Henry Ford once said: “Any customer can have a car painted any color that he wants so long as it is black.”
The Age Old Argument of Standardization vs. Customization
Standardization is often thought to be fundamental to the SaaS business model which owes its cost advantage to a scalable, single-instance, multi-tenant design. The theory goes that you need to find a problem that is common to as many customers as possible, ideally a mass market, and develop a uniform solution which solves that problem for all customers, equally. So, if your target customer base is a small group of enterprise customers with highly-specific requirements then SaaS is not for you – you will forego the economies of scale associated with a standardized product and your margins will be eaten up by needy, control freak customers who require customized implementations and personalized in-life support.
Nonetheless, the ideal of complete standardization in SaaS is somewhat unrealistic. Customers have unique requirements, and it is too easy to say that it is only large enterprises that have these requirements and that large enterprise isn’t your target market. In reality, custom requirements develop at the very early stages in even the smallest of businesses, owing to the infinite number of variables that determine how each business operates. One size doesn’t really fit all. So how can a SaaS vendor bridge the gap between standardization and customization and give their customers a solution that works for their business? Also, what are the implications of doing so and is it sustainable?
An early example of how SaaS could be tailored to a specific customer’s need was NetSuite’s announcement of its SuiteFlow offering in 2010. The SuiteFlow platform brought easy, drag and drop customization to end users of its ERP system. The logic behind NetSuite’s decision to offer customization is sound, in that ERP is a function which is inherently unique to each organization and NetSuite would inevitably face a decision to either go down the risky path of custom implementations which increased TCO for customers or to empower the end user to customize the platform easily to their specific needs. It is essentially a democratization of a once centrally-planned process that hands over ownership of the product to the day-to-day users on the ground.
Another good example of how this can be achieved is Wrike’s project management platform. Late last year, Wrike released its “dynamic platform” which brought deep customization to its project management tools. CEO Andrew Filev explained how not only individual customers but different teams within a customer’s organisation would have very different expectations of a project management tool like Wrike. With that in mind, the team at Wrike spent almost a year developing its dynamic offering that allows end users to easily add fields and create custom workflows to meet its unique requirements. Much like NetSuite, Wrike has pushed what could have become a costly, time-consuming, consultative implementation process right down the value chain to the end user who is best placed to design the product to their own specifications.
So what are the implications for your SaaS business? Well, the first point to note is that the various SaaS verticals differ in the degree to which they should customise their offering. To a certain extent, storage, email, conferencing, and messaging providers solve problems which are common to a large majority of businesses. Providers of ERP, CRM, project management, HR, and marketing solutions, on the other hand, aim to assist in more complex business processes that are by their nature more unique to each customer. Secondly, the customisation permitted must in itself be standardised in so far as possible. This may seem like a contradiction in terms but customisation can’t be allowed to grow legs and get out of control. Think of it in terms of different colours or flavours of the same basic offering – there must be defined parameters.
It is also vital that custom configuration is made as easy-to-use as possible and enables self-service amongst end users. Assuming this can be achieved, the next problem arises when it comes to in-life support and customer success – we can all imagine the technical support call with a customer using an instance of our product with deep customisation of which the support agent has no view and how costly these calls might potentially become. Therefore, it is vital that your end users customisation is based on an underlying standard and that it is remotely visible to your support functions. The advantage, of course, comes from the fact that customers who recognise that your SaaS offering is tailored to meet their individual requirements will be far stickier and you have an opportunity offset the CAC of a higher-touch on-boarding process by maximizing the long-term value of that customer relationship. Like in all things, then, when it comes to standardization vs. customisation, balance is key.
by Michael Cullen @michaelcullen87