Quick Tips - November 7, 2007

Tips from the practice masters...

Making a SaaS strategy work

SaaS – Software offered as an online service rather than in the more traditional form as shrink-wrapped CDs installed on the customer’s own computers – is the fastest growing segment of the business software market. But for companies which have established themselves with the CD-based deployment model, expanding or transitioning into SaaS comes with a unique set of challenges. In a recent online talkcast, Rick Collision, Ariba’s Director of Solutions Marketing, discussed the tactics of implementing a company’s SaaS offerings. 

Meet the customer.

Even after your company’s SaaS service is deployed, listen carefully to the voice of the customer. Hold conversations with business owners at least several times a year. Try to ascertain what they’re getting from it and what they need. Use that insight in subsequent updates and revisions.

Define service levels.

Service level agreements concerning Up-time for a SaaS operation need to take factors into account which are distinctive to that form of deployment. Administrative services such as adding new users within a designated time period, supporting a certain specified number of users online with the service at the same time, and maximum lag time to refresh screens with updated information, are typically included. But be clear about what is fair and reasonable recognizing that there are many moving parts involved in providing the service, only some of which belong to the vendor. Promise only those things you can control and deliver yourself.

Consider offshore labor.

The SaaS model requires more labor on the part of the vendor including managing the network, the databases, and the security of the enterprise – typically with 24/7support availability. That can be costly. However the quality of service provided by a SaaS-based organization can be kept at a high level, but at a lower cost, through the use of offshore labor in places like India and eastern Europe. Don’t be a cannibal. If your company’s main business is offering its software as a custom installation tailored to each customer on their own private network, how can you bring similar capability to the market as a SaaS model without cannibalizing your own core business? The answer is to know your customers’ business well and to do what is best for them. It also requires understanding the tradeoffs of the different delivery systems and how those tradeoffs, like lack of customization, will impact that customer. Don’t confuse the customer with too many choices, but provide enough detail so they can make an informed decision about which way to go.

Consider commissions.

Sales people have been described as coin-operated. So don’t inadvertently introduce a sales commission bias that would favor one delivery method over another – particularly if it could be to the detriment of a customer. Align your sales compensation system with the strategic direction of your company. And keep in mind that over a normal three-year contract period for SaaS delivery, things may happen that can frustrate the original arrangement.

Have an exit strategy.

What happens to the customer’s data when your relationship with them ends as a SaaS vendor? A plan to handle whatever sensitive sales, financial, personnel and tax information which reside on the vendor’s system when a customer decides to leave is important to consider before the situation arises. What is legally required? How do you give it back to the customer? How do you avoid making it attractive for the customer to leave before your company has recouped its initial setup costs?

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Read Part I of this series: How to think about SaaS (Part I of II), Meet the Customer. 

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