When a company decides to start selling software as a service, it usually means that instead of paying up-front for perpetual licences, their customers start paying on a recurring subscription basis. There are a number of benefits for vendors adopting this kind of business model, it cuts delivery costs for one and enables software developers to monitor usage and maintain technological advantage via automated software updates. It also helps fight copyright fraud (a significant problem in my part of the world) but essentially, there is more money to be made selling subscription than from reoccurring contracts (although, exactly how much is difficult to quantify).
For the customer, it broadly comes down to cost and convenience. It should simplify many software support tasks, whilst you can get applications up and running very quickly and upfront investment is far lower. Compatibility across device screens is also much more straight-forward.
The downside for most vendors and their resellers is the dramatic impact that SaaS has on their business models. A transition to SaaS will almost certainly have a negative impact on short-term cash-flow whilst the transparency that it creates in the customer’s IT portfolio isn’t always welcome
For customers the biggest barrier appears to be concerns over security. Having data that is secure in the cloud doesn’t alter the fact that it is still located somewhere physically that they have less control over. But all told, the benefits should outweigh the negatives and SaaS has already become the common delivery model for many business applications.
Companies are not just changing the way they sell, they’re changing what they build in order to sell it in the cloud
But maybe the biggest challenge comes with how your sales and marketing teams now need to work. Put simply: companies aren’t selling products anymore, they’re selling services. It’s not about getting to the biggest deal, they’re driven by the life-time value of the customer. So a lot more of their focus is going to be on retention than acquisition and that changes the customers you want to target and how you need to interact with them.
For instance, software-as-a-service can dramatically impact when and what a customer will commit to. That invariably shortens the sales cycles and can increase volume. So, companies now need sales teams that can take lower value business and drive higher margin opportunity off the back of it. They need marketing teams then, to be very defined at the top of the funnel about who the customer is and how they are going to develop that business.
Which of course is what good marketing teams should be doing anyway, but in reality – particularly when they’ve emerged from high volume sales businesses – they aren’t always set up to do that.
This is why born-in-the-cloud businesses have such an advantage. Not only are their businesses setup around an annuity revenue streams, their sales and marketing functions have been designed from the ground up to figure out the optimal go-to-market model for cloud solutions.
These companies structure their go-to-market models around how the customer wants to buy. They ‘land-and-expand’ and secure initial customer commitment much earlier in the process. They offer trials and proof of concepts around the changing buying behaviours that SaaS deployment drives. What that does effectively, is to move marketing from being about one P ‘promotion’ to its proper role in helping define what the product offering should be in the first place.
These companies have grown up around the need to integrate a seamless on-to-offline customer experience, and that usually means that they are less focused on ‘big ticket’ marketing events and are driven by processes and initiatives that they can industrialise and scale digitally. In short, these companies are not just changing the way they sell the product, they’re changing what they build it, in order to sell it in a cloud-driven world.
But learning how to sell software-as-a-service is only part of the business challenge. In the brave new world of digital, social, cloud and mobile, the way customers access information and want to interact with companies is moving sales further down the buying process. That means that Marketing is going to have to take much more of the load in winning new customers, integrating programmes, maintaining relationships AND setting business strategy, because for many organisations SaaS will also be a prelude to selling BPaaS, IaaS and even PaaS.
It’s marketing Jim, but not as we now it!
Gavin McClement
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