In one of my recent blogposts, I discussed the growing opportunities incumbent software vendors (ISVs), especially publicly traded ISVs, have to move their applications to the cloud and offer a new generation of Software-as-a-Service (SaaS) solutions to their customers. I’d like to outline one path that provides particular promise to those ISVs that are concerned about cannibalizing their installed base of perpetual license customers and disrupting their existing business models.
While there are many software design, packaging, pricing and promotional issues to be addressed in order to move from an on-premises to an on-demand solution offering, one of the keys to success is building a services-led corporate culture. Unfortunately, even ISVs with world-class support organizations lack the fundamental skills and service delivery mechanisms to successfully sell and deliver SaaS solutions. The reason is that most traditional support organizations react to customer issues rather than assume responsibility for customer success as is required in the SaaS world.
Therefore, ISVs seeking to become world-class SaaS companies must adopt a new set of proactive management tools and develop a different set of staff skills that focus on helping customers fully utilize the functional capabilities of their software rather than simply overcoming the technical issues that surrounded software in the past.
One approach to moving in this direction entails a three-phase migration process that starts with delivering a series of managed services. Offering managed services allows the ISVs to continue to sell their traditional, perpetual license software products to organizations that want to operate the software internally but may not want to handle the day-to-day management responsibilities.
Providing managed services forces the ISV to assume the responsibility of ensuring the availability and performance of its software on the customer’s site and enables the ISV to learn what it takes to keep the application up and running, as well as giving better insight into how the software is being used. Managed services also require the ISV to adopt automated management systems and predictive tools so the ISV can deliver the services in a profitable fashion. These same systems and tools will be essential in delivering SaaS in a similar manner.
The managed services experience also should give the ISV enough information and insight to enable the vendor to offer a series of hosted services to customers that don’t want to deploy the ISV’s software on site and are willing to take advantage of the software functionality remotely.
Delivering hosted services is becoming more economical because of the availability of low-cost Infrastructure-as-a-Service (IaaS) alternatives from AWS, Rackspace and other service providers. It places even more of the burden for customer success on the ISV and instills more service sensibility into a broader set of business units. It also teaches the ISV more about the service delivery infrastructure necessary to provide SaaS solutions, and the sales, marketing and financial implications of delivering these solutions.
However, hosted software services don’t scale long-term because customers often demand unique configurations of the vendor’s software. This makes it difficult to provide cost-effective support and roll out updates and upgrades in a uniform fashion. Hosting also fails to fulfill the two primary promises of SaaS:
- Rapid access to new innovation via a single code base.
- Equal access industry benchmark statistics derived from the aggregated customer metadata.
Even ISVs that want to move quickly to a SaaS model should seriously consider this multi-step migration approach to give them a better chance of successfully overcoming the multidisciplinary challenges of moving to the cloud.
Jeff Kaplan is the managing director of THINKstrategies, founder of the Cloud Computing Showplace and host of the Cloud Innovators Summit conference series, including the third annual Cloud Channel Summit on Monday, November 4 in Mountain View, CA. He can be reached at jkaplan@thinkstrategies.com.