Which Business Model: SaaS (Software as a Service) or Desktop ?

Question

I've got a product something like a SEO analyser in a more enterprise level. Target is mostly medium to big sized companies.

Which business model is better?

SaaS (Software as a Service) or classical desktop application. SaaS comes with some great advantages such as :

• Easier to update the backend system (quick fixes, UI changes, instant updates etc.)
• No piracy issues
• Easier subscription model (maybe!)

Also there are obvious disadvantages:

• Hardware cost
• Some companies might not prefer to outsource this sort of stuff (policy, security, privacy reasons)
• It won't work for internal network or on development projects

etc.

Since this is big decision which is not easy to revert, I'm trying to be careful about it. What are your thoughts on the subject? Real world experience would be great as well.

Answer 1

Well, being a consultant, I'll give the perfect consultant's answer: it depends.

Personally, I think if it'll work as SaaS that would be worth trying. This is especially true if its something where you can have lots of customers, and your marginal cost of adding your n+1-th customer is small. Then you can set the price low, not spend a ton on marketing, and if it's a hit, it's gravy.

If there aren't many customers, or the marginal cost of adding a customer is high, you probably want to go for a conventional model.

Answer 2

This may be a silly question, but why can't you provide it as a web application which can be hosted OR installed locally?

If you do this then all the SAAS disadvantages (except hardware costs) are negated.

Answer 3

SaaS is a real tough sell right now. There have been instances of SaaS providers going belly up and disappearing. That has made people think twice about storing data elsewhere. Corporations generally like the feeling of security provided by having "real" software hosted locally.

Answer 4

Medium to big sized companies don't do SaaS.

[Edit] You might not like it, but that doesn't change it

Answer 5

You are lucky to be in the early stages of your business to make this decision. From my research on the market, i would say if you can build both models great! Do it.

SaaS is a growing model... the other posters who said "SaaS is a tough sell" and "medium to big sized companies don't do SaaS" are not in touch with the larger market.

http://www.gartner.com/it/page.jsp?id=501991

http://humancapitalist.com/?p=624

http://www.computerweekly.com/Articles/2008/11/27/233608/recession-boosts-saas-model.htm

Good luck.

PS. I work for a SaaS company currently and love the delivery model. I know that my customers will always get the best value from our software.