What makes SaaS so successful? Four lessons all businesses can learn
Since Salesforce invented the term “Software-as-a-Service” more than twenty years ago, the industry has been characterised by tremendous growth and increasing sophistication. Skyhigh networks found the average employee now actively uses 36 cloud services at work, including nine collaboration, six file-sharing, and five content-sharing services. What’s more, global spending for cloud-based software is estimated to exceed $100 billion this year, according to Synergy Research Group.
These figures aren’t surprising when you consider Netflix, which celebrated its eighth UK birthday in early 2020, increased its UK subscriber base from 7.4m to 10m between 2016-18 alone.
All businesses would like to see such success, but many are unable to copy SaaS business models like-for-like. There are, however, four fundamental qualities that have fuelled the industry’s success and carry lessons for that will benefit just about any business. Let’s take a look.
Unlike the sales process for traditional businesses, success for SaaS companies isn’t based solely on the initial sale. Subscription is a double-edged sword: it’s easy for customers to get on, but it’s also easy for them to get off. A failure to address churn can kill any subscription business.
SaaS companies therefore typically invest heavily in their customer success, marketing and consulting teams to forensically manage their clients’ satisfaction and address any issues before they arise. The best Customer Success Managers (CSMs) set out to understand their customers’ challenges. They don’t care about being liked; they want to earn respect by helping to address specific pain points. Success is not measured by a stunning presentation deck, a positive health score or the number of engagements they’ve had in the last quarter; the only thing that really matters is whether the customer bought again, and if so, how much more they spent. The large investments in CSMs made by a typical SaaS company means they’ve created a solid foundation for these direct and honest conversations with customers.
The biggest lesson for non-SaaS companies is that transparency breeds transparency. Establish an open dialogue with your customers and ask direct questions. Why would you pick us again? Why would you recommend us? This all helps an organisation become more self-aware in delivering its products and services, direct innovation and keep current clients happy.
For big players such as Microsoft, it was only a few years ago that customers had to renew individual products each time new versions were released. Now, the software giant allows individuals and businesses to connect to and use its cloud-based apps over the internet for a monthly fee.
A big driver of SaaS’ success is this cloud-based software delivery, which reduces the need for the large, up-front costs associated with purchasing software or hardware once and owning it, only to be left with an obsolete product once a new version comes out. In the SaaS world, the customer always has real-time access to the latest, greatest versions.
SaaS offers many other potential advantages over traditional ‘buy and own’ models, too. For example, the time it takes to set-up and deploy services is reduced and customers have effortless access to upgrades.
