By Oded Rosenmann, SaaS Business Lead at AWS
Executive leaders with deep experience in software-as-a-service (SaaS) say that, looking back, they would have done things differently to improve their company’s journey to SaaS.
According to an Ernst & Young survey of 200 decision-makers from SaaS companies, their foremost answer (with 25 percent of the surveyed responding) was that they’d have moved much more quickly into SaaS in order to reap the rewards associated with this delivery model.
SaaS transformations are full of unknowns for those who navigate these issues for the first time. The AWS SaaS Factory team has observed many organizations transforming to a SaaS delivery model, and we have witnessed many that succeeded and some who haven’t.
In this post, I will focus on common challenges faced in the Business Planning phase of the SaaS Journey Framework. I’ll explore SaaS transformation pitfalls that are hindering companies’ SaaS success and share key learnings from organizations that have successfully navigated this transition.
I encourage you to use this information to challenge your current approach and set your company up for success.
We often say the move to SaaS represents a significant transformational event requiring companies to examine all of the moving parts of their business.
To understand what it means to you as a leader, it’s important to lay out the term “transformation.” Moving to a SaaS business model represents a change in how you build, operate, deliver, and engage with your customers.
Working with hundreds of AWS Partners, the SaaS Factory team has learned that a SaaS transformation really represents a number of different transformations: digital, cultural, business, and technology.
We find that organizations moving to SaaS likely need to transform multiple parts of their business and go deeper to address how they operate in the new model.
One trend we see is that organizations underestimate the transition’s work, as SaaS really represents many, or perhaps all, of these transformations in one go.
According to a Forrester Analytics Global Business and Technology Services Survey, SaaS is the leading strategy for technology companies in their digital transformation investments. Organizations are looking at SaaS as the preferred approach to lead their transformation, mainly for the agility benefits of this model.
What’s interesting, though, is that when looking at data from an IDC study, you find there’s a slow and steady evolution in how organizations are adopting SaaS.
Software companies that participated in the study estimated that SaaS will represent about 40 percent of their software revenue in 3-5 years. I think many would suggest we should be further along. It’s clear that SaaS remains a huge growth driver and provides benefits to end customers and software providers.
For these exact reasons, however, you would expect these numbers to be higher. That brings us back to the theme of this discussion, and the truth that moving to SaaS is a challenging journey with many pitfalls along the way.
SaaS Business Planning: 5 Pitfalls Hindering Success
In the Business Planning phase of a SaaS transformation, you’ll need to develop a clear vision that captures and conveys the fundamental elements of your strategy. This process will be used to validate the key components of your strategy and connect them to the model that illustrates how the move to SaaS addresses the needs of the business.
Based on years of AWS experience, and feedback from hundreds of AWS Partners, I have focused on five common pitfalls that are hindering SaaS success. While these are not the only topics you should consider, they are common ones you can learn from.
Pitfall #1: Viewing SaaS as a Technology Strategy
If there is one area I would recommend businesses moving to SaaS focus on, it’s this one.
At AWS re:Invent 2019, Andy Jassy talked about digital transformation, how companies can transform themselves, and how they can reinvent their business and their customer experience. “The first element in transformation”, he said, “is not technical, it’s all about leadership. You need to get your senior leadership team alignment and conviction that you are going to make this change.”
Many organizations start this discussion from a technical discussion; what should be the architectural considerations to enable SaaS and enjoy the full value proposition of this model?
In reality, if you’re moving to SaaS, you are really making a business decision and therefore need take a step back from all of the technical questions, think through the lens of the business, and what it means to become a SaaS business.
This is where you should start thinking about the business considerations of the transformation; how will this model help grow your business, innovate faster, stay ahead of your competitors, and drive greater customer loyalty?
An example to learn from here is F5, which specializes in application delivery networking and application security. The AWS SaaS Factory team had the opportunity to work with F5 to build and launch the F5 Cloud Services suite of SaaS offerings.
Seeing SaaS as an immediate opportunity to deliver additional value to existing customers and generate new revenue opportunity, F5 carved out a “startup” within the organization to establish a new business model supporting the SaaS delivery model.
With the leadership team aligned, and by focusing on both business and technology strategies early on, F5 developed and launched its first SaaS offering in less than 18 months. It has since launched a total of four offerings as part of the F5 Cloud Services suite in 12 months.
Learn more about F5’s journey to SaaS and the advice they have for other AWS Partners building SaaS solutions on AWS in this Q&A with F5.
Pitfall #2: Thinking There is Lots of Time
The second challenge for organizations moving to SaaS is that they have a really long, multi-year transformation process. They think they have a captive market, with a good customer base and a solid revenue stream.
The challenge, however, is that they can’t get good customer feedback with such a long cycle time. With a long, multi-year plan, you enable opportunities for other competitors to show up and start getting momentum, and you may find yourself in a catch-up mode.
