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The Four Pillars of transitioning to the SaaS/Cloud Business Model

The Four Pillars of transitioning to the SaaS/Cloud Business Model

March 11, 2010 0 Comments

I have the pleasure of spending a vast majority of my time working with ISVs or as well call them APs on their business strategy, specifically those that are looking to move from a traditional software business model to that of a Software as a Service(SaaS) business model.  Yesterday I was reading a favorite blog of mine Phil Wainewright’s Software as Services ZDnet Blog (http://blogs.zdnet.com/SAAS/) and I thought it was a very insightful piece on the Four Pillars of the Transition to SaaS.  The four pillars he highlights are:

Partner strategy. It’s clear that providers have to work with partners— but it’s equally clear that the old partner models have to be radically revised.

Pricing, packaging and selling. Makes a huge difference in timespan and ease or difficulty of the sales cycle, and the value of upsells and renewals. Once these decisions have been taken, there’s then the question of how to organize and incent the sales process.

As-a-service infrastructure. A highly automated operational infrastructure is needed to deliver the necessary partner, sales and customer relations in a cost-effective and responsive manner.

Customer relationships. Moving from a product sales cycle to a continuous, iterative service provider relationship is a complete culture change both for vendors and for their customers.

It is as though he has been on the phone with me and talking to our APs – the only thing that I would change is the order, as the biggest obstacle for most of our APs is the PRICING, PACKAGING and SELLING.  I work very closely with our partners to help them understand that SaaS is not just a pricing model – but the pricing is critical to the successful transition to the SaaS business model.   Understanding the target market and who the buyer is and how they are looking to consume the service is absolutely critical to understand, before making the transition.

Next, I would put the infrastructure requirements – only because that is a “COST” factor in the delivery of the service – so you need to understand your underlying costs – before you price and package your offering – so that one is also a critical component.

I would be remiss if I did not next say that the “CUSTOMER” is next on the list.  I mentioned before knowing your “buyer” is important – but just as critical is the understanding of the customer relationship on a go-forward basis.  You are no longer just selling them a piece of software or an application.  In the SaaS business model – you are now a SERVICE provider and the relationship that you have with your customer is just different.  You are now their “go to” person whenever anything goes wrong…and so you need to be prepared to address all of their business requirements.  Otherwise they will leave you and go elsewhere.

Finally, the PARTNER STRATEGY, but I would look carefully at this in more than just one dimension.  The partnering strategy changes considerably in a SaaS model – mostly because you are now most likely relying on multiple players for successful delivery of your service/product to the customer.  For example – there is the provider of the Internet connection for your customer, there is the hosting or Cloud provider that will be responsible for the hardware, virtualization and operating system delivery and finally there is who you will partner with to deliver the integration and the access to other applications that need to work very closely with your business application.  There might even be someone in your ecosystem that in the past has delivered training and/or implementation services for your application – the question then is: are they still needed? If not, what have you done to your application to make it easier for end-users to get up to speed and knowledgeable on using the application?  Have you investigated the “ease of use” aspect of your SaaS application – or are you still thinking “old school”?  Is your application now more likely to be part of a broader ecosystem and how do you fit into that system? 

These are just some of the questions that you need to be thinking about as you transition to a SaaS business model.  Most of our APs that have made the transition will tell you that after a few years, it can turn out to be a very lucrative growth model.  However, that does not mean that it was an easy transition.  But just keep in mind we are here to help, as we also have thought about our partnering strategy as it relates to the SaaS business model.  As always – any questions – feel free to contact me at cosmith@progress.com.


Colleen Smith

Colleen is responsible for go-to-market planning, strategy and product marketing for Progress’ OpenEdge Business Unit, in addition to SaaS/Cloud industry thought leadership.  Colleen joined the company in 2005 with 20 years of enterprise software marketing, sales, and product strategy experience, and has helped transform software companies into industry leaders, built strategic partnerships, designed acquisition strategies, and moved companies through aggressive growth stages.  

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