In my last blog I covered the key challenges and benefits of implementing the SaaS model. In part two of the SaaS series, I’d like to offer some top tips for selling SaaS.
What’s the right SaaS model for you?
So you have decided to build your own application and it is now time to take it to market; but where do you start and what is the right model for you? Well first of all you have to decide if you are going to just licence your software and have a third party support it or you are going to stand up the software yourself and deliver it out as SaaS. While the first option may seem appealing due to the fact you are only selling software and licences it does come with a number of drawbacks:
- You may have a service provider licence programme but essentially you will look like any other software vendor and that’s a competitive market place
- You will have to manage all software updates for the partners or customers you have, whereas if you stand up a SaaS you have centralised control
- You will have to train the partner or customer to set up and maintain the solution. With SaaS they just have to understand the user interface
- Badly implemented solutions are likely to reflect badly on your software, even if it’s not your software that’s at fault
- Ultimately you lose control of your intellectual property.
Delivering as a SaaS does mean that you will have to manage the infrastructure but the service providers are more mature now and can take much of the headache away, leaving you to get on and deliver a great software service to your customers. This is where you have to make your next decision: who is going to host your service?
Hosting and SLAs
Different service providers offer different packaged services; from basic infrastructure, where they offer an SLA only around the resource you consume and you manage everything else, to fully managed PaaS services, which not only include the platform but could also include backup, DR and even a managed database service. The choice is down to a balance between the level of control you want and the cost of management. The next point to consider when picking your service provider is ‘will your customers have data residency issues?’ in which case does your service provider have a DC in the countries you want to trade in? Last but not least, what sort of SLA are your customers going to demand and how are you going deliver it? It’s much easier to deliver an SLA if your underlying SP has the same SLA, i.e. you want 9999 up time and your SP offers 9999 up time. Otherwise, you have to build the extra resilience into the software, which can add considerable complexity to your solution.
So you have decided to stand up the solution and offer out SaaS and you have picked you service provider; now how do you price this service so you can make money and yet be competitive?
Let’s start with granularity under the pay as you go model. Customers only want to pay for what they use, therefore the more granular the pricing the more comfortable the customer will be. Charging for concurrent connected users is a popular model as you only pay for the software when the system is running. The final charging model will depend on the type of service you are offering. For example, if you are data mining then you are likely to have only a few connected users but consume large amounts of resource, so concurrent connected users probably won’t be profitable. The other factor that can affect granularity relates to third party software you may be using in your service. If that is priced in three-month increments then that is likely to be the limiting factor.
Next, you have to decide what to charge; you could just divide the cost by 365 days in the year, but that is not exactly ground-breaking and is unlikely to succeed in the new world of SaaS. You have to be flexible and offer innovative price plans to your customers. Here we can learn a lot from the telecom providers. If you think about it the technology is essentially the same across all the big providers and the differentiation comes with how those services are packaged to meet the different customer usage requirements. This should be the same for SaaS, as in my opinion, success in this market will rely on innovative pricing plans.
Access and extensibility
Unlike on-premise software solutions, you can’t offload security as someone else’s problem; you have to ensure your solution is robust enough to be exposed on a public network and meets all the industry standards required for a multi-tenant service. Remember your reputation is only as good as your first breach.
With the increased popularity of BYOD within the industry, the most successful SaaS providers offer services that are compatible across all software platforms. These not only include Mac and Windows desktops but also smart devices running on iOS and Android.
Extensibility will become key as SaaS matures. Your product is unlikely to run in isolation within a customer’s enterprise and so how you pass data in and out of your system could be the deciding factor in whether you service succeeds over the competition. As stated in my last blog, other partners will be looking to integrate your service into a cohesive business solution for their customers, so the more support you can give them, with full featured APIs and pre-packaged connectors, the greater your success will be.
Where is ‘value add’ going to be delivered?
With traditional solution sales, the end user often has a direct relationship with the vendor for support e.g. if a piece of EMC kit goes wrong, an EMC engineer comes out to fix it. In an XaaS model, however, the sale is to the next link in the chain.
This is for good reason and is demonstrated in the following example. An IaaS supplier sells resource to the SaaS provider, the SaaS provider then sits their software on top of it and the integrator packages it up with other services for an end customer. As a result, when problems occur they must be traced back through the layers of service to the point of origin within the supply chain, with each provider signing off to say the issue is not within their part of the service. That being said, it’s essential to know your supply chain well and document where your responsibility starts and ends.
In our third blog in the SaaS series we will explore the role of the SaaS integrator.