Making a Business Strategy to Seize the SaaS Opportunity

SaaS has revolutionized how the software industry operates. Learn how Progress is empowering our OpenEdge Application Partners to capitalize on this paradigm shift.

The Software as a Service (SaaS) model has completely upended the software industry and redefined how many companies are buying, building and using applications today. To help our ISVs capitalize on this paradigm shift, we’ve developed our own programs and resources that enable Application Partners to embrace SaaS and the profitability it offers.

In the first blog of this series, we introduced the SaaS model and dove into some of the ways businesses are delivering SaaS. This blog will focus on how software vendors can rework their business strategy to take advantage of the new SaaS model and provide some easy steps to get started.

Understanding the Business Model

The software industry has seen constant and dramatic change in its relatively brief history. SaaS has become the new paradigm for the design, sale and delivery of business applications.

The approach is changing the role of ISVs, VARs and other vendors, and promises to create new, more profitable revenue streams. The objective for these companies is to build, offer and support functional software-powered services at agreed-upon performance levels and deliver these applications as service contracts, instead of products they sell a single time.

The shift from providing products to offering SaaS requires a substantial shift in the business model. Rather than a single sale, SaaS companies draw regular revenue in exchange for providing support throughout the life of the contract. This is a win for the customers as well as vendors, who are encouraged to focus on providing greater value and offering superior customer service.

Developing Your SaaS Strategy

SaaS offerings involve far more than subscription pricing and hosting services. Next-generation, re-architected SaaS application software delivers a greatly reduced cost of ownership and far higher value over time. Fast implementation, included upgrades, increased software flexibility and higher customer responsiveness all combine to greatly increase the software’s value at a fraction of the total cost of ownership.

This revolutionizes the application software cost/benefit equation and fundamentally changes the customer ownership experience for the better. To that end, it requires existing software vendors take a step back and evaluate their current business model, then determine what a successful SaaS business model will entail.

A winning SaaS strategy doesn’t require you to make all the necessary changes today and put everything on hold until you’re “SaaS ready.” But it does require you to think things through, as though you were starting a new business—and that means starting with a plan.

An SMB Focus

Since the business strategy is shifting in a major way, it’s only natural for the marketing strategy to evolve alongside it. While companies of all different sizes across many different industries benefit from SaaS, the big target market for SaaS tends to be small and midsize businesses (SMBs). For SMBs, the ability to capture market share quickly is critical—as is the ability to put in place an infrastructure to support rapid growth. Because the initial investment required of the customer is minimal, and the time to bring an application live is short, the potential for SaaS in the SMB market is vast.

With the SaaS model, SMB prospects aren’t required to come up with the substantial investment necessary for all the hardware, operating systems, databases, licenses, IT staff and ongoing overhead. SMBs typically don’t have the luxury of IT support. And by outsourcing a much-needed application to a SaaS provider, SMBs can focus on core business activities, rather than diverting funds and other resources to support advanced applications.

Of course, the way SaaS providers position their offerings may also have to shift to resonate better with this new audience. As SMBs evaluate different SaaS providers, they tend to look for SaaS providers that can promise:

• Fast implementation, so they can get off the ground sooner
• High configurability, enabling SMBs to implement custom processes
• Frequent upgrades, to ensure SMBs can take advantage of the latest improvements
• Faster ROI, so they can fuel their growth

Getting Started

Start with your foundation, and remember these three essential tips:

1. The increase in demand for software-powered services will be the backbone for developing your SaaS strategy.
2. Don’t focus exclusively on either your existing customers or your target market. Look at what customer requirements exist today in markets that you have been unable to serve in the past. Then develop a strategy to go after that new business.
3. While customers today are struggling to cut software costs and management complexity, you, as a software supplier, are in a great position. You can increase your overall product and services revenue by developing new long-term income streams that are more predictable than the perpetual license fee.

Given the growth and resiliency of the SaaS market, all types of vendors are looking to seize the SaaS opportunity, including many Progress ISVs that have the specialized and/or vertical domain expertise to transition smoothly to the SaaS model. Progress SaaS FastTrack can help Progress Application Partners create and execute a SaaS strategy to capitalize on these new opportunities.

You can also check out our other programs and resources at the SaaS Resource Center—our repository of various videos, blogs, whitepapers and other content to help you make the business transition. Alternatively, contact your Progress Account Manager to help you get started.