The Cloud And The Accelerating vs Deflating Time To SaaS Revenue

Accelerating vs. deflating time to SaaS revenue

Over the past 8 months, we have seen an increase in the number of ISVs contacting us to help them plan a roadmap to SaaS. After reviewing these conversations, a trend has started to emerge.

1. On-Premise ISVs see the need to begin the journey, typically due to competitive and market pressures.
2. They understand and want to get to the technical end game — a true multi-tenanted, singular code basis — but they don’t know how or even why they should get there.
3. They want to get to that end game as quickly as possible.
4. They haven’t really evaluated and understood the financial implications of moving from a perpetual license model to a monthly recurring model.
5. They don’t understand the changes needed in their support and operations teams to maintain a true SaaS business.

Many ISVs are testing the SaaS waters by simply re-branding on-premise solutions as SaaS and developing ‘one off’ managed hosted solutions for each customer.
Unfortunately, these approaches are fraught with problems and they set the ISV up for failure. Without understanding the financial and operational impact of the above, companies often find it hard to project profitability with their SaaS solutions; many abandon their SaaS plans.

From a financial perspective, one-off ‘managed hosting’ silos for each customer can be very expensive and these costs are often passed through to end clients. End customers in turn don’t appreciate the value of the service as ISVs struggle to create the sales and marketing messaging for SaaS. This compounds the problem and results in a decline of sales. In addition, companies often struggle to understand the cash flow impact of moving from large perpetual licenses to smaller, monthly recurring revenue models.

Operationally, ISVs struggle to provide the necessary changes in their support organization to enable true 24x7x365 support. The technical skill set(s) and operational processes needed to support always-on operations with SLAs are vastly different from a traditional support model. Many ISVs don’t appreciate the increased number of technical staff required to enable a 24/7 operation (especially if you have 100’s of separate silo’d client implementations). They typically bootstrap this vital function by having fewer resources on call all the time. We have seen incidents in the press where this has backfired. Tired resources make mistakes leading to more outages and downtime due to stress related human errors. It also brings up the interesting topic of liability. Many companies today are not aware of HR laws that prohibit excessive working hours.

Guest Post Provided By Tenzing

Founded in 1998, Tenzing is a managed hosting company trusted by leading software-as-a-service (SaaS) providers and Ecommerce systems integrators to deliver business critical applications to some of the world’s largest companies and most recognizable brands. Tenzing’s mission-critical hosting infrastructure, mature IT Service Management (ITSM) practices, and comprehensive application-level Service Level Agreements (SLAs), enable the reliable, secure, and scalable delivery of complex SaaS and Ecommerce applications. Tenzing is ISO 27001 and SAS 70 Type II certified with data centres in Toronto, Vancouver and Kelowna, B.C. For more information, visit www.tenzing.com.

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