Lessons Learned: How One Solution Provider Became A SaaS Provider

While providing software applications using the software-as-a-service (SaaS) model is not as easy as 1-2-3, the journey to becoming a SaaS provider did provide three primary lessons that all solution providers could learn, said Mary Stanhope, chief marketing officer of CloudScale365, a Nashville, Tenn.-based provider of managed and cloud services and software development services.

Stanhope, speaking before an audience of her peers at this week's XChange Solution Provider conference, said the sharing economy, where capital assets ranging from hardware infrastructure to cars are shared by multiple users who do not actually purchase those assets, has become pervasive, and will push solution providers to find ways to capitalize on it.

Indeed, Stanhope said, the next big shift in IT is towards the concept of everything becoming available as a service.

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Stanhope said that point was driven home when her condominium needed a new elevator, and was told it could get the elevator for free and be charged for the monthly service. "Elevator-as-a-service," she said. "Almost anything as a service."

CloudScale365, which has experience designing and delivering software applications and the environments they go into, last year entered the SaaS market with its development of the FuturTrak case management software aimed at a niche market.

Stanhope said CloudScale365 learned three lessons during the process on bringing on monthly subscribers.

The first, she said, is that utilization is critical to the SaaS model. A developer has to track who signed in, when they did, how often they did, etc. "All of these data elements are important to understand to keep that customer engaged each month," she said.

CloudScale365 solved that issue by building a customer success practice, and hired someone specifically to run that practice, Stanhope said. "Not an account manager," she said. "Not a customer service rep. Not a trainer. But someone who is passionate about the application, passionate about the customer's business, and spends every day bringing those two together in making sure there was utilization and engagement."

The second lesson was to move away from wrapping the cost of the software as a line item in a proposal to providing a clear monthly billing with its own clearly identified performance and support but no mention of the underlying infrastructure, Stanhope said.

"CloudScale365 has become the client for the infrastructure that we're buying," she said. "And the very first thing we need to do is to turn to our suppliers and talk to them about how we get a smooth, dynamic, scaling environment. We're no longer talking cost of goods sold. We're talking capital expenditure. We needed that capital expenditure to be smooth, and we needed that capital expenditure to be below the revenue."

CloudScale365 decided to go with infrastructure-as-a-service, Stanhope said. "It gave us the right time to market, and the right support and the right cost," she said.

It is also important to see whether one can go to market jointly with partners, both those who regularly work with the solution providers and those who don't, she said.

The third lesson relates to how resource and personnel needs change as a solution provider moves from legacy applications which are sold with an up-front billing process to the SaaS model where billing is done on a recurring basis, Stanhope said.

In CloudScale365's case, the solution provider also found itself opening new doors in the midmarket space with its SaaS-based FuturTrak application, she said.

"One of the number one mistakes SaaS companies make in the first 18 to 24 months is, they use the exact same sales process," she said. "The cost of sale is too high. In opening up mid-market, we needed to look at who that buyer was, we needed to put in different marketing to attract them, we needed to sell to them differently, and we needed to not abandon the enterprise."

CloudScale365 suddenly found itself facing both midmarket and enterprise markets but without two separate market teams, Stanhope said. The company did that via outsourcing.

"We worked with the consultants and did our playbook," she said. "We outsourced the marketing. We outsourced the inside sales. We actually just recently brought that back in."