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The Growing Bond Between Product Management and Successful SaaS Companies

by Nicolas Costa, Koombea / April 1, 2016

Note: This blog entry is available in English only.

 

Product management and SaaS

SaaS is quickly becoming the new tech giant, and it is only getting bigger. Here is a snapshot of the industry growth.

  • In 2010, sales in the –software as a service — business hit the high mark of $10 billion in revenue.
  • 2013 saw that sales number increase to almost $23 billion.
  • In 2015, the SaaS industry closed out at around $49 billion (beating earlier estimates).
  • Right now, the estimates for 2018 show that SaaS products could hit $67 billion by 2018.

As any industry grows, it inevitably becomes more complex. Many companies that began with a single successful solution have found more opportunities in a similar category. There are still new startups being formed at a staggering rate. The number of companies looking to add/improve products and grow revenue is growing almost as quickly. Not to mention, the number of previous SaaS founders looking to start a new product in a different industry.

The added number of products being introduced into the market have prompted many in the SaaS game to improve upon their product management.

The Necessity of a Process

Both “old” and new SaaS providers are feeling pressure to create quality software and introduce them to the market quickly, which is creating a growing need for product management.

Software Product Management: The process of managing software that is built and implemented as a product, taking into account life-cycle considerations and generally with a wide audience. (Wikipedia)

Essentially, it’s every step of a new product from pre-conception to completion. Product management has always been a part of the software industry, but now it’s becoming a larger part of the SaaS world.

The efficiency and speed at which your company releases and improves a new SaaS can have lasting implications on its overall success. Everyone does it differently, but it usually ends up looking similar to the image below.

SaaS product management

Why Is It Important?

Programming and software creation still have a stigma of being developed by a few students in a dorm room in between shots of cheap liquor. While many of the companies started questionably, they have “grown up” to be some of the largest businesses in the world.

The SaaS market seems to have a similar path as the early days of software. Many products may have had interesting and small starts, but have become giants.

Example: It’s hard to doubt the success of Slack. Breaking $10 million in revenue within a year and growing incredibly fast (more on that in a minute). Although, the company started out trying to create an online game (which failed), and had to beg it’s first users to give it a shot.

The speed at which a company grows is largely due to the process that it uses to develop and improve its product(s). Although, just wanting to be better isn’t the only reason for the growing bond to product management.

The Need for Sales and Growth

For the bond to be easily understood, the motivation has to be found. SaaS companies that are heavily product management driven usually (but not always) boils down into two categories. Funded startups (early rounds of funding) and existing SaaS or enterprise application companies. The need for a better-managed process is different for both.

Funded Startups

If you have a valuable preliminary working version of your product or are the founder of another successful product, seed funding VC’s will stand up and take notice. The SaaS market is of particular interest for current and coming investors. However, taking funds in exchange for ownership produces a need for performance and speed.

This demand for return has created some of the best development practices that have ever been used. We will go back to our original example.

Example (continued): Slack has received two rounds of funding since its creation in 2014. After getting a total of $280 million, the company has a valuation of $2.8 billion. The need for new products and improvements/additions to the original productivity software will now always be necessary.  To meet these needs, the Slack team is constantly evaluating and gauging how clients interact with the software. The company has also purchased other companies to integrate with their product.

Interesting: Slack pulled in around 10% of their overall funding in revenue for 2015.

Existing SaaS

With any existing company, growth has to be a focus. Whether that means growing a current product by introducing new features, or creating a whole new product the need to improve and increase is always there.

The motivation here could still be investors, but more likely the thing keeping existing SaaS CEOs up at night is competition. It’s important to note that depending on your niche, growth rate, and other factors, competition could be a minimal concern. It is something to keep in mind if your product serves a volatile and finicky customer, or if it is easy to replicate.

If you do have competition concerns, a product management plan will help you stay current and keep your customers happy (lowering your churn rate).

The Other Side of the Coin

The SaaS model has broken into the mainstream of the software world and (as we’ve discussed) will need to further embrace product management. Since developing a SaaS is different, the process itself has become different in several ways to further bond with this relatively new industry.

Here are a few of the ways traditional product management is different for SaaS:

Faster Releases: Developing new features or updating products that are continuous requires constant development and an incredible level of organization for serial releases and smaller iterations.

Complex Levels: Many SaaS products have multiple levels from free to premium. Since all of these levels have very similar coding, it creates a new subset of opportunities and needs.

Feedback: Since there is no definitive end to your initial program, there is no “down time” for you to develop an entirely new program. Customer feedback needs to be constant instead of incremental, and evaluation of data needs to be continuous as well.

Creating a Better Bond with Product Management

With the market growing rapidly, your products need to be introduced or improved upon faster than ever. Having a better product management system will help, but only as much as the experience and skill of the team implementing it.

The good news is that our new era of SaaS has begun to forge excellent candidates to meet the needs of the future. There are now more quality outsourcing options and consultants than ever before to help further improve the speed and quality of products. With an experienced team and better development systems like Agile and Scrum, software iterations are being released quickly to the market with incredible quality.

Is your SaaS using product management? We would love to help you succeed, Koombea has put together one of the best teams for SaaS solutions.

We have worked with large enterprise clients like Samsung and Aetna as well as early stage startups.

or send us an email at mvp@koombea.com if you have any idea you want to check with our experts.

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