Established and new ISVs, telcos, hosters and other tech providers are launching Software-as-a-Service at an ever-increasing pace. That’s great. However, many of these initiatives fail to attract leads and customers in the volume expected, resulting in management, market and shareholder disappointment. Why?
While organizations spend a lot of time understanding the technical transformation required to build a SaaS service, they fail to understand that this is just the anchorage of the transitional bridging they must do. In order to gain share and revenues, they must deal with the remaining pieces of the bridge to service success, which are their mindset, their organizational structure and their go-to-market tactics. Let’s take a look at a basic blueprint for bridging to commercial SaaS success:
Mindset – P-2-S
Product to Service. Services require a mindset of continuous relationship management, not of spiky product delivery and transactions. Changing your organizational mindset is the first and foremost step to SaaS success.
Organization – L-2-C
Linear to Circular. Today’s ISV structure is built to deliver products in a build-and-sell mindset. Even organizations that have adopted Agile SW development paradigms still go to the rhythm of minor and major releases, quarterly sales cycles, and other traditional techniques leading to an initial sale to a renewal. These are all linear processes. Successful service organizations are circular, surrounding the customer with experience, support and delivery from the time of first contact onward.
Go-To-Market Tactics – E-2-E
Evaluation to Experience. Today’s go-to-market mix, pricing, channel and promotion is built to drive evaluation and transaction. Successful service go-to-market requires a shift to tactics that drive experience and satisfaction. Successful SaaS organizations shift their go-to-market tactics and investments and become experience and service marketers, not evaluation and product marketers.
Are you firing and forgetting or bridging?
If you know where you’re going but fire away without preparation and work, you are at grave risk. Even SaaS start-ups can fall into the trap when they build their organization and tactics with people who have not transitioned to this new world themselves. Firing and forgetting leads to poor execution and results. So start today by looking to see if you have bridged to a SaaS world or have fired away without changing your mindset, organization and go-to-market tactics.
Mindset Matters Most
Mindset is made up of three things: orientation, perspective and focus. In order to make this transition, we must get all three of these in alignment.
First and foremost, we must shift our orientation from product to service. Products, even software products, are tangible things to be purchased, installed and used. Services are experienced. This fundamental shift ripples through everything else we need to do to succeed with SaaS. Maybe your product managers should change their name to service managers. AOL, with its many flaws, had this right with its maniacal focus on “The Service.” The words had an almost mystical quality and permeated their mindset and actions.
Second, we must shift our perspective from spiky to continuous. Products are built, shipped and sold as discrete widgets, which leads release schedules, sales quotas and customer relationships that are “spiky” by their very nature. Services are always running (hopefully), and always under evaluation and subject to churn. Customers make a continuous buying decision, and their ongoing experience drives long-term value. With the recent April 2011 Amazon outage, the providers who understood this went the extra yard to be ready to drive continuous delivery despite Amazon’s challenges. A great example of the right mindset driving the right investment.
Third and last, we must change our focus from transaction to relationship. Great product companies have always understood this, good ones not always. There is no missing this continuous mindset with SaaS. It’s a must-have. In the enterprise software world, transaction is king. Large investments create economic, organizational and personal commitment to past decisions well beyond healthy levels.
Buyers love SaaS because it raises the bar on providers to deliver real service levels, and lowers both real and perceived switching costs. There are plenty of Amazon customers looking today at alternative service providers. The providers who choose to compete for mature and enterprise customers need to raise their relationship game significantly.
How does your organization’s mindset stack up for SaaS success? What action plan do you have to get a service orientation, perspective and focus to permeate from development to marketing to sales and support?
Surround the Customer
Once I have adopting a SaaS Mindset, the next thing I need to do is to change my the organizational approach from linear to circular.
Today’s organization and its interaction with customers looks like this:
It’s linear, with sporadic customer contact. The product mindset is spiky spikey and transaction- oriented, and the organization’s linear structure is perfect to support this mindset.
