One, SaaS has infinite beauty but there are bones everywhere
In China, there is a rather weird phenomenon, the SaaS industry is only on the surface. According to the latest data from Chinasoft.com, the overall scale of China's SaaS market in 2019 was 37.85 billion yuan (approximately US$5.49 billion), a year-on-year increase of 42%, much higher than the global SaaS market's 18.8% growth rate, and future development is good.
Since the beginning of this year, SaaS concept stocks have risen across the board, and listed companies are thriving. Since the beginning of the year, the domestic SaaS service provider Weimob has increased by 262.22% and its market value has exceeded 29.1 billion Hong Kong dollars; while another SaaS service provider Youzan also has a cumulative increase of 206% during the year, and its market value has exceeded 26.3 billion Hong Kong dollars.
China's SaaS market size
(unit: 100 million yuan)
Data source: China Software Industry Association Application Software Product Cloud Service Branch, Haibi Research
But the reality is that a large number of SaaS companies are still trapped in the swamp, unable to even break even. Quoting a quote from Jiang Yi, Managing Director of Hengye Capital, “We noticed that 50% of SaaS products are now on the market, which proves to be completely off the track. Only less than 10% of SaaS products can break even. %, even 1%, 2% of products can correspond to corporate customers and have a significant impact on effectiveness."
And this Yunmeng, which was established on August 25, 2013, experienced 5 years of losses, and suddenly turned losses into profits in 2018. What is even more surprising is that the following year, in 2019, the revenue exceeded 100 million, the profit was 10 million, and the current valuation exceeded 500 million. In the five years of loss, what adjustment has reversed this situation? This entrepreneur Jiang Xiaopeng, who graduated from Beijing Institute of Technology in 2003, told us: "The secret lies in C."
Second, choosing the right path is just the beginning
In 2013, Jiang Xiaopeng decided to leave his position at Ali P9 to become a pure cloud SaaS company. What is a pure cloud SaaS company? This means that a SaaS company must firmly abandon the idea of developing its own IaaS&PaaS (the underlying technology of SaaS deployment), and encapsulate its SaaS application on the public cloud, that is, deploy it on a large cloud computing factory led by Alibaba Cloud.
Even today when cloud computing has been widely recognized, it is still a courageous decision to do so. According to the latest statistics from Chinasoft.com, SaaS accounts for a relatively low proportion of China's public cloud market, about 38.9%; while SaaS accounts for 62.61% of the global public cloud market. This sends a signal that, compared to foreign countries, most Chinese companies favor traditional deployments.
China's public cloud market structure
Source: China Software Industry Association Application Software Product Cloud Service Branch, Haibi Research
7 years ago, this was a major event that shocked the field of technology. "Even if cloud computing was criticized at the time, I firmly believe that this is the future direction." The mature development of SaaS depends on the emergence of such a large number of pure cloud SaaS companies, but the opposite of the matter is the abnormal development of China's SaaS industry. The real status quo.
Most enterprises are still hesitating whether traditional deployment (private deployment) or cloudification, and refuse to cooperate with IaaS&PaaS platform or give up cooperation with IaaS&PaaS platform because of the trouble of migration. When I searched for SaaS deployment issues on Baidu, a lot of bad public cloud deployments advocated privatization and hybrid cloud.
According to statistics from Haibi Research, in terms of application deployment methods, in 2020, enterprises will mainly install on the local deployment of their company's server and the public cloud represented by SaaS, accounting for 46.3% and 41.9% respectively. Among them, 46.3% of the companies rejected the conservative approach of cloudification and refused to cooperate with the platform layer, making SaaS, a lightweight software development and entrepreneurial project in the cloud computing field, abruptly turned into a traditional old school, high-cost entrepreneurial project .
Judging from the data we have learned in the industry, for example, Fancor is self-built IaaS&PaaS, and the annual expenditure on servers alone is millions of dollars. Finally, SaaS services have not improved, and they can only rely on other businesses. Such as marketing and other services to achieve profitability.
A more abnormal development is that SaaS companies that reject cloudification must persuade customers to order a pure cloud tool and let small and medium-sized enterprises deploy this set of tools in other people's homes, that is, IaaS&PaaS of SaaS companies. This really sounds like a joke, but it is also a norm for Chinese SaaS companies.
It directly leads to the high cost of SaaS tools and the inability to achieve large-scale profitability. I have no choice but to return to the old road of traditional customization, and the competitors are also super-large groups such as Chinasoft and Neusoft. The track is off track and the market is cracked. What about profit?
