3 Common Mistakes Made When Moving to SaaS

One of the questions that I get asked a lot is “What are the mistakes that others have made when moving to Software as a Service (SaaS)?”  I think that software vendors are always looking to learn from others mistakes – so they don’t make the same ones.  So, I thought I would highlight some of the common mistakes that I have seen by some of the vendors that I have spoken with over the past few years.

1) Thinking that SaaS is a replacement for the current offering
Many times when I first meet with a vendor, they are thinking about their SaaS offering in relationship to their existing product and their current target market.  The problem with this is that if you come in thinking that this new SaaS offering is just to replace your existing product offering – then that is called “cannibalization” and that is a bad thing.  What you want to do is develop a new adjunct or complementary service/offering for your existing customers – or even better - to develop a new offering for a completely new target market.  It may be based on your existing product/expertise – but you need to think of it as a new service offering to a new customer base and not just as a replacement to your current offering. The last thing you want to do is cannibalize your current product offering.
 
So, my advice is as follows: If you feel you have found an untapped market for your existing product capability – then go after this new market with a new service offering.  If you feel you only have access to your current target market/customers – then you need to develop a new service to be offered in addition to your existing on-premise product.

2) Targeting too broad of a market segment with the initial SaaS offering
The next thing that happens after many vendors decide to move to SaaS is that they try and take on the world all at once with the new offering.  Too many times when I first meet with a vendor and I ask who their target market is – they come back with an answer that almost includes everyone.  Now, I know that many times a product can solve many problems for many types of companies – but one thing to keep in mind when bringing a new product/service offering to market is to FOCUS.   What I mean by that is for your initial SaaS offering – think about starting small and targeted.  Maybe you can pick a subset of a broader market – or maybe you can limit your target by geography or by a particular set of business processes – whichever way you choose – the key is to start small – become successful and work out all the kinks. 

Once you have shown success – then it is time to open up the field a bit more and expand – but my advice would be to start small and target your offering at a set group of prospects and then once you have achieved success – expand into other areas.

3) Treating the SaaS customers the same as the current customers
Another mistake that I hear a lot about is around the level of service and customer support that is provided to a SaaS customer.  When I first meet with existing software vendors they always tell me that support is not a problem – because they have been doing software support for their customers for years and that is something they know a lot about.  Well – maybe they know a lot about product support – but servicing a SaaS customer is different.  Here is what I mean by that: in the SaaS model – it is all about service levels – that includes: product support, technical support, operational access and overall customer service experience.  I think that most software vendors are good at product and technical support – but it is in the areas of operational support and the overall customer experience that sometimes is forgotten or in many cases – just not thought about at all.

The customer experience will not only be critical to the renewing of the service – but it also counts in terms of how much the service is used as well as many times – how many additional services will be utilized/desired by the customer.  SaaS success is all about “stickiness” – and that means you need to get more customers using the system and you want them to think about going to you for additional services and not to another service provider.

So, my advice is to create a separate account management function to make sure that the needs of the SaaS customers are always being looked after.  You may also want to incent those account managers to continuously ask about how the service is going and provide them with additional service offerings.  Also, make sure from an operational perspective that service levels are constantly being met- if not exceeded – as it has been shown that a happy customer is much more likely to buy more and an unhappy customer is always ready to tell someone else how unsatisfied they were with a vendor.