Mike: Right. But this just operates in the background. What I mean is it’s a feature where there’s a copy the file locally while you go out to the internet and pull it down if you can pull it from somebody’s machine nearby that it’s all over the local network.
[06:38] Rob: So it’s a form of cashing it.
[06:39] Mike: Kind of. Yeah.
[06:41] Rob: But the cloud is still the premier or the first class [Cross-talk] I think it’s still a cloud app of some kind. This one all seems to be API based. If you think about it like Dropbox, you could really think about it as just storage somewhere and then a bunch of different ways to get at that storage. There’s like 10 different UI’s based on your platform. There’s all the mobile versions and all the desktop versions in a web version and all that stuff, S3 similar right? Amazon cloud player, similar. There’s a bunch of different desktop and web versions and mobile versions. I think that’s where maybe cloud comes through where it’s a little different. SaaS I think is web. The web is the primary interface. Even if data’s coming in from trafficking code or from other API’s or anything. The primary way that you get at that data is go to a website and you log in and that’s I think the differentiating thing that I think about when I’m looking at these two categories.
[07:30] Mike: I think that’s partially where SaaS kind of came from I mean because you look at something like Basecamp or Salesforce and that historically where these things came from so when you think SaaS, you immediately think web application.
[07:41] Rob: Right.
[07:42] Mike: I like having cloud as kind of its own separate category because it sort of implies that there’s this other category that yes its sort of Saas but there’s also local components that may operate independently sometimes but for the most part they really need to interact with that piece that’s out in the cloud that you may very well a subscription service for.
[08:03] Rob: Right. And I don’t like the cloud as such a buzz word and everybody’s using it these days but I do think it’s a decent application of that category. So let’s move on a little bit and look at – I had one thought on why SaaS is being so dramatically adapted like it really has been this upward trend. And if you look back into around the year 2000 there were probably just a handful of SaaS apps. It just was so hard to build really good apps that could even come close to mimicking a desktop app.
[08:33] And then as AJAX and browsers and coding technology on the web got better, 37 Signals becomes popular, Salesforce, kind of pioneers through it, Constant Contact, these really early writers in the SaaS market and I remember seeing them early on I think wow, I would never do that. I don’t want my data stored out on their server. We have to pay every month instead of I could just host in on my desktop box here. I remember hosting like an email server just so I could send out small email blasts because I didn’t want to pay the $20 a month or whatever to Constant Contact.
[09:03]But the thing is as these things have gotten cheaper they’ve gotten more reliable and as I have multiple devices, SaaS has really taken off because it gives you access to that stuff from everywhere. So I think a lot of the desktop apps and a lot of the paradigms that we saw in the 80’s 90’s and early 2000’s have now been moved or are moving to the web.
[09:22] So in the old days you buy like a proposal, you download a proposal software, you install in your desktop and you build it, now you’d go to a place like Bidsketch. In the old days I would think you’d download long tail keyword tool and install it on your desktop and now you might go to something like HitTail that’s all in the cloud. So there is definitely a trend and pretentiously a faddishness and I think that’s where there is some backlash. I think people could be pushing into SaaS for the wrong reasons, taking a look at the benefit and not think about the drawbacks or just over extending themselves into it.
[09:51] Mike: For the benefits and the drawbacks, I mean there’s two different perspectives to look at. I mean first one is from the perspective of the user and the other one is from the perspective of the developer and those two things can be wildly different. I mean something that is good for the user may be bad for the developer and vice versa.
[10:07] Rob: Yeah, exactly. So let’s dive into those. Let’s first talk about the benefits of SaaS over other forms like the installable apps from the user’s perspective. The first one is there is no installation and I don’t know about you but I change laptops now every 18 months. I have a bunch of different devices and multiple desktop, multiple laptops and so I do not have to install something and keep a DMG file or an EXE file depending on your platform. Keep that handy or else have the log in so I can go back and download it when I download my next version. Is it even going to be compatible with the new OS, all that stuff goes away when you’re using a SaaS app from user’s perspective.