Jiang Xiaopeng told us that abandoning platform-level development, relying on Alibaba Cloud's ECS cluster (cloud server), cloud storage, and cloud load balancing, etc., save at least 2 million hardware costs (servers, cabinets, etc.) each year, and 10 people for operation and maintenance. Around 1.8 million.
In addition to cost savings, the team focused on the application layer, which also accelerated the iteration of SaaS. In 18 years, Yunmeng has iterated out a SaaS website building tool (version 4.0) that is satisfactory to the market. For all SaaS companies, only by accelerating cloudification can they truly reduce their costs and increase efficiency.
3. Bold revolution can reverse losses
What do you need to experience to become the top profitable company in the SaaS market?
In countless SaaS entrepreneurial roads, he chose an extremely vertical segment: SaaS+ website construction, which is the focus of his personal feelings in his past experience. But it is also a conclusion that SaaS is launched by effect and cause. The key to SaaS entrepreneurship is to do a good job in an extremely vertical segmentation field.
01. Change the way of acquiring customers, SaaS business must be e-commerce
Ministry of Industry and Information Technology Minister Miao Wei stated that as of the end of 2018, “the number of small and medium-sized enterprises in China has exceeded 30 million, and the number of individual industrial and commercial households has exceeded 70 million.” In the face of such a large amount of demand, where to find small and medium-sized enterprises has always been SaaS. Business problems.
Shop channels? Strengthen the sales team? Jiang Xiaopeng tried all of them, but the massive manpower cost made him unable to make ends meet. Until 2018, he completely handed over the product to Alibaba Cloud agents and quickly became e-commerce in the Alibaba Cloud cloud market. Just like brands entering Taobao and Tmall, e-commerce has ushered Yunmeng's first million profits.
Jiang Xiaopeng told us that the ability to acquire customers is greater than the product itself. "The vast majority of failed entrepreneurial projects are not because the product is not good but because they cannot be bought."
In Jiang Xiaopeng's resume, taking Wolfsmoke Technology Co., Ltd. from 2006 to 2007 as an example, it is also a SaaS building product. They invested 30 channel managers, with a labor cost of 300,000 per month, and finally realized sales of 200,000 per month, a year The cost of sales alone is a net loss of more than 1 million yuan, not counting the research and development costs.
And when they put the same product on Wanwang (the largest domain name registration website in China at the time), the monthly natural traffic achieved a turnover of 500,000/month. It was finally merged by Wanwang because this set of technology was urgently needed by Wanwang, and they also needed a suitable ecosystem of Wanwang.
Until now, Jiang Xiaopeng remembers that they received 500,000 U.S. dollars from Northern Light Venture Capital before entering Wanwang, but they still couldn't help Wolf Smoke solve the actual customer acquisition problem. Then in 2009, they achieved tens of millions of turnover of SaaS website building tools on the Wanwang platform.
This set of business logic is not new, but if you do it well, you have a chance to step up to the first step of becoming a giant. At that time, Ali's first pot of gold relied on Google's platform to attract traffic, while Pinduoduo relied on the madness of WeChat friends. And the first small SaaS enterprise (tools such as order printing plug-ins) that achieved revenues of over 100 million yuan is also Taobao. Nowadays, several hundred million yuan in revenue a year is not a problem. Youzan Mall, which is particularly conspicuous right now, is also based on the ecology of WeChat.
Jiang Xiaopeng's resume allowed him to successfully establish cooperation with Alibaba Cloud. It was the B-end gene of the Ali department that attracted him to watch. But Jiang Xiaopeng also endured for 5 years and co-created the cloud market with Alibaba Cloud. After the platform construction period and the drainage period, he tasted the sweetness of today's profitability.
Today, led by Alibaba, Huawei, Tencent, and Baidu are all competing for the big cake of cloud computing. According to the current market share, Alibaba Cloud (48.1%), Huawei Cloud (3%), and Tencent Cloud (20.4%) ), AWS (10.4%), Oracle (7%).
Big platforms compete against each other and small companies stand in teams. Choosing a suitable platform is a good opportunity for SaaS entrepreneurship to take advantage of the trend.
02. To change product thinking, we must start from paying
According to C, the product manager of the Yunmeng website SaaS tools, as early as 2017, they made a lot of mistakes, "Customers say what features are needed, and they will add as much as possible in the iteration."
