COVID19 + The “Consumerization” of SaaS
As the COVID19 pandemic spreads around the world, millions of workers are adjusting to the new reality of working remotely. My conversations with entrepreneurs and investors alike are making it clear that this epidemic will accelerate the broader trend of enterprises moving towards remote and distributed work. As such, tools like Zoom and Slack that empower these teams are rising in prominence and will only continue to do so. What is more interesting, however, is what I’m learning about how this epidemic will change the very nature of enterprise software going forward: how it is designed, how it is sold, and the metrics used to evaluate its success.
In what ways will enterprise software become “consumerized”?
- As our primary interactions with the outside world happen digitally, enterprise software products of the future will start to adopt more social features, including chat, video, user profiles, and “timelines.” Outside of collaborating through tools like Slack and Microsoft Teams, we will use whatever our core workflow tools are to communicate and work with colleagues, customer success teams and other key stakeholders.
- We now have a more direct side-by-side comparison between the consumer products/experiences we use in our homes and the typically clunky tools we use in the workplace. Additionally, we no longer have support on-premises to help us when we encounter issues. As a result, we will surely see enterprise software tools become more intuitive and user-friendly.
- The go-to-market motion in enterprise software has historically been very top-down with a purchase decision made by an executive (CISO, CTO, CFO, etc.) and the tool then deployed on a corporate network or individual endpoints. However, this new paradigm of distributed teams will demand tools that are self-serve and have a bottoms-up go-to-market motion.
What are the implications?
- Even in categories like IT infrastructure and security that have historically had the most top-down sales motions, we will start to see more self-serve and developer-facing products. This buyer-user alignment will shift the focus of new companies towards building products that are delightful as opposed to inside sales strategies that are most effective. Longer term, we will start to see the best products win out as opposed to the companies with the best go-to-market strategies. We might even see enterprise software categories more closely resembling the consumer world, with “winner-take-most” dynamics and bigger winners overall.
- Pricing will become more granular (metered pricing per API call, per user per month) and thus enterprises will be paying for actual value as opposed to the often opaque pricing schemes that are employed today.
- The metrics VCs use to evaluate enterprise software businesses at the early stage will be increasingly “consumery” in nature. Metrics like DAU, MAU and corresponding ratios will give us a better sense of user engagement and love. As adoption and pricing becomes more granular in nature, cohort retention of both free and paid users will be more meaningful at the early stages. We will look at metrics like K-factor to better understand how bottoms-up adoption is working and whether there is the type of fast viral growth that we look for in consumer opportunities.
At net, the move towards remote and distributed teams and its corresponding impact on enterprise software is going to be a positive one. My current conversations with entrepreneurs building SaaS companies are promising and show a heightened focus on capital efficient customer acquisition through product excellence. Hopefully, the future tools that make us more productive at work are intuitive and delightful in the same way our favorite consumer products are.