Goals of SaaS transition
Posted on Jul 30, 2020
When traditional software company or IT service provider wants to become a SaaS vendor, the whole organisation takes a giant leap towards unknown territory. Not only products and services get renewed, but the whole company culture, business strategies, management, operations and skills of employees need to be reinvented. These changes require organisational level transition projects that take easily from six months to a year - often even longer depending on company size and product offering.
As in any organisational transition project, we need a clear set of goals before going any further. Here's the list of most common high level goals that I've used with my clients - they are partly based on Boston Consulting Group's article "How Kronos Pulled Off its Successful Transition to the SaaS World". You could think these as the main themes that help people to identify actionable goals for your transition project:
Before even getting into actual changes, first you need to make everyone aware of SaaS concepts, business models and trends overall. It's a constantly evolving landscape of innovations, concepts and methodologies. Without shared language and mutual knowhow people can have very different understanding about SaaS. In practice alignment happens typically by coaching, workshopping, creating knowledge banks and so on.
It should not be a secret anymore that early SaaS companies such as Salesforce innovated the whole new way of nurturing customer relationships in deeper and more meaningful level: Customer Success. It's the new data-driven way to understand and help your customers succeed in their everyday business. If your customers don't succeed with your product, neither will you. Data is the key, therefore actionable goals here might be for example identifying user tracking tools, usage statistics, customer satisfaction metrics and anything that can provide you a real-time 360 degree overview into each customer's life with pains and gains.
Quote to cash
SaaS sales is much faster than traditional perpetual licenses sales. This is because SaaS monetising does not happen during the transaction when closing a deal. Instead, it happens over upcoming years when customer pays monthly or annual subscription charges one after another - slowly, but steadily. Typically it can take a year or two before SaaS customer pays the sales costs off and becomes profitable for vendor. Because of this, the closing must be super-fast and cost effective - often fully automated or at least boosted with inbound marketing - while customer retention (or more commonly "fight against churn") and up-selling becomes your sales team's main challenge.
Time to value
While quote to cash focuses on sales perspective, time to value is measured more from customer's perspective: How fast can your users get onboarded and find the true value of your product. In SaaS this is one of the most critical factors in sales, because typically SaaS products are sold with free trials and even after the deal is closed, customer might still rethink during first couple of months. Value must be obvious and instantly visible, otherwise customer gets tired and moves on. In practice this is the main theme for product managers and user interface designers to make product as intuitive and obvious as possible. Support and knowledge center can then make sure that users follow the desired path without issues.
When selling subscriptions instead of perpetual licenses with maintenance, everything in your company statistics changes. Transactional revenue based metrics must be turned into monthly or annual recurring metrics. Customer satisfaction metrics must be turned into real-life usage metrics. With combination of these key numbers your sales, support and product management is able to make educated decisions about real status of your users and how does it impact to your business numbers. One of the most profound articles about SaaS metrics can be found from For Entrepreneurs's blog post "SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters".
User experience between SaaS-product vs. traditional licenses software is like a night and day - and this is not only because of the technology moving from desktop to cloud. When having a SaaS product, as a user you wish to have new features on regular basis provided to you on a silver platter with clear instructions, without installations or technical maintenance. Users have learned that SaaS companies provide updates much more frequently than traditional software companies. And this affects to agile development cycles. In practice each sprint typically ends to a beta deployment, which in certain intervals is then generating production deployments. After each delivery you get instant feedback from users who got the upgrade with no delay - be ready to listen your users and be agile to provide new changes based on what you learned.
If earlier the sales director was the king of customer relationships in software business, in SaaS business it's the tech nerd who serves customers the best. The fastest growing SaaS companies are tech driven. When you are creating your SaaS ecosystem, everything gets connected with tech: If a feature in your software changes, it affects to user tracking data, which brings new information to your CRM, which in turn automatically triggers sales and marketing activities based on user's behaviour. There's no space for sales director's innovative PowerPoint presentations in this chain. Instead, you build your automated sales processes within same sprints and with the same people as you deliver your product. When everything is integrated like this, it is not enough to understand the product's concepts, but everyone from sales to support and product teams must understand how integrations and data integrity affect to your business operations. In my opinion this is the most difficult challenge for traditional software companies, which used to separate the business and sales from "technical guys".
If you are interested to hear more, please contact me - I've helped dozens of companies in SaaS transitions both online (across the world) as well as on-site (mainly in Central Europe, US East Coast and Nordics).