Reducing the Cost of SaaS Implementations
Customers need vendors to work harder to alleviate the cost and stress associated with SaaS deployments. Here's what needs to be done.
By Subraya Mallya, FOYOPA
Jul. 30, 2009
In the on-premise enterprise software world, I have seen many software implementations go awry despite ballooning implementation expenditures. Customers never see their ROI until many years into the implementation, by which time they are so deep into upgrades, manpower turnover, shrinking IT budgets, IT organizational fiefdom - you get the picture - that ROI is the last thing on their mind.
As the customer struggles, the software vendor bears very little risk. The company has pocketed the license dollars and issued the press release on the customer acquisition.
With SaaS, the tables are turned. The SaaS software vendors (to their own detriment) have perpetuated this notion that, with SaaS, implementation will be effortless. But as we all know, enterprise software implementation is much more than just installing the software. Vendors must work harder to reduce deployment cost and improve ROI for their customers. Here's how.
The High Cost of Implementation
Recently I met with a CEO friend of mine who runs a late stage SaaS company that sells a industry specific business process automation software. The company is currently going through the infancy-to-adulthood transition. They have a great product and a excellent customer base, but the downturn and reluctance on the part of customers to sign checks has made them look for efficiencies in other places. During our conversation about the general business environment and challenges faced by companies naturally we delved into the topic of managing the cost of customer acquisition, implementation costs, maintaining profits etc. Most companies are in the same boat - managing their operations efficiently cutting costs, reducing the burn and maintaining the margins.
To really get to that state of customers doing their own implementations and onward to use the application, the vendor has to invest a lot in creating guided implementation tools, migration tools, WYSIWIG integration tools. If you look at the current stable of SaaS vendors, very few have that kind of maturity.
Most smaller SaaS companies operate more in the Software+Services model than pure Software model. Me, I think this is a flawed strategy. As a startup you are much better off building a product that is simple to implement by the customer themselves with guided implementation wizards etc and focus all your energies on building a great product. Selling a product is tough enough, then to add a service fee on top of that for implementation will only result in additional approvals and prolong the sales cycle. Nevertheless, the reasons companies go with this strategy is usually twofold.
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As the customer struggles, the software vendor bears very little risk. The company has pocketed the license dollars and issued the press release on the customer acquisition.
With SaaS, the tables are turned. The SaaS software vendors (to their own detriment) have perpetuated this notion that, with SaaS, implementation will be effortless. But as we all know, enterprise software implementation is much more than just installing the software. Vendors must work harder to reduce deployment cost and improve ROI for their customers. Here's how.
The High Cost of Implementation
Recently I met with a CEO friend of mine who runs a late stage SaaS company that sells a industry specific business process automation software. The company is currently going through the infancy-to-adulthood transition. They have a great product and a excellent customer base, but the downturn and reluctance on the part of customers to sign checks has made them look for efficiencies in other places. During our conversation about the general business environment and challenges faced by companies naturally we delved into the topic of managing the cost of customer acquisition, implementation costs, maintaining profits etc. Most companies are in the same boat - managing their operations efficiently cutting costs, reducing the burn and maintaining the margins.
To really get to that state of customers doing their own implementations and onward to use the application, the vendor has to invest a lot in creating guided implementation tools, migration tools, WYSIWIG integration tools. If you look at the current stable of SaaS vendors, very few have that kind of maturity.
Most smaller SaaS companies operate more in the Software+Services model than pure Software model. Me, I think this is a flawed strategy. As a startup you are much better off building a product that is simple to implement by the customer themselves with guided implementation wizards etc and focus all your energies on building a great product. Selling a product is tough enough, then to add a service fee on top of that for implementation will only result in additional approvals and prolong the sales cycle. Nevertheless, the reasons companies go with this strategy is usually twofold.
- Firstly, the technology they are building is still evolving so there are only few people beyond the employees of the company who can implement and guide customers through this process. That way, working closely with customers the companies can understand the gaps better and manage the bumps on the road much better.
- Second and more important reason is, being small, the companies can ill afford to lose the revenue that comes via the services arm. The services revenue helps in augmenting the minuscule subscription revenue when the product footprint is small.
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