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There seems to be increasing momentum for companies to be formed around Software as a Service delivered in a self-service manner.

I think this is the future for the following reasons:

  1. More profits. With little or no sales staff, it’s more profitable to deliver software this way.
  2. Less risk. Without having to hire a sales staff, there is less risk of the market changing and you being stuck with an expensive, hard to manage sales force.
  3. Shorter sales cycle.  Just about anyone can type in their information and sign up for your product if you’re charging under $100/mo for the basic service.  Anything that involves a salesperson is going to end up costing a company at least $1000/mo, and that means a whole long drawn out multi-month sales process.
  4. Reduced competitive threat.  If you’re a company delivering a $1000/mo solution to an enterprise, and a competitor introduces a substitute product at $100/mo, if the switching costs aren’t too high, you could lose them. Basically, expensive enterprise SaaS products are subject to “innovator’s dilemma” type attacks, particularly if switching costs are low.
  5. More learning.  As a self-service SaaS, you’re likely to have more customers, which allows you to learn more from them and allows you to grow you business more quickly and profitably.
  6. Easier to implement.  The commodity LAMP stack in software engineering is migrating up-market and the tools necessary  to implement and run a SaaS model have become much cheaper than they used to be.  A great example is payments processing – just a few years ago, there were no recurring payments processing/management companies, and it was a nightmare to manage recurring credit card payments.  That has all changed with companies like Recurly entering the space.