SaaS is on the rise. More than three quarters of businesses in Europe and the US are using SaaS offers to some degree in their IT infrastructure, with plans to use even more in the future.
Depending on their size, IT requirements and appetite, however, organisations are at very different stages of the SaaS journey.
Consequently, the software sector is operating in a hybrid landscape where SaaS and on-premise software are used in parallel.
Time and again, customers’ migration trends are keeping software providers up at night – and with good reason. On average, on-premise software customers will undergo a major upgrade every five years.
Research by OC&C Strategy Consultants has found that in more than 50% of situations, customers will at least consider SaaS solutions in an RFI. If they decide to stay on-premise thereafter, they are typically very loyal and 90% will stick with the upgrade from their existing vendor.
However – and this is where software providers begin to quake in their boots – when customers do decide to make the switch to SaaS, at least 50% of the time they switch away from their existing vendor.
This means that the migration towards SaaS represents a huge risk for on-premise software players. It’s not as if on-premise players can simply bury their heads in the sand and hope to stave off migration altogether. SaaS is here and it’s growing.
As a result, all software players need to develop a compelling SaaS solution. Firstly, to entice existing on-premise customers to join the SaaS journey. Secondly, to ensure that when customers do choose to migrate, they remain loyal. And finally, to win new customers. These seven tactics will help them entice, engage loyalty and win in the race to SaaS adoption.
1. Get that web look and feel
Invest heavily in the look and feel of on-premise software, as well as SaaS software, to make both as web-like as possible. This will align your offer to the SaaS interface, making users’ migration to your SaaS solutions more intuitive. The key here, however, is to make on-premise software more similar to SaaS software, rather than the other way around.
2. Utilise a ‘surround’ strategy
Surround on-premise software with SaaS modules, so that your customers begin to think of you as a SaaS player. This will make the move to SaaS easier for hesitant users, while simultaneously bolstering your SaaS credentials.
3. Make it seamless
Invest in developing seamless migration strategies, particularly focused on making it easy for customers to migrate their data into a multi-tenant cloud environment. Software players need to develop standard workflows which make undertaking this one-off migration easier not only for existing customers, but also for those using competitors’ software. Customers are nervous about this process going wrong, so providing success stories is key.
4. Exploit the appeal of collaboration functionality
One of SaaS’s main selling points is that it makes it easy for people to collaborate and connect. Make the most of this feature by putting it front and centre in your offer. All the latest book-keeping software products, like Xero for example, are designed to make it easy for small businesses and their book-keepers to work together seamlessly and view the same data in real-time.
Savvy software players will look at other areas where collaboration functionality can be most useful and use this knowledge to differentiate their offer. Expense management and staff scheduling are two such examples where collaboration functionality can help make your software stickier and more deeply embedded within a customer’s organisation.
5. Make ecosystems and app stores your best friend
Ecosystems of SaaS partner software which work seamlessly with one another create a virtuous circle of sales. That’s why all the major SaaS players are building them.
Companies like Salesforce, Intuit and Exact are all pursuing this avenue aggressively. Building ecosystems with hundreds of software products means that whenever a customer wants an additional piece of functionality relevant to their industry, an ecosystem partner is bound to have developed it.
6. Tap into the goldmine of data analytics modules
SaaS companies possess huge amounts of customer data. While critical to ensure it is held securely, this data has incredible value potential. Monetise the advantage without risking data security and you’re looking at a lucrative new revenue stream.
Opportunities to monetise include selling data analytics modules (do-it-yourself), selling data analytics services (do-it-for-me), and offering customers benchmarking services against similar companies.
Fourth Hospitality, a leading SaaS software provider for restaurants is a great example of how this can be done well. Through data analytics modules, Fourth Hospitality enables its customers to determine how effectively they’re running their businesses against their peers. Providing invaluable insights such as these is a robust way of differentiating an offer from competitors.
7. Welcome configuration, not customisation
SaaS adoption is leading to a market where customers are able to configure their software, but are offered less bespoke customisation. While many still find this challenging, in the long run it can only be good thing – both for customers and for software companies.
With bespoke software, at first functionality is perfect. Perfect fades fast however, and users are soon slapped with tricky and inconvenient upgrade processes because their bespoke modules don’t interwork easily with newer versions.
In a SaaS world, upgrades are seamless and ongoing. So be brave and embrace the shift towards configuration – short-term challenges make way for long-term opportunities.
Every challenge is an opportunity in disguise in the world of SaaS. While on-premise players are right to be concerned about the rise of SaaS and its challenges, opportunities abound for those companies willing to adapt and swim with the SaaS tide. Kicking against the current, on the other hand, is a sure-fire way to drown.
Sourced from Ewan Parry, OC&C Strategy