How Smart CTOs Transform Legacy to SaaS
Companies with traditional software are rethinking how to transform their business to leverage the power of SaaS. Not only have SaaS company valuations skyrocketed, but SaaS is an enabler for recurring (subscription) revenue, additional monetization streams, product stickiness, and reduced operational costs.
But not every business lends itself intuitively to a SaaS model. Especially if you have years of legacy technology and processes established with an existing customer base, the transition won't happen overnight. When planning a transition to SaaS, these are the questions to answer in each facet of the business.
Before the software development team launches a major new effort to port their legacy technology to web and cloud to support SaaS, stop and think: what’s in it for the customer? The first step is to go back-to-basics and talk to customers, prospects and non-customers in your target markets. Understand what problems they have that your SaaS offering could solve. Why would web/cloud technology truly benefit them, what problem would it solve? Why would a subscription model lend itself better to solving their problem than a traditional sale? SaaS is very attractive for you, but it only works if there's overwhelming value to the customer.
Strategic Roadmap for Existing Customers and New Customers
For your existing customers, the question is whether you will aim to REPLACE their legacy product with a new SaaS version (migration path), or continue to support the legacy while at the same time up-selling something new in SaaS. Or, perhaps the SaaS product is a complement to the existing legacy product, such as a mobile or voice companion to the core product, offered as an upgrade to existing customers. Or, maybe it's not intended for your existing customer base at all, but rather an offering to new markets?
Of course, nothing is done overnight. Smart CTOs and VPs of product work together towards an end-state over the course of several years. They build a multi-year roadmap that provides incremental value to existing customers and new customers alike.
SaaS businesses can collect and monetize anonymized customer data, including patterns of customer behaviour. They can serve ads to different customer segments, or upsell partnering products. For example, if the SaaS offering is an online store, it could be natural to serve targeted ads to particular user groups. If it's a second-language e-learning tool, it could be natural to track anonymized patterns of learning and sell it to AI companies looking to better understand natural language processing. If it's a mobile tool in a hospital, it could track and sell patterns of hospital staff movement or inventory usage, etc.
The key is that the monetization part of the plan needs to be vetted too. If you're selling ads or monetizing anonymized data, who is the target buyer? What problem of theirs does this part of the offering solve? What's the roadmap?
User Experience Design
Re-creating your offering in SaaS often comes with the opportunity to re-think the user experience design. For years customers (and employees) may have had pet peeves about the user experience of the legacy product and finally this is a chance to make things right! But there are risks with re-inventing the user experience however such as analysis paralysis, "political" design ("the VP of Sales wants to see the button over here..."), and undertaking too big of a redesign such that it actually undermines what customers liked about the legacy product in the first place.
Do you know what speciﬁc aspects of your user interface would yield the highest return on investment (ROI) if you updated them? An aesthetic face lift may be nice, but the real wow factor usually has more to do with the little things within the core workflow, such as how quickly the user can accomplish their primary tasks, or how the product handles offline mode and spotty connectivity. The CS and helpdesk teams usually have a trove of these issues and will tell you all about them!
Engineering, IT, Customer Success
Beyond a strong architectural and technology strategy, the investment in new skills, hiring and new partners to deliver, SaaS has become synonymous with continuous, automated delivery of new features and on-the-fly improvements. To enable this, companies are turning to the DevOps model, in which the traditionally-distinct functions of software development, testing and IT operations are brought together. However, the transition to DevOps really is a transformational initiative in and of itself, as it requires not only a change in skills and tools but also in mindset and culture.
Along with the customer's expectation of continuous delivery of new features is a similar expectation that SaaS solutions are an easy, "frictionless" experience to deploy and learn, and that any issues found can be resolved quickly on the fly. In fact, sales will likely promote customer service as one of the key reasons to adopt a subscription product. This can mean a significant investment in the customer success "playbook", particularly if customer success was previously tuned to the traditional model of onsite deployment and defect resolution as part of monthly or quarterly service packs rather than next-day updates. It also means a much higher degree of integration between customer success, engineering and product management.
A move to SaaS likely means a massive shift in focus on Data Privacy, as customer data may now be flowing through or be stored in the cloud, and anonymized patterns of data may be part of the value proposition. Data leaks are at an all-time high, and a single high-profile data breach in your new SaaS offering can instantly rupture trust.
Finally, you may need to work with all departments to ensure new tools are put in place to enable their needs at the right time. For example, if the SaaS offering is to be self-service, where a customer can purchase a license online via credit card, this can require a new tool to be evaluated by IT, sales, accounting and CS, and then implemented.
Commitment to Transform
No matter how carefully planned the SaaS transformation strategy, no matter how well aligned each department, and no matter how ingenious the value to the customer, there is still one more thing that can make or break the transformation: is the organization truly committed to transformation? This means frequent communication with staff, customers, and shareholders. And beyond just communication, it means action, taking into account the new reality in each decision that is made day-to-day, from internal KPIs to how a customer request is prioritized, to product trade offs to hiring decisions.
Change is hard, and if employees do not believe their company is committed, the organization will not change. With a strong commitment demonstrated at all levels, the SaaS transformation - and all of its benefits - are just a plan and a commitment away.
Consider a Digital Acceleration Team
Need an authoritative consultant to drive a SaaS transformation across all departments? Need specialized skills or bandwidth to carry out large-scale legacy-to-SaaS transformation? Consider a digital acceleration partner like Thinklogic. