Where the traditional model was about maintenance and upgrades, ISVs have to get used to delivering a service, with SLAs in place that need to be maintained on an ongoing basis or face the possibility that customers could go elsewhere. ISVs also need to consider scalability, which is key to growth and fundamental to maintaining service quality as the volumes of users grow.
A New Remuneration Model
One of the biggest impacts this shift in business and payments makes is to that of sales staff remuneration. The sales compensation model of paying commissions for selling big deals crumbles when there isn't a big contract for the customer to sign or big renewals to negotiate.
Different ISVs are experimenting with alternate remuneration models and thus far it seems to vary depending on the company or industry, as well as the type of service being delivered.
Typical SaaS pricing also implies another important change in how organizations should think about their business. Traditionally, both sellers and customers view an ISV's fourth fiscal quarter as the most important, as that's when they're trying to land accounts and boost numbers for the year. However, with the SaaS business model, it is more about the length of the term of the contract, continuously driving new business and increasing the volume of the business.
The SaaS model, particularly when linked with a cloud delivery platform also enables an ISV to look at what's going on in the market and quickly address changing market conditions, as well as look to new geographies – but once again this requires a change in how sales and marketing are perceived and executed.
A New Partnership
This level of change can be a daunting prospect for any ISV, and highlights the need for a partner that can not only deliver the technological underpinning to assist with this transition, but also provide consultancy and support on changing the underlying business too.
When eyeing the cloud, ISVs should look to partner with someone that will provide all of the benefits of multitenancy, scalability, security, data encryption and so on, to allow them to deliver the best and most secure and reliable cloud-based applications possible. The best partner possible will provide all of this as well as help shape the new strategy. This includes enabling the sales team to understand what the selling strategy is, how to change lead generation and marketing and use of the web and social media.
Getting the business model right is imperative to the successful migration to a SaaS model, but there are many factors to consider. As such, the right partner is key to successfully navigating the transition, not just of the software delivery, but of the business model.
From a technology perspective, it's about supporting web-based clients, multitenancy, data and access security, scalability and pay-as-you-go payment models, helping migrate over time without having to replace loads of hardware and intellectual property.
Colleen Smith is vice president, software as a service, for Progress Software.