What Can Make SaaS A Profitable Business For ISVs?

What can make SaaS a profitable business for ISVs?

There are 3 important dimensions for a successful SaaS offering. They are Business, Operations / Support and most importantly Software. Many ISVs focus only on the software dimension and overlook the other 2 which leads them to the road of failure. There are so many ISVs who have failed in the SaaS business inspite of having a strong product for many reasons but In order to be profitable it is equally or in fact more important to focus on the other two dimensions as well.

Let’s look at the three important aspects in detail

Increase revenue

It is very essential for a business to device and manage dynamic price models that can attract, acquire and upsell to the customers. The product pricing should not just be attractive but also be profitable for the product owners. Alternatively, it is also important to experiment various pricing strategies, trial options & offers, freemium models at the right time to attract and acquire more customers. To achieve this, the business need to have a strong solution which can not only manage different subscription strategies but also provide necessary insights and data points on how each customer is performing, who needs attentions and whom they can upsell to.

Operations

This will be a completely new area for ISVs as so far they would not have a need for this in the on-premise model. There are quite a few areas that have to be worked out – hosting infrastructure, infrastructure monitoring, multiple support options (email, chat, phone), measuring usage by customer, bill customers by usage, track and collect payments, monitor product health, monitor Service Level Agreements, deployment and release management.

Decrease ongoing cost

Operation is entirely a new ball game for an ISV migrating to SaaS model. The ISV must have a strong operations and support team and process to keep the customers happy which is a key in the SaaS world to control the churn. ISV’s operation teams might be swamped with running tasks such as SLA Tracking, Customer follow-ups, Contract Renewals, Invoice Preparation, Payment Collections etc. The support team also needs to handle new customer onboarding process, ad-hoc requests such as new reports, integration setups, Data exports, altered workflows on an ongoing basis.
ISVs already have a challenge in offering the product in a low cost subscription model (compared to the one-time cost model), on top of this they need to have a higher bandwidth of operation and support resources to run their services and keep the customers happy which is going to increase their cost exponentially. In order to avoid this ISVs need a proven solution to increase operational efficiency by automating most of the operational and support related tasks.

SaaS_Life_Cycle_Management

Decrease Churn

The average customer churn rate in SaaS industry is around 15%, but most of the verticals operate even at high rates i.e. as high as 25%-30%, this literally means that product owners are losing their entire customer base in a very fast pace, so within 3-4 years the customer might lose the entire customer base. As per analysis, the primary reasons for Customer churns are product inflexibility, provider dependency, increasing product cost, product stability etc.

One of the way to keep customers happy is to empower them to self-service their own needs, track their own SLAs which will increase their confidence and reliability on the system. To achieve this, an ISV needs a solution that can easily extend the product’s capability using metadata to fit the requirements of the customers.

SaaS Lifecycle Management Solutions (LMS) really help in addressing these areas and improve the overall profitability of the system. SaaS LMS can help completely automate the operational tasks like subscription management, multiple price plans, trial conversions, licensing by usage, tenant management, reseller management, customer self-service portal, metering, invoices, auto payment, credit card support, pay pal support, billing dashboard and product analytics.

Please visit http://www.techcello.com for more details about SaaS Lifecycle Management Solution.

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Janaki Jayachandran

Janaki serves as the Director of Technology at Techcello. Janaki has more than 15+ years of software development experience. He is responsible for product engineering, support and evangelization of Techcello. Prior to Techcello, Janaki worked with Aspire Systems as Delivery Manager and Practice Manager focused on Microsoft Technologies and SaaS/On-Demand product development. He has worked with several ISVs and enterprises in building multi-tenant, cloud enabled products. He has travelled widely across the US and UK for working with various customers. Janaki is an ardent cloud enthusiast and a prolific speaker at various cloud conferences including Interop, SaaS University, Cloud Connect and Euro Cloud.

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