How SaaS vendors can increase revenues, overcome objections & lower costs

It’s been a while since I wrote a SaaSparilla report, but as luck would have it my recent presentation at the SDForum Cloud Computing SIG, had some SaaSy aspects to it which generated some buzz and interest, which I thought I’d repeat here.

As per the title of the post, How can SaaS vendors increase revenues, overcome objections & lower costs, thereby breaking the old rule of you can’t have all 3.

Let’s first take a look at the opportunities and then we’ll cover off the solution:

1. Increase Revenues – Let’s imagine that you have a new SaaS offering. The idea is that you are greatly simplifying and moving an application to SaaS that has previously been a domain of a large on-premise application. E.g. Salesforce.com vs. Siebel (now Oracle) or Netsuite vs. SAP. Let’s then assume that your prospect tells you they love your new SaaS application but ask the question “What do I do with my legacy application and data?”. Your answer might be “We’ll migrate the important stuff (say 10%) and map it over to our schemas. The rest you’ll leave in your legacy app.” To which your prospect might reply “I see. You want me to continue to pay maintenance on my on premise app, and have 2 different interfaces to access my old legacy data and the new SaaS application? I don’t think so.” This actually sounds very much like an objection (covered in point #2) but actually it is also a missed revenue opportunity as will soon be revealed.

2. Overcome Objections – Apart from the objection illustrated in #1 above, your prospect might also rightly ask “You are a pretty small vendor, what type of guarantee do we have if you fail or we are not able to access our critical data?” Your reply might be, “Trust us, we have good backing and a growing set of customers.” Will that be enough?

3. Reduce Costs – Due to your increasing success and usefulness of your platform your customers start to amass large quantities of transactions and data within your cloud infrastructure. The problem is, this is costing you money and slowing down your production systems. You believe you have options by telling your customers “Excuse me, I didn’t think you would use our system so much, you are going over your storage quotas. I’ll have to charge you a penalty for exceeding.” To which your customer might reply “I’ll pay you more if you can improve the terrible performance I’m experiencing in line with my growing data volumes.” To which you might reply “You can always delete some of your data to free up space and improve performance”.
(Pause for a min for reaction) After the expletives you hear from your customer at the other end of the phone line, you reconsider that last suggestion.

Now let’s see how you can have all 3:

1. Increase Revenues– The problem here is that you don’t have the capability of absorbing large scale volumes of data into your SaaS system. If you could cost-efficiently store the 90% of legacy information while keeping it accessible, your prospect would not only be grateful for saving their maintenance $$$ on the legacy app but would love to be seeing all their data via your cool new SaaS interface. They would migrate and be on your platform hook-line-and-sinker. You would win more deals through overcoming this objection and (drum roll) you could charge an additional per user fee for the legacy access to the historical data=new revenue opportunity.

2. Overcome Objections – In addition to the dual support and maintenance of legacy on premise systems, the other objection we discussed was around small vendor viability. In the “old days” when enterprise software purchases from small vendors was the concern, the way to alleviate fears was to offer “Code Escrow”. In fact that was a de facto standard for any software purchase. For SaaS this clearly makes no sense, however “Data Escrow” certainly has appeal. So what if you could offer a neutral 3rd party service to store a copy or copies of the SaaS data. Your prospects would feel a lot safer about enrolling in your service.

3. Reduce Costs – To avoid charging overages, while increasing performance of your SaaS application, all while supporting your growth of customers and data volumes, you need to be able to store massive quantities of data at the lowest possible cost per terabyte. Similar to point #1 whereby the initial migration of data from a large on premise system may be the gating factor, if you could significantly offload historical data to a repository that would still provide efficient access, all the while reducing the storage footprint and allowing a significant reduction in hardware and people resources, that would be a win-win.

It’s as easy as that!
I’ll let you ponder on how you can get all 3 benefits listed here, in the meantime I’ve got to get back to my day job promoting the only repository that performs retention of massive amounts of structured data through data and pattern deduplication, while keeping data on line and queriable on premise and in the cloud.