Why SaaS founders should take Marketplace Listing Optimization seriously

I wrote about the 3 things to do before your SaaS product launch to increase inbound leads before and also talked about How you can use Marketplace Listing Optimization (MLO) to increase your inbound leads for a SaaS product.

One of the things I forgot to mention was why you should take MLO seriously. I will outline that in this post.

The market for SaaS applications will be about $130 – $150 Billion by 2020 according to IDC. That compares to $5 Billion for IaaS (AWS, Azure – compute, networking, storage, etc.) and $12 Billion for PaaS (Meteor, Angular, etc.)

The second way to segment this is by size of company purchasing SaaS solutions. Enterprises greater than 1000 people will account for 48% of this spend, Mid-sized companies 100 to 999 people will account for 28% of this and 24% by companies with 1 to 99 people.

Another way to segment this is by type of SaaS application. Customer facing applications (eCommerce websites, etc.) will account for 59% of this spend and 41% towards internal, employee facing applications (ERP, etc.)

Yet another way to segment this spend is by location. The US is expected to be 37% of the spend, Europe about 29% and the rest of the world about 34%.

Finally if you segment by the “cost” of the application purchased by user per month, then SaaS offerings that cost < $25 / mo / user will account for 61%, $26 – $100 will account for 31% and > $101 per user, per month will be about 8%.

So, any way you cut it, SaaS is a large market, with global purchase capability focused on your clients customer, and for smaller $ per user per month.

One segmentation that none of the analysts cover is the segmentation for the SaaS provider by channel of opportunity. What I mean by that is what % of that spend will be direct, versus through a channel.

If you look at the top 100 software companies overall, in the B2B space, 64% of their revenues come from direct customers and 36% from channels (VAR’s, resellers, SI Partners, etc.)

In SaaS currently, that’s the other way around. Thanks to SEO, Google based search results, direct marketing and online digital marketing, 70%+ of the purchases are direct to customer. VAR’s, channel partners and others have yet to figure out how to sell and partner in this new era.

That will change though. There is a new class of larger partners (Salesforce for example) who have a large base of installed customers and can help SaaS and other companies sell “through” them.

The value add to the customer (buyer) is obvious – they get to buy from a trusted brand (Telstra, Microsoft etc.) and they have an existing relationship with the partner.

Cloud Marketplace Brokerage Services

Cloud Marketplace Brokerage Services (image credit)

The value add to the SaaS provider (seller) is also obvious – instead of having to go through a lengthy process of getting on the vendor list and get empanelled, etc. they can sell using the existing relationship the brokerage or large company has with the buyer.

This is what many of the analysts predict will happen by 2020.

So the Direct vs. Indirect business will again get to 70-30 mix.

Which means if you the SaaS company has a good relationship with the brokerage or listing provider, you can expect 30-40% of your revenues to come from that instead of direct.

This will lower your cost of sales, support and service.

Which will help you grow faster and bigger with lesser capital raised, and hence more profitable.

OpenShift Marketplace Brokerge Service

How you can use Marketplace Listing Optimization to increase your inbound leads for SaaS products

I wrote about the 3 things to do before your SaaS product launch to increase inbound leads before.

Cloud Broker Service

Cloud Broker Service

Unlike SEO (Search Engine Optimization), MLO (Marketplace Listing Optimization) for B2B SaaS has far fewer criteria to consider. Since the listing provider themselves are focused on SEO for their website, your focus and goal is to primarily show up higher if someone searches for the term or category within which your solution falls under (on page optimization), or appear on the top of the listing within a category when customers are browsing within the listing website.

So what are the portions of the listing you need to optimize?

