Once, software companies installed an application directly onto a client’s computer system and sold it as a perpetual license. The client paid up front, and the supplier raked in big profits through maintenance fees.
Those days are quickly fading into the ether. Today, 69% of businesses use at least one cloud-based application for a variety of business functions, including customer relationship management (CRM), payroll administration, and supply chain management. And it’s a trend that will only grow—global spending on software as a service (SaaS) is expected to rise to $127 billion by 2018.
As a result, many software suppliers are offering SaaS products to remain agile and boost revenue, but making the transition to a SaaS business model is not as simple as changing delivery methods; it’s a large-scale organizational shift. This can rattle internal teams such as sales, marketing, customer service, and pricing, who find their traditional roles upended. Whereas sales typically rule the roost in a perpetual licensing model with support from marketing, in the SaaS model, marketing moves to the forefront of demand generation along with sales.
Global spending on software as a service (SaaS) is expected to rise to $127 billion by 2018.
The radical shift to SaaS can lead to turf battles if left unchecked. Morale can be affected, which, in turn, can hurt a company’s productivity, lead to turnover, and, ultimately, impact the bottom line. Thankfully, there are ways to ease infighting. For software suppliers changing over, here are five steps to avoid the pitfalls, streamline the process, and bring in the sales.
1. Get your teams on board early
Before announcing the transition to SaaS, you must communicate your intentions to your sales team leaders. Explain that the goal of your company remains how to best serve customers and that one team will not be valued over another. Rather, the new model will boost the long-term viability of the company and give it a competitive edge. For sales, it’s especially important to have a plan in place for how to integrate your various teams—some of whom will still be selling on-premises software at the same time that others will be concentrating on SaaS. Sales compensation must be adapted to reward collaboration among the teams.
2. Project a vision of the future
Get everyone on board with the vision of where you want the company (or division) to be in one year, two, five, and 10. One way to do that is to share models or examples of software suppliers who have made a successful transition. What did they do right? They anticipated competing demands between traditional and SaaS models for resources, such as research and development (R&D) and sales and support, and allocated accordingly. Where did they go wrong? They did not understand that not all customers were ready to adopt the model and failed to anticipate the questions, anxieties, and needs to service them without affecting revenue.
3. Be up front and transparent
Change, especially coming from top management, can be daunting for many workers. You may want to select one part of your company to start with to begin moving things along fully. Above all, make sure you keep an open-door policy. Answer staff questions as quickly and as best you can. Be honest. Encourage your teams so they feel more comfortable talking to you in person. This isn’t the time to send out an announcement and go dark or defer to someone else. This is a time to show good leadership.
4. Get human resources up to speed
You’ll want to consider retraining teams, if necessary. Otherwise, there may be no way around it—you might have to overhaul staff. If you’re considering new hires, get human resources up to speed right away. Know that sales reps must have the ability to focus on customer acquisition and retention over account management. Marketers, meanwhile, must be focused on enhancing the customer experience and differentiating messaging by market segments. You may also need to look at R&D: SaaS product release cycles are shorter, and developers may need to be conversant in different technologies, delivery models, and tools.
5. Look outside for inside help
The transition to SaaS is intense; to better understand perspective, you may want to consider bringing in outside expertise with experience in helping companies shift to a SaaS model. Experts can help accelerate change and transition by providing access to external benchmarks, key performance indicators, adoption rates, and customer and sales incentives. There should be no issue in seeking outside help for such an enormous change—in fact, it can save money in the long run.
The transition will take time. During the migration, remember that your employees are your most valuable asset and that incentives and rewards can go a long way toward easing the transition and promoting harmony. You’ll lose some folks, and there will be bumps in the road, but if you keep communication lines open and remain realistic about the extent and process of conversion, you’ll smooth the waters.
Nitin Kumar is a Senior Managing Director at FTI Consulting and is based in New York. He is part of the Telecom, Media, and Technology (TMT) practice. He is also a regular contributor to FTI Journal. Nitin's core area of expertise is around driving revenue growth by unlocking value from functions such as sales, marketing, service, pricing, and customer experience. Contact him at Nitin.Kumar@fticonsulting.com or via LinkedIn.