What are good operations-based metrics for SaaS companies?

SaaS definitely has benefits for customers – at the same time it has enormous benefits for software companies providing the service. Most significantly it gives software companies visibility into revenue on a go forward basis far more predictably than the on premise model.

At the same time SaaS changes the cost and management models. The software company basically becomes part of the extended IT organization. The helpdesk role is expanded – and operational efficiency needs to become a high priority to ensure profitability. Your cost models for the subscriptions probably include platform related expenses (hardware, networks), support (system administration and helpdesk), and possibly royalties. Most people are able to get the hardware cost and royalties to a predictable model – if not you need to drive deeper into those costs to understand what is going on. Given this, the efficiency metrics move to how well (quality) and effectively (cost) you deploy and support the service.

For the metrics and drivers for that organization I would consider:
1) Average support hours per customer
2) Average support hours for setup
3) Support team per customer
4) If platform costs are significantly variable then platform cost divided by customer revenue.

My suggestion is to focus on metrics related to operational efficiency and execution – and to try to build a culture around margin and cost management. Sometimes a bit more automation from your team will generate huge margin benefits. Sometimes rethinking how the service is provided or how your code could be changed to eliminate the service need also add significant value.