In a classic blogger’s example of “I wish I’d written that,” here is a great piece by David Skok on metrics for running your SaaS business with a focus on information that is meaningful and useful:

Metrics for metric’s sake are not very useful. Instead the goal is to provide a detailed look at what management must focus on to drive a successful SaaS business. For each metric, we will also look at what is actionable.

The piece also includes some guidelines. Did you know, for example, that the lifetime value of a customer should ideally be greater than three times the cost to acquire that customer and that you should aim to recoup the cost of acquiring that customer in less than a year?

Skok’s article is a crash course in SaaS economics. If you’re serious about a SaaS business, read the whole thing.

SaaS organizational success is the latest chapter in the story of flatter, faster organizations in mainstream American business.

Delivering software as a service is much more than a technological challenge. It is, fundamentally, an organizational challenge and its lifeblood is coordinating business activities at a scale and cost efficiency that packaged product can’t touch.

Case in point: When I made my first foray into SaaS in 2002, the principal problem I was solving wasn’t a technical problem, but a business problem:

• How can a small company that can’t afford to build traditional sales channels possibly compete with a larger competitor with the resources to put boxes on store shelves?
• How can we afford to shorten our product cycles and accelerate our pace of innovation when upgrading customer installations is patchy and error-prone?
• How can we keep the cost of development and support down and provide high reliability regardless of customer hardware and operating system?

We answered these questions with SaaS. I didn’t think we were forging a revolution in software at the time; we were just trying to deliver value to the customer within the resources we had available.

I had one advantage at the time that played well to the strengths of SaaS, though it took some time to recognize that: Our relatively small team size meant that the communications burden across company functions was quite low. We could literally make interlocking strategy, marketing, sales, product, and technology decisions within hours and implement them within days.

When taking an existing application to the SaaS delivery model, one with an established customer base and company sales and marketing apparatus, I find that making these interlocking decisions quickly and effectively is probably the most important hurdle that you face, and the key area to pay attention to if you want your SaaS products to succeed. 

When the company needs to succeed in SaaS product delivery, I make it my priority to break down communications barriers and build teamwork and cooperation. 

Of course, setting teamwork as a goal and achieving its benefits are two different things. To know when we’ve achieved our goals, we need metrics. Here are some of the areas of measurement you should thinking about if you want to know whether your efforts are bearing fruit:

• Trial Provisioning Speed
  How long does it take, in minutes and seconds, from the time when a prospect requests a trial to the time when their trial is ready?
• Customer Provisioning Speed
  How long does it take, in minutes and seconds, from the time when a customer purchases to the time when they are online and able to use the offering?
• Content Management Speed
  How long does it take for changes to the web application content or the surrounding marketing web content to be edited, reviewed, approved, and published? Does it take a full product release to change some of the content?
• Value Creation Speed
  How many times each year can your team deliver new features, improvements, optimizations, and enhancements?
• Deployment Speed
  How quickly can you deploy your application once a complete installation package is ready?
• Customer Support Speed
  How long does it take for a simple customer support request to be answered and closed? How long does it take for a complex request?

These are the first things to examine because speed is a key part of the service that software as a service brings.

SaaS is about reducing and removing the cost and friction involved in conceiving, designing, building, deploying, evaluating, buying and using great software.

When you’re doing SaaS right, you’re going faster.