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SaaS Success in Web 2.0 – Reach across the firewall

For better or for worse, I am old enough to remember the reengineering craze of the early nineties.  For those of you that are under 30, this was a monumental hype cycle throughout the technology consulting industry centered on redesigning business processes for order-of-magnitude gains in productivity by leveraging new client-server technology.  It was codified in the famous book:  Reengineering the Corporation by Michael Hammer and James Champy.

Brainstorming and out-of-the-box thinking were the order of the day, because creativity was the key ingredient to realizing the potential gains. However, creativity has not been the mantra of the SaaS revolution, the mantra of SaaS has been lowering TCO (total cost of ownership). Basically, take what you do now, make it multi-tenant, outsource it, and pay less.

While this is a great business proposition for customers, it places SaaS vendors squarely into highly-competitive, price-sensitive commodity businesses.  If you want to differentiate your offering, you must look beyond the client-server application you are replacing and ask yourself: How can I revolutionize the current business processes of my customer by connecting my SaaS offering to the larger Web? Or, more concretely by connecting it to users and applications outside the firewall.

A key point of difference is that the business processes in question are NOT internal processes (classic enterprise), but internal-external processes or even purely external. While 90’s style reengineering was about employee productivity gains, SaaS and cloud-based reengineering will center on prospect, customer, and partner processes and will derive order of magnitude gains in productivity from integration, network effects, user-generated content, and outsourced processing or data.

In earlier posts, I gave some specific examples that included Zendesk’s online support applications and B2B2C platform plays.  But, I believe that opportunities abound and that they will only increase as cloud computing becomes more the norm.  My poster child for this concept is Google AdWords/AdSense.  This application is rarely classified as SaaS, but it is clearly B2B(2C) software-as-a-service.  I think this is because it doesn’t look like a traditional enterprise client-server application, like CRM or ERP.   However, it does completely revolutionize a business process that crosses the firewall: demand generation.  And, if you buy what I’m selling in this post, you will now classify them as a new breed of enterprise SaaS CRM, just like email marketing platform can be considered as such. The fact that Google and Salesforce recently announced partnership and that Adwords is becoming more and more integrated into salesforce.com provides evidence enough.

If you think outside-the-box or rather outside-the-firewall, can you reach out across the Web to your customers prospects, customers, and partners or to the cloud to other applications and data to enable order-of-magnitude increases in productivity?  Can you envision entirely new killer applications that have not be made before?  If you can, then your have taken the first step toward breaking out of the SaaS mainstream and the hard life of low cost-based competition to the Web 2.0 world of innovation, differentiation and competitive advantage.

This is post number four in a series of five.

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