SaaS

Spain: The New SaaS Frontier?

(En español aquí)

spain saas

As Marc Andreesen famously said: “Software is eating the world”. This applies fully to business, where software processes are doing the eating. A software process embodies the digital paradox, faster, better, cheaper, instead of the typical cost-speed-quality trade-off. So software processes are the way of the future, winning irreversibly over analog ones.. Software as a Services (SaaS) companies make software processes for businesses, either horizontal (e.g. Salesforce.com for the sales process) or vertical (e.g. Veeva for the life sciences world). They have already been spectacularly successful, creating a 400 billion industry and moving all the big enterprise software players (Oracle, SAP, Microsoft, Adobe) to SaaS.

From an economic viewpoint creating a large SaaS sector in a country makes sense. SaaS is an industry with relatively large employment base, and also a high qualification one. Salesforce has over 26.000 employees, Oracle over 130.000 and SAP over 80.000. They also generate a vibrant ecosystem of integration partners that also create large high value job bases. This compares with much less employment created from consumer internet startups, the most famous being Whatsapp with its less than 100 employees at its time of purchase for 20 billion. SaaS also boosts the productivity of businesses in a given country by softwarizing their processes. So investing to create a SaaS sector in Spain could make sense, especially as we enjoy some comparative advantages.

Spain’s advantages

Creating a SaaS product requires a three legged-stool: product, technology and sales. Product represents the business knowledge of what is the process and what pain that business feels. Technology requires experienced developers and managers to create. Sales puts the product in the hands of the thousands of businesses that can profit from it, and then makes sure they derive full advantage from it. In Spain we have the makings to create a vibrant SaaS ecosystem. We have comparative advantages in terms of the three legs of the stool.

In terms of product, we have a lot of business executives with relevant experience but limited opportunity. The Spanish labor market if very rigid and Spanish large companies are shedding jobs and limiting opportunity. The most entrepreneurial employees are facing either the shedding, because they are younger and cheaper to let go, or the lack of opportunity, because older employees keep top management roles limiting advancement prospects. This creates a steady stream of available entrepreneurial individuals with the requisite domain knowledge.

In terms of technology Spain has great and cheap coding talent. Spanish coders are top contributors to open source efforts and figure greatly in technical online courses. A large supply and limited demand creates relatively cheap programming talent. Spain also has great lifestyle in a secure European setting, this allows companies to attract foreign development talent to Spain easily.

Finally, in terms of sales, Spain has a very tough market. Spanish companies are penny pinching and tend towards do it yourself. So they are a tough market to sell effectively to. This means that proving a product in the Spanish market will force you to create a winning value proposition and have your marketing, sales and customer success up to snuff. It is not a great market, but it is a very good testing ground. If you make it here you can be sure that you will make it elsewhere.

Challenges to overcome

Of course, the ecosystem still needs further development. Even if we have the ingredients we have a lot of work to do yet. We are missing people with experience in SaaS, our developers tend to be more about quick hacking than at scale software engineering and we lack sales and customer success talent with SaaS experience.

First, we are just getting the first generation of SaaS enterprises to mature. This means that there is still very little people in Spain with the experience of building a SaaS company. Fortunately, the first generation is maturing and we can expect them to help new SaaS entrepreneurs as mentors and angels. On top of that, there is plenty of great material on SaaS available, people like Jason Lemkin through SaaStr, David Skok in For Entrepreneurs and Tomasz Tunguz in his blog have an MBA worth of material on how SaaS should work. No substitute for real world experience but a good complement. We need to put this knowledge in the hands of all SaaS entrepreneurs in Spain so they don’t have to repeat the mistakes that are already well known.

Second, technical people in Spain are great coders but need to improve their software engineering prowess. Coding will take you to a prototype but it requires a real software engineering pipeline with design, development, qa, deployment, operations and architecture to build something that scales. Initiatives such as Ironhack take Spanish great development talent to modern software engineering levels. There is also plenty of training available nearly for free, whether global like Udacity, or Spanish like Tutellus. More Ironhack, Tutellus and experienced technologists will help Spanish awesome native talent to move to software engineering.

Finally, the most difficult gap to close is the sales, marketing and customer success gap. In Spain we have great professionals in large enterprises running effectively huge sales, marketing and customer support staffs. However, they tend to be totally disconnected from the startup world and be schooled in the traditional ways to run these functions. SaaS experience will help, the staff in the Spanish branches of Salesforce, Oracle, SAP and many others will also provide a fertile ground. We might need the equivalent of Ironhack for Sales, Marketing and Customer success to take the talent pool to the next level and create the new rooster of practitioners.

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