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In today's fast-paced and technology-driven market, the role of a Chief Technology Officer (CTO) has never been more critical for SaaS companies at the helm of innovation. As you’ll see below, we contend every SaaS company needs a CTO - whether full-time or fractional. The following excerpt delves into the unique challenges and scenarios faced by SaaS companies lacking this pivotal position. It's a must-read to ensure your company not only keeps pace with emerging technologies but also excels in delivering cutting-edge solutions and maintaining a sustainable competitive advantage.
This excerpt from “A CEO’s Guide to Hiring a CTO” discusses three common scenarios where the absence of a CTO can have detrimental effects and highlights the critical need for a clearly defined and empowered CTO role within technology-centric enterprises.
Excerpt from “A CEO’s Guide to Hiring a CTO”:
Most companies achieve innovation through software, and commercial software companies provide the vast majority of software. Technology Creators, such as SaaS companies, need a CTO. The complexities of building a commercial software product are too great and too broad to risk not having the input and oversight of a competent and experienced CTO. The good news is that most modern software companies of size, say over $5-10M in revenue, do have a CTO overseeing the development of the Product.
If a SaaS company does not have a CTO, it is usually due to one of three reasons:
1) The Founder or Co-Founder is the CTO. Otherwise known as a Technical Founder or Co-Founder, they may have other titles such as CEO, Co-CEO, Chief Product Officer, or COO. When this is the case, these other general management titles obscure the fact that the company has an embedded CTO. Often, these CTOs-in-disguise are much better CTOs than whatever other role their titles might suggest. If the company continues to grow, takes on new investors, and/or brings in an experienced CEO, the CTO will usually take on their appropriate title as CTO to allow the company’s leadership to evolve. Interestingly, the Technical Founder is often most passionate about the initial product vision and finds the early stages of building and taking a product to market the most rewarding. It is not uncommon for the company’s early founder/CTO to lose interest or be found inadequate in the increasing management and strategy responsibility of the CTO role as it grows.
2) The Founder is not technical; there is no Technical Co-Founder or an individual/ small team built the early product without CTO oversight. While this approach may be sufficient to get a product to market or achieve product-market fit, the non-technical Founder often manages the increasing complexities of a commercial software product without the necessary skills and experience.
Common medium- to long-term implications include:
a) Rising development costs without associated increases in features or mounting quality problems,
b) Software developers have built the product “into a corner” where poor technical decisions make progress increasingly difficult and more expensive, resulting in claims that the product needs to be rebuilt “from scratch,”
c) The early developer or developers become intransigent, disagreeing with the decisions made by the Founder, Board, or investors, and put the company at risk by refusing to comply or even engaging in subversive activities.
3) The Founder or CEO is unaware or doesn’t agree that the company needs a technology leader on the senior leadership team. The technology leader may be capable and experienced. Still, they are not in a senior leadership role - often reporting to the CFO, Sales, or some other non-technical role that reports to the CEO. This approach may work in the early years, most commonly in Founder-led or bootstrapped software companies. Still, as the company grows, it will result in dysfunctional behaviors, such as:
a) The technology leader (e.g., Director of Software Development, VP of Software Engineering, etc.) is effectively limited to tactical execution without input into product strategy or the ability to influence key decisions in Product Management, Finance, Sales, or Marketing. The result is(technical debt, new features without a proper foundation, and the lack of sales blamed on the product instead of Sales)
b) “Software culture” never really develops. The organization can’t recruit the best developers, doesn’t pay them well, and is unable to keep the product current so that the best developers want to work on it.
c) Technical innovation stalls as, ironically, the only “CTO” who would remain in a role that doesn’t report to the CEO may not be a CTO at all.
These three scenarios illustrate the importance of clearly and authoritatively defining the CTO role, its place in Technology Creators, and its relationship with Technology Consumers. Buyers of commercial software are increasingly outsourcing innovation and regulatory compliance to Technology Creators and expect them to have strong leadership at all levels, especially over product development. Such a company without a CTO, as we’ve defined here, puts its customers at risk and should be a warning sign for existing and future customers.
To read the full e-book - A CEO’s Guide to Hiring a CTO, click HERE.
