The Past, Present, and Future of SAAS Software

Hi all!

I wanted to share a great podcast from the Invest Like The Best podcast:

http://investorfieldguide.com/eric-vishria-the-past-present-…

It’s really worth listening to, although most of the information is already known on this board. What I found interesting is that the host, Patrick O’Shaughnessy, seems to be warming up a bit more to these crazy expensive companies (he has a quant background and I think that he generally favors “value” investing).

I like this episode especially for the historical background of SaaS development and the way Eric Vishria made categories of 3 SaaS-tiers. He is also looking into the future of modern Saas software and explains how modern software is shifting away from serving a human user via “GUI’s” (= graphical user interface) à la Salesforce to serving other software programs (i.e. API’s à la Twilio). He also talks a bit about the potential moat-problem that some SaaS companies have from being super easy and quick to deploy and operate. These companies are giving up one of the most important sources of a moat for software companies: high switching costs. But Eric sees companies trying to counter that “lost” moat by creating marketplaces for users and developers, which possibly creates an even stronger moat, i.e. network effects.

Another interesting point related to the superior economic model of Saas: I think Eric said that in the past 30% of the support cost for software companies came from ensuring backward compatibility with old versions of the software. In the SaaS model, this cost completely disappears. Saas is not only increasing customer satisfaction and the lifetime value of the customer, but it’s also drastically decreasing the operating cost for the company.

Great stuff!

Best
Niki

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From SSI,

Twilio (TWLO) conducted a study of over 2,500 enterprise decision makers globally to gauge the effect of COVID-19 on their company’s digital transformation and communication roadmap. The study highlighted common themes that we have heard previously about the impact of shelter in place and work from home on businesses. However, this survey provided actual data about these trends. The headline is understood - that decade-long digital transformation plans were compressed into days or weeks as a result of COVID-19. Businesses had to figure out how to interact with their customers without the benefit of physical proximity. Here are some highlights from the survey:

  • When asked if COVID-19 sped up their company’s digital transformation, 68% responded “a great deal” and another 29% responded “yes, somewhat”. The average amount of acceleration was 6 years.
  • Almost all companies (95%) are seeking new ways to engage customers as a result of COVID-19. 92% say transforming digital communications is extremely or very critical to that.
  • 79% of respondents say that COVID-19 increased the budget for digital transformation.
  • 92% say their organization is very or somewhat likely to expand digital communications channels.
  • 54% said COVID-19 propelled focus on omni-channel communications and 53% added new channels during the pandemic.
  • 1 in 3 companies started using live chat and IVR channels for the first time as a result of COVID-19

Me here: As my portfolio is above 100% yr to date as is many here, I’m looking to the second act. Which companies are going to participate most in this acceleration of time to digitalization mentioned above and is this a good time to invest in any of them?

I’ve trimmed some overweight positions and added a few to my portfolio just to sleep better at night. We may all the mountain climbers, just perhaps as comfortable at the peaks as others.

I’ve recently re-entered: MDB, ESTC and TWLO and also added WORK, and BPRMF for the same reason.

There’s a great thread on MDB going on now and was started for the same reason, it sounds like to me.

Jason

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I need to correct the very point of the last post:

We may all be mountain climbers, just not as comfortable at the peaks as others.

There was a great post about Saul being a mountain climber, somewhere in the recent past. I’m not saying this is a peak for everyone, just for maybe some of us.

Thanks,

Jason

Here are some interesting snips and the transcript to the entire episode :

http://investorfieldguide.com/wp-content/uploads/2020/07/Ep…

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