“I am excited about how the cloud and new devices can help us communicate and collaborate in new ways… Office connected to the cloud has a LOT of potential and we are off to a good start.”
- Bill Gates
Microsoft, one of the biggest software product development companies, could not afford to ignore cloud computing. A shift from on-premises to SaaS can bring in a bunch of benefits, even if the transformation is not a walk in the park. Some powerful benefits include:
- Instead of selling and installing on-premise software, you sell an easily accessible service.
- There is a possibility of marketing and selling your product to decision markers directly.
- Reliable data on churn and new subscription gives a high level of predictability to your revenue generation.
- You can reach out to new customers through a cloud-based model.
- Costs drop as you do not have to support separate instances of your software for different clients.
However, not each and every ISV or product range will benefit from SaaS enablement. Also, not all customers are comfortable with replacing on-premise for cloud-based applications. For instance:
- Businesses refuse to add SaaS to their IT mix, citing data security concerns.
- Enterprises are not okay with the fact that the data and application are not on their own servers.
- For organizations looking for a high level of configurability, SaaS versions of your product may feel limiting.
- If your SaaS product doesn’t offer pay-as-you-go options and is underutilized, you are likely to see a high rate of churn.
- Unless your product comes with out-of-the-box connectors to integrate the app with legacy enterprise systems, the chances of large businesses buying it are slim.
Bottom Line: Choose SaaS for Growth or for Countering Competition
Should an ISV move its on-premise products to SaaS? Should it move all the products or just a few? There is no one answer that fits all cases. The answer to these questions depends on the industry or market you are serving, and the competition you are facing.
1. Adopt SaaS for Growth
“Our product was quite popular among regional customers, and our sales strategy was also centered around gaining more local customers. But with SaaS, we saw the potential to reaching a global audience and growing exponentially.”
– ISV Leader, USA.
- Is it possible for you to open up new market segments within your locale, or gain customers in new regions through SaaS enablement? In this case, you must explore the potential of SaaS.
- SaaS enablement may also make sense for your product if you can increase your profits by shifting from an on-premise model to a SaaS-based model.
2. Invest in SaaS Enablement to Keep Competition at Bay
It is possible that SaaS enablement may not bring much benefit to you in the short term. In case you are serving an industry that is fundamentally resistant to SaaS solutions owing to security, privacy or other concerns, there may be no point in considering SaaS. But if the potential for SaaS adoption is high, you have to consider other factors:
- Can a new startup or existing competitor with a SaaS solution potentially take a bite out of your market share? Can the enterprises or SMEs you serve benefit from choosing such a solution over your on-premise offerings? If so, it is best to create a similar solution of your own.
- Is there already a competitor with a similar product who is enjoying success with a SaaS-based solution? If so, you must create a SaaS version of your product (or part of your product).
Do you find yourself in one or more of the above scenarios? If yes, then you must give a serious consideration creating a SaaS-based product.