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Why B2B Application Performance & Latency Matter

Published on
Last updated on

June 3, 2024

Max 3 min
Why B2B Application Performance & Latency Matter

Summary

  • Performance and latency are crucial for B2B SaaS applications, even though their impacts are often less dramatic than in B2C contexts. Evidence shows that slow performance in B2B apps can equate to significant revenue losses, similar to extended outages.
  • A 100ms slowdown can have a substantial financial impact on a business unit with $100M annual revenue, equating to the impact of an 88-hour outage based on Amazon's 1% revenue assumption.
  • Research by TracResearch found that organizations lose nearly twice the revenue from application slowdowns compared to outages, highlighting the often overlooked yet critical issue of latency.
  • Faster loading times can significantly boost engagement and retention
  • Poor SaaS performance can severely impact user productivity and retention, with Riverbed reporting that 90% of respondents agree that poor performance slows down their business, and 70-85% of SaaS revenue typically comes from renewals, making performance optimization essential for customer retention and satisfaction.

SaaS Performance & Latency Impacts Engagement, Retention and Revenue

The impact of latency on B2C is better researched with several well known statistics. For example, Amazon's Greg Linden shared that a 100ms delay led to a 1% revenue reduction. A more recent statistic from Zalando put the impact of 100ms improvement at 0.7% revenue gain [9]. But what about B2B SaaS?

Is SaaS Performance Material? Slowness is the New Outage

The impact of slowness is under-appreciated relative to the more dramatic case of a major outage. The example below, based on an insight from AppDynamics' Marco Coulter, shows that for a business unit with $100M annual revenue that a 100ms slowdown running across the course of a year has the equivalent impact to an extended 88 hour outage, using the Amazon 1% assumption. Individual results will vary by business. Latency is a silent killer.

Outage Slowdown
Impact 88 hour outage 100ms slowdown
Impact $11,000 lost revenue per hour 1% revenue lost
Business Cost $1M $1M

While availability is important, latency is often just as important to users as downtime. TracResearch estimated that organizations lose nearly 2x the amount of revenue due to application slowdowns than they do to outages [19].

In the past, the primary concern with applications was downtime. However, with advancements in engineering, slow performance has become a more significant issue than outages. It's not just about availability anymore; performance is equally critical. Users are more likely to report that their applications are stuck or loading slowly rather than being completely inaccessible. These intermittent issues, often dismissed as vague "WiFi problems," can be challenging to diagnose and replicate.

Marketing, CRM, and enterprise SaaS applications must deliver a consistently excellent user experience. Even with 99.9% uptime, minor downtimes can be managed and excused by users. However, slow performance results in lost productivity, which can prompt companies to reconsider their software choices. This makes maintaining optimal performance essential for retaining customers and ensuring smooth business operations.

Poor SaaS Performance Reduces Signups

Portent analyzed millions of page views for 14 B2B sites and found that a site with a 1 second load time converts 3x higher than a site with a 5 second load time, and a rate 5x higher than a 10 second load time site [20].

"Speed improves your ability to rank well in search engines, the likelihood someone will amplify your work, the reach of your pages to those with slower connections, the percent of visitors who won’t hit that back button, and the odds that someone will feel elation versus frustration while using your site." - Rand Fishkin, Founder of Moz

SaaS Performance Reduces Engagement

Professional audiences engage less with slower sites:

  • B2B marketplace Agrofy made a 56% reduction in load time and saw a 76% reduction in abandonment rate and an 18% engagement increase [11].
  • Professional network LinkedIn also saw a simple image load speed optimization lead to billions for extra Feed Viral Actions (+0.23%) taken, millions more Engaged Feed Users (+0.16%) as well as Sponsored Revenue  (+0.76% increase) [12].
  • The UK Business news outlet Financial Times found that a one second delay reduced revisit rates by 4.9% after one week, and a three second delay reduced revisit rates by 7.2% [7]. The FT also found that "users with lower engagement rates showed an extreme reaction to even a short delay", which could be extrapolated to a B2B SaaS trial user experience. The FT concludes "The speed of the site negatively impacts a user’s session depth, no matter how small the delay".
a frustrated customer experiencing bad performance will result in poor adoption - Archana Sethuraman, Salesforce

SaaS Performance Impacts Retention

Retention is the #1 priority for SaaS platforms. For SaaS companies, 70-85% of revenue comes from renewals[5]. With the median length of SaaS software contracts being around 1.3 years [18]., and users often have fairly low barriers to switching means SaaS providers must offer a great user experience, or risk churn. An app that’s slow or difficult to use won’t achieve wide usage. Performance contributes to product-related churn, estimated at 14% by Zonka [6]

Poor SaaS Performance Impacts User Productivity

According to Riverbed, 90% respondents agreed that poor SaaS performance impacts and slows down their business [3]. Loggly also reported that 80% https://www.loggly.com/blog/five-tips-for-monitoring-your-saas/

For many major industries like finance, healthcare, or retail, every second matters. An increase in speed can directly help increase the revenue — for example, by increasing the number of healthcare claims processed or increasing the number of items sold and shipped... We know that performance is a core feature that our customers have come to expect out of our platform  - Archana Sethuraman, Salesforce

SaaS App Performance Increasingly Visible to Enterprise Buyers

The dramatic growth of B2B SaaS applications has led enterprises to invest in monitoring not just outages but also application performance of their SaaS vendors, making performance visible to corporate IT teams who manage the budget for SaaS spending. Gartner projects that by 2024, 40% of enterprises will have extended their Digital Experience Monitoring to include home workers, up from less than 1% in 2020. Below is an example of SaaS application latency monitoring from Catchpoint, a provider of SaaS Monitoring tools. In this example, Zendesk is the slowest responding app with 3.1 seconds response time while Intuit TurboTax was the fastest at 514 ms. While performance may not yet be in SaaS B2B SLAs, that performance is becoming more visible to B2B SaaS buyers, further reducing the historic gap between end user and buyer experience in B2B software that allowed apps with poor UX to still achieve high retention rates.

