Comments on: Another Interesting Implication for SaaS

By: Scott Blackwood

Scott Blackwood — Tue, 23 Jun 2009 13:46:32 +0000

Debbie, fair point. My intent with the word ‘relatively’ was specifically in comparison between SaaS vs on-premises solutions that often require additional infrastructure for integration… certainly didn’t intend to downplay the complexity of various integrations as a whole. We tend to utilize standards where possible but depending on the legacy system the mapping is far from trivial as you say.

Really my main point was in relation to the non-technical aspects of change being often overlooked or at least not understood appropriately before embarking on change. Irrespective of SaaS vs on-premises solutions providers.

By: Debbie Wilson

Debbie Wilson — Tue, 23 Jun 2009 03:30:42 +0000

Thanks for your comment Scott but “there is no infrastructure so plugging back end systems into a new SaaS provider is relatively straightforward” doesn’t resonate with me . . . i.e. what about heterogeneous data models? Perhaps you find mapping trivial . . but I don’t think it necesarily is . . . . ..

By: Scott Blackwood

Scott Blackwood — Mon, 22 Jun 2009 20:49:57 +0000

It should be easy to technically switch from SaaS solutions but there is always cost incurred irrespective of SaaS or licensed solutions.
Certainly with 100% SaaS there is no infrastructure so plugging back-end systems into a new SaaS provider is relatively straight forward (compared to licensed solutions) but the change management related to business process and organizational impact of any change needs to be evaluated as it is often overlooked or unanticipated.
Unimarket (http://www.unimarket.com), like other SaaS companies tout that it is technically easy to “plug-in” and easy to “plug-out” and then internally emphasize to staff the crucial need to ensure consistant customer satisfaction for this very reason. E.g. Unimarket has a “raving fans” strategy which encourages our employees to ensure our customers are ‘always’ raving fans! By achieving this our customers have less reason to switch at the close of their subscription term.

By: Martial GERARDIN

Martial GERARDIN — Thu, 18 Jun 2009 14:07:49 +0000

“In a perpetual license deal, there is no corresponding natural “point” at which a customer would pause and contemplate their options.”

May I courteously disagree with this statement?

Each time an old version is no longer supported by the software provider, discovering the migration cost to a newer release IS the natural point.

Reason why SaaS market share is growing quarter after quarter I think….-:)

By: To SaaS or Not, Is That a Question? – SaaSy Discussions (Part IIc) » The TEC Blog

Tue, 09 Jun 2009 06:06:42 +0000

[...] company is to minimize or eliminate the customer churn rate. Indeed, SaaS vendors are certainly not immune to customer attrition, especially in the time of contract renewals. Aleks said: “The cost of renewing a customer is significantly lower than the cost of signing up [...]

By: Debbie Wilson

Debbie Wilson — Wed, 25 Mar 2009 22:33:40 +0000

Thanks for all the interesting comments; great food for thought. One thing I am seeing – particularly in sourcing and spend analysis, is that cusotmers dont’ move their data to the new system. They simply start afresh with a new system.

By: Scott Wilson

Scott Wilson — Wed, 25 Mar 2009 14:24:58 +0000

I’m not all that sure that there isn’t a natural point for companies to look at options when using on-premises software; it’s when major upgrades come out. But you are correct in that they don’t actually often do so.

I think this has less to do with subscription terms than the general effectiveness of on-premises lock-in versus SaaS lock-in. SaaS is cheaper and generally easier to transition from platform to platform; that’s one of the selling points, after all. As A Gupta points out, it’s not entirely free from difficulty, but in my experience it’s considerably less difficult than making the same transition between on-premises platforms.

Given that, I think that the churn is inevitable, regardless of the billing model being used. Prices are lower (making experimentation less costly) and lock-in is intentionally less a factor, and I don’t see how you could avoid greater churn in such an environment. But as others point out, that’s a good thing for customers, and it will force SaaS providers (not a business I would want to be in!) to work harder and for less to keep their business and stay competetive.

By: A Gupta

A Gupta — Wed, 25 Mar 2009 04:49:12 +0000

What this article describes makes me wonder if this indeed would happen?

For example, if I give you a new FREE cell phone, and you will have to invest significant time/energy to bring your address book from old phone to new phone. Would you consider doing so?

So I feel that switching cost is also the energy/labor/time/consulting fee involved in bringing data from current Saas company to new Saas company? How do you explain that businesses will be okay migrate data across – and there is an inherent risk that some data may get lost etc.

By: Peter Cohen

Peter Cohen — Tue, 24 Mar 2009 20:20:57 +0000

Your observation also makes it clear why SaaS providers must continue to market to their existing customers, not only to prospects.

To reduce the risk of losing customers as they come up for renewal, SaaS vendors must ensure that their customers are actually using the solution, deriving benefits from it, and are aware of product enhancements as they are delivered over the life of the subscription.

FYI, I’ve discussed this need to market to existing customers here: http://saasmarketingstrategy.blogspot.com/2009/03/your-existing-customers-are-prospects.html

By: Debbie Wilson

Debbie Wilson — Tue, 24 Mar 2009 12:49:56 +0000

Thanks for the comment MIke, you do bring up a good point, that from the buyer’s perspective, it can be very productive to periodically assess how a solution is meeting needs. Clearly this is not something all software app stakeholders go through – if only because switching costs are so prohibitive. Why ask a question if you don’t want to know the answer. . . .