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6 Compelling Reasons for offering Service as a Subscription

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When talking with traditional software consulting partners, we often hear that there is no compelling reason to change their business model from time and materials to Service as a Subscription.  Perform a search and you can find lots of articles comparing time and materials to fixed price or value based billing, but little in formal academic research.   However; if you speak to partners who have made the change to Services as a Subscription, the benefits are real and substantive.

Services as a Service

1. Increased Customer Satisfaction

The obvious most important reason is to improve customer satisfaction.  Changing a billing model without change in service mindset will not increase satisfaction.  Real improvements in Net Promoter Score (NPS) are achieved when a SaaSy model includes regular proactive customer communication with a dedicated Customer Success Executive.  In the blog Defining Service as a Subscription, we provide a sample structure for a SaaSy team, and the role of a dedicated and experienced executive which is crucial for increasing customer satisfaction.

2. Leveling Cash Flow for Clients and Partners

A key benefit of the subscription model for customers is a predictable cash flow model.  Rather than purchasing a system up front and waiting for a return on their investment, the subscription model accelerates the benefits when compared to the cost.  This not only applies with subscriptions is also applicable to services.   When implemented properly, the shifting of services revenue over time can improve partner cash flow and level service delivery for better staff management.  In the blog, Structure of a SaaSy Organization, sample team construction and evolution provide insight into maximizing staff utilization.

3. Increased Employee Satisfaction

Leveling of cash flow comes with leveling of work.  In a society where work life balance has ever-increasing impact on employee happiness, reducing the peak load of go-live and stress of “busy seasons” improves both employee satisfaction and retention.  The blog, 8 Steps for Amazing Customer Service as a Subscription provides some tricks for leveling of workload while improving both customer and employee satisfaction.

4. Increase Revenue

Software companies introduces the subscription model to increase revenue over the perpetual licensing model.  Customers are smart and calculated return on investment and at first resisted change.  The model became popular when the subscription break-even period compared to full recovery of perpetual license costs was extended and the value of subscription increased with regular upgrades which included value to the customer.   By providing ongoing and recurring value, publishers were able to increase their overall revenue.

Service providers will also increase customer satisfaction through the continuous delivery of value.  Increased satisfaction improves customer retention.  Using the 8 Steps for Amazing Customer Service will result in increased customer revenue.

5. Increase Consultancy Valuation

The value of a consultancy is relatively formulaic based.  Value is derived from both re-occurring and recurring revenue.   Good customers often purchase blocks of hours for support, report development and other consulting services.   These services re-occur periodically, but are not contractually obligated.   Service as a Subscription is a contractual obligation over a period of time.  

Recurring subscription revenue is valued higher in the market due to its contractual nature.  The longer the timeframe, the higher the valuation.  This is also consistent with retention rates.  The higher the renewal on either re-occurring or recurring revenue, the higher the valuation.   Implementing the 8 Steps for Amazing Customer Service can increase valuation, for both, but valuation will always be higher for a SaaSy model.

6. Improve Alignment with Publisher

Service partners rarely make the rules of engagement for software delivery.  Software publishers, especially the large and powerful ones, determine how software will be sold and incent partners to work with them.  All major publishers have moved exclusively to or are very motivated to sell software in a subscription model to increase revenue and stock valuation.  This is not speculation, but supported by research and years of implementation.

When service partners align themselves with their publishers only good things can happen.   Offering a SaaSy model

  • Lowers upfront services costs resulting in a better close rate
  • Improves customer satisfaction and retention for the publisher
  • Shows that the partner is a “team player” and can increase lead flow

The Time to Get SaSaaSy is Now

The time for Software and Services as a Subscription has come. For non-NetSuite consulting organizations you have seen the impact of the model whenever you lose the deal to NetSuite corporate or one of the partners who has adopted the model. For NetSuite partners who have not become SaSaaSy, what are you waiting for? The pressure to increase year over year (YOY) revenue is not going away and only gets harder as you grow your business!

If you are ready, but struggling how to make the change, subscribe to our newsletter, follow the blog series or complete a partner application and let us know in the message section of the form. With over 20 years providing Service as a Subscription, we can help!

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