May 15, 2011 | Random Musings
A couple of weeks ago, I had the privilege of attending the Goldman Sachs Cloud Computing conference in Menlo Park, Ca. Goldman put an amazing group of companies and execs on stage. Particularly interesting to me was the conflict in opinion between the “Selling SaaS to the Enterprise” and the “Empowering the Clouds” panels when it came to the topic of the Enterprise sale cycle and process.
The first panel had execs from Workday, Apptio, Appirio and Zuora. The execs from the first 3, took the position that SaaS has NOT fundamentally changed enterprise sales. I am not a reporter, but the net of their position was, “We are still doing large deals, the cycle is still 6 to 9 months, nothing has changed”
The second panel had execs from PaaS providers Engine Yard and Joyent, and automation PaaS provider RightScale. Not surprisingly, these folks, who tend to target developers, saw that the dynamics have and are changing to shorter, trial and experience driven selling cycles. They see developers log in, code and deploy, and boom, there’s a sale. Short, sweet and fast. John Dillon, CEO of Engine Yard was emphatic in declaring that the enterprise sale was coming to an end.
I have blogged recently about the transition from evaluation to experience go to market, and so I definitely lean toward the second panel’s view. Successful SaaS and PaaS and IaaS providers understand the power of experience to start, accelerate and end a sales cycle.
Now certainly, many of the SaaS providers on the first panel, rightfully point out that successfully implementing a ERP or CRM or IT Portfolio management Service requires more change within the organization, which is really NOT related to SaaS vs. Software. Change in large orgs comes slowly and with pain. However, Chris Barbin of Appirio did agree that SaaS has shortened the time and cost of prof services in support of these implementations, and in fact is building his business on these types of $100K range projects vs. the old Accenture/EDS style $Ms of dollars projects.
We are in the 5-6 yr of the cloud computing transformation, the early SaaS successes (eg. Salesforce.com, Netsuite, Workday and Successfactors…) took the enterprise sales model and replicated it with SaaS Services.
However, next generation successes like Box.net, DropBox, and those we haven’t seen yet, will likely disrupt these first generation successes with new sales and marketing models that fully leverage the power of experience. This, I believe is the future of Enterprise technology sales.
May 9, 2011 | Breakthrough Marketing
This is my fourth blog in my series on Bridging to SaaS Success and today I’d like to focus on Go To Market Strategy.
Once we have shifted our mindset from product to serviceand ourorganization from linear to circular, we must now bridge our go to market strategy, objectives and tactics from Evaluation to Experience.
Today’s customer has little patience for White Papers, datasheets, detailed feature function product specs and the like. They may attend a webinar, but the next step is experience. Even for large organizations with complex buying behavior, the expecation of SaaS is easy, accessible and meaningful experience of the service, either through demonstration instances, trial or freemium models.
In a post in November 2010 entitled, “Meet the New Enterprise Customer, He’s a Lot Like the Old Enterprise Customer” , Ben Horowitz of Andreesson Horowitz concluded;
“If you are selling to consumers or companies that behave like consumers, then moving away from the old channel models may make perfect sense. However, if you plan to sell to a large enterprise, keep in mind that the new boss is the same as the old boss.”
And while Ben’s point on having to manage a buying process is spot on, this blog has been bandied about by others as evidence that we should cling to the old enterprise sales and marketing model. This interpretation is just WRONG. It ignores the fundamental shift from product to service.
Service organization knows this first hand that services are evaluated via experience, not spec sheets, RFPs and lab evaluation. SaaS providers who replicate and cling to today’s software Go To Market model are doomed to LONG sales cycles and MISSED opportunity.
One infrastructure ISV who launched their SaaS offering experienced this first hand. Initially, they continued their sales and marketing model of stringent business and lead qualification before trial approval. For every 100 trial requests, they approved less than 10, with an average qualification period of 2 months. This stringent qualification gave them a close rate of about 2 in 100 trial requests, as 20% of trials closed.
When they experimented with a much loosened qualification, where ~30% of the 100 requests were granted in an average of 2 weeks an amazing thing happened. Their conversion rate per 100 request shot up from 2 to 6, an incredible result, meaning the “less qualified” leads that experienced the product actually converted at the same rate as the previous model. This means that for every 100 leads in the old model, they were throwing away 4 deals!!! Not only that, they shortened their sales cycle, and are now leveraging their SaaS trials to sell their on-Premise solutions as well.
The mindset and tactical shift from Evaluation to Experience marketing and selling can payoff like this in any market segment. However, to reap the full benefits and scale of a SaaS model, providers must take a long hard look at all pieces of the marketing mix, from pricing to channel to promotion and messaging, to competition and company organization.
This brings me full circle to the post that started this series. In order to be a successful SaaS provider, organizations must not only build a great service, but they must shift their:
- Mindset from Product to Service
- Organization from Linear to Circular
- Go to market strategy and tactics from Evaluation to Experience.
With that, the Bridge to SaaS Success can generate revenues, share and valuation that meets and exceeds our most aggressive goals.
Happy Bridging,
Ken
Apr 27, 2011 | Breakthrough Marketing
Continuing my blog series on bridging to SaaS success, today I want to talk about transitioning from a linear to a circular organization architecture. Once I have adopted a SaaS Mindset, the next think I need to do is build the supporting infrastructure to SaaS success. In this context, your infrastructure is made up of your people and skills, your domain expertise and your organizational approach.
For the time being, let’s assume you’ve built/hired the technical skills you need, and you are sticking to your domain “knitting”, in other words you are an EXPERT in the needs and solutions you deliver and you are not simultaneously bridging to a new solution space as you move from product to service. If you lack the skills, then get them, if you are jumping domain AND delivery models, well, good luck, you’ll need it.
OK, now that we have that out of the way, let’s talk organization. Today’s organization and its interaction with customers looks like this:
It’s linear, with sporadic customer contact. The product mindset we discussed in the last post is spikey and transaction oriented, and the organization’s linear structure is perfect to support this mindset.
But, as we move from a product to a services model and mindset, the organization must reflect the continuous and relationship oriented mindset we’ve adopted.
The organization must be circular, surrounding the customer and look like this:
Because services are about experience, to truly optimize our experience delivery, we must collapse our organizations and surround the customer. Sales and Marketing, Dev and Ops and Support and Delivery must function as a tightly knit ecosystem, enveloping the customer in the highest quality service delivery possible, continuously.
This is a HARD transition to make, it requires executive commitment and drive, and constant attention. However, market leaders MUST do this or they will fundamentally remain a product company, which is the kiss of death for any SaaS provider. Marc Benioff was wrong when he said the “End of Software”, he should have said the “End of Products”.
Apr 25, 2011 | Breakthrough Marketing
July 3, 2012 Update: I wrote this post over a year ago, in April 2011, when Amazon had a significant outage. In the wake of this weeks outages, I thought it was worth reposting…)
April 2011: The easy thing to do today would be to pontificate about the Amazon outages and the impact they had on service delivery for a wide range of SaaS providers…but you don’t need this blog to do that, it’s old news now (4 days later!). Instead, I’d like to use this as a great opportunity to talk about what I call the SaaS Mindset.
Last week, I blogged here about bridging to SaaS success and said that you have to change not only your product to a service, but you have to change mindset, org structure and go to market tactics. Today, I want to talk about transitioning from a Build and Sell mindset to a Market and Deliver one.
In our last 20 years in the tech industry, we’ve been in what I would call a Build and Sell mindset. Now that we are selling services, we must transform to a Market and Deliver mindset.
Mindset is made up of 3 things, orientation, perspective, and focus. In order to make this transition, we must get all three of these in alignment.
First and foremost, we must shift our orientation from product to service. Products, even software products, are tangible things to be purchased, installed and used. Services are experienced. This fundamental shift ripples through everything else we need to do to succeed with SaaS. Maybe all you Product Managers should change their name to Service Managers. When I worked with AOL, with their many flaws, one thing I noticed was their maniacal focus on “The Service”. The words had almost a mystical quality and permeated their mindset.
Second, we must shift our perspective from spikey to continuous. Products are built, shipped and sold as discreet widgets, which leads release schedules, sales quotas and customer relationships that are “spikey” by their very nature. Services are always running (hopefully:), and always under evaluation and subject to churn. Customers make a continuous buying decision and their ongoing experience is what drives long term value. Providers who understood this went the extra yard to be ready to drive continuous delivery despite Amazon’s challenges. A great example of the right mindset driving the right investment.
Third and last, we must change our focus from transaction to relationship. Great product companies have always understood this, good ones not always. There is no missing this continuous mindset with SaaS, it’s a must have. In the enterprise software world, transaction is king. Large investments create both economic, organizational and personal committment to decision well beyond healthy levels. Buyers love SaaS because it raises the bar on providers to deliver real service levels, and lowers both real and perceived switching costs. I know their are plenty of Amazon customers looking TODAY at alternative service providers. This is a wake up call for Amazon if they should choose to compete for mature and enterprise customers, they need to raise their relationship game significantly.
How does your organization’s mindset stack up for SaaS success? What action plan do you have to get a Service orientation, perspective and focus to permeate from Dev to marketing to sales and support???
Apr 20, 2011 | Breakthrough Marketing
(June 2012 – A quick note and update: While I originally wrote this series in early 2011, today it seems both slight dated, but also more relevant than ever. While I still see packaged software vendors, nearly 100% now have significant SaaS/PaaS and IaaS efforts underway. It is without a doubt the future and it is here. However, many managers still have not fully understood the nuance of this transition, and are still operating with product mindsets, linear orgs and evaluation based go to market tactics. This makes this post and series more relevant than ever. I hope you find it helpful and informative…)
I see a lot of ISVs launching SaaS services, that’s great. However, many of these initiatives fail to attract leads and customers in the volume expected, resulting in management, market and shareholder disappointment. Why is this?
While organizations spend a LOT of time understanding the technical transformation required to build a SaaS service, they fail to understand that this is just the anchorage of the transitional bridging they must do. In order to gain share and revenues they must deal with the remaining pieces of the bridge to SaaS success, which are their mindset, their organizational structure and their go to market tactics. Let’s take a look at a basic blueprint for bridging to SaaS success.
Mindset – P-> S: Product to Service. Services require a mindset of continuous relationship management, not of spikey product delivery and transactions. Changing your organizational mindset is the next step to SaaS success. Read more about Mindset transitions here.
Organization – L-> C: Linear to Circular. Today’s ISV structure is built to deliver products in a build and sell mindset. Even organizations that have adopted Agile SW development paradigms still go to the rhythm of minor and major releases, quarterly sales cycles, etc. Lead to sale to renewal. All linear processes. Successful service organizations are circular, they surround the customer with experience, support and delivery from the time of first contact onward. Read more on surrounding the customer here.
Go to Market Tactics: E -> E: Evaluation to Experience. Today’s go to market mix, pricing, channel and promotion is built to drive evaluation and transaction. Successful service go to market requires a shift to tactics that drive experience and satisfaction. Successful SaaS organizations shift their go to market tactics and investments and become experience, not product marketers. Read more on driving your marketing and sales Velocity with Experience here
Are you catapulting or bridging?
If you know where your going, but fire away without preparation and work, you are catapulting not bridging. Even SaaS start-ups can fall into the trap when they build their organization and tactics with people who are not transitioned to this new world themselves. Catapulting leads to poor execution and results. So start today by looking to see if you have bridged to a SaaS world or have catapulted without changing your mindset, organization and go to market tactics.
Happy Bridging
Ken
