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What You Need to Know to Sell SaaS

The market for software as a service (SaaS) and software on-demand is growing rapidly, led by the success of firms such as Salesforce.com. Instead of paying an upfront licensing fee to purchase the software and servers to run the application on, the user simply pays a monthly fee to the provider for access to the software and the hardware it runs on. Storage, data replication and some level of user support are included in the monthly cost. The application is available to the user from any Internet connection worldwide. Alternatively, options exist to provide managed software application services out of a telco-grade data center for applications not available in a SaaS model and/or when the customer has software on site already licensed and does not want to migrate to a new platform.

What does an agent, VAR or managed services provider need to understand about potential customers, the selling message, targets and the technology to address these market opportunities? The following questions will help you to prepare for successful SaaS sales.

1. What are the key triggers that will open up SaaS for managed application services opportunities? The following are common triggers:

  • A drive to reduce or redeploy IT resources to business critical issues and away from support for standard software applications.
  • Having a limited or overworked IT staff
  • Purchasing a new application or requiring a major version upgrade of existing software (including migration from Lotus to Exchange or moving between Exchange platforms)
  • Security and Regulatory Compliance Concerns: HIPAA, SOX, FINRA
  • Desire for improved service levels available out of a data center environment
  • Need to accommodate a variable environment — can be characterized by both rapid growth or the need to manage downsizing the organization
  • Need to support multiple locations — with appropriate levels of IT control in a decentralized operating environment.

2. Are you positioned with key decision makers at the C level or within the IT department? Each decision-maker will have different drivers. The drivers for C-level executives will include total cost of ownership, ROI, regulatory compliance, disaster recovery and business continuity as well as user experience. IT decision-makers will be more technically focused and tend to be driven by their internal workload. If projects are lagging and resources can be freed to help the business differentiate itself, the IT department will be interested.

3. How can you overcome key objections? C-level management will be very concerned with data security/application availability and the financial viability of the provider (a leading indicator of provider longevity). Be prepared to provide basic information on other clients using the provider in similar lines of business, the provider’s financials at a high level and the provider’s capabilities relative to SAS 70, HIPAA and other regulatory requirements.

The IT department will have some of the same concerns and will want more technical information, but will be much more likely to have questions about control of the software and operating environment. Be prepared to have technical resources from the provider available to answer questions on data backup, restoration, network redundancy and availability and the like. You may find that a half step to address concerns about control on the part of the IT shop is to offer virtual or dedicated servers as a solution. In this scenario, the customer would receive the benefit of the data center (multiple ISPs, hardened facility, physical security, redundant fiber, mirrored hardware and all the rest) while retaining control over the server —either virtual or dedicated. The customer would have a console to access the server just as they do on their internal LAN.

4. What software your prospect is running? While customers can and do outsource many types of software to managed application or SaaS providers, certain software is more likely to be outsourced than other types. Commonly outsourced software categories include productivity/collaboration software (especially Microsoft Exchange and Outlook, Office and Sharepoint), CRM, accounting and human resources. Human resources applications are especially prone to outsourcing as many companies do not want payroll information exposed to internal staff.

5. Can your prospect easily support remote locations/workers? Many times the answer to this question is, “no,” due to issues with VPNs, security, workforce management and related issues. Both SaaS and managed application providers deliver a seamless user experience over broadband connections from anywhere in the world.

6. Do you understand virtualization and the data center environment you are proposing? At a high level the answer is probably, “yes.” At a more technical level, most would probably admit to some gaps. This should not be an issue with the right vendor relationship. The best vendor(s) will have sales engineering support to help develop a solution, answer the customer’s questions about the environment, price out custom solutions and execute some aspects of the paperwork upon a successful close.

7. Are you adept at selling concepts? The selling agent needs to build a case that the business he/she is targeting is better off with a third-party delivering software over the internet (as well as patches, version control, data backup and much more) than it is doing things as they have traditionally been done — buying hardware and software and locating all of these assets in, usually, the HQ location of the customer. Given the realities of limited capital and the inability of most businesses to cost justify a true data center, it makes sense to sell the business continuity aspects of a SaaS or managed application provider.

8. How much customization of its software/environment does your prospect needs? You will want to ask if the customer has or needs multiple applications integrated together. If so, does the SaaS or managed application provider support that level of customization? In some cases the answer will be a clear, “no,” but some providers will fully support third-party applications tied into primary applications. You should look for providers with maximum flexibility.

9. Are you comfortable in demonstrating the product? You should be able to demonstrate at a high level the delivery of applications in a hosted environment. Your provider should have demo accounts set up to facilitate the customer experiencing a live environment to develop comfort with the concept. The provider can have a sales engineer assist if necessary in case technical questions arise in this phase of the selling process.

10. Do you understand the market opportunity? While SaaS is growing quickly and supplanting traditional software distribution channels (resellers, VARs, ISVs, third-party developers and more), the agent would be wise to evaluate the market from the perspective of what the installed base is (which is paid for) and who serves the account. Most software is still sold by resellers who can be partnered with to take the application into a managed environment. The customization and licensing revenues are preserved for the reseller, while the agent can earn commissions on the management of the applications in a data center. Similarly, the applications the customer uses today can benefit from a move into a data center while the reseller can be given access to the application for upgrades and customization just as he has now on the customer’s LAN.

Tom Turpin is president of Lightwave Consulting Group Inc., a Charlotte, N.C.-based telecommunications and software-on-demand consultancy. He can be reached at tt@lightwavegroup.com.


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