Sofware-as-a-service Cost Structure Vision
Recently, I was asked what the ideal cost structure is for an on-demand software company. There are few benchmarks of successful mature SaaS companies out there so here’s my proposal: a percentage of sales and some variable costs. Whether you can achieve this in your business will depend on market demands, technology and sadly enough company culture (as many Saas businesses still have enterprise habits).
Software companies are no accident. They work together to produce a whole that is very profitable, even though it may not be the best for their customers.
The preceding paradigm is a self-reinforcing business model that will naturally evolve towards this equilibrium. It’s incredibly difficult to break out of it because there are economic and cultural aspects involved in breaking the balance, which makes up for an efficient cost structure.
A business that operates on a subscription-based pricing model, has simple products and offers the best customer experience possible is more likely to be successful. A company should not focus too much of its attention on sales but instead offer customers an automated service they can rely upon.
Cost Structure Vision
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