By Christopher Gormley
Over the past few years SaaS – Software-as-a-Service– has triggered a sea change in the way providers and buyers of enterprise software do business. For buyers, SaaS offers a much shorter time to realize value as well as lower upfront costs compared to traditional enterprise software. However, as SaaS has become more mainstream, a number of challenges have emerged for its providers.
CHALLENGES
One is that a large number of new SaaS providers have materialized, challenging the position of incumbents. These new entrants, as well as existing players, are seeking ways to differentiate themselves in an increasingly crowded market. At the same time, many potential customers are slashing their budgets for software, including SaaS, in response to a weak economy. The result has led to pressure on new and existing account sales.
The ease of installation and use that is among the greatest advantages of SaaS is actually a double-edged sword. It also succeeds in creating less “stickiness” than traditional software models because unlike traditional software, SaaS customers are not locked in by their massive investment in systems, staff, facilities, and consultants. Therefore, SaaS providers face increased competition in the face of customer budget pressures by using a model that makes it relatively easy for customers to switch to a new provider.
But what if there were a way for a SaaS provider to create market differentiation and increase market share while enabling customers to work within their budgets? And what if that approach increased stickiness and improved existing customer sales? We believe there are three strategic methods which SaaS providers can use to augment their applications and create what we call Augmented SaaS Services to achieve these goals: Remote Human Services, Primer Information Services, and Residual Information Services. When combined with and embedded in a SaaS application, these elements create a truly differentiated solution that is hard to duplicate.
AUGMENTED APPROACHES
Remote Human Services refer to remotely delivering, on-demand, what were previously provided only as on-premise expert services, and doing so in a consistent, high quality, cost-effective manner. It is a form of service delivery made possible by high speed internet, low cost bandwidth, “call center” scale economies, and workflow software. Examples include remote tax preparation and legal services.
Remote Human Services offer powerful benefits for SaaS providers since these services can be seamlessly intertwined with SaaS applications so that their customers can take advantage of them on either an a la carte or full-service basis. SaaS customers can use these services to supplement their existing staff, leverage changing staff levels, or access skills that are not available in their organizations. This differs from Business Process Outsourcing in that customers retain overall responsibility for the operation of their business processes.
Primer Information Services refers to the on-demand delivery of “knowledge” in the form of templates, lists, or workflow through a SaaS application. For instance, if a manufacturer needs a list of suppliers that are classified as minority- or woman-owned businesses, the SaaS provider can not only provide a pre-screened list, but deploy it in a ready-to-use manner within its SaaS application. This can all be done centrally and instantaneously with a simple email request from a SaaS customer.
Residual Information Services – if you have ever used an on-premise consultant, what “leave behind” do you remember receiving (other than a report)? Residual Information Services refers to the lasting “enrichment” to a SaaS subscription which is made possible through the use of Remote Human Services. As Remote Human Services are delivered, information, workflow, or service “artifacts” can be directly entered into the customer’s SaaS deployment for its personnel to use later, without the intervention of third-party services.
For instance, a firm may leverage its SaaS provider to screen and recruit minority- or women-owned suppliers. For each supplier, remotely located SaaS provider service personnel record their screening results directly into their customer’s SaaS application. At the end of the sourcing project, the SaaS customer can reuse the results for another sourcing project without using SaaS provider services. This residual enrichment is made possible through the coupled delivery of Remote Human Services and a SaaS application since SaaS provider service personnel are simply working in a one-to-many deployment of their product. The more a SaaS provider integrates its back-end Remote Human Services with its customer deployed SaaS application, the greater the efficiencies of scale that can be achieved in delivering Residual Information Services.
EXAMPLES
As a result of these three approaches, astute product managers at a growing number of SaaS providers are finding ways to simultaneously differentiate themselves from their competitors, deepen their customer relationships, increase their stickiness, and generate more revenue through Augmented SaaS Services.
Bidding for an Answer
Take the case of FreeMarkets, now Ariba. One of their SaaS products, QuickSource, was an eSourcing platform that enabled buyers to create a request for proposal, research suppliers in their own supplier database, issue RFPs to suppliers, qualify them, and then conduct online auctions. The SaaS platform was fully self-service; customers could do everything themselves. But it quickly became evident that some QuickSource customers didn’t have the capabilities or the staff to do all the steps for all sourcing events by themselves and that Ariba had market knowledge and eSourcing process know-how which those customers found useful.
I was working there at the time, and customers would ask us: could you deliver services and information to us through your SaaS platform? Examples of these services included identifying qualified suppliers, helping customers craft the bid specifications, running e-Auctions, or providing starting templates for bid evaluations. Ariba took some of our own back-office services and knowledgeable, trained personnel, logged into our own SaaS platform as a customer “agent,” and worked hand-in-hand with customer personnel. Ariba service professionals, who were located in North America, Europe, and Asia, delivered their services in seven different spoken languages. We became just like the customers’ own virtual employees who could have been located within the customers’ own organizations. When we completed our services, we left residual value stored in customers’ QuickSource deployment – for example, supplier profiles to enrich their own supplier database.
Delivering Remote Human Services through QuickSource was not the same as full service business process outsourcing. For instance, Ariba might coach a SaaS customer in structuring and writing an RFP. Or we might provide a template for a preexisting machined-part RFP that we had already created with another client. We would perform the work within their SaaS QuickSource deployment and collaborate on the results, making changes as needed. For other projects, Ariba may have run the e-Auction event for the SaaS customer. And for still other projects, our people would just advise clients who otherwise did all the work. The key was customer choice while still benefiting from economies of scale in delivering the service.
