One thing that I have noticed is that no template exists for creating a macro view of the economics of a SaaS business. Sure I have worked on detailed spreadsheets that analysis a monthly P&L for an existing business where revenue and expenses are known but if you are trying to get started and need a reference point for financial planning then a template would be good.

Many speak of a 3- 5 year plan to break profit and that is scary.

If you are new to SaaS then many costs that are borne for SaaS may not be known or even understood just as costs in a software licensing/services business sold via a direct salesforce may be overstated for a SaaS business.

Have you with your economics background dug into this and developed a financial template to get the cost base covered so you have a reliable foundation to build a pricing model and revenue plan?

I agree with your that (from the individual service provider’s/supplier perspective) the core software features of a SaaS offering is a commodity. In other words, all features should work similarly across all buyers. Therefore, like other commodity sellers who stay profitable from high volumes SaaS providers need high volumes to achieve the core tenet of low TCO and profitability.

My view is that product differentiation exists in the eyes of the buyer. This differentiation in the case of SaaS is achieved through superior service. The cheesy example, is Starbucks in Coffee. The product is a commodity, but the service is highly differentiated.

The perspective I have about SaaS is as follows: The first S – software, software features, infrastructure, etc – is a commodity. The second S – service, customer service – is the differentiating element.