Software as a Service (SaaS) started at the same time as I-Business Network back in 1999. Over the past few years subscriptions have been expanding into services as well with subscriptions for everything from cars to doctors, lawyers and consultants. The expansion of recurring charges can now be called Service and Software as a Subscription (SaSaaS).
Most of us called it a monthly rental program or something similar, but the concept of online service application companies dates back to the mainframe days of the 1960’s. Companies like ADP were SaSaaSy in the 1970’s by providing access to their mainframe and providing keypunch services
Most if not all major software publishers have or are creating emphasis on a subscription model in the cloud. Cloud subscriptions ensures customers remain on the current supported levels of software and provides cash flow stability to both the publisher and the customer. A recent article from Nancy Teixeira, Channel Chief at Sage North America, discusses “How Increasing Popularity of Subscription-Based Business Models Will Impact the Channel Partner Community” on the Channel Futures website. Nancy asserts that the increasing success of SaaS as a business model for publishers creates an imperative for partners to realign their business models for future success including:
- Developing long term customer relationships through continuous communication beyond sales calls
- Streamlining backend processes to adapt to ever changing subscription amounts.
Nancy’s message of continuous engagement and agility in business processes are consistent with concepts of landing new customers and cross selling complimentary cloud products to increase value to customers and returns to the publisher. For the consulting partner this should also provide ongoing consulting opportunities over the customer lifecycle.
Customer Lifecycle
The customer lifecycle can be defined as:
The period of time from when a prospective customer first engages with a company to purchase through the last day the customer uses the product and/or service.
In a cloud subscription relationship both the customer and Software as a Service (SaaS) providers measure the value provided compared to the cost of service over the life of an initial subscription contract and overall relationship. A SaaS company has marketing and sales costs to interest the prospective customers which are often called Customer Acquisition Costs (CAC). Salespeople also expect commissions and a new sale often does not include a large up front amount. Alternatively, customers receive the time value of money from not having the big upfront payment. Accordingly, the service providers must look at the initial contract term for a break even analysis. Both parties must project and evaluate the entire lifecycle for a more holistic view of the cost benefit relationship
Customer & Vendor Partnerships
When customers look at their “value added reseller” (VAR) as a vendor the relationship is transactional and confrontational. A partnership between the consumer and service provider requires investments and trust from both parties. Trust must be earned and not assumed.
The subscription model encourages trust between parties as profit is earned over time by the VAR and the customer makes a term commitment. However, both parties must go beyond contractual obligations and take specific actions that develop partnership:
| Customers | Service Providers |
| Provide open and honest access to information. | Transfer knowledge to client team |
| Management involvement and dedicate resources to projects | Schedule sufficient resources to achieve goals on client timeline |
| Be open to new ideas, processes and procedures. Don’t replicate legacy systems. | Monitor usage patterns and only recommend subscriptions with clear value. |
SAP provides its partners extensive training on transitioning to a subscription model and the role of a Customer Engagement Executive (CEE). The CEE is an experienced partner or project manager who meets regularly with customers to review business goals, understand the interaction of those goals with systems and services provided and make recommendations on expansion or contraction of subscription.
New SaSaaS Engagement Models
The VAR community has developed a variety of new business models to adapt to Software as a Service (SaaS). Many of I-BN’s partners have developed engagement models with SaaS!
- SaaS with Traditional Services –
- The initial default for most partners transitioning is to charge for Software as a Service and then the standard billing practice for consulting services.
- SaaS with Bundled Services – SAP Distribution Start & Grow
- This model includes a fixed fee fixed scope up front implementation of SAP Business One combined with a subscription which includes break fix and upgrade services
- SaSaaS – Axiology
- A complete subscription model for Sage100 with comprehensive services on a monthly subscription basis. A simple and transparent pricing method is based upon whether distribution or manufacturing and number of users.
These business models have proven successful for partners, but very few have gone as far as Axiology in embracing change. Larger consulting organizations are currently developing new models which embrace partnership, subscription and customer lifetime value.
Next Steps
Customers who are looking for a new business management system and are looking for a partner, schedule a system selection exploration call to expedite your search. Look for our upcoming article on how to get the most our of your SaSaaS subscription!
Partners who are looking for ideas to transition their business to a SaSaaSy model, learn about our Partner Program and schedule time with Gary Feldman. Look for our upcoming article on the Customer Engagement Executive (CEE) as a role within your organization.