One of my regularly watched blogs had this post yesterday, looking at the location of the major profit pools for SaaS businesses. The gist of the post was that entrepreneurs and investors should aim to identify the high profit areas of SaaS business and move towards operating in that particular space.

The post had the following diagram to indicate suggested disparate profit centres for SaaS and discussed which of those centres is, and will be, most profitable.


Now my comments here are going to come from a purely theoretical base, but one which should be thought about when implementing a practical business plan.

I contend (and have done often on this blog), that SaaS business should attempt to become integrators and aggregators along all parts of the eco-system. I’m not sure how helpful it is to build an ecosystem diagram like the one above, and then break it down and consider each component a distinct area to be dealt with separately. While openness and organic development are important parts of web 2.0 (witness API’s, facebook apps etc etc), there is a difference between opening ones API to other developers, and turning ones back on entire chunks of the ecosystem.

The model I prefer is where the enterprise intends to cover all the areas of the ecosystem themselves, but at the same time opens things up for other developers to add on, co-develop and organically grow the model. To often I come across SaaS businesses (you know who you are!) that limit themselves to a very small part of their eco-system. This, by definition, is limiting and sub-optimal given the way the space would seem to be developing.

Now this does not negate the validity of businesses that set themselves up as niche players but what I am saying is that when creating the business plan it is vital that an enterprise defines the eco-system within which they operate, and also defines their particular breadth and depth of focus within that eco-system.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

  • hey Ben,

    Are you saying that i’ve applied a 1.0 framework to a 2.0 world?

    I agree that companies should play in the whole ecosystem IF THEY CAN. But given the amount of effort and complexity it is to be a SaaS company (whats simple for the user is very complex for the provider) and the difficulty to get funding etc, i don’t think its feasible for your average SaaS start up to be all things… Even IBM realised that back in the late 90’s, it couldn’t do everything IT

  • I think we’re both in agreement – I guess what gets me all excited is helping businesses find a way to do the whole ecosystem thing.

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