Is it possible to win as a customer of SaaS?

A case for why it’s critical to own your software systems

In the 3rd Quarter of 2017, Venture Capitalists invested $7.8 BILLION into Internet companies making it the largest concentration of venture capital by sector. For past 10+ years, the Internet sector has dominated venture capital investments and shows little sign of slowing.

Why does this matter to you?

Because every one of those investments has been made with the expectation of those dollars being worth more in the future.

Investors dumped $7.8 BILLION into Internet companies in 3 months in 2017 (source)

Many of these internet companies operate subscription-based services to provide for every possible need. The concept of Software-as-a-Service is taking the world by storm.

It sounds great on the surface. Pay a small amount of money to rent a software system that solves a portion of your businesses needs and stop paying when it’s no longer required.

SaaS is a bite-sized way to access the results of this invested capital. Build a business by piecing together different software systems, the barrier to entry has never been lower. We can all be business owners by the good graces of the software owners we pay. Everybody wins.

But can that really be true?

In the real world, it’s not likely you are going to find yourself as the customer of a Software-As-A-Service system without already having spent years building your business. In that time, you’ve figured out how to make things work, you have your own rules, and your own way of getting things done that gives your business its own unique feel.

And each time you use one of these services, you hand some of the control of your business to a third party who will rent it back to you indefinitely. What appears great makes sense only for short-term experiments before the cost of renting exceeds the cost of building your own smaller software system to fit your specific needs.

Your choice to use software you don’t own to help run your business means one thing:

By choosing to use a software system instead of choosing to build one, you give up some of your ability to compete in the 21st century world.

Think about it this way. If I own a software system that helps dentists schedule appointments and I have 2,000 dentists all entering their appointments and I’ve spent years addressing help-desk tickets to serve every possible need, who is going to be better equipped to run a dentist’s office?

What happens when my investors demand a return on their investment that I can’t meet with subscription services? Is it a stretch to think that I will start opening my own dentist offices, hiring freshly graduated dentists who are drowning in school loan debt?

When another company owns and controls the points where your customers interact with your business, that company owns your customers and holds more power over you than you realize.

Building custom software systems to serve customers at scale is expensive. It takes millions of dollars and a full-time dedicated software team.

Building a product to serve the needs of just your business is far more affordable when aligned against what you give up by choosing to work with the wrong software-as-a-service systems.

Any system that interacts with your customers should be owned and controlled fully by the business owner; even when there are “better” systems and platforms for small monthly fee.

Software is required for all modern business. Be strategic with your choices. Beware services that can one day turn against you.

Nick Hance owns and operates Reenhanced, a software company dedicated to maintaining its customer’s digital independence.