I was talking to one of the SaaS vendors and he was mentioning that their Sales & Marketing expenses were 75% to 125% of their new sales bookings. He was also mentioning that anything below 75% and anything above 125% is considered to be danger zones. I was relating this to one of my earlier posts on this “To SaaS or not to SaaS – An ISV’s perspective”.  In that post I had dealt in detail as to why ISVs may not be going for SaaS discounting the benefits of moving to SaaS.

This high percentage of Sales & Marketing expense adds another dimension to ISVs possibly not wanting to move the SaaS way. For them to be successful, it becomes extremely important for ISVs to ensure that their sales and marketing is cost-effective, for which they need to have extremely good visibility on their sales funnel and ability to predict and forecast accurately. Additionally, they need to identify metrics that would be able to measure the returns on every program that they do in the mix. Keep what brings revenue and throw what doesn’t in your marketing mix.

This also makes it necessary for the ISVs to have access to quality funding that will allow them to do increased sales and marketing spending towards achieving breakeven and eventually profitability. As more and more customers seek SaaS, this may not result in a level playing field as big platform players would be better positioned to offer them as opposed to non-funded setups. Else, you need to have substantial legacy revenue for you to easily move the SaaS way.

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