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Great piece from Elad today on market size! I wanted to underscore one point he references on SaaS and the implications for market size. blog.eladgil.com/2019/05/market…
By the way. nothing here should be taken as investment advice and full disclosure, a16z portfolio companies are referenced. see a16z.com/disclosures for additional important information.
In the client/server world, enterprise apps were deployed inside the firewall. Thus the limiter on the number of apps that an enterprise could support was a function of whether IT could customize, deploy, support and upgrade apps.
As a result, enterprise sales were always tops-down: The CIO/CTO or CFO had the budget and ultimately the CIO/CTO had final say on deploying an app.
Most enterprises therefore had a relatively small number of apps and with a limited numbers of users (productivity tools – e.g., email – being the one significant exception re users).
SaaS changed – and is still changing – a number of things.
Freeing internal IT from managing apps alleviates the cap on the number of applications that can be deployed in a single enterprise – this is why we see a proliferation of department-specific apps in the SaaS world.
This necessitated the push-down/decentralization of budgets from the CIO/CTO to the departments – if users can get value from a department-specific application, better to align the budget with the users.
Account control was a huge barrier to entry in favor of incumbents (vs upstarts) in the client-server world – if you owned the CIO/CTO relationship, you controlled the account.
With SaaS users at the departmental level (and with budgets following), upstarts now have a fair chance to compete with incumbents because in many cases they are building relationships for the first time with a new set of buyers.
Add all of this up and SaaS changes everything – market size can grow, upstarts can thrive, users get a better experience.