  1. Ratings: In most of these listing and marketplace services, their internal ranking, which is comprised of multiple factors, but largely end customer ranking of the SaaS solution, tends to be the most important criteria to list higher. I would highly recommend you request, provide credits, incentives (beg, cajole, plead, request, etc.) or just ask your customers to rate your product at these listing and brokerage services. You want to ensure that customers rate you high across the criteria that you are judged. Some customers might think this is a forum for giving feedback on your product – that’s not the goal. Your goal is to rank high and be rated higher than other competing products.
  2. Completeness of profile. Most listing and brokerage services have different requirements for your profile. Similar to your own Facebook profile and LinkedIn profile, some require just your website, logo, product details, etc., while others request your demo video, high resolution screen shots, feature checklist, and in a few cases exclusive discounts or content. Find out the key things you need to complete and be as close to 100% as possible. This is the #2 criteria, but may be #1 for you to list higher, since an incomplete profile makes the marketplace brokerage service look unprofessional. To optimize your profile, ensure that you have all the profile elements complete.
  3. Billing, distribution and on-boarding : Unlike listing services, brokerage vendors actually will “resell” your product or be a channel partner – online. To that effect they will bill their customer, collect the payment, keep their rake and send you the dues. They will want to own the customer relationship, but not the support. In many cases, they will already have a billing and contractual relationship (for e.g. Telstra has over 500K SMB customers in Australia and bills them for telecommunications services anyway, so their brokerage services are an additional line item on the customer’s bill). To optimize your listing and appear higher, you will be required to bill and deliver on their platform as well.
  4. Feature checklist profiling: Most brokerage and listing services allow customers to compare features of products within a category. This means even if you dont support a few features that you competitors do, you will have to state them and if there are options to state few features that are different in your product than others, it is important to mention those. Many of these feature comparison criteria are human generated, meaning there’s someone at the listing site, putting these together – ensure that you build a relationship with them. To optimize your listing, you need more criteria you are ranked favorably for.
  5. Featured products: Once every so often, (each of them varies) the marketplace will feature certain products on their home page. Obviously they will feature products they think their customers will like or feature those that their customers already buy. These features are similar to the mobile app store feature listings, where some of it is data driven and other times it might be a “staff pick”. To optimize your listing, getting featured is important. Understand the criteria for the featured listing and find ways to get featured at least 2-3 times each quarter.
Cloud Brokerage

Three things to do before you launch your SaaS startup to get inbound leads

There are 3 items you should do quickly, if you are going to launch your SaaS startup or a new product that caters to a new audience.

First, get listed on SaaS marketplaces, Cloud Brokerage Services and Cloud listing providers.

There are over 120 SaaS marketplaces from telcos – AT&T,  T-Mobile and others, to large Cloud Service Providers (AWS, Google, Microsoft, etc.) and other large technology companies (Samsung, DELL, etc.) I would spend at least a few days making sure your SaaS solution gets listed in all these marketplaces under the right categories.

There are between 30 to 40 Cloud Brokerage Services, including Appia, App Carousel, AppDirect, Jamcracker, Appirio, Cloud Nation. Here is a more comprehensive list.

Cloud Services Brokerage

Cloud Services Brokerage

Then ensure that you list on Cloud listing providers such as Capterra, G2Crowd, GetApp, etc. Here is a comprehensive list of Cloud Listing Providers.

Second, focus on Marketplace Listing Optimization (MLO). Like SEO (Search Engine Optimization) and App Store Optimization (ASO), MLO will help you rank higher, which drives leads.

How do you Optimize for marketplace listing: Get real customers to review your products, ensure that you are listed in the right categories, Use the right keywords in your description, show screen shots of your application and showcase a good video for demos. I will detail this more in tomorrow’s post.

Third, optimize your customer on-boarding process for these providers. Find out their rake, the incentive cut-off structure and renewal discount rate. Ensure that a customer coming from these solutions is able to be measured, can setup their account quickly and can easily get the first few “tasks”done on your platform.

Software as a Service

Services and consulting companies become “Software as a Service”

I wrote about how the cloud migration represents a large opportunity for Systems Integrators such as Accenture and Infosys, among others. Many customers are moving their existing applications to the cloud and using SI’s to enable that migration. This is largely being driven by lowering the cost of infrastructure for their existing applications.

The other big opportunity that I am starting to see for systems integration companies is the development and introduction of internal employee facing applications, which so far has been only been developed by pure play SaaS companies.

All applications built by a company fall into two categories – those that are used by employees and those that are used by customers / partners / suppliers etc.

The customer facing applications that are “business critical” and revenue producing are the ones that companies are starting to build themselves. The ones that are internal, employee used are the ones they are buying from SaaS vendors.

