MBA Thesis Marketing Strategy for Software as a Service Companies within the Logistics Vertical Software Niche A multiple case study Fredrik Einarsson & Ardy Daniel Kusnadi Supervisor Johanna Börrefors Karlskrona, Sweden June 2020 www.bth.se/mba DEPARTMENT OF INDUSTRIAL ECONOMICS This thesis is submitted to the Department of Industrial Economics at Blekinge Institute of Technology in partial fulfilment of the requirements for the Degree of Master of Science in Industrial Economics and Management. The thesis is awarded 15 ECTS credits. The author(s) declare(s) that they have completed the thesis work independently. All external sources are cited and listed under the References section. The thesis work has not been submitted in the same or similar form to any other institution(s) as part of another examination or degree. Author information: Fredrik Einarsson [email protected] Ardy Daniel Kusnadi [email protected] Department of Industrial Economics Blekinge Institute of Technology SE-371 79 Karlskrona, Sweden Website: www.bth.se Telephone: +46 455 38 50 00 Fax: +46 455 38 50 57 Abstract Background Utilizing the Software as a Service (SaaS) business model is a distinct trend for marketing software via the Internet. It allows software suppliers to expand their market globally and to extend their offering to customers by simplifying their software procurements and ownerships. The trend has been ongoing for some time concerning horizontal software niches and now intensifies for vertical niches. Logistics is such an examples of a vertical software niche. Objectives This thesis aims to investigate the utilized marketing strategies for companies using a Software as a Service business model within the logistics niche. The purpose of this thesis is to deepen the knowledge about how to market a vertical Software as a Service solution within the logistics domain. Methodology An explorative research method in the form of a multiple case study is used. Three companies are sampled using a theoretical sampling approach. SaaS ideally requires less people contact and the marketing materials are integrated in the published SaaS on the respective companies’ web pages. Data publicly available on the Internet is collected and used to investigate the utilized marketing strategies. Findings The identified marketing strategies are categorized according to an eight-element model utilized in earlier studies. The eight elements are product, price, place, promotion, people, process, productivity & quality, and physical environment. The categorization does help to guide during data collections and data analysis. The last element physical environment is confirmed to be not relevant since the required physical material are chosen and decided by customers themselves. Conclusions The marketing strategies within this niche is at large consistent with earlier findings. One of the newly findings is that the sample companies choose one of SaaS strong points that is most suitable to their offering solution and emphasize it in their marketing strategies. Here are easiness, scalability and flexibility. Some main deviations however exist. The sample companies do not provide easily available trial accounts. They instead offer manned online demonstrations. The market is also not found to be as global as the business model enables. The reason of being that is the fact that the products/services are too dependent on the integrations to local-market software solutions. Recommendations for future research A similar study with a larger sample may strengthen the findings. Performing interviews in addition to online data collection may extend more information about post customer contact marketing strategies as well as reasons behind the selected strategies. Keywords: Marketing strategy, SaaS, Vertical Software, Cloud Computing i Acknowledgements The authors would like to thank the supervisors, Johanna Börrefors, Martin Svensson and Anders Wrenne for pointing into the right directions. We would also like to thank our friends and family for their support during the nights and weekends which was required to complete this thesis besides our full-time employments. Gothenburg, June 2020 Fredrik Einarsson Ardy Daniel Kusnadi ii Table of contents 1. Introduction ___________________________________________ 8 1.1. Problem discussion_____________________________________________________ 8 1.2. Problem formulation and purpose __________________________________________ 9 1.2.1. Research Question __________________________________________________ 10 1.3. Delimitations ________________________________________________________ 10 1.4. Thesis structure ______________________________________________________ 10 2. Theoretical framework __________________________________ 12 2.1. Cloud computing _____________________________________________________ 12 2.2. Software as a Service (SaaS) _____________________________________________ 13 2.3. Vertical Software _____________________________________________________ 14 2.4. Selling and Marketing Strategies ___________________________________________ 16 2.5. Factors affecting SaaS marketing __________________________________________ 19 3. Methodology __________________________________________ 21 3.1. Case study – an inductive qualitative research approach _________________________ 21 3.2. Case Selection and units of study _________________________________________ 21 3.2.1. Case 1 ___________________________________________________________ 22 3.2.2. Case 2 ___________________________________________________________ 22 3.2.3. Case 3 ___________________________________________________________ 23 3.3. Ethical aspects and consideration __________________________________________ 23 3.4. Procedure __________________________________________________________ 23 3.5. Validity and Reliability __________________________________________________ 25 4. Results ______________________________________________ 26 4.1. Case1 _____________________________________________________________ 27 4.1.1. General __________________________________________________________ 27 4.1.2. Selling and marketing strategies _________________________________________ 27 4.2. Case 2 _____________________________________________________________ 30 4.2.1. General __________________________________________________________ 30 4.2.2. Selling and marketing strategies _________________________________________ 31 4.3. Case 3 _____________________________________________________________ 33 4.3.1. General __________________________________________________________ 33 4.3.2. Selling and marketing strategies _________________________________________ 33 iii 5. Analysis _____________________________________________ 36 5.1.1. General __________________________________________________________ 36 5.1.2. Selling and marketing strategies _________________________________________ 36 6. Conclusions __________________________________________ 40 6.1. Future research ______________________________________________________ 41 6.2. Limitations of the study ________________________________________________ 41 7. Bibliography __________________________________________ 42 iv List of Tables Table 1 - The 15 largest Internet capitalizing firms in 1995 compared to 2017 (OECD, 2017) ____ 12 Table 2 - List of characteristics of the selected cases in the sample _______________________ 22 Table 3 - Eisenhardt's eight steps for building theory from case study research. ______________ 24 Table 4 - Result summary ____________________________________________________ 27 v List of Figures Figure 1 - An illustration of the 5 layers of computational resources and its components (Youseff, Butrico, & Silva, 2008) _______________________________________________________ 13 Figure 2 - SaaS interaction flow (Rudolf, 2015) _____________________________________ 14 Figure 3 - Overview over the sizes of companies within the different service domains (OECD, 2017) _______________________________________________________________________ 15 Figure 4 - Cost of buying outsourced application versus developing in-house (Tyrväinen, Frank, & Mazhelis, 2013) ____________________________________________________________ 17 Figure 5 - Selecting business target (Lerouge, 2016) __________________________________ 18 Figure 6 - The Clover Model for selling and marketing SaaS (Tyrväinen & Selin, 2011) _________ 19 Figure 7 - SaaS Customer Lifecycle ______________________________________________ 38 vi List of abbreviations API Application Programming Interface CaaS Containers as a Service CAC Customer Acquisition Cost CMRR Committed Monthly Recurring Revenue CRM Customer Relationship Management DaaS Data as a Service DiD Defense in Depth ERP Enterprise Resource Planning HaaS Hardware as a Service IaaS Infrastructure as a Service ICT Information and Communication Technology IT Information Technology LTV Lifetime Value OECD Organization for Economic Co-operation and Development PaaS Product as a Service SaaS Software as a Service SLA Service Level Agreement SMB Small and Mid-sized Business TA Transport Administration TiVA Trade in Value-Added TMS Transport Management System vii 1. Introduction Business transactions can be decomposed into a series of activities along a vertical chain (Custom, 2017, ss. 90-127). Firms may decide to perform the activities by themselves or outsource them to a more specialized firm. Vertical integration is the action of increasing the number of activities along the vertical chain that the firms handles. Vertical integration is desirable