“Code customers only make up 8% of our customer base (today), it shows you the move from code to SaaS, 100% of our customers used to be code” – this was a quote I noticed on a staff members Twitter account.
He’s right though. We operate a leading project management software company – www.proworkflow.com. We’ve been around since 2002 and have seen a few things over that time. The most obvious is the natural shift from a ‘Code Selling’ model to a ‘Subscription/SaaS’. I say a ‘NATURAL’ shift because over the past 4 years we’ve been marketing a single solution with both code download and subscription option.
When we began, we only offered the code download option, and listed in many code libraries. 2 years later, we started the subscription offering (SaaS/Software as a Service). At no point did we ever really push the deployment option as a marketing angle. Simply put, our approach has always been that we have a solution, and customers can either download locally or host with us on subscription. It’s their choice – not us pushing.
Admittedly, the past 6 months our focus is leaning towards the idea of a full subscription model, but only because the ‘Code Download’ option has declined to the point that it’s obvious it’s a trend. We want to invest our efforts where the best return is for ourselves and the customers.
“So we’re not forcing subscriptions, rather the customers are now ‘preferring’ that option
– This marks a change in businesses perception of SaaS as a viable and credible option”
At our company, ProActive Software (www.proworkflow.com) code sales these days are nearly non existent as users are looking for SaaS solutions so they can outsource the maintenance aspect of their core software (They just want to use it – not have tech/IT hassles). It may cost them a little more in the long term for SaaS solutions, but we’re finding that in this economy businesses don’t have large piles of cash for traditional perpetual license purchases. They are looking at their cash flow and budgets monthly rather than annually. The Subscription/SaaS model suits this as it’s typically a low monthly price, and they can have the flexibility to leave at any time.
Some software co’s may say “flexibility to leave at any time” is a bad thing, however the opposite is true. SaaS companies must perform, deliver and support at a high standard if they are to keep their customers. This adds value to the customer as it’s not a purchase, but an ongoing relationship with the SaaS co.
Support is better, more proactive. Updates are delivered faster. The feedback loop from customer to developers is closed and all customers start to work on the central solution with a couple of common goals.
Customers – Make suggestions to the software company so the solution will work better for them
SaaS Company – Works hard with customers to perfect the app and systems so they can reduce support load and increase customer satisfaction.
So what’s the difference in regards to the software company making money?
With traditional software solutions (perpetual licensing), the software company would need to make double the sales to double their revenue.
With SaaS companies, the software company only needs to hold onto the customer for twice as long to double their revenue.
And we all know it’s a lot easier to retain a customer than to find a new one! So to put it very simply, With SaaS, the software company MUST satisfy it’s customers not just once, but continually to succeed. And that has to be good for the customers!
About The Author:
Julian Stone begin_of_the_skype_highlighting end_of_the_skype_highlighting is the CEO of ProActive Software, developers and creators of the leading web based project management software http://www.proworkflow.com.