Why? Three main reasons:

  1. If they were to build applications in-house they need to hire people, and hiring developers for any company right now is very tough. That might change if a lot of coding schools end up producing more developers, but you can never be too rich, too thin or have too many good developers.
  2. Many of the internal application purchases are increasingly being bought directly by the business team instead of asking IT to procure. Thanks to cloud and SaaS, it no longer takes 3-6-12 months to buy, install, customize and deploy a solution, so business teams with the need (HR, Sales, Marketing, etc.) are directly buying software (usually that’s being done by someone who needs it, not by the head of the business unit) that’s needed by employees to be productive.
  3. Thanks to the lower cost and subscription pricing models it is cheaper to buy than to build. Many companies are also realizing that internal applications are no longer “the competitive edge” that they thought it was in the 80’s, and 90’s.

So, where is the opportunity?

Although many businesses are buying these applications via a SaaS model, SI’s are usually the first to know about the need as they scan the market for potential partnerships and vendors.

They also have a clear idea of business needs for these internal applications. I am surprised more system integrators are not offering products and services they have built for one customer “as a service” to others.

Currently if a customer needs an internal application – they put them into 3 buckets – a) those for individual use, b) those that are departmental and c) those that are to be used by an entire organization or across multiple organizations.

The ones that are for individual use (e.g: SEO optimization software) are usually purchased by the person with peer reviews and feedback.

The apps that are departmental (e.g. Collaboration software) involved one early adopter who gets 2-3 folks in the team to use them together and that spreads virally among others.

Software as a Service

Software as a Service

Finally the ones that are enterprise-wide, or multi-department or department-wide in usage (e.g. HR software, Email, etc.) are the only ones that go through the RFP and purchase process. These also have many customization requirements and fall into two categories themselves – 1) those that are standard off the shelf and 2) those that are custom and specific to a company / industry, etc.

The off the shelf products can be purchased from SaaS vendors, but I think the opportunity for the systems integrations to turn their businesses from consulting and services to Software as a Services is in the custom applications – being developed as a subscription style offering instead of consulting and billable hours.

New market analysis: The “database” market #napkinStage

The database market is about $45 Billion with Oracle, Microsoft and IBM dominating the paid enterprise market in revenue, MySQL, PostGres and NOSQL databases such as Mongo and Cassandra leading on the opensource side, and distributed databases such as Hadoop doing well in pockets for specialized applications.

Global Database Market 2015

Global Database Market 2015

The large companies that need high end features still rely on very expensive databases such as Oracle, Terradata, IBM’s DB/2 and SAP’s in memory HANA. Microsoft SQL Server is more prevalent as a departmental solution.

As the type of applications has changed dramatically, the biggest driving factor among new app developers has been the reduced friction to get started, costs and ease of use (easy to learn, easy to maintain and scale).

Which is why databases such as PostGres are starting to do very well as is Amazon’s (Relational Database, RDS). Most applications that are simple to start with tend to use basic features that databases offer, so many developers start to choose PostGres or another OpenSource database. With Oracle’s purchase of MySQL, there has been a big shift away from that software to PostGres.

Database ranking over time

Database ranking over time

As applications start to mature, gain more traction and grow, developers are starting to explore column stores, NO SQL databases and other options as well.

The selection of a database used to be driven by high end security, performance and how extensible they were, it is increasingly being driven by convenience, ease of use and price.

So, where’s the opportunity.

From the 1980’s to the 2005 time frame, you could make money being a DBA or database administrator and earn upwards of $150K to $250K, managing the complex systems on top of which internal applications such as ERP, HR and CRM systems were built.

There was a large market for database tools as well, to help these DBA’s.

With the advent of the cloud, and move to developers managing, deploying and maintaining apps, the choice of database has been relegated to “what works, what’s cheap and what is easy to use”.

Most developers are starting to make the choice of technology stack – Node.JS, Angular.JS, Meteor.JS, Ruby on Rails, etc. and use the default database that is supported by the stack they choose.

Database ranking

Database ranking

So the market for database tools and DBA’s is going away to a large extent. Except for maintaining those legacy applications.

The opportunities are in providing optimization, tuning and application level services instead of the database management capabilities in the short term.

If you are a developer, I’d love to talk to you about your choice of database and stack to understand this market better. Tweet to me and we can setup a time.

IT Org Chart

“Peak IT”: Or how most new startups may NEVER have an “IT department” in their future

Yesterday I had the chance to talk to 2 startups. One has been around for 2 years and has raised $2 Million in seed funding and is in the B2B SaaS (Marketing) space. The other is older, has raised a series B and has over 47 people in their company.