But, as we move from a product to a services model and mindset, the organization must reflect the continuous and relationship- oriented mindset we’ve adopted.
The organization must be circular, surrounding the customer, and must look like this diagram below.
Because services are about experience, to truly optimize our experience delivery, we must collapse our organizations and surround the customer. Sales and Marketing, Development and Operations, and Support and Delivery must function as a tightly knit ecosystem, continuously enveloping the customer in the highest quality service delivery possible.
This is a hard transition to make. It requires executive commitment and drive, and constant attention. However, market leaders must do this, or they will fundamentally remain a product company, which is the kiss of death for any SaaS provider. Marc Benioff was wrong when he said the “End of Software.” He should have said the “End of Products.”
Are You Experienced?
Once we have shifted our mindset from product to service and our organization from linear to circular, we must now bridge our go-to-market strategy, objectives and tactics from Evaluation to Experience.
Today’s customers have little patience for white papers, datasheets, detailed feature function product specs and the like. They may attend a webinar, but the next step is experience. Even for large organizations with complex buying behavior, the expectation of SaaS is easy, accessible and meaningful experience of the service, either through demonstration instances, trial or freemium models.
In a post in November 2010 titled, “Meet the New Enterprise Customer, He’s a Lot Like the Old Enterprise Customer” , Ben Horowitz of Andreessen Horowitz concluded:
“If you are selling to consumers or companies that behave like consumers, then moving away from the old channel models may make perfect sense. However, if you plan to sell to a large enterprise, keep in mind that the new boss is the same as the old boss.”
And while Ben’s point on having to manage a buying process is spot-on, others have bandied about this post as evidence that we should cling to the old enterprise sales and marketing model. This interpretation is just wrong. It ignores the fundamental shift from product to service.
Services are evaluated via experience, not spec sheets, RFPs and lab evaluation. SaaS providers who replicate and cling to today’s software Go To Market model are doomed to LONG sales cycles and MISSED opportunity.
One infrastructure ISV that launched its SaaS offering experienced this firsthand. Initially, the company continued its sales and marketing model of stringent business and lead qualification before trial approval. For every 100 trial requests, fewer than 10 were approved, with an average qualification period of two months. This stringent qualification gave the company a close rate of about 2 in 100 trial requests, as 20% of trials closed.
When the group experimented with a much loosened qualification, where about 30 percent of the 100 requests were granted in an average of two weeks, an amazing thing happened. The conversion rate per 100 request shot up from 2 to 6, an incredible result, meaning the “less qualified” leads that experienced the product actually converted at the same rate as the previous model. This means that for every 100 leads in the old model, the company throwing away four deals! Not only that, the sales cycle shortened and the company is now leveraging its SaaS trials to sell its on-premise solutions as well.
The mindset and tactical shift from Evaluation to Experience marketing and selling can pay off like this in any market segment. However, to reap the full benefits and scale of a SaaS model, providers must take a long, hard look at all pieces of the marketing mix, from pricing, to channel, to promotion and messaging, to competition and company organization.
Summary: Bridging to Success
This brings us full circle to our blueprint for success. In order to be a successful SaaS provider, organizations must not only build a great service, but they must bridge their:
Mindset from Product to Service
Organization from Linear to Circular
Go to market strategy and tactics from Evaluation to Experience.
With that, the Bridge to SaaS Success can generate revenues, share and valuation that meets and exceeds our most aggressive goals.
About Ken Rutsky
President and Thought Leader at KJR Associates, Inc.
Ken Rutsky is a Product and Service Marketing Consultant, and has spent 20+ years in the industry, launching his first Internet services while at Netscape from 1995-99. Since then, he has been CMO at several start-ups and ran Network Security Marketing at McAfee. Ken launched McAfee's Secure Web Protection Service, and his time as a consultant has included the launch of Nimsoft's Nimsoft On Demand service. Today, he is laser-focused on helping ISVs and start-ups understand how to bridge from the world of products to SaaS Services with their mindset, organization and go-to-market tactics.