Starting point determines height: How does ONES practice software standardization

Recently, in the "21st Century China Business Model Competitiveness Research List (2021)", ONES was awarded the "21st Century Enterprise Software Application Innovation Award". The following is the interpretation and analysis of the innovative business model of ONES by the business magazine "21st Century Business Review".

"Before 2016, a relatively large domestic company said that it would give us 3 million yuan and let us make customized project management software for them," said Wang Yingqi, the founder and CEO of ONES. "I immediately rejected it. At that time, we didn't have any income, and I don't know where this confidence came from. I said, I only make my own standardized products."

Founded in 2015, ONES has grown into a leading domestic R&D management solution provider in just a few years. Its 8 professional R&D management products run through the entire life cycle of software R&D.

In 2021, ONES completed three consecutive rounds of financing totaling nearly US$100 million in half a year. Thus, ONES is the company that has received the most financing in the domestic R&D management field, and it has also set a record for the fastest financing speed in this field in history.

This also means: On the Chinese software R&D and engineering management track, ONES's leading position in the industry has been further consolidated and consolidated.

These results validate the concept of "choice is as important as effort". Because it is because ONES has chosen and adhered to the business model of "only making general-purpose standard products" from the beginning of its establishment, it has been able to embark on an increasingly broad path of growth.

Choose one without hesitation

In the SaaS software business model, there is a difference between customization and standardization. Customization is based on project services, while standardization is based on product-driven. One of the biggest differences in business is whether labor costs increase simultaneously with the increase in scale.

It can be said that customization is a double-edged sword. On the one hand, "customizing" helps to understand customer needs in depth and polish products. On the other hand, deep involvement in customization will bring a ceiling on technical capabilities, because the project services under customization are realized through a single or multiple single project services, and services provided by humans dominate, allowing customers to Manpower pays.

Moreover, because customization is a "one-shot deal", the sustainability of revenue is poor; on the cost side, customer service costs will also increase correspondingly due to the continuous investment in manual services.

Therefore, too high degree of customization and too many customer-specific requirements will bring large sunk costs, and it is generally difficult to replicate it in other projects of other customers. Customization that is highly dependent on human power will limit the potential increase and expansion of the income scale.

Based on the understanding of customization, ONES must have a clear understanding of the customers that it chooses. "Then what kind of customers need us? It must be scaled up to a certain level. We don't want to outsource or customize us." Wang Yingqi said that a team of more than 100 people is a key customer of ONES because they are just in need.

From the practice of ONES, standardized product development puts resources and energy on the research and development of industrial technology, bringing continuous breakthroughs in their own technological capabilities for SaaS companies.

Standardization promoted by product drivers, combined with revenue realized in the form of annual subscription fees, makes ARR (total annual subscription revenue + additional component or upgraded recurring revenue-loss caused by cancellation of subscription) present a stable and continuous state. As the requirements for people or services are lower, the standardization of product technology polishing will bring down the cost of customer service, and the cost of manual service is lower than that of the customized model.

As Wang Yingqi said: "Software is actually a good business. It is essentially a product made through some innovative ideas and engineering. The marginal cost of standardized software is very low, and it can be scaled and expanded relatively easily."

However, knowing is easier than doing. SaaS has to invest high costs in the research and development process, including products to be made, functional modules to be expanded, and so on. In the early stage of a company's start-up, Party A paid money to request customization-this is an irresistible "temptation".

Therefore, as for the choice of customization and standardization, some people suggest that start-ups need to customize in order to survive, and they can earn the money first. After they survive, they can make a better standardized product, or even some kind of customization. A standardized "compromise" approach.

And Wang Yingqi’s response was: “Many companies say: We first do outsourcing customization, and first do projects to polish products. However, after so many years, I have never seen such a successful grinding. I think we can shift from customization to standard success. The probability is very small, because you do it for others, it is impossible to do something like that." In Wang Yingqi's view, in the process of doing many things, don't make excuses for yourself, or seek surprises.

Customization or standardization. On the topic of "choose one out of two", ONES did not hesitate to insist on the option of "make standardization".

Covering R&D scenarios in all walks of life

Universal tool

SaaS products will be divided into general-purpose and industry vertical. The former has general tool value and is oriented to various industries; the latter focuses on sub-industries and provides a complete set of scenario solutions based on software services.

From the perspective of product characteristics, general-purpose or tool-based SaaS is more in line with the ideal business model, that is, standardization is easier to replicate, machines provide services without relying on labor less, and revenue sustainability can be achieved through renewal.

ONES is a universal enterprise-level R&D management tool SaaS product. "Compared to many industries, a single investment in standardized software can have long-term returns, and the subscription model makes cash income predictable, and there is a very good model to measure future returns," Wang Yingqi said.

Moreover, through more business examples, ONES continues to iterate and become more standardized and productized. Many personalized requirements can be achieved through process configuration, parameter configuration, and field expansion.

Also, ideally, with the gradual development and maturity of SaaS companies themselves, customer acquisition costs will show a non-linear downward trend until they reach a relatively stable level.

Regarding the choice of SaaS business model, a topic that has always been unavoidable is which size of customer to target. Is it focusing on small and medium-sized enterprises (SMB customers) or serving large enterprises (KA customers)? Because no matter which type of customer is biased, it will bring about the paradox of business considerations. Once the customer "libra" is out of balance, SaaS companies may lose sight of one another.

As long as you have done a review of Salesforce, a benchmark company in the SaaS field, you will find that the company is starting from a small and medium-sized enterprise and gradually evolving to a large enterprise.

Although Salesforce’s overall model is still controversial for China, based on related considerations, in 2020, ONES acquired Tower, a well-known domestic team collaboration tool, and was able to expand its business landscape and achieve “full coverage” from small teams to medium and large teams. Provide one-stop solutions from various project management scenarios to professional R&D management.

At present, ONES’s customers cover many Fortune 500 companies including Xiaomi, China Telecom, Kweichow Moutai, SAIC, China Merchants Fund, Inspur Software, etc.; Tower serves companies including Transsion Holdings, China Resources Innovation and Learning Center, San Francisco The leading companies in various fields such as the Agricultural Group and Yuanjiao have accumulated more than one million teams.

"ONES has a very good team of executives. They basically do all of my work. Therefore, my pressure does not come from working less, but more from'don't make wrong decisions'". In Wang Yingqi's view, ONES's choice and adherence to every detail of the business model is a "correct decision" one after another.