But the final result is that this method of iteration has no contribution to the transaction and renewal. Only after successive failures did I realize: "Iteration is for paying, not for need."
"Customer first" is a consensus in all industries, but as Jobs said, "They don't know what they want." Here, Jobs' philosophy seems to be misrepresented as "imaginary customer needs and obtaining information that customers need." How important it is to make products in this way."
The real fact behind it is that your products must be rushed to pay by customers, rushing to buy instead of rushing to use it. Even if the free model can help you acquire a large number of users at an early stage, you must cultivate the willingness of customers to continue paying to form a healthy model.
But when the product is half done, how hard is it to start thinking about payment? Whether it is graphite or Dingding, these projects that are losing money are proving the difficulty of realizing free customers. Once paid, the graphite for collaborative office was quickly abandoned by small and medium-sized enterprises. We learned from the circle of entrepreneurs in the education industry that “the charge of more than 3,000 a year makes them decisively give up using it.”
And this is not a problem of free, but the function of your product is dispensable to the business owner, once it involves payment, it will be abandoned. So the question that SaaS products need to think urgently is: what kind of product you have made, customers will pay for it. If you don't have the ability to make paid products, then exit the market as soon as possible, and you can pay as little as possible.
03. Reduce costs and increase efficiency, SaaS can only be AI
The first step in reducing costs and increasing efficiency is to reduce the size of the company. Jiang Xiaopeng reduced the company's scale to 50% from 2016, saving a total of 2.48 million labor costs. The second step is AI automation.
In the public interview of Dharma Academy, we learned that its establishment has two main goals: one is to put the basic AI capabilities (atomic capabilities) of Dharma Academy on the platform to support all businesses. The second is going to the cloud. After passing the internal core business verification, the user's acceptance and satisfaction reached a certain index, and the product was commercialized on the cloud to further amplify the value and serve the entire society.
It is this plan that makes AI possible for all small SaaS companies. That morning, Jiang Xiaopeng sat in a daze at Starbucks, and the sweeping robot working outside inspired him to think about where to integrate AI into SaaS. Human sweeping-human + machine-sweeping robot, and this process is very similar, the evolution of website construction SaaS tools: "designer + engineer (design + development + deployment)-designer + SaaS-AI automation + SaaS ."
Combining the natural language processing (NLP) provided by Alibaba Cloud with SaaS, the machine can automatically process the graphics, text, page elements, etc. needed to build the website, and improve the company's product delivery (design level) speed. The original team took 3 days to complete the work. It may be achieved within an hour after joining AI, which can save millions of labor costs alone.
But this is only the first step. This intelligent system also needs to use computer neural network for deep learning, and it will take 1 to 2 years to fully replace manual automation. At that time, AI automation + SaaS will completely replace the template building site. Users only need to put text data in and wait for the web page to be automatically generated.
Conclusion
AI is actually a kind of thinking that returns to the essence of SaaS. SaaS itself is a revolution in the form of application delivery. It enables traditional computer room deployment, face-to-face delivery to cloud deployment, and online delivery. At the same time, it can provide services to multi-tenants and realize benefits on a large scale.
In other words, your delivery efficiency is the decisive factor for whether you can become a giant in this industry. Nowadays, the technology of SaaS is not new. Only AI can help you complete the final sprint on this track. We can say with certainty that whoever grasps the nature of SaaS will grasp the future
On July 24th, Jiang Xiaopeng went to the Dharma Academy of Hangzhou headquarters to confirm the last round of algorithm schemes before going online with technical researchers, and the product has run through. When he was on the plane back to Beijing, the company’s technical team went through a night’s test and got through to 6 o’clock the next morning. They greeted the sunrise in Beijing at their respective homes. It was a difficult time for 7 years. I finally saw the future of SaaS in a moment.
At present, Yunmeng has put into the use of AI intelligent SaaS system within the company. Looking at the entire SaaS industry in China, there has not yet been a company with a market value of more than 30 billion U.S. dollars. We finally asked Jiang Xiaopeng: "Do you think you will be this company?" He only said: "We just need to work hard. Success depends on luck."
The picture is from the Internet, delete it
I hope that today's sharing will be helpful to your SaaS entrepreneurship. If you have any questions about cloud computing and website building, you can privately trust me. I am Bei Ke, a master's degree in CS (Computer Science) from Cornell University, and a serial entrepreneur. I am currently working in the R&D team of Alibaba Cloud AI intelligent website construction technology as a senior algorithm engineer. Welcome to pay attention.