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 first blog in this series, Get SaSaaSy – Services and Software as a Service introduces value concepts and provides examples of a Service and Software as a Subscription (SaSaaS). As a service provider how do you transform your business into a SaSaaSy model?
Publishers have suggested changes in the business models of the partners who provide services around subscriptions for years. Sometimes at conferences software companies provide theoretical guidance on potential models for business transformation using the same “success stories” year after year. Although the publishers acknowledge that change is hard and expensive, the pandemic and economic pressures have limited the investments in those partners willing and eager to make the transition. If you want to make a service transformation the responsibility will be yours! Three tips to for SaSaaSy transformation are:
- Break Free of the Hourly Mindset
- Go Vertical
- Establish the Cloud Engagement Executive Role
Breaking Free of Hourly Mindset
Most partners have “grown up” with the one consultant for one hour generates $xxx revenue mindset. The hourly billing mindset creates a confrontational relationship with customers.
- “Why did it take x hours to do a task we do not understand and can’t do ourselves?”
- “I didn’t approve x hours for that!”
- “You said it would take x hours, why are you billing me for y hours?”
- “How many hours will that take?”
The reality is nobody buys time. Back in 2011, John Shaver with Axiology (formerly Aries Technology Group) created the Bob’s Barbeque video to demonstrate the value fallacy of the most common billing model.
Some strategies to break the mindset include:
- Hire a business coach –
- Start with some Fixed Fee Services
- Most partners have extensive experience and really good estimating factors for standard services.
- Create a Quick Start program. Start & Grow is an example we created for SAP as fixed fee fixed scope integrations for distributors of discrete products.
The real shift in services transformation comes when you change the focus from fees and billing rates to value. Customer value must be derived and identified by the customer. Provider value can be
- Increases in
- Customer Lifetime Value (CLTV),
- Annual/Monthly Recurring Revenue (ARR/MRR) and Average Revenue Per Account (ARPA)
- Customer Satisfaction (CSAT) or Net Promoter Score (NPS)
- Billing per consultant or utilization, but the goal would be to choose other metrics!
- Reductions in
- Administrative efforts (ditching the timesheet)
- Customer Acquisition Costs (CAC) through referrals and/or simplified sales cycles
- The actual number of customers for smaller consultancies.
Customers have always wanted advice from an expert in their industry. Publishers have pushed partners to go focus on a vertical or micro-vertical for decades! Going vertical has several advantages:
- Provides a consistency in service from both a content and execution perspective.
- Creates re-usable content for projects.
- Industry specific intellectual property can include programs and scripts to enhance your core ERP offering
- Regulatory compliance and industry specific reports
- Training materials, help files and other end-user tools tailored for the industry.
- Targets a smaller group of prospective customers which in turn lowers overall Customer Acquisition Costs
Partners who have successfully gone vertical include:
- SAPDistribution.com is the horizontal package we created for distribution with complex unit of measure requirements and then focused on the Flooring Industry
- Tesserae Technologies went a step further building a complete platform for the Tile and Stone industry on the Nextworld platform.
- PC Bennett Solutions is a leading Acumatica reseller who focuses on the Automotive industry for manufacturing and distribution of parts.
The Cloud Engagement Executive Role
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. It is the CEE who can elevate the relationship of your company to that of a trusted advisor. David Maister defines four types of relationships in his book the Trusted Advisor as:
- Service Based
- Needs- Based
The service transition to trust-based comes when both the depth of the personal relationship and the breadth of business issues are expanded. This only comes when the human dimension of interpersonal individual relationships is recognized as meaningful.
Continuous and genuine engagement and agility in meeting business requirements are hallmarks for a successful service transformation to SaSaaSy. A trust-based relationship leads to cross selling complimentary cloud products to increase value to customers and returns to the the consultant and their publisher. The CEE also must monitor for products and services which are not adding value to the customer and proactively suggest adjustment or discontinuation.
Get Started with SaSaaSy Transformation
Changing business models is hard. It requires changing behavior and mindset. As discussed in our previous blog, Get SaSaaSy – Services and Software as a Service, transforming from a transactional to a relationship model also creates a change in the customer mindset. A SaSaaSy relationship requires building that trusted advisor relationship both parties really want! Recognize that change will not be a straight line.
- If the customer is looking to buy hours for the lowest cost, going SaSaaSy may result in losing or firing that customer.
- Because subscription pricing has a lower up front investment, you may gain customers who otherwise may have thought your products and services were too costly. Alternatively, you may experience an initial unwanted churn if you sign up customers who are too small, don’t understand what they signed up for, or if you don’t engage and continuously ensure value matches cost.
- If your work is performed efficiently margins may increase. However, if your team doesn’t understand scope included margins can suffer.
- In “all you can eat” subscriptions capacity planning and having clear response expectations and communications is critical. If customers expect a 72 hour response and staffing constraints result in long delays, customer satisfaction will suffer.
Recognizing that SaSaaSy service transformation will have “bumps in the road,” it is important to create your plan and make change an imperative for your organization. Success is achieved when leadership makes a commitment, embraces change and keeps the eye on the prize. If there were a magical formula for service transformation, with guaranteed results, consultancies would have all transformed. To get started on your transformation with I-BN, complete a SaSaaSy Explore!