Key Takeaways from Rippling's Investor Notes on Compound Software

Rippling recently published their investor notes and finally I got time to write about the most juicy parts applicable to all B2B SaaS!

Compound vs Point SaaS

Point-SaaS refers to individual software applications that provide specific features or functionalities for a particular industry, task, or problem. Examples: Trello for project management, Expensify for travel and expense reporting, ...

While compound SaaS refers to software platforms that offer multiple applications, features and functionalities within a single platform.

I am building a compound business SaaS. That's why Rippling's investor notes resonated with me so much, which reveal the secrets behind their success in the world of compound software.

The Problem with Point-SaaS Applications

Rippling highlights three common weaknesses in point-SaaS applications: under-permissioned employees, shallow implementation of approvals and workflows, and weak reporting and analytics. These limitations can lead to frustration for companies trying to manage multiple business systems with disconnected data.

Compound Software Advantages

Rippling's compound software approach offers five significant advantages over focused point-SaaS competitors:

Deep Integration inside Rippling platform: Rippling's products are deeply integrated within the platform, allowing for seamless workflows and streamlined operations.
Employee Data Integration: The company's focus on employee data enables a deeper understanding of an organization and its employees, leading to more effective solutions.
Platform Components: By building on a set of middleware or platform components, Rippling can reuse capabilities across products, resulting in better quality and efficiency.
Common UX Patterns: Customers only need to learn one set of user experience patterns, making it easier for them to navigate multiple products within the Rippling ecosystem.
Bundled Pricing and Contracting: Rippling's bundled pricing approach allows for optimized software costs, giving customers more value for their money.

Why Compound Software Wins

Compound platform capabilities give Rippling (and other compound SaaS) an edge over point-SaaS competitors. By only matching competitors on features and excelling in platform reusable features like analytics, permissions, and workflows, Rippling can outshine its rivals.

The Future of Compound Software

The more commoditized the market, the more Rippling’s offering will stand out and become the “default buy” for our customers. With a longer and deeper R&D investment phase, better CAC payback, and larger overall TAM, compound software businesses like Rippling are poised for success.

🤓 Stay tuned for more updates!

References

https://rippling2.imgix.net/Investor-Memo-2024-Apr-public.pdf - Rippling's Investor Memo 2024