Friday, May 31, 2013

SaaS Vendors Need To Be An Extended Part Of The Customer Organization

With the proliferation of Software-as-a-Service tools that support critical business processes such as sales, people management and operations, software providers have become an extended part of their customer organizations.

During SaaS sales pursuits, vendors cannot go and just explain what the product does and expect customers to embrace their solution. Unfortunately I see many software sales people do this over and over again without success. Vendors and their employees need to study what a particular customers' business realities are and help them understand how the vendor's products and services will fit their needs and solve their current problems. An even better step would be to help customers understand how they can get towards the desired state in multiple phases.

Traditionally, this kind of trusted advising was done by large and expensive consulting organizations which also made a lot of money building custom software for organizations. From my experience working at multiple Software-as-a-Service companies (DigitalThink, SuccessFactors), I have realized that the software vendor needs to take on some of this advisory responsibility to earn the trust of customers.

I tried this approach with tens of customers who were considering SaaS products last year. It works very well. When you spend some time learning the customer's business and the customer's landscape, your conversation with them becomes about the customer's problems and less about individual products.

A workshop to discuss the customer's situation is a key difference between success and failure of SaaS projects
In the past year, when ever I was provided with the opportunity to take this approach by my sales colleagues, customers appreciated it, embraced what I had to recommend and generally bought more than what my sales colleagues were planning to sell. It helped that my incentives were designed to make the customer successful and happy in the long run, and not to sell just one product. In many cases I would mention a product or service that the sales team was not proposing and the customer would end up asking for it and buying it. SAP Jam is a good example of a product which was sought after by customers.

On the contrary,  when my sales colleague lined up an army of individual product experts, who talked about their product and took the plane home, customers failed to make a purchasing decision even after many months. That did not surprise me. Customers want to know how the latest and greatest is relevant for their current reality, which is very often far from ideal and usually pretty messy.

In cases where a customer buys products and services without thinking through how the products will fit  their current business and technology requirements and environments, their projects get delayed and their relationships with the vendors suffer, leading to less business value for both customer and vendor in the long run.

I asked one of my customers recently about their delay in purchasing cloud products. They mentioned that while they were very impressed with the individual features and products and even the value they brought as a suite, they were not clear about where to start, how the products will fit in their current landscape and how they can move to a desired end state in stages. They were not even looking for technical or product details. They were looking for a big picture and my sales colleagues kept bringing in individual product experts to show demo after demo. Clearly that did not work.

This trusted adviser approach is not feasible when an expert is asked to jump on call just to appease a customer. This has to be a deliberate, planned, recognized activity.

The current organization model of most software vendors, where there is a product organization that just builds and another one that markets or sells is not sufficient to support the Software-as-a-Service model, where the vendor in essence becomes an extended part of the customers business and information technology organization. It is time to rethink the kind of organization SaaS software vendors need to build, if they want to be successful.

I know how this worked at DigitalThink, where we supported about 80 customers with a dedicated team of trusted advisers. But there are few proven models today to scale this model to tens of thousands of customers and tens of millions of users. I guess we are going to experiment, learn and improve a lot.

I am not just talking about it. I did bring this up with my colleagues at SAP and SuccessFactors recently. They all agree that we need to do this. Will keep you posted about how it goes. It is going to be a journey for sure.

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