To be successful, new and existing SaaS providers must understand the unique requirements needed to create a viable SaaS business model. There are several key areas that must be addressed that highlight the differences between product software businesses and SaaS providers.
Software product vendors typically acquire more customers and retain existing customers by launching new features in their software. The focus is clearly on gathering more new customers, since once a customer buys a license, the costs for the customer to switch to another vendor is high, so fewer customers will channel their efforts in the direction of switching. This is automatically reflected in the product vendor’s team structure as well — product development and engineering teams usually have more members than the customer support or IT operations groups to ensure that they are maintaining and enhancing strong product offers. Hence to sustain this different business model – a different organizational structure is needed.
Here also the SaaS business model is different. SaaS providers need more strength in their support teams to deliver high customer satisfaction and build customer loyalty. Monthly subscription charges, with lower initial investment and low switching costs for the customer, demand that these customers are highly content with the service and will remain loyal customers. To ensure that higher performance, system uptime, security requirements and business continuity needs are all met, a stronger operations team will be needed. Concurrently, the SaaS provider’s engineering team needs to be strong in order to focus on building new features to drive new revenue growth.
The executive management must be cognizant about supporting these organizational nuances for enabling success.