SMB’s, SaaS, and a Tough Economy

I was recently asked “How Valuable do you think Software-as-a-Service (SaaS) products are to Smalll-to-medium Businesses (SMB) in a tough economy?”  The answer is simple – If you are an SMB, SaaS could save your company during an economic downturn, and position you to dominate when the economy recovers.

Wise investments in technology will always help position a company to be a leader in their industry. Technology creates efficiencies and lowers costs, allowing the SMB to win more business.  In tough economic times, this basic premise doesn’t change, but a large capitol expenditure and a multi-year ROI for your technology investment does become much harder to justify.

On the other hand, a small monthly investment in a SaaS solution can give you nearly instant ROI, with no up-front costs.  You receive the same efficiencies and the technical edge over your competition, but you are rewarded for the investment in 1 month, instead of 3 years.  This can be the difference between laying off valuable employees and growing your business in a tough economy.

Just about any type of software solution is available as a SaaS application.  You can streamline your Sales Order process with e-Commerce or EDI, speed up your warehouse with a Warehouse Management System, or optimize your shipping with a TMS.

Let’s say you have acquired a SaaS solution.  You have used the slowdown in your business to your advantage and are using the “down” time to train your employees to use your new solution.  Your company is benefiting from the advantages it brings.  Perhaps you are even seeing a little growth as your new technology helps you win some business from your competitors.  The economy doesn’t seem quite so bad. You are starting to thrive where others are struggling.  

Your competitors now have a choice on their hands.  Both the economy and your new efficiencies are killing them. Most will blame the economy and try to ride it out.  They will turtle up and cut costs.  Sales and marketing are usually the first to go.  This has always seemed short sighted to me, but it will be great for you.  Some of your competitors will also go looking for technology.  With a bit of luck, they will not be as smart as you.  They will be scared of this new SaaS concept, and they will go the traditional path.  They will spend their money on a big up-front software purchase, further impacting their cash flow, and probably forcing them to raise their prices or cut additional costs to recover from the purchase.  Creating an even weaker position for themselves in the marketplace.

Now the economy starts to turn.  Things are looking up.  Customers are increasing their orders, they are looking to spend more money.  Your competitors are scrambling to gear back up, to come out of the defensive position they maintained throughout the downturn.  They demolished sales and marketing, keeping only the core people necessary to survive.  Now they have to rebuild.  You on the other hand, stayed on the offensive.  You have all the pieces in place to take care of the customer, even better than you could before the economic downturn.  Your company will capitalize on this strength and rise to the top.  Now you have a position of dominance in the market, and quite possibly the competition will never be the same.

Kevin Reynolds