Has Everything Become ‘As a Service’?
By Jim Tholen, Managing Partner
We have witnessed a pretty remarkable revolution in the software business to Software as a Service or SaaS. Stories abound on traditional software firms making (or trying and not making) the transition to SaaS as they compete with more native Cloud competitors.
At BroadSoft we were one of these companies — it took us lots of work and several years of breaking internal and external china to appreciably move our needle to SaaS and Cloud with BroadCloud. We still have the bruises to prove how tough that journey was.
The wild change we are seeing is this SaaS thing isn’t just software anymore!
We are increasingly seeing this “As a Service” model moving well beyond software to appliances and hardware, and to services in various forms. Intriguingly we see models combining hardware and/or software with services — really a Solutions as a Service model — we’ll call this a SolaaS model.
We have been working with several clients as they have evolved their models to this SolaaSapproach.
As an example, we have a client that exclusively offered pretty specific technical services, with a dollop of automation in the background (and are very good at what they do). We have worked with them to be able to drive a much more predictable, growing (and profitable) SolaaS model. They wrapped their services around this underlying automation platform to offer simple SKU’s based on certain volume metrics to their customers. What is particularly cool is this model much better describes and aligns their value proposition to their customers.
While the end result of the SolaaS can be awesome (and hopefully value creating), it can be a challenging journey. There are several keys to keep in mind, including:
Pricing. Keep it simple! The fewer SKU’s the better. And if possible only a single pricing regime. By that we mean — all pricing is based on the same price per unit per month — depending on how your customer uses your product, it could be number of employees, terabytes of storage, number of offices, number of users etc.
Unit and incremental costs. If you move from a product/services to a SolaaS model, you definitely need to understand your unit and incremental costs, to make sure you do not get sideways from a traditional pay per use model. You need to really nail which costs move in what ways as the number of customers and number of users increases. Importantly, you need to think about how to stay true to the Solutions-aaS ethos while bounding your customers with some reasonable ‘fair use’ boundaries. This is even more true if you are moving your hardware appliance business to a subscription model. You will be managing lots of unit costs up front with delayed subscription satisfaction farther down the road…..
Culture. Driving a change from more traditional product models to a SolaaS is a big deal culturally. Everything changes. How you service customers. How you think about measuring performance including sales performance. How you compensate your reps. Everything. Changes. Including Sales.
Sales and selling. If you have reps that are used to making their numbers on home run deals will have your hands full. Not all your reps will make it to the other side. They need to become much more client management oriented.
E-Commerce and business model and your customers. Along with pricing mentioned above, you need to figure out a way to be brutally easy to do business with. Customers want total ease of use — not just with the SaaS platforms but now with their services and hardware providers offering ‘as a service solutions. The name of the game is self help and simplicity.
A final note for our hardware/appliance friends. We see lots of hybrid models out there. Companies wanting to continue to price their appliances more traditionally but package incremental software and/or services on an ‘as a service’ model. This is HARD. And confusing for customers. We encourage the move to ‘as a service’ but would strongly encourage going whole hog — hybrid models are really difficult and rarely achieve the objectives we laid out above.
We are big advocates on this move to Solution as a Service — we think it can really create significant value for companies successfully making this transition — and can be a positive for their customers as well.
We are happy to talk to any of you out there on your journey. May it be a delightful one!
