SaaS Blogs

Uri Lederman of Konverge recently published an excellent post that maps the internal machinations of a non-SaaS ISV to those of a SaaS ISV. The key takeaway from that post is that the move from non-SaaS to SaaS is not only a revenue and model change, but also an operational change for ISVs. On various occassions, I’ve highlighted the fact that SaaS is a paradigm shift that requires buyin from within the organization rather than from just sales. Lederman identifies the impact in a more pointed fashion, specifying that operations and insuring proper transition impact customer churn.

When determining how to best map your current operations to a “saas-ified” one, the key analytic point is to evaluate whether a particular operational facet will negatively impact churn if left as-is. If, in fact, it will negatively impact churn you must determine how that operational facet can be morphed into something that either a.) provides recurring value to the customer or b.) reduces the probability that a negative experience results in a customer dropping your service. A good example is customer support (help desk). Traditionally, ISVs deployed software on-premise. This allowed for significant “wiggle room” on the part of support since uptime was two components: the quality and stability of the software (provided by the ISV) and the quality and stability of the infrastructure (responsibility of the customer). If an ISV making the move to SaaS doesn’t realize that both components (and therefore all burdens and accountability) are now their responsibility, they’re in a for a world of hurt. Help desk and customer support needs to be re-tuned from strictly a reactive entity to a proactive entity with reactive functions that strive to reduce customer loss. Don’t forget, customers pay recurring fees for recurring value. In the on-premise world, the customer has already paid for licenses and most likely for a year or more of support. This creates an upkeep scenario that is much less demanding than that required by SaaS since the downside is already dampened by a prepay amount.

Some ISVs try to create artificial downside by requiring very large SaaS “setup fees” in hopes of reducing the likelihood that a customer will leave as a result of poor service (if the customer has sunk enough money in the offering already, a psychological deterrent is established). Clearly, this is a sweeping generalization that doesn’t always apply but generally it is my opinion that these fees probably negatively affect that ISV’s adoption curve. Instead, that same ISV can take Lederman’s advice of recognizing that their operations need to be overhauled to support SaaS and rather than relying on artificial barriers to reduce attrition, they can rely on the mechanics of their “saas-ified” business.

Do you believe that ISVs can function in a business as usual fashion, or that they need to shift internal operations in addition to sales methodology?