Web3 could seize on the decades-old software-as-a-service business model

In the age of services like Netflix, Dropbox or Amazon Prime, it is quite easy to forget about the times when customers queued up to get boxed digital products, such as software or entertainment media, with one-time purchases. The age of annual fees began when consumer products became subscription-based services.

The same transformation happened about a decade ago in the enterprise world when businesses reimagined long-standing solutions like enterprise resource planning or customer relationship management as ongoing services monetized through recurring billing. Therefore, the business-to-business (B2B) software as a service (SaaS) model was born in the 2000s and has disrupted the way enterprise technologies have operated for the past two decades.

B2B SaaS was largely untouched by the flourishing blockchain and crypto ecosystem until last year, but a prolonged bear market has made the Web3-first startups realize that they must leave no stone unturned to survive the harsh market conditions and deal with increasing competition. .

From providing enterprise-grade Ethereum infrastructure to blockchain-based document storage systems, Web3 SaaS (or SaaS3) companies are offering decades-old business services reimagined in the Web3 environment, and recent data shows that the business world is open to trying new ways of doing things. old things

One attempt by venture capitalist Tomasz Tunguz to size up the total addressable B2B SaaS3 market calculated that 57 Web3 SaaS projects generated revenues from $500,000 to more than $100 million in the second half of 2022. The on-chain revenue of Web3 startups, mostly dominated by Ethereum, indicates a total addressable a market of $ 231. million in 2022.

The total addressable market, or TAM, is certainly an optimistic diagram that multiplies the potential number of clients of a project with the budget reserved for the service. It does not involve any competition or real-life restrictions, hence the probability that the “addressable” part implies. TAM is the potential market opportunity for a product or service, and the B2B SaaS3 space had south of a quarter of a billion dollars of that opportunity last year.

Cashless society goals work in favor of Web3

Mark Smargon, CEO of blockchain-based payment platform Fuse, believes that B2B SaaS in the Web3 industry can benefit from quite a few factors, including the increasing adoption of mobile devices, the Internet and e-commerce platforms, as well as change. to cashless societies in many countries.

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Inherent problems such as high costs, privacy issues and geographic restrictions make traditional payment systems expensive and difficult for merchants. Therefore, Smargon noted that Web3 startups would see the most significant growth opportunity by providing services to Web2 companies and simplifying the onboarding and use of blockchain solutions, applications and payment channels. He told Cointelegraph:

“It boils down to Web3 startups that give businesses a way to provide their customers with experiences on par with what they’re used to on Web2, improving efficiency, value proposition and stickiness.”

Web3 startups need to start introducing the blockchain-based way of doing business to traditional companies with baby steps, according to Fuse’s CEO. “Salesforce users are thinking of non-fungible tokens (NFTs) less as collectibles or works of art and more as the next generation of loyalty programs for their best customers,” said Smargon. “NFTs can be changed on the fly to adjust conditions and unlock physical and digital rewards as customers engage more with a company.”

Web3 adoption starts with Web2 outsourcing

The real tipping point may come when companies use blockchain solutions to manage day-to-day business activities, such as accounting, procurement and invoicing, Smargon claimed.

When it comes to payment services, developing countries, where a significant portion of the population is either unbanked or underbanked, add some unique opportunities, he explained. In such countries, companies are not stuck in legacy systems or locked in by vendors, making them “free to innovate and engage with Web3 solutions from the start rather than having to retrofit.”

Onboarding companies to Web3 has another challenge for startups, Smargon noted: “They have to offboard businesses first. [from Web2] and then onboarding them to Web3-based systems.” The key to getting businesses to understand that there are viable alternatives is providing them with compelling business and efficiency benefits, Smargon said:

“To do this, [Web3 startups] needs to produce solutions for businesses to build secure products without taking on the burden of custody, reaching customers without paying the costs of compliance and licensing, and providing exceptional consumer experiences without building wallets from scratch.”

But it doesn’t end there: Smargon added that Web3 users also need to be able to move value inside and outside their companies without facing high fees and barriers. “Changing consumer demand is driving change at the grassroots level, which means businesses must adapt or die,” he said.

Web3 still needs its “picks and shovels”

On the surface, the SaaS movement and the Web3 movement are quite misaligned in their interests, according to Nils Pihl, the CEO of decentralized protocol developer Auki Labs:

“While Web3 encourages people to take ownership and responsibility for their own digital presence, the core philosophical principle of the SaaS movement is handling the complexities of the digital realm for you.”

Looking from the opposite perspective, however, SaaS has already won the Web3 space, Pihl asserted: “Platforms like Infura and Alchemy run large parts of the Web3 ecosystem because so few can, or even want to, run their own nodes.”

As such, many of the companies that actually make reliable income in Web3 actually provide tools (as a service, usually) for other Web3 projects, Pihl explained, adding:

“In a world where the killer programs have not yet been found, a safe bet is to sell picks and shovels to those who dig.”

He continued by saying that many Web3 companies are so passionate about Web3 that they design according to ideology instead of looking for product-market fit. Pihl believes that if startups start by saying “we’re a Web3 company,” they limit their perspective or ability to listen and understand the business needs of their potential customers from the start.

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Although the B2B SaaS market is huge, people shouldn’t assume that “product X but on the blockchain” is a winning idea. The creator could raise money for it, but if the new on-chain “product X” doesn’t solve the problem better than the one already in use, there’s no reason to switch to the new product, according to Pihl.

Assuming that customers will be happy to accept a Web3 product because its developer finds it philosophically, ethically, or aesthetically superior is not a good approach, according to Pihl:

“You have to solve an urgent problem for the customer, or they won’t engage.”