Neither of them have a single person in “IT”. They both have over 40+ applications they use and everyone of their employees is using notebooks, phones, etc., but they dont have a central IT team.

I asked the CEO’s at what point do they see themselves getting an IT team and the answer from both of them was “Why do we need an IT team”?

That reminded me of Nichoas Carr’s piece, 12 years ago, in which he claims IT does not matter. He was subjected to a lot of ridicule many year’s ago, but he’s proving to be right.

I started to read about what all IT does actually in any company. You can break it down into 5 main priorities.

IT Org Chart

IT Org Chart

  1. Support the business with computing – notebooks, devices, etc. Turns out most new startups, (which will grow into larger ones later), have mostly a BYOD policy or let their employees choose their own machines, which focuses on the support, maintenance and upgrade of the machines to the employee. So, that’s mostly not needed.
  2. Provide the business teams with internal applications (Build, Buy or Outsource)- Email, Collaboration, HR systems, ERP, etc. Most new companies are buying SaaS products and are letting the business teams (HR, Sales, Engineering, etc.) make their own decisions on which applications to buy.
  3. Build, buy or outsource external customer / partner facing applications – These are also being moved from IT to the business teams. They directly engage with partners, agencies or buy off the shelf SaaS applications, bypassing IT to directly buy to their requirements. In fact over the last 10 years, according to Gartner, 50% of IT spend on applications is being managed directly by the business teams, bypassing IT. That’s in the large companies. In the small companies, it is 100%.
  4. Supporting, managing and assisting internal users via a help desk on problems they have with IT systems. Most users are bringing their own devices and building their own applications, so the help desk is largely eliminated.
  5. Operationally support the applications built with DBA’s, system administrators, operations managers, etc. With the rise of DevOps and the cloud, all of these external facing, customer applications, which are developed internally are being deployed, managed and supported by the developers who built the applications in the first place.

The only remaining portions are vendor management (if there are many suppliers to IT) or outsource partner management, which is starting to get managed by the business teams.

While, many of these startups are saying they dont have an IT team, what’s really going on is that many of the functional elements that IT did before are being given back to the business teams.

The two entrepreneurs who I spoke with foresee a day when they might need a person to help them with integrating their different “apps” which the teams bought, but that’s much later, and a highly specialized role.

Maybe in 20 years only 10% of large companies will have an IT org, and that’s when they have multiple locations, need to make sure all the offices have connectivity to their VPN and need an intranet (which can also #SaaS), but that’s going to be rare.

Cup of Ambition

The size of your ambition determines the value of your outcome

When you are building a technology startup, one of the first choices you make even before you get started is the size of your ambition. Most entrepreneurs dont think about it, so it tends to be an unstated but large impact choice.

If you get inspired by another entrepreneur, such as Sachin Bansal of Flipkart or Drew Houston of Dropbox, then you are likely to think in terms of a large market-changing company. If you find inspiration instead, in a wrong that needs to be righted then you are more likely to build a purpose-driven company. Finally if you think in terms of targeting a large market and are interested in being a meaningful player, then you going to end up doing that but only smaller.

What I have found from my experience is that entrepreneurs that start with the intent of solving a small problem, but in a large market have a much higher chance of creating a large company. Which is very counter intuitive.

This is dramatically different than what most investors have been looking for and what most entrepreneurs to be true as well.

“Focus on becoming big”, we are told. “Go big or go home”, is another term bandied around.

What I have noticed is also that having a large ambition but wearing that on your sleeve up front tends to distract most entrepreneurs.

The single biggest indicator of increasing ambition, unsurprisingly is confidence from achievement.

Which means, the small goals you set for your self and overachieve, the more size of your ambition becomes.

It becomes a self perpetuating virtuous cycle of delivering on your smaller milestones and gaining confidence from them.

Ambition

Ambition

So what are the other items that determine the size of your ambition?

The obvious one is market. Larger the market, the more ambitious you become.

The next one seems to be time together with your team. The more your team has worked together, got some wins together and more the battles you have fought, the bigger your ambition gets.

One proxy indicator seems to be amount of money raised, but that’s usually not a signal for anything other than the artificial pressure on the founders to return the money that investors have poured into the company.

So, if you are ever in doubt about how big you should become, I’d say aim higher. Much, much higher, but execute towards a smaller goal faster to let your ambition grow.