Every client was different. Some did their own auctions, some didn’t. Some wanted help with suppliers, some didn’t. But it was very flexible for us because we had the back office services configured to deliver as QuickSource customers demanded. We layered a set of revenue on top of customer QuickSource subscriptions and made our offering much more competitive compared to SaaS-only offerings. QuickSource with services also became stickier because we were interacting with that client every day, learning about new problems, augmenting their staff, and becoming more valuable than if we had just sold them the SaaS platform alone. We made money off the tiered service approach, but also from information assets like a supplier list and details of a supplier.
You’re a VIP
Here is another example. Landslide is a company which offers a SaaS solution for sales force productivity. The software helps sales people manage their daily activities: I get a prospect, I qualify the prospect, I close the prospect, and I service the prospect.
Landslide provides VIP Assistants in conjunction with their SaaS application, which is essentially a “back office” set of services to support sales people in the field. VIP Assistants are provided as an integral part of Landslide’s SaaS application. For instance, a sales person on the road who just visited a client might call Landslide with the names of the people he or she just met and the Landslide VIP enters these contacts into the sales person’s Landslide SaaS deployment, enabling the sales professional to save time. VIP personnel also arrange appointments, create call reports, perform research on sales prospects, create prospect lists, and edit presentations. All of their results are entered directly into their Landslide deployment, creating a large level of Residual Information. As a result of VIP services, sales professionals can be more productive.
Since Landslide is dealing with thousands of customers and delivers VIP services centrally, they can provide high quality, repeatable Remote Human Services more cheaply than a customer could by itself. Landslide also provides Primer Information Services by dropping third-party sales processes, which could come from just about any vendor, straight into the SaaS application. It forms a workflow template that corresponds to the training that sales professionals receive as a Primer Information Service. It can also provide prospect lists directly into a customer SaaS platform.
The end result is that Landslide is more competitive within the highly crowded CRM SaaS space and stickier with sales professionals through their VIP services.
Do the Math
A third example is Apangea Learning. They’ve created a platform that provides “affordable tutoring.” For instance, Agangea Math blends SaaS tutoring technology with certified teachers. The SaaS software guides a student through various math learning paths. When a student gets stuck, the SaaS software attempts to correct the misunderstanding. If, after multiple attempts, the student still doesn’t get it, Apangea has a built-in escalation process where students get live support from a remotely located certified teacher. Chat, phone and web meeting tools enable one-on-one interaction wherever students need remedial assistance.
The tutor, however, is highly levered by the SaaS application. The only time that individual ever gets a call is when all the automated techniques have failed. As a result, it’s much better than programs which don’t have that feature and which make the student totally reliant on the software and much less expensive than hiring a one-on-one live tutor. The combined system is the best of both worlds: the system is smarter because there’s a person involved, and that person can then tweak the settings in the underlying software to make it work more effectively for that student.
PRODUCT MANAGEMENT LEARNING
What techniques can help product managers in creating Augmented SaaS Services? Here are three methods for creating Augmented SaaS Services.
1. Workflow Analysis
A core prerequisite is to understand how your customers use your SaaS application, particularly with respect to their internal information flows and processes. Most product managers are already know how customers use their SaaS software products, but may have less insight into a customer’s internal processes that interface with the SaaS application. You need to answer these questions: (a) Where do customers get the information they use in the platform? (b) Who actually performs the work in your SaaS application? (c) Where does the work go once it’s completed within your SaaS application? Answering these questions should yield a map of opportunities where your firm could offer Remote Human Services or Primer Information Services and where Residual Information Services could prove most valuable.
2. Services and Information Substitution / Augmentation Analysis
Once the customer’s information flows and work processes are understood, look for opportunities. Where does your customer currently make use of third-party services, particularly on-site consultants, while using your SaaS application? Where are there bottlenecks in the flow of work or information due to lack of resources? Where does the customer fall short in using your SaaS product due to inexperience or lack of knowledge? Where do they buy third-party information? Where does the customer spend inordinate amounts of time setting up workflow steps or creating document templates within your SaaS application? And how frequently do these needs occur – once in a while? Or regularly?
Armed with this information, match your organization’s capabilities, information, knowledge and pre-existing templates to your customers’ knowledge gaps, experience gaps, bottlenecks, or labor shortfalls. Ask yourself: Can your firm substitute for high-priced on-site consultants using centrally delivered, high-scale Remote Human Services? Can you substitute for some customer employees, enabling them to be assigned to other areas? Can you drop information based on your firm’s knowledge directly into a customer’s SaaS deployment – including both “in-house” and partner solutions? One caution, however: when using a partner, “white label” their service or information product to retain the maximum stickiness; if the customer can use the partner solution on your SaaS application, they can also use it on a competitor’s SaaS application.
3. Customer Needs Assessment
The easiest way to determine which services or information your customers need is to listen to their feedback and to ask for their input. Make sure your customer service (CSR) and sales representatives are listening for additional services and information needs whenever they interact with customers. Train your CSRs and Sales staff to look out for opportunities for you to provide Remote Human Services, Primer Information Services, and Residual Information Services. Regularly solicit their feedback and use it to inform your Services Substitution and Augmentation analysis. Once your initial analysis is complete, test the results with customers. Prioritize the relative value customers assign to various services and information products using standard product and service needs assessment. That same customer feedback will also help you predict demand profiles that you can use for designing service and information “products,” calculating costs, and establishing service levels.
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