Moving to a software as a service sales model is more challenging than it looks. Here’s how to avoid the pitfalls.

For software companies, SaaSification has meant a continuous source of income, as the move to subscription-based models promises big revenue potential and lower costs. Once sold, most software subscriptions renew automatically with little to no sales involvement. 

With so much upside, why do companies struggle with the transition to SaaS? 

The answer is that the software as a service (SaaS) transition isn’t nearly as intuitive as companies think. It requires a top-down makeover, including support and sales, and a reshaping of strategy and products.

Making the SaaS transition

As software companies migrate from selling software to selling solutions, here are three areas in which they often fall short—and guidance on how to streamline the SaaS transition:

• Revisit the business basics. In the rush to SaaSification, software companies often overlook the need for all functions from marketing and engineering to support and IT to align on the new strategy and product direction. A lack of strategic clarity is common for companies as their priorities proliferate.
  
  The result is that instead of alignment, confusion abounds as to when and which products are ready for commercialization. For example, where product marketing sees a functioning prototype ready for commercial use, IT sees a product that still needs performance testing, stress testing and security.
  
  The upshot is disarray: Products are taken to market without proper customer support, and when multiple sales channels are involved, chaos often ensues in the go-to-market strategy.
  
  How to course-correct: The first step to a successful SaaS transition is to develop a clear, common message to align business and IT on strategy and product direction. Without one, the go-to-market is often unfocused. Questions to address include how will channels affect direct sellers? Which channel will be used for which product sales and in what regions? How do we market with channel partners to improve campaign success rates?
  
  Another common pitfall is the failure to retrain customer service to support SaaS solutions. It’s critical to anticipate subscriber questions and establish the process that support will use to reach back to product marketing for answers.
  
  
• Adjust your sales organization to support SaaS. A critical yet little discussed challenge is how to sell SaaS products. Many organizations find it a bumpy transition from one-time sales of licensed products and services to the cadence of annual subscriptions and variable compensation plans (VCP). Worse, running into hurdles in the sales process directly impacts the ability to offer better, more competitive SaaS products.
  
  How to course-correct: The rise of partner ecosystems is fundamentally changing the role of sales, especially as B2B software buyers increasingly prefer to buy from third-party marketplaces. As a result, SaaS vendors’ success grows more reliant on the quality of ecosystem solutions. Developing ecosystems around a simplified approach to niche solutions is an increasingly important component of any market-share strategy.
  
  A clearly articulated sales strategy and the organizational structure to support it starts with sales rep training. It also includes improvements to the internal approval processes to ensure shorter sales cycles and appropriate compensation for sales teams when partner solutions are bundled with the base software.
  
  
• Remember that SaaSification isn’t one-and-done. Successful SaaSification requires extending the concept of continuous improvement that’s at the heart of product development and applying it to the design of package offerings. It’s never been more important to pay close attention to customer experience.
  
  Zoom is a classic example of a best practice: When it comes to package design and bundling, customers simply choose from one of three options. But most SaaS options suffer from flat SKUs and too many products. Some bundles are too complex, cramming in every available feature. Others are too limited. Still others have little flexibility to adapt for slightly different use cases, let alone other verticals.
  
  How to course-correct: Successful SaaS products require periodic analysis and updates. It’s critical to track and monitor parameters such as customer types, purchasing behaviors, usage patterns, support issues and competitor dynamics, and then continuously evolve the products in iterative cycles. Market research, which often kicks off the SaaSification process, is helpful at this stage, as well.
  
  Establish a plan to analyze sales transactions and determine which products are selling and, equally important, which aren’t. Because your competition is always changing, plan to regularly evaluate which features require upgrading and how you will introduce new ones.
  
  Unlike the perpetual business model of licensing, churn is a constant threat within the SaaS model, and a successful bundling strategy is a key part of customer retention. Build in flexibility: If the three-year warranty that your organization took to market isn’t selling, try repackaging it to 20 months and dropping the price.

Making the SaaSification pivot

SaaSification is undoubtedly the future for software sales. To succeed with the SaaS transition, software companies need to see it for what it is: an ultimate win that requires big changes for sales, support, engineering and product strategy. Businesses that move forward with an appetite for change will maximize SaaS satisfaction.