[10:42] Mike: I cheat on that front because I just take full drive snapshots and backups so if I ever have to reinstall my machine I just lay the image back down and I don’t have to worry about it but I think that’s partly because I know how to do that stuff because I’ve done it for so long to me it’s not a big deal but I think that most people in general probably don’t necessarily have that knowledge,
[11:03] Rob: Yeah so that’s one way around it but obviously like you said most people aren’t going to do that. The next benefit of SaaS from a user’s perspective is there’s no upgrades so stuff is just upgraded in place. Right? The web app is there. It’s always new. It’s the newest version. Hopefully if they’re continuing to work on it and fixing bugs as they come up whereas if you’re on a desktop or a severer and you have an old version, the upgrade process can be and will be at some point a big pain. It will take a bunch of time. If you have a bug or a security vulnerability you have to drop everything you’re doing and you have to do an upgrade. And if that breaks things, if the data changes, it can be a hassle. And this all goes all the way from server apps that I’ve had to maintain to desktop apps like if I would upgrade to a newer version of like Photoshop, Microsoft word or whatever, you have all these files that might now be incompatible, some of them gets skewed up during the upgrade.
[11:56] With QuickBooks, where is your data? Where does that live? ITunes is the same way. Like when I would move from one laptop to another, just getting that data was always the biggest hassle of the move. Was trying to find like the QuickBooks file and make sure I had everything in the iTunes library and so not having to upgrade and not having to maintain the local files to maintain your state is definitely one of the pluses that I see for SaaS.
[12:18] Mike: I think there’s a difference between maintaining your files and kind of the title of this particular point which is no upgrades and I’ll give you a prime counterpoint for it that we’ve actually run into. PayPal’s upgrade of all of your data to the new PayPal interface.
[12:35] Rob: We have not done that because I’m too scared. But that’s PayPal. See, that’s two things. 1) It’s PayPal and I don’t trust that they’re going to do a great job with it and be one that will get better over time and 2) this is like something they’ve been regretting for years. It’s a huge upgrade that they are like actually migrating data. And if you don’t know what we’re talking about, if you log into your PayPal account, some people are seeing this thing that says migrate to the new PayPal. I think they’ve written a whole new UI. I’m sure it’s going to be cool. They’re mucking with data at that point. If you think about what’s your experience with most SaaS apps. The ones that work pretty well, you don’t even know that they moved, that they’ve added features. You don’t even know if they’ve changed the back end data model because they’ve just taken care of it.
[13:10] Mike: That is the general rule I think for most SaaS apps. They do upgrades and they can do an upgrade in the middle of while you’re using the software and you just don’t notice because they basically got a switchover mechanism where you just don’t even notice. You’re suddenly using the new version…
[13:26] Rob: Right. And it’s not that way every time, not for every SaaS app, not for every user. You run into same issues but by and large for me personally the experience of not having to upgrade software anymore is a big plus. And I think for most consumers, most people who aren’t heavily technical I would say it’s probably a plus for them as well.
[13:45] Mike: Yeah and I think there’s two reasons for that. One is how many different applications does any given user given company have that they would need to upgrade on a regular basis and what is the schedule of those upgrades? I mean if the software does not upgrade very often then it’s probably not that big a deal so for example something like word only comes out every couple years of sequel server for example but then you have other things to take into account like a service packs and security patches and things like that. So I think those things kind of create a differentiator a little bit but yeah I mean obviously not having to upgrade the SaaS apps is something that is attractive for most companies.
[14:25] Rob: The next benefit was when you get a new computer, there’s no reinstall. There’s no looking for that installation file. There’s no trying to find your data and moving it over and making sure you get everything.
[14:35] Mike: Or your license key, god that’s the worst like when you have to track down all your license keys for everything, it’s a nightmare.
[14:42] Rob: The next benefit of SaaS for the user is the lower upfront cost since it is a subscription, you may not have to drop $300 or $400 at one time, maybe you can pay $15 $20 a month for it even out that spending over time.
[14:54] Mike: Hopefully leveling out your total cost of ownership and if you go and sign up for a piece of software that really just isn’t working out then you haven’t just sunk a couple thousand dollars into a piece of software that becomes shelf ware because you know, it just didn’t work out for you. You can at least try things out and it cost you a lot less initially to get started with it.
[15:16] Rob: Alright, our next benefit for users is that SaaS apps accessible from most devices. So I work sometimes on a desktop sometimes among someone else’s laptop, sometimes I’m on mine I’m on my iPhone, I’m on my iPad. frankly sometimes I’m at a public computer at a hotel and my data is accessible from all those places and that’s a perk that you don’t have with something like if I’m accounting in QuickBooks on my local machine even if it’s on a network drive, unless I made that accessible from the outside world which obviously I wouldn’t recommend from a security perspective then you can’t get access to your data sometimes when you need it on the road. I know SaaS apps are not ideal when you’re logging in form a mobile browser but still I’ve done it and it works.
[15:57] Mike: Right. If you’re using a password manager for them then you’re kind of screwed.
[16:00] Rob: On contraire sir now if you use I think it’s last pass, they have a browser and the passwords auto populate in it so it’s the last pass browser. I think tying with this accessible from all devices is that multi-user capabilities are easily built in. It’s not to say that they’re free but with things, I’m thinking of like trying to share QuickBooks files in the old days or trying to share word docs you’d like email them around or you would put them on some share drive and then two people would open them at once and things would crash whereas with the SaaS app ideally if you have a team or you have multiple people who need to look at your accounting or who need to work on a single doc the collaboration is a lot easier to do and it’s kind of handled for you assuming that the developer has built it.
[16:46] Mike: That’s a very subtle differentiator there between multiuser versus collaboration because just having multiple users doesn’t mean that collaboration is easy.
[16:54] Rob: Right. Like real time collaboration is a whole other thing but yeah, I’m just saying multiple people at least being able to kind of edit and view stuff maybe not at the same time.
[17:03] Mike: Just being able to collaborate on the same data set that’s the important piece of it. It’s not just having multiple users because I think with QuickBooks for example on the downloadable one, you can have multiple users but it doesn’t really do any good.
[17:17] Rob: And the second to last benefit from a users perspective is that your data is stored for you and it’s backed up for you and you don’t have to worry about having crash plan or other things running locally. You don’t have to worry about a backup not running and losing your accounting data or losing a bunch of word docs because in theory the SaaS app that you’re entrusting them to is taking care of the backups and they have that all handled. Now we’ll look at the drawbacks in a second and one of the drawbacks is a potential of that not happening but assuming it is and it’s a reputable company and they’re getting stuff done, it does take some of the burden off of your shoulder as a user.
[17:52] Mike: And the last benefit is that companies who offer SaaS apps have to continually earn your business or you can leave at any time. So if you’re running into issues or you have bad experiences with their support or with their software, because of that lower outlay of cash up front, the cost of switching through, the monetary cost of switching to you, but it’s a lot less than it would be than if you were to invest a whole ton of money upfront into the solution that ultimately find out doesn’t meet your needs.
[18:22] Rob: Let’s dive into some of the drawbacks of SaaS for users there are quite a few of those as well. First is recurring charges. And depending on how long you use an app it may be cheaper to pay that big upfront fee than to pay that fee every month. And I know that some people just don’t like subscriptions. Right? They don’t want to pay the monthly fee and they prefer to just kind of plunk it down and be done with it.
[18:42] Mike: Yeah. I know people who have gone out and specifically purchased the installable version of a piece of software because they didn’t want to pay for the recurring charges. And interestingly enough one of the founders of Atlassian had kind of talked a little bit about whether or not you should do a SaaS version of something versus a onetime charge for it and his differentiator was essentially does the app become more valuable over time? And if the answer to that is yes then you should charge a subscription fee for it. And if the value of that drops over time then you shouldn’t get all your money upfront. And I thought that was a really insightful mechanism for determining whether you go more towards the SaaS model or more towards a onetime fee for a piece of software or for anything for that matter.
[19:29] Rob: Another drawback of SaaS from user’s perspective is frankly web apps are often not as powerful as desktop versions or downloadable versions of software simply because the desktop has a decade or two of programming that API’s are stronger. It’s local so things can be faster if you’re going to do heavy image or video manipulation, there’s just a lot of cases where building a desktop app is actually better from a usage perspective when you’re actually inside the app working on it.
[19:55] Mike: Some of it has to do with the processing capability, some of it’s just a matter of what’s possible in the web across browser mechanism versus what’s possible on a desktop because with a desktop typically you’re deciding what the operating system is going to be that you’re developing for and you can say okay I’m only developing for Mac or I’m only developing for Windows. And if you start going down the road of developing for both, a lot of times not all the time but a lot of times, the complexities of having two different versions of the same piece of software is a different skill sets, it costs a lot more in terms of time and money and implementation than if you only chose one platform and you’re essentially limiting the scope of what you’re going after.