Employee Experience – Monitoring the Metrics That Matter

These metrics can also be monitored at a feature level for performance. Below is an example of monitoring for key tasks across multiple applications.

End User Experience Monitoring for Better Customer Satisfaction | Aternity

These can trigger SaaS users to engage with SaaS providers to address performance concerns (see an example of a slow expense management app being resolved here).

What is the right latency for SaaS applications?

Earlier in the internet era Neilsen determined that the following web response times could be used to guide response times.

  • 0.1 seconds gives the feeling of instantaneous response — that is, the outcome feels like it was caused by the user, not the computer. This level of responsiveness is essential to support the feeling of direct manipulation
  • 1 second keeps the user's flow of thought seamless. Users can sense a delay, and thus know the computer is generating the outcome, but they still feel in control of the overall experience and that they're not waiting on the computer.
  • 10 seconds keeps the user's attention. From 1–10 seconds, users feel at the mercy of the computer and wish it was faster, but they can manage it. After 10 seconds, they think about other things, and itd difficult to get back on track

Now that we are in the TikTok era, assume lower times are needed, especially around the latter time to maintain attention. Users have materially higher expectations today for how long a site should take to load.   Human Factors research has found that the users's willingness to wait varies according to the perceived difficulty of the task for the computer [13].

Poor SaaS Performance Impacts Company Reputation

"No one wishes their public identity to be tarnished because [the application] fails to work under duress, or simply because it became too popular" noted Freshworks Engineering Manager Siva Venkatachalam on their blog [16]

Competitor Comparisons Used by Buyers and SaaS Companies

Benchmarking performance against competitors is also used by sophisticated SaaS providers to check that their application load times and experience is in line or better than that of your competitor. Catchpoint provides a disguised example for two competitors below in which one company has a 14.4 second page load time while a competitor has a 5.5 second time, providing a 62% advantage to the faster company (read more here):

Remote Work Increases SaaS Performance Challenges

The potential for poor SaaS performance has expanded as workers have shifted to work from home where network access can be highly variable. According to Riverbed, 42% of enterprises report that at half or more of their distributed workers suffer consistently poor experience with the SaaS applications they use in their daily work [1].

The impact of remote working for SaaS applications has expanded. By the end of 2021, 51% of all knowledge workers worldwide were working remotely, up from 27% of knowledge workers in 2019, according to a Gartner estimate [2].

The Opportunity

86% of global IT decision makers agree that low-latency applications help differentiate their organizations from competitors, according to a survey by Lumen [14]. In a Performance Engineering survey by Sogeti, 66% of respondents said they were very committed to correlating app performance with business metrics, only 15% of respondents said their organizations actually did [10].

Sources

[1] "15 Surprising Stats on the Shift to Remote Work due to COVID-19", Riverbed, https://www.riverbed.com/blogs/15-surprising-stats-on-remote-work-due-to-covid-19.html
[2] https://www.gartner.com/en/newsroom/press-releases/2021-06-22-gartner-forecasts-51-percent-of-global-knowledge-workers-will-be-remote-by-2021

[3] https://www.riverbed.com/sites/default/files/document/infographics/the-impact-of-poor-saas-performance-in-global-deployment.pdf
[4] https://samknows.com/blog/critical-services-report-video-conferencing-uk

[5] https://heap.io/blog/saas-user-retention-flows

[6] https://www.zonkafeedback.com/blog/main-causes-of-customer-churn

[7] http://mediashift.org/2016/04/a-faster-ft-com-how-slow-websites-damage-publishers-revenue/ and https://twitter.com/leanmediaorg/status/1249770904877502465?s=12&t=5CeUZqbfrNHSNiWpqLxQtQ

[9] Zalando saw a 0.7% increase in revenue when they shaved 100ms off their load time.

[10] https://www.neotys.com/wp-content/uploads/2020/08/State-of-Performance-Engineering-2020-Report.pdf

[11] https://mollar-luciano.medium.com/how-agrofy-optimised-core-web-vitals-and-improved-business-metrics-2f73311bca

[12] https://blog.tensorflow.org/2022/03/how-linkedin-personalized-performance.html

[13] https://www.humanfactors.com/newsletters/response_times.asp

[14] https://discover.lumen.com/edge-computing/trends-report

[15] https://userpilot.com/blog/day-one-retention/

[16] https://www.freshworks.com/saas/how-to-make-performance-testing-more-effective-for-an-organization-blog/

[17] https://www.appcues.com/blog/end-user-retention

[18] https://www.forentrepreneurs.com/2016-saas-survey-part-2/

[19] https://www.slideshare.net/KenGodskind/alertsitetrac

[20] https://www.portent.com/blog/analytics/research-site-speed-hurting-everyones-revenue.htm

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