I’ve written extensively about user experience characteristics that define a successful and profitable SaaS application. I’ve talked about performance, connectedness, conceptual models, monitoring, on-boarding and the essential requirement to design for the complete customer life cycle.
I’d even argue that the user experience of a SaaS application can be more important to its ultimate profitability then the features provided by the core application. Because the SaaS business model relies on service subscriptions (which are perishable!), continued customer retention is essential for profitability. Continued customer retention depends on user experience.
This is in contrast to traditional on-premise software. With on-premise software, profitability is defined by the intellectual property of the code and the value that it can command on a per-seat license. The vendor’s goal is to sell as many licensed copies as possible. The list of features is what makes the sale. Once the software is sold, the revenue is recognized. Retention or even long-term use or user satisfaction, is not the primary focus (the 10%-20% maintenance fees traditionally charged by big enterprise on-premise software vendors does not change this focus).
With SaaS, value is defined by the user experience that leads to customer retention and a predictable recurring revenue stream.The engagement process (sign-up, provisioning, social networking), the ease of use, the timed/frequent updates, a focus on high value scenarios, user monitoring, agile pricing, etc. are what engenders sign-ups and retention (i.e. the recurring revenue stream for the application). Modular, reusable UI and mutli-tenant design enable scalability without linearly increasing costs.
This radically alters what defines successful application design. In on-premise software, the sale of the application license defines the value. With SaaS, a scalable user experience around the entire customer life cycle defines the value.