[20:37] Rob: And I think this gap is narrowing over time. Certainly 10 years ago there was a huge gap between what you could do in a desktop and in a web app and that’s smaller now with just all the web technologies, Ajax and front end stuff that’s come about. But still you see older web apps especially like you log into PayPal, it is grindingly slow. I mean you’re not even trying to do anything exotic and it is painful to use the web app.
[20:58] Someone actually built a desktop front end for PayPal where you download it and install it and then in the background it would check every X minutes and it would download all your transactions so that you could then actually search them and not have to go get a cup of coffee while you waited for the transactions to appear. It’s a pretty clever idea basically outlining a desktop interface over what is now a pretty legacy app.
[21:21] Mike: Another drawback of SaaS over an installable piece of software is that it cost you a lot more to switch in some cases and the real issue here is that if you’re trying to switch from one application to another, if you have a desktop app that you’re switching to another desktop app then you can run them side by side and you don’t have to worry about importing all of your data in one shot and you also don’t have to worry about how am I going to go about doing this without paying for two different subscriptions?
[21:48] Because with the SaaS app you literally have to dump all your data, get it over to the new system, get it in there and make sure that everything’s working and that can be a huge undertaking in terms of time and effort to do that. But if you have two desktop apps and you’re switching from one to another, you can move some of the data over and just the stuff that you need that it’s kind of like your active working set and the rest of it you can leave in the old app and if you ever need to go back to it or moving forward you need to get at it, you just fire up the old app and you can get to it. But with SaaS, that’s a lot more difficult. You really need to kind of bite the bullet if you don’t want to be paying both of those subscription fees at the same time.
[22:25] Rob: The next three drawbacks are all interrelated and it’s privacy of your data, security of your data and backups of your data. And so privacy is is someone else able to access that data is this other company since its not living on your premise, are they able to look at that data? Security, is it going to get hacked? Is your credit card or other sensitive data going to get stolen? Because you are now in control of that security and you’re entrusting that to a third party SaaS provider and then backups. Are they actually doing backups and are they actually going to be able to recovery your data or if they go down and everything’s gone, you really didn’t have necessarily an opportunity to at least be responsible for that so people who like to have more control over it and don’t want to entrust it to a third party, these are three pretty major drawbacks for users.
[23:13] Mike: I think all three of those boiled down to one thing. It’s like do you trust the vendor in terms of the privacy, security and backup? Do you trust that they’re doing the right things and have they told you what it is that they are doing so that you do have that trust in their process?
[23:28] Rob: And then the last drawback is that too many logins, I hear people complaining I have 50 logins, 100 logins to different SaaS apps and that’s just a pain. So I think it’s more of a minor inconvenience that can be solved with a password manger like one pass or last pass.
[23:40] Mike: Yeah. I have over 500. It’s ridiculous.
[23:44] Rob: Wow, in your password manager?
[23:45] Mike: Yeah just in general. I have over 500 different logins and that’s probably on the low side.
[23:50] Rob: That’s another – the whole password issue needs to get solved. That’s not the right way to authenticate anymore like somebody needs to figure out a better way to do that because username password thing, it’s just too easy to hack. Nobody remembers them. Unless you’re using a password manager, people use the same one over and over and there’s just major security issues with it so I’m hoping that someone will fix this in the next few years, come up with a major innovation in that space.
[24:12] So now let’s dive into the benefits and the drawbacks from the developer’s perspective. So this is the founder or the person who’s building the software. What are your benefits? What are your drawbacks? And let’s start it off with one of the big benefits that’s always mentioned is no installation support. And so if you have a desktop app, you have a server app, everybody who does a free trial you have to support them. You have to give support to people who may never pay you and I don’t know if you’ve ever logged into a customer server that is completely catastrophically in bad shape with all kinds of crazy stuff going on but even if you have an app and you’ve tested in on all the platforms over and over, it works fine. It installs for you.
[24:50] But they go install it on their 20 year old server running windows 95 you have to then help them or else you just kind of – A) you get a bad rep or B) you’re just never going to make the sale. Right? So not having to deal with that as people are installing and trying to get some value out of your software is a major upfront time saver that I would say is the benefit for Saas for developers.
[25:10] Mike: Just over the last couple of weeks I’ve talked a little bit about in the past about the desktop version of Audit Shark. I had request to support, installing it and running it on windows XP and I’m just like unless you have a lot of money to spend on this particular thing, it’s probably not going to happen.
[25:26] Rob: Yeah, exactly.
[25:27] Mike: Plus you have all these conflicts that you can run into on somebody’s machine just because they’ve got other software or if it’s not like something where you’re hooking into IS or a patch here or something like that if you’re opening your own ports for example you could write in the port conflex or other services that just shut things down. So for example I’ve seen a lot of antivirus software that will just say hey, I don’t trust your software and it just shuts it down. I mean I’ve seen it do that before with just the installer so it just says I don’t trust your installer and boom, done, it just kills it.
[25:57] Rob: Yeah. We used to spend a lot of time when .net invoice was selling at its peak. I would spend a lot of time doing support and troubleshooting people’s servers and I’d log in and it was just crazy the setups they had and how old they were and how many – just how poorly it was setup and yet it’s my responsibility as the owner of my product to be able to figure out how to make that work. And so we would invest hours into software people had bought it and it was kind of like if you say no or you just say ah, your server’s too screwed up then they just say alright then give me a refund because we had a 30 day refund policy. So you’re basically saying I don’t want to invest this time here but I know that money’s going to basically come out of my bank account if I don’t so I always struggled with that. I know that as you hit scale, it might get a little better but that’s definitely one of the drawbacks of having to install stuff.
[26:43] I think tying into this is upgrade support. Whenever we’d release a new version of .net invoice or if you release a new version of a desktop app you then have a lot of customers that are upgrading all at once. So you can have several thousand people who are now running into issues whether it’s their data, whether it’s an incompatibility with their OS or something like that, so upgrade support from the developer perspective can also be a big burden especially when you only do upgrades say 2 or 3 times a year you release a new version and it’s like boom, go ahead and just knock off the next week or two just to help people get setup with that.
[27:18] Mike: Just to be clear, I mean this is something you can in some ways run into if you’re hosting a SaaS app just because in some cases you are going to have to move or migrate somebody’s data from kind of an old version to a new version or something. I think that the headaches are significantly less than if you got an installable component that runs on their desktop because they’ve got dependencies to worry about as well.
[27:40] Rob: The next benefit is that troubleshooting bug fixes all that stuff, it’s easier because everyone’s using the same code base and it’s easier to reproduce errors. When you have that single web server and everybody’s using it, I mean it’s pretty rare that we are not able to reproduce an error that someone’s run into, it only tends to be browser plug-in and that kind of stuff. But overall troubleshooting bug fixes, the fact that you can release bug fixes instantly if it’s affecting a lot of people is a huge plus more as the desktop app you have to roll out a new version and notify everybody and then they get upset. If you do that too many times, people start getting really upset about it whereas the SaaS you can just do it silently in the background, you fix the stuff you’re improving the software constantly and no one really needs to be bothered with it.
[28:24] Rob: I think the other benefit is that you own the platform itself that its installed on so that you can hook into it and troubleshoot stuff directly on a server and there’s only one place to do it that you don’t have to go 3 or 4 different places on a customer’s environment with what as you said can be totally screwed up machines and you also don’t have to worry about VPN-ing in. You don’t have to worry about any sort of security or firewall issues with that sort of thing. If it’s your server, you can kind of control everything.
[28:53] Rob: the last benefit we have from a developer’s perspective is the recurring revenue. It’s that you don’t start each month at zero dollars in revenue. You’re really always chasing the next sale as I saw back in like 2008, 2009 somewhere .net invoice’s revenue catered 80% in one month when kind of the recession hit. And that was a big wakeup call. I already had some recurring stuff but I realized, boy I really want to double down on recurring businesses so that that doesn’t happen when I’m really paying employees and not really reliant on that revenue.
[29:23] And so I know there’s both sides to recurring revenues. Some users may not like it but from a business perspective, from a founder’s perspective, this is the Holy Grail. And this I think is the number one reason that so many of the Silicon Valley and funded startups are heading into this market is because of the recurring revenue and not having to do the enterprise sale stuff of this huge contracts and chase them down and get these big revenue spikes. The recurring revenue really is a good way to go.
