The rationale for PaaS – High-level Thoughts
I have now been engaged with almost 30 portfolio companies in the start-up domain and have interacted with over 300 Founders. This view is based on the fact that companies which have a virtual presence and have the internet as the backbone must explore leveraging Platform as a Service (PaaS) to scale faster, enhance value creation and increase the gap with competition
The objectives for offering PaaS should be to become “intel inside” or as infrastructure providers like “Android” both in B2B or B2B2C, vertical or horizontal business that the company offers.
In my personal view PaaS can benefit the company in multiple ways:
- Expand reach in multiple geographies and locations and customize use cases for relevant customers to increase revenues and own customer experience
- Build a database for AI/ ML
- Brand reach and awareness and increasing market share
- Scale faster with minimal investment
- Enhance profitability and higher ROI
- Increase value creation
The owner of the software and processes should use an R&D lab to continue to improve upon the offering by learning from the current business along with generating revenues for the business. The company needs to deliver excellence to its customers/consumers and continue to raise the bar.
PaaS, as far as possible, must be integrated with the ERP of the partner or customer and customization should be as minimal as possible (for e.g. regulations and compliances, new use cases for different markets).
Here are some thoughts on the broad framework to implement PaaS:
- As far as possible the company should own customer experience in a B2B2C. This will be one of the key drivers of how the company wishes to license the software and define the Playbook.
In certain cases, the company may want to do a white label (B2B), while doing so it should be aware of the downside risk of partner developing his own software and becoming a competitor to the company.
- Define the role of partner and company based on SLAs.
- Criteria for partner selection and on boarding must be clearly defined considering both DNA and culture alignment.
- The choice and timing of partnership could be based on the attractiveness of the market, competition, and the finalization of the right partner.
- The company needs to identify the champion to lead this initiative and could start with a pilot before doing a full-fledged launch of PaaS.
- The playbook should contain at least the following:
- Elaborate on the objectives and detail of the mechanism and framework referred to above
- Terms of engagement and commercials
- Use cases
- Tax and regulations for compliances
- Risk management and quality assurance
- Setting realistic economic expectations
These are very high-level thoughts to initiate a discussion amongst the founders and business owners to see if PaaS is a good model to scale, the example in the physical world could be like franchising to expand the reach. To create franchisee, the oil companies have company-owned and company-operated (similar to R&D lab) referred above at one end and franchisee owned and operated at the other end.