Data as Part of Your SaaS Revenue

The Software as a Service (SaaS) business model provides another revenue opportunity beyond customers paying for your service and that is providing information from the aggregate data provided your customers. The first and most important aspect of this approach is to be straight forward with your customers that this is a part of your service and being very clear about what data is used and in what circumstances. This should be part of the service agreement. In no way am I suggesting using customer data without their knowledge and permission.

The traffic overlay option with Google maps is an excellent example that everyone can understand. Currently Google does not charge for that data and it isn’t clear that they will, but they certainly could. Real-time traffic information has great value. The way the service works is that GPS information is sent to Google from everyone who is using Google Maps on their mobile device. For anyone on the highway the changes in the GPS location approximates the speed and if you have enough people providing this information you have an excellent picture of the speed of traffic on a certain highway in real-time. No individual user minds agreeing to provide this information since it is only used in the aggregate.

Your business SaaS application may have similar information. Think about what metrics the transaction information in your application provides. Does it provide time-frame, size, cost, performance or other potentially valuable information? Some of the best examples come from supply chain applications and many of these providers make use of that information. Freight costs, freight on-time performance and actual commodity prices paid are all examples of information that can be difficult to get, changes regularly, and is of great interest to purchasing and logistic staff.

In some cases the information may not be sufficiently valuable to sell as a separate service or customers may be unwilling to let you use the data. In those cases providing the information as part of your service, or as a value-added service only to your customers, or just providing this information only to the customer that provides it may have significant value. I use Constant Contact’s service for my email newsletter and part of their service shows my open rate and click-through rate compared to industry averages. Although I would be unlikely to pay for this information it is a valuable part of their service. I certainly do not feel that using my own open and click-through information in the aggregate is a problem.

There are a variety of ways that data use can be structured as part of your service. In many cases the customer could opt-in or out of allowing the use of their data. The Constant Contact example above could be set up that way. The most straightforward of these cases is if they opt-in they get to use the aggregate data and see where they compare. For example, if you allow the use of your commodity pricing you can see how the pricing you are getting compares to the average, median, highest and lowest prices.

The key is to think about what data you have from your customers that is valuable to most customers in the aggregate and what you can do to increase the value. Additional outside data that you buy and add to the data set from your customers may be a possibility or providing specific analytical services may provide additional value. With the addition of “big data” tools the possibilities for looking for value are increasing since larger data sets can now be analyzed.

To pursue these opportunities you need to have this possibility in mind very early in the service life-cycle so that customers understand it and the contracts reflect this possibility. Your customers also have to trust you to only use the data in ways they have agreed to. Done carefully this approach can add value and revenue to your service offerings and it is worth thinking this through for your SaaS services.

Paul

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