After having sold and implemented SaaS ERP and accounting software for hundreds of companies, many of them software companies, I’ve learned something surprising about what companies find most important when moving to a new system or technology. While it may seem counterintuitive, the software’s delivery model – how it’s installed, hosted, updated and supported – is and should be more important than the specific features it has.
As a company chooses to move from one enterprise solution to another, SaaS provides better value, higher return on investment, lower total cost of ownership, and a pathway to upgrades and improved functionality; but these characteristics are not just some of the advantages of a SaaS product. They are the advantages, and they provide value beyond the meeting of specific functional requirements. The product’s infrastructure itself carries value before the product specifics even come into play.
Here are some of these SaaS delivery model characteristics, and how they provide value.
1. Multi-tenancy allows a software publisher to maintain only one code base for all customers.
Having only one code base allows for economies of scale that bring down the overall cost of the product, allowing SaaS publishers to invest more in the software’s functional capabilities and how it’s supported. In a legacy environment, upgrading one’s enterprise software is not that different from buying a new product. Each customer implementation of the new version is a separate and unique project, and any customizations would likely have to be re-implemented, costing time and development resources.
With SaaS, each new release is pushed out to all users at no additional cost, eliminating development work or the possibility of major bugs or errors specific to each customer installation.
Multi-tenancy allows for resource pooling, where a company accessing the system only uses the resources they need at any given moment, rather than having a certain chunk of resources reserved for them that may sit idle when not in use. SaaS products can redistribute those resources to other users of the system, maximizing efficiency and performance and reducing costs. Bugs or errors within an on-premises or hosted implementation of a legacy application are often specific to that installation and any customizations that were implemented. Tracking down the source and finding a solution can be like finding a needle in a haystack.
With one code base and shared data types in a SaaS environment, problems can quickly be discovered, isolated, and fixed, providing customers with a more robust and reliable application.
2. The subscription model requires that software publishers win a customer’s business every year by providing value and high levels of service.
A SaaS software publisher and/or its implementation partners can’t install your application, do some user acceptance testing, get sign-off and disappear into the sunset. The relationship between publisher or consultant and customer is a partnership. The customer will need solid support, advice and powerful upgrades that can change with and continue to support their business for years to come. This adds tremendous value to the product. Idea portals or feedback channels for requesting new functionality are crucial for the publisher to know where to take the product in subsequent releases. The publisher and consulting partners understand that without a product that changes with the customer base, and without high levels of service, customers can decide to take their business elsewhere. Moreover, with more and more SaaS products coming on the market, those options will only increase.
As an example, we recently sat down with one of our SaaS ERP customers to talk about renewing their software subscription and to make sure there weren’t any add-ons or changes they might need as their business has grown and changed in the past year. We discovered that there were opportunities to improve our support processes that would provide them with better customer service. They had the option of changing partners or moving their business directly to the software publisher, but sitting down and hearing their concerns allowed us to improve our processes in a way that will benefit not only that customer but also our entire customer base.
This experience also taught us that we should increase the touch points we have with our current customers. Because our support was tied to the software subscription model, we were far more invested in improving our customer service than a company that installs a legacy system once, charges a large fee for the software and implementation and then provides minimal, if any, support going forward with very little incentive for improvement and very little recourse for the customer when things go wrong.
3. The delivery model provides users with anytime, anywhere access from any device without client-side software requirements.
The benefit of this may be self-explanatory. Our world is changing, as are our work lives. Many of us find the boundary between work and home life to be blurring. Hopefully we find this flexibility refreshing rather than restrictive. Either way, having the ability to approve a purchase order or an expense report, or check a financial dashboard from any device with an Internet connection is a powerful thing.
While many legacy products have introduced “cloud” versions, in many cases client-side software is required for it to run, or it can only be accessed with limited functionality from a phone or tablet. True SaaS applications only require a Web browser and Internet connection and provide users with access to the full application.
4. The delivery model allows companies to redeploy IT staff and resources normally required to support an enterprise application: maintenance, hardware and support.
Instead of striking fear in the hearts of IT directors and managers, SaaS products should provide them with a new role as technology strategists, helping their companies navigate the many options and select the best fit for the business. IT often finds itself under fire for unmet service level agreements, overwhelmed with hardware management and constantly chasing security concerns in an increasingly dangerous cybersecurity environment.
SaaS applications should set IT free from supporting business systems that are best supported elsewhere, allowing them to focus on issues that are more important. SaaS products can often help companies save the cost of up to one full-time employee in IT or allow those resources to be redeployed to higher-value tasks.
So, how do these benefits “trump” the features of the software? Well … within reason. If mission-critical functional requirements simply cannot be met, then of course the solution is the wrong one. My point is that choosing a solution based solely on how two products’ features match up head-to-head, without taking into account the differences in the delivery models, is a mistake.
In the new world of SaaS solutions, companies buying software need to look at the product’s history of upgrades and enhancements, the roadmap for future releases, the levels of service the publisher provides, the cost savings associated with how the product is delivered and the reduction (and even elimination) of development costs needed to configure the product.
SaaS companies need to realize the value that their products intrinsically possess rather than get in a tit-for-tat comparison with outdated legacy systems. That said, until buyers concerns around security, uptime, data integrity and redundancy are satisfied, no number of SaaS advantages or features will be enough to move them to buy.
Marcus Wagner is founder and CEO of AcctTwo, a consulting firm and provider of cloud-based financial management solutions for challenges unique to oilfield/environmental/industrial services, midstream oil and gas companies, faith-based organizations and software industries. Click here to connect with Marcus.