On Target: The #CloudSummit and the State of SMB SaaS
January 11, 2018 | Contributed by: Charles Laughlin
Do small businesses really want all in one solutions for their small business apps? Or is this concept more for the benefit of SMB sellers looking to boost margins and reduce churn?
Will AI/machine learning be the catalysts for development of a self-service sales platform that small businesses will actually use.
Are Internet service providers like Comcast going to be big players in the SMB SaaS marketplace?
In the latest Local Search Association On Target podcast, I was joined by veteran industry analysts Greg Sterling and Neal Polachek to tackle these and other topics in a free ranging discussion on the state of the small business SaaS world. The conversation was framed around themes emerging from the LSA’s recent SMB Cloud Adoption Summit in San Francisco.
Leading off the pod, I observed that many players at the summit, including ReachLocal and GoDaddy, articulated some version of the all in one solution, combining various business apps into a single dashboard, as part of their product vision. I noted the most recent wave of LSA’s Tech Adoption Index data shows about 55 percent of SMBs prefer something that aggregates SMB apps into a single solution. My sense was this figure represents “tepid” support for all in one solutions among SMBs.
Polachek noted that companies are driven to this aggregation model by the need for better churn metrics, while Sterling said all in one can only succeeds if a certain “quality threshold” has been achieved. At the beginning of the event, we showed a short video featuring interviews with a handful of SMBs, two of which articulated the view that they prefer choosing “best of breed” solutions on their own over settling for “least common denominator” technology in exchanges for convenience and bundled pricing advantages.
On the pod, Sterling echoed this view that bundles offering just good enough quality won’t succeed. Small businesses are too smart and demanding to tolerate this, as the video demonstrates, at least anecdotally.
“You have to cross a certain threshold of quality or functionality,” he said. “Lots of folks out there think they can throw together a bunch of tools and because of convenience or inertia they will get adoption. I don’t think that’s true.”
Polachek argued that trying to build a complete all in one solution that does everything from payments to payroll is too difficult a task. However companies will succeed by bringing to market packages that combine naturally adjacent solutions.
“Then you start to get the kind of retention economics that you need to drive a successful SaaS platform,” Polachek said.
Economics are also driving companies to seek some kind of automated guided selling platform. Specifically, GoDaddy’s Irana Wasti shared this vision during an on stage interview with Sterling.
Wasti, discussing how GoDaddy is trying to offer more to SMBs than the basics of domain, website and email, said that the long-term answer is a guided selling platform that “takes the guesswork out of the decision process for small businesses.”
Polachek argued on the pod that the guided selling vision will happen because it has to happen. Companies need to drive to the lowest possible cost of customer acquisition in order to grow. Polachek articulated a vision where customers are acquired or at least qualified via an automated process, and then driven to higher retention and lifetime value using live and automated customer service.
“It used to be when you got a sale, that was the ‘close’. I have a view that when you get the sale, that’s now the ‘open’,” Polachek said.
Much more ground was covered in this lively 30-plus minute discussion. The pod also dove into which companies will succeed in the SMB SaaS world, with Polachek making an argument that our “consumer lens” blinds many of us to seeing how well positioned connectivity companies like Comcast are to become leading providers of small-businesses cloud tools.