Congratulations! You’re now a SaaS customer!

I moderated a panel discussion today for the York Technology Association, which was hosting a lunch event as part of Toronto Tech Week. The session, focusing on Internet strategies, was called “Is Your Business Positioned for the Future?”

Given the recent stock market woes, I suggested to the audience that most businesses would have to admit that they’re not, and that even the best Web technologies probably couldn’t have saved them. In some ways, being part of this panel brought back some strange memories of similar events about 10 years ago, when we would all gather to hear the experts talk about their “dot-com” strategies. It wasn’t long after that the stock market sank, and dragged the North American economy down along with it. But if there was a silver lining in that experience, it was that it forced a lot of companies to put their critical thinking skills to the test, to separate the nice-to-have technologies from the truly mission-critical, and invest in that which creates real value for shareholders, employees and customers.

Our panel made some great points about how companies are using the Internet as a delivery vehicle, collaboration tool or marketing resource, but it was a question from the audience that got me thinking more deeply about this topic. He brought up the topic of software-as-a-service, and asked how, if you were a provider adopting that model, you effectively communicate it to your customer base.

This, to me, is one of the fundamental differences between the last online explosion and the current one. In the dot-com days we were focused as an industry on how to deliver products and services (or at least facilitate the payment) though Web sites. Then we moved into converting on-premise, client-based electronic business processes to Web-based versions. Software-as-a-service (SaaS) is different in that it creates another new relationship between supplier and customer. Much like fundraising organizations that have evolved from asking for a one-time donation to a monthly bank account deduction, ISVs are looking for a reliable, consistent revenue stream, one which can increase depending on the customer’s needs.

Our panellists didn’t have any strong answers to this question of communicating the SaaS message to customers, but I’d rather think of it from their perspective. How best to approach them with the change in model? A few basics come to mind. First, it’s not a model to be imposed unilaterally. An on-premise option should be available, at least for a limited time. There should be sufficient warning before anything moves entirely to SaaS – think of the timelines Microsoft has had to set (and then reset) for obsolete product support. Finally, I’d suggest that customers get something for converting to SaaS besides the opportunity to pay more as their needs escalate. Maybe it’s a more flexible contract, maybe it’s dedicated help services of some kind.

These are the kinds of issues vendors should be mulling over, and not just the ones who attended today’s YTA luncheon. Is your business positioned for the future? Better hope your customers are, too.

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