Keys to Making the Transition to SaaS: A Q&A with Peter Cohen

Editor’s note: This article has been adapted from the OpenView Labcast Prepping Your Marketing Strategy for SaaS.

Is a SaaS migration at the top of your company’s to-do list?

In an interview with OpenView Labs, ManagingPartner at SaaS Marketing Strategy Advisors Peter Cohen warned of the dangers related to a check-the-box approach to the transition to SaaS. Without proper planning, your oversized ambitions may sync up with the realities of life in the SaaS lane.

Organizations often find themselves attracted to the possibilities that SaaS offers without an understanding of the challenges it poses, explains Cohen. Short-sighted vision – cited by Cohen as one of the most common growth-inhibitors during a transition – will ultimately lead to problems. And when that is coupled with a lack of internal department identity, it’s no wonder why some companies struggle to make the jump from traditional software to SaaS. Read on to gain more from Cohen’s insights on the biggest adjustments and challenges companies face making the transition to SaaS, and discover what you can do to ensure you don’t fall into this trap.

How should companies decide whether or not they should offer a SaaS solution?

Sometimes I talk with people who are with companies that are thinking about moving into SaaS and they haven’t asked that question. They sort of get captured by the potential opportunities in SaaS and the fact that it has a very high profile these days. But then they start asking me questions like, “How do I continue to sell my existing business and then add on the SaaS solution?” Or, “Is there a way for me to structure my SaaS contract so that I still get an upfront payment?”

It began to dawn on me that, maybe, what they really wanted to ask was, “How do I do this SaaS stuff without really doing SaaS stuff?” So what I would say to these folks quite frankly is, “Look, there are a lot of good reasons to do SaaS, but they may not necessarily be good reasons for you to do SaaS. If you have a very successful on-premise business model and you don’t need to do SaaS, don’t.”

What are some legitimate reasons, then, for companies to explore SaaS?

I’ve identified a few reasons that I think people should think through really carefully. One is competitive pressure. Obviously, if your competitors are offering a SaaS solution and you’re losing business to these competitors because prospective customers prefer the SaaS solution over the on-premise or a hosted solution, then clearly that’s a good reason to consider a SaaS solution. The other reason is if customers demand it. If you have customers who are demanding that you sell them your solution on-demand in a SaaS model, it’s always a good idea to listen to the customers.

Is there anything else organizations weighing SaaS as an option should consider?

The final reason is that there may be things that you can do in a SaaS model — features and functions that you can offer in a SaaS model — that you can’t do or are more difficult to do in a traditional, on-premise model. If you have an application that’s updated frequently and has to be distributed to a remote workforce, for example. I’m thinking about expense report software or CRM in many cases where you have a sales force dispersed around the country or around the globe. That’s the SaaS model, where you access it remotely via any browser. That makes an awful lot of sense for the SaaS model.

What is one of the most significant or challenging changes that a company making the transition to an SaaS model needs to adapt to?

There are big changes that have to go on, and one of them that I’ve found is within your internal organization as a vendor. When you look at Org Charts, traditionally they had these nice boxes and they’re well separated and there are lines. But that whole model of the nicely organized Org Chart kind of breaks down in the SaaS model.

Let me give you some idea as to what I’m talking about: you used to have the marketing box and you had the sales box. In the SaaS model, you can’t afford to have these two separate boxes where oftentimes they’re sort of sniping back and forth across each other. The marketing guys are saying, “You sales guys are not closing business.” The sales guys are saying, “Your leads are no good.”

You just can’t afford that. The SaaS business model requires really close coordination between marketing and sales, and to have these sort of separate boxes where they work in different organizations, with different objectives is a failure. Another example that’s not quite so obvious is customer support and the sales organization. It used to be that the salesperson sold the software. Then they handed it over the wall. The customer support group went and deployed it, and they maintained it and answered all the customer support questions over the lifetime of the software. There wasn’t a whole lot of back and forth. There was the one hand-off between sales and customer support and that was it.

Well, in the SaaS model it’s different. In the SaaS model, this customer is under subscription. So they need to renew them, that is, sales essentially needs to go resale the existing customer whenever the subscription expires. The business model, in most cases, requires renewal to be successful. So your customer support people, they’ve actually become part of the sales process.

It’s an indication of how different the model is and how it has a pervasive impact throughout the entire organization.

 

Peter Cohen is the Managing Partner of SaaS Marketing Strategy Advisors, an advisory services firm that helps SaaS companies acquire enterprise customers, and author of the Practical Advice on SaaS Marketing blog. Follow him @saasmarketing.