As cloud-based software continues to transform how businesses operate, you would think that we’re entering a new golden age of Software-as-a-Service (SaaS) applications, where innovative developers take advantage of the cloud, offer their business applications through a SaaS app store and leapfrog entrenched legacy software vendors.
After all, the cloud is reducing those long-standing barriers to entry. It has allowed disruptive, cloud-based apps to grab market share and has made it easier than ever for emerging SaaS app providers to compete against the tech giants, or so you would think.
And you would be wrong.
Certainly, the cloud does make it easier for bright, innovative developers and entrepreneurs to compete, but even the most impactful applications cannot overcome the simple fact that many, otherwise brilliant, SaaS app providers are sabotaging their own chances of success.
How are they hurting themselves? By refusing to collaborate with each other. Most SaaS app vendors choose to work alone, instead of forging mutually beneficial partnerships. In fact, out of the more than 1,300 cloud-based app vendors listed in SaaS Markets’ app stores , 80 percent have no affiliate support, active network or partner ecosystem.
By working together, these app vendors could refer business customers to one another for a nominal referral fee, increasing their customer pipeline cost-effectively. Instead, for many SaaS-based businesses, there is no incentive to review or resell customers on related, relevant business applications. Isolated from their customer base, they struggle to generate leads and attract businesses to subscribe to their app(s).
What’s preventing this collaboration? Many emerging cloud-based app vendors are religious about cost-containment, and fail to realize that by opening up to affiliate partners, they can drive customers and their revenues to new heights; thus, growing the entire SaaS app ecosystem.
What should they be doing? An example of a successful business app vendor is Evernote. Evernote, which has an active partner ecosystem, where customers can find related applications and products on the Evernote website, while also getting referrals from other affiliate vendors.
Yet, the self-sabotage goes even further.
Many SaaS app vendors strive to avoid being placed near competitors, out of an understandable fear that they will lose customers. This avoidance hurts them in two critical ways.
First, by isolating themselves from similar vendors, they also make it hard for business customers to find them. For example, many restaurants are located in areas where there are a lot of other dining places. As a result, the entire location attracts a lot of diners who then have a great selection of possible menus, and the end result benefits all of the businesses.
The same rule applies to cloud-based applications. Business owners and technology decision makers prefer to go to one trusted online location, where they can easily find all relevant business apps they need, so they can evaluate their options based on their specific business requirements. The increased traffic of potential customers then fuels sales for all of the participating SaaS app vendors.
Another critical loss for SaaS vendors who choose to steer clear of competition is the ability to reduce the number of prospective customers who are not a good fit for the application.
Here is how that hurts those vendors. In our app stores, virtually all of the SaaS apps offered can be trialed for a period before paying for them. When a vendor is not easily compared to other similar applications, a prospective customer may engage in a trial, but then choose not to buy because the app is not a good fit for their specific needs.
In other words, they are the wrong customer—and the vendor just wasted a lot of resources in a trial that went nowhere.
In a comparative app store environment, prospective customers can evaluate a range of similar apps against their requirements, leading to much higher conversions after the trial period. In other words, the comparison opportunity benefits the vendors by eliminating unnecessary trials, aligning the right customers with the right app.
Cloud-based app vendors need to realize the advantages of working together. They should start pooling their resources to build the overall SaaS app marketplace, and stop sabotaging their own success.
Jay Manciocchi, JD is a proven digital marketing executive and client-facing sales officer. He previously worked in a leadership role at the nation’s largest content marketing agency. Jay has also worked at a global consulting company, large and boutique marketing agencies, and at law firms (as a former legal professional). He received his Juris Doctor degree from New England Law and his B.S. degree from Northeastern University. Jay also has his Series 7 & 66 certifications, and is conversant in Spanish, Italian and Arabic.