Bessemer's Top 10 Laws for Being "SaaS-y"
By Byron Deeter, Bessemer Venture Partners
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6. One datacenter - Invest early in backup and disaster recovery, but stick to one data center, at least until well after IPO.
SaaS companies have this debate all the time, and yet the recent data is pretty clear: most SaaS companies can get by with a single datacenter in North America until well past their IPO. In fact, Salesforce.com is approaching $1 billion in revenue and just recently announced plans for additional datacenters.
Data centers are extremely expensive and create significant organizational complexity on every level. Many of the historical issues around data backup, disaster recovery, and global application latency that caused companies to add a second datacenter can also now be better addressed in other ways.
7. Single instance, multi-tenant - Have only one version of the code in production. Really. "Just say no" to on-premise deployments.
This is a guiding architectural principle for best-of-breed SaaS companies. The notion of a multi-instance, single tenant situation only applies to legacy software companies moving to a dedicated hosting model because they don't have the luxury of an architectural re-design. It is possible to use virtualization to provide multiple instances, but this hybrid strategy is very inferior for the organization. If designing a SaaS product out of the gate, the best situation is single instance, multi-tenant. It is a hard and fast law that shouldn't be debated. Any CTO who thinks otherwise (for a conventional use-case) should be fired.
8. By definition, your sales prospects are online - Savvy online marketing is a core competence (sometimes the only one) of every successful SaaS business.
You sell a product that requires an internet connection and a web browser for access, which means your prospects are online! Numerous studies show that your customers are now doing most of their primary research online. You should therefore be aggressive in marketing to them online.
This is a clear example where business-to-business (B2B) marketers need to learn from their business-to-consumer (B2C) counterparts. The most innovative B2C companies are lead generation machines, leveraging search engine optimization (SEO), viral marketing, and other technically-advanced methods. Yet many B2B companies don't have a clue.
The incumbent technology leaders like IBM, Oracle, or SAP, have done very little with regard to marketing automation, search engine optimization, search engine marketing, email marketing, or viral marketing. Private SaaS companies have so many disadvantages against the larger incumbent vendors that it is imperative for them to exploit this potential advantage. Whether they use an automated product like Eloqua (as is the case with almost a dozen of our companies) or a team of marketing analysts and spreadsheets, online marketing is simply a must for SaaS companies.
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