[29:48] Mike: I think that’s the point though is that it takes out the revenue spikes and evens out your cash flow and you can see generally much further in advance if your revenue is starting to trend downwards. So if your revenue craters 80% in one month I mean it’s really hard to see that coming but if you start seeing significantly higher numbers of people kind of falling out of your funnel or cancellation, things like that, you can keep an eye on it a little bit better I think.
[30:15] The other thing I think is that if a recession hits or something mass market comes into play where people are going to stop paying for stuff, they’re not going to make capital purchases anymore they’re going to pay ongoing expenses but they won’t necessarily make new ones. That’s the kind of thing that you probably run into is that people stop paying for new stuff. But if they were already paying for it, they love to get rid of that. They kind of cut all new purchases first and then if it’s an ongoing issue, an ongoing economic meltdown, they will start cutting back on other things but they won’t do that right away. So for example when the economy tanks, consulting was the very first thing to go because that was something that people were actively paying more money for.
[30:55] Rob: Alright now, let’s look at some drawbacks of SaaS from a developer’s perspective. The first one is that you have to maintain up time and that down time is a really big deal. This is lot more complex than releasing an app into the wild. Once it’s installed on the user’s system, it’s their responsibility to keep it up, to maintain the data, to keep the server running. But with SaaS, it’s your responsibility and this is not trivial unless you are technical you have someone who is solid at technical stuff and you’re able to take care of the backups and you’re able to really maintain that uptime to a certain level, you’re not going to last as a SaaS provider.
[31:28] Mike: I think it’s one of those things that when people are first building their apps they probably spend a lot of time on because they’re like I don’t want this thing to go down. It’s gotta be rock solid and I’ve seen people spend lots and of time. I’ve done it myself on making sure that the service is going to be up almost 100% of the time and that’s really hard to do first of all just from a technical perspective but at the same time like they’re going to be times where you just need to do some scheduled down time and there’s nothing you can do about it. But I think that’s one place where people spend probably far more time especially early on when a minimal number of customers would be impacted by down time anyway.
[32:06] Rob: Another drawback from a developer’s perspective is you have an obligation once you launch a SaaS app and people are using it, you can’t just walk away from it or abandon it. It’s obviously not great if you build a desktop app and do the same thing but at least people can continue to use it and get value out of it. If you walk away from a SaaS app, it has a limited lifespan. Either the server’s going to have an issue at some point, it’s going to get bugs. It’s going to security flaws. It just needs maintenance or else this thing will run into itself into the ground a lot faster than desktop apps. So there’s an obligation there.
[32:36] The worst thing you can do it’s not to get zero customers, it’s to get like 50 or 100 customers and then want to walk away from it because you’re kind of letting those people down they’ve invested in you, they believed in your app and now what are you going to do? Just tell them go spend their time and migrate to another platform or something. I mean there’s an upfront commitment I think when you launch a SaaS app then it’s probably not as important as with a downloadable installable app.
[33:00] Next drawback of SaaS from a developer’s perspective is platform and browser compatibility issues and this is basically the troubleshooting factor of someone is using a crazy browser on a Linux system where they have privacy plug-ins or cookie blockers or ad blockers or all kinds of stuff, this is where it gets complex and if you can’t reproduce it, it does become kind of pain. That’s probably the most complex kind of bug fixing and bug trucking stuff that we’ve seen trying to reproduce things where people have weird configurations. Luckily it doesn’t happen very much, not nearly as much as I saw when installing downloadable stuff for customers.
[33:39] Mike: Yeah I mean this is where some of the issues coming up with the minimum version number for different browsers that you support and then just the sure number of browsers I mean are you supporting Firefox? Are you supporting opera, chrome, IE? What versions of IE? The compatibility issues between them and understanding what versions of jquery or what different plug-ins could potential impact your software? That can be a huge – not a huge undertaking but it can be a big deal for what you’re trying to support and its costly in terms of time to troubleshoot those. Once you figure them out it is hopefully helpful moving forward as you kind of scale up the company and get more customers but initially those interactions are going to be in some cases long and protracted and just difficult to get through.
[34:22] Rob: This is definitely a drawback but the thing I like about it, because we had something with someone who use an IE7 or IE8 with Drip and they ran into something, might have been HitTail actually and we went in and it took like 4 hours just to – we had to get a virtual machine setup this whole thing but when we finally figured it out it was a weird thing in IE and we fixed it and now if anyone else comes along with IE8 it’s fixed for them because we have one version of the code and that’s where the benefit is of like – it’s always such a hassle with desktop installation because you have to deal with their configuration and once you fixed it it’s not fixed for everyone so you may have to do things multiple times.
[34:58] Mike: When you’re doing that type of thing and this kind of leads into the last drawback which is that when you’re interacting with those customers, it’s an opportunity for you to either lose a customer or gain their loyalty. I mean customer support is really, really key when you have a SaaS app because every single time you interact with a customer if you lead them with a bad taste in their mouth they can say you know what, I’m really tired of these guys, I‘m just done. I’m going to leave. And then you’ve lost that revenue for that customer from that point forward.
[35:26] Rob: I think this is something that people don’t always realize but people can leave SaaS apps pretty easily. It’s definitely a benefit for the customer I think that customer support is so critical with SaaS. So I think kind of to wrap us up and summarize, you might be thinking, listening to this, so when should I make something a SaaS app? When should I make it a desktop app or downloadable app? And I like to think about it on kind of three distinct categories. The first is functionality. Like is the functionality better served by making it a desktop app or a mobile app or some type of cloud app then do that. But if it’s better served as a web app then go that route.
[36:02] The second is the market. is the market that you’re going to be selling into, are they willing to go subscription and are they willing to pay a price that makes this thing maintainable because B to C SaaS apps are really, really hard. B to B, not so difficult. So think about the market and look at that aspect of it. And the third one is do you have the expertise? Do you have the experience or do you have the money to hire someone who really knows what they’re doing because SaaS is not something that I think these days that beginners can just dive into and do it right. If you can get an app built, you can throw it up on a $10 shared hosting account, you don’t know how to do the security, the privacy, the backups, all this other stuff.
[36:39] So if you don’t have any experience with it, I’d encourage you to go get the experience or to get enough money to hire someone who’s really solid at this and who could build a SaaS app right. So those are kind of the three elements that I think about if someone were to be deciding whether to build SaaS or not.
[36:54] Mike: I think it’s interesting to note that when you look at those three things, not one of them was directly on our list of benefits or drawbacks. It’s all about the user’s interaction with the software and has very little to do with the ancillary stuff like is it secure? Do they have to support upgrades or installations? It’s all about the functionality and can you get to the market with that type of product and are you going to be able to compete with it?
[37:20] Rob: Right. I think some of them planned – the privacy, security and the backups plan to the expertise part…
[37:24] Mike: Yeah but I think that’s more of a perception issue that may very well be left over from legacy apps that people are already used to in that space for example.
[37:33] Rob: I don’t know if just perception – I actually think that truly having privacy, security and backups is important, not just the perception of having good privacy, security and backups and to do that, you have to have expertise in SaaS. We have to know what you’re doing to do it right.
[37:49] Mike: Right. But I’m talking about the user’s perspective of them being comfortable with that sort of thing. So for example, if you’re going after manufacturers for example, manufacturing in general they want everything in house. They want it local because that’s what they understand and they’re comfortable with and if you come out with a SaaS app for something that would replace something that they already have a desktop app for, I think you would have a very difficult time going into that market just because they’re not used to that kind of things. So you’re going to have a much harder sale even though the app might be better.
[38:20] Rob: Right. That makes sense. Yeah. And I think for the record I said this before probably on this podcast but definitely in talks that I’ve done that personally I will never build a non-recurring app again. Now it may not always be a SaaS app because you could build like a cloud app that’s recurring or there are other ways but for me, having done business with one time purchases with stuff I have to install on people’s computers, all that outweighs any of these other benefits that I get from those things. So I will purposefully only select ideas where I don’t have to build an app that installs on other peoples software where I have to support that and where there’s only a one time sale and I don’t have recurring fees.
[38:59] Mike: And I think that’s something that you take into account way, way before you even start writing code.
[39:04] Rob: That’s exactly right. That wraps us up for today. If you have a question for us, call our voicemail number at 1-888-801-9690 or email us at email@example.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.