Why Are SaaS “Unbundling?”

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Why Many SaaS are “Unbundling”

  • by Miguel Perez
  • Posted February 5, 2018
  • SAAS INNOVATION

The idea of “bigger is better” doesn’t always work for SaaS.

When you think of a traditional SaaS software, you probably immediately think of some of the massive, full-featured platforms out there. These “giants” frequently offer every conceivable feature that someone looking for a solution in their category might need, but sometimes, all of that is just too much.

If you put yourself in the shoes of a small business, for example, there is probably a small set of very specific tasks that they want to take care of very well. A behemoth of a software solution can be just too much – who has time to learn all of those features?

Customers are demanding more and more customized experiences, which is where “unbundling” comes into the equation for SaaS…

What are the pros and cons of unbundling? Get our guide here

What is “unbundling?”

The main idea of unbundling is that the same, cookie-cutter solution does not work for every company. Sometimes the solution is just too big for them, or sometimes it’s just not specific enough to their particular needs.

Clement Vouillon defines unbundling like this:

“By “Unbundling of SaaS” I’m referring to a new breed of startups which don’t offer traditional “full featured” SaaS products to their users but rather package their core service as an API and a suite of small tools.”

By “API”, it’s not that he means only companies with developers at their disposal will be able to use these tools, but the tool can be used to customize their own UX or work with something else that they are using already.

To take an example, Clearbit is all about better data and analytics, but they have split their solutions into different verticals. Their solutions allow companies to tailor their own experience and includes add-ons for tools like Google Spreadsheets, something they may already be using. They also have integrations with Salesforce, Zapier, Slack, Marketo, Connect and Segment.

You could look at this as a trend in conjunction with the vertical SaaS model, which we’ve talked about previously. Sometimes the big, full-featured, “one size” solution just doesn’t fit for companies that have a specific set of needs. Evan Besser describes in an article why Newscred opted to go with an unbundled SaaS option to drive their product decisions. The struggled to find the right analytics solution to resolve their usage-related questions and discovered that; “our questions and metrics are extremely specific to our organization, our product, and our users.”

Unbundled SaaS seek to fill that gap in the market for companies that struggle to find the right solution, or wish that they could somehow customize solutions that they already have. These are often companies who’d rather not build an in-house solution from scratch, so putting together a customized solution from tools that are already available is appealing. Besser further adds:

“The main idea here is that a cookie-cutter solution doesn’t always work for every company. While this is essentially at odds with the approach taken to create successful SaaS businesses, there’s a gap in the market created by businesses that:

  1. Find that existing solutions don’t quite fit their needs/solve their pain points
  2. Don’t want to build an in-house tool from scratch
  3. Need a malleable solution that can change with the business and technology needs
  4. Have technical/knowledgeable resources available to implement more convoluted solutions”

Essentially, what you end up with is a kind of hybrid – it’s not quite SaaS and not quite API (in the developer sense). You’re providing a niche solution to a problem.

Why consider unbundling?

Create your own turf

One of the first reasons to consider offering an unbundled solution is that it can give you a very persuasive point of difference from other solutions out there. Many SaaS categories have become very crowded and increasingly difficult to gain any traction in. They are often dominated by a small handful of key players, with anyone else becoming lost in the crowd.

From the perspective of the user, it can be a case of information overload when looking for solutions in these crowded categories – your big feature-rich SaaS solution may appear no different to them than the next one. What often happens? They might go with one of the dominant solutions in the category, but perhaps feel that they were picking the “better” choice, rather than the perfect solution.

Unbundling gives you a unique edge with a niche offering. You can move away from the concept of a rigid UI and allow users to determine their own experience.

Capture businesses who do have development capabilities

Clement Vouillon points out that the SaaS market is already very mature. Most businesses are very familiar with SaaS and know exactly what they want out of a solution. They may have the desire and capability to build their own UX based on their unique needs, but they don’t want to have to code everything from scratch if it isn’t necessary.

Unbundled solutions can be a great option for these businesses. They can simply tack on the solutions that they need to the overall experience that they build. In fact, “do it yourself” solutions have become more common – people in departments outside of IT often have technical skills now, so it’s not a huge stretch for them to set up their own solutions.

Natural value-based pricing strategy

One of the downsides to a massive, fully-featured SaaS is that they tend to need to price themselves accordingly. From the buyer’s point of view, if they’re only using 50% of the features, why should they still have to pay the same full price as everyone else? It can be difficult to tie value to pricing in these sorts of situations, because how do you justify price based on the scale the product is used?

Unbundling means that customers pay for exactly how much of the product they would like to use. If you look at Clearbit’s pricing page as an example, it invites people to “configure pricing” by going through and selecting what they need.

As a natural extension of this, up-selling can be a key part of plan expansion. Customers may find they need more from your product over time and want to build on what they have. This expansion revenue can be a great source of growth.

What about cons to unbundling?

Of course, there are a few downsides to consider with unbundling. Firstly, as you create a very niche product, it can prove to be more difficult to scale up your business. You’re naturally targeting a segment of users who want customized solutions. (The flipside of this is that those customers are often within larger companies, where you can build a long-term relationship and potentially charge higher prices to help set them up).

Secondly, it can be difficult to market these sorts of products. How will you explain it in language the customer understands? How will you find and target the right audiences? People already know what a traditional SaaS is, so you may need to do some educating to explain how your solution is different.

Know the pros and cons of unbundling first. Get our tips here

Final thoughts

Unbundling looks to be a new incarnation for SaaS that is likely to go the distance, at least insofar as their creators offer needed custom solutions to businesses. Where traditional SaaS can offer large, overwhelming feature sets and a fixed UI, unbundling offers a tailored experience where users get just the features they need and can create their own UI.

This definitely answers a need in the marketplace for more flexible solutions and lends itself nicely to value-based pricing.

Will it be the right thing for your company to do? One of the keys will be your ability to find a clear target audience and market well to them. Unbundled solutions don’t necessarily have the scalability of full-featured SaaS, but it could be that you carve out your niche in a small, but well-paying vertical.

Koombea helps companies to build customized solutions to their needs. Talk to us about how we can help you today.

Miguel Perez Product Development Director

Full Stack Developer, interested in web and mobile platforms, and the APIs to integrate them. Expert in product development and building integrations between products. The one always with a gray t-shirt.

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