The good folks at Gartner shocked me recently when they reported that SaaS was eating a larger hole in enterprise budgets, now accounting for about $4.2B in spending, and growing at a 22.3% clip.

Many folks, myself included, predicted some enterprise SaaS uptake, mainly filling in areas where IT was backlogged or where renting services was faster and cheaper than implementing something behind the firewall.  By this criteria, any SaaS offering that supported:

• Smaller groups of people — not enterprise wide
• In distributed areas
• Where collaboration was required

Would be a hit.  Sure enough Gartner observed “SaaS adoption is highest in applications that support simplified,
common business processes or large, distributed virtual workforce
teams.”  This explain how SalesForce.com can attract enterprises — CRM is not a universal, corporate-wide function.  But people who need access to CRM data are far-flung, especially sales folk who know the desk clerk at the Butte Holiday Inn better than they know their own wives ( what happens in Butte stays in Butte … thankfully ).

Most interesting in Gartner’s blurb was this little gem:

“Ease of use, rapid deployment, limited upfront investment in capital
and staffing, plus a reduction in software management responsibility
all make SaaS a desirable alternative to many on-premises solutions,
and they will continue to act as drivers of growth.”

If you want to find a market to exploit, examine it from the customer pain-and-dread perspective first.  Has enterprise software traditionally been difficult to use (often), slow to deploy (always), capital intensive (typically), and costly to maintain (yep)?  No wonder SasS is finding traction — it eliminates the primary disgruntling elements.

Oddly, Circuit City and CarMax are good examples of how this marketing principle works.  When Circuit City evolved out of an outfit named WARDS ( and not Montgomery Wards I’ll add ), they decided to look at the consumer electronics retail industry, and asked people what they hated about it.  What people disliked was small selection, lack of sales support, poor customer service, high prices.  Circuit City engineered all of that out of their offering.  This is why Circuit City grew so rapidly throughout the 1980’s — because people liked shopping there.  And yes, Circuit City sells a lot of TVs.

CarMax, a company conceived and born from Circuit City, did the exact same thing — surprise.  They asked people what they hated about buying a used car, and the people noted small inventories, slimy and pushy sales people, haggling, no warranties for “lot lemons”, etc. CarMax engineered all of this out of their business model, providing huge lots, hundreds of cars, pre-inspections and warranties, etc.  And yes, they sell a lot of cars.

Anyone marketing high-tech should start with the approach, because high-tech is especially prone to navel-gazing product introspection.  High tech also tends to focus on the feature/benefit side of product creation and not customer experience deficit reduction.  Enterprise traction for SaaS is almost an accidental byproduct of serving the needs of the masses who reflect and articulate pain better than Global 2000 organizations.  For all the marketing mavens in the audience, the take-aways are these:

• Survey broadly
• Ask what people hate in open-ended fashion
• Deep interview to discover “why” they are unsatisfied
• First eliminate your corporate procedures that create customer unhappiness
• Design products with pain reduction in mind

This is why SalesForce.com, WebEx, and other SaaS players are the CarMax’s of the high tech world.