Cohesity, an AWS Storage Competency Partner, released Data Management as a Service (DMaaS) as SaaS on AWS that simplifies data management. Cohesity collaborated with AWS AWS SaaS Factory to navigate technical and business decisions to design, implement, and launch the DMaaS offering, while accelerating their time to market by 50 percent. To learn more, read our Q&A with Cohesity.
We can learn from Cohesity’s approach to the first rollout of DMaaS; they focused on an initial use case designed to deliver value to prospective customers and accelerate time-to-market. This approach helped Cohesity quickly validate the potential opportunity and align the product roadmap per customer feedback.
You need to try and get a minimum viable service (MVS) out there as soon as possible to test your assumptions. Use the MVS approach to collect data and feedback from your early adopters on whether you’re building the right functionality, and whether you created the right customer experience.
Avoid over-indexing on optimizing the product to make it “perfect” before customers have had an opportunity to get their hands on it. Customer feedback, after all, may lead you in a completely different direction.
Pitfalls #3: Under-Investing in Agility
One of the biggest advantages of the SaaS delivery model is agility and being able to shorten development cycles, innovate faster, and respond quickly to market dynamics. To get there, you need to invest in agility from day one of the journey; it should be the core value of your system.
Identity security leader CyberArk, worked with AWS SaaS Factory on Privilege Cloud, their Privileged Access Manager (PAM) as a Service offering. CyberArk invested in how the system is built to help ensure teams are focused on achieving the agility and innovation that’s part of SaaS. This enabled their customers to deploy, scale, and secure their solutions.
Furthermore, being able to minimize on-premises infrastructure as well as automate upgrades and patches was a benefit for CyberArk.
The CyberArk team also defined key metrics that helped measure cycle time for feature releases, system up time, time to response to issues, and other well-defined metrics to assess and prioritize operations and agility.
When CyberArk started to get traction and onboard new tenants fast, they had already invested in agility and were ready for the spike in growth.
Pitfall #4: Missing the “Service” in Software-as-a-Service
The movement to an “as-a-service” model is challenging. Some companies stay in the product mindset, where they view this as a product they built for customers.
When moving to the service mindset, you need to look at the holistic customer experience, including how fast you respond to issues, how you engage with customers to help them adopt features and expand their usage, and the operational agility you provide.
Yes, you need to build the “right thing” for customers, but their experience with you is also a service experience. You need to make it a great experience to succeed in the SaaS mindset.
One of the secrets behind BMC’s success was embracing the as-a-service mindset. Diving deep into the customer journey, BMC focused on customer outcomes and worked backwards on a go-to-market (GTM) and customer success models that created an excellent customer experience. To learn more, read our Q&A with BMC.
Pitfall #5: Delaying the Start of the Business Transformation
As I mentioned in the first pitfall, many organizations think of the move to SaaS as a technology strategy. A side effect of thinking like that is they start working on the technology development in the beginning, and only later think about how it will affect other parts of the organization. This includes how sales and marketing will change, and what other organizational adjustments are required to align to the new model.
An example to learn from here is Nasdaq and their SaaS business transformation initiatives. AWS SaaS Factory helped Nasdaq to validate and accelerate the transition to SaaS, while aligning hundreds of team members to a common mission to bring new SaaS solutions to market with agility and operational efficiency.
The key for Nasdaq was building the business strategy early in the process. They trained staff on the importance of cultural transformation across all parts of the organization, enabled cross-functional team collaboration, and deployed agile models that helped teams innovate faster.
In our webinar series Behind the Scenes of SaaS Success, we further explore this topic as we sit down with industry leaders to discuss how to build an organizational structure that supports and promotes the culture and tenets of SaaS.
Often times, delaying the business strategy ends up being a challenge to organizations that find themselves operating in a SaaS model. This is why you want to align the business and GTM planning closer to the time you start your development efforts.
In this post, I reviewed five pitfalls hindering SaaS success as part of the business planning phase of the SaaS Journey Framework. Use this content to challenge your current approach and learn from other organizations that have successfully avoided common mistakes.
“Vision without action is a dream. Action without vision is a nightmare.” ~ James Kerr, Legacy.
As a leader guiding your company through a SaaS transformation, ensure senior team alignment about the vision and develop an action plan with mechanisms to force the change. You’ll also need top-down aggressive goals for the transformation to avoid common pitfalls and set your company up for success.
For further reading about building SaaS on AWS, please review all of our content in the AWS SaaS Factory Insights Hub.
About AWS SaaS Factory
AWS SaaS Factory helps organizations at any stage of the SaaS journey. Whether looking to build new products, migrate existing applications, or optimize SaaS solutions on AWS, we can help. Visit the AWS SaaS Factory Insights Hub to discover more technical and business content and best practices.
SaaS builders are encouraged to reach out to their account representative to inquire about engagement models and to work with the AWS SaaS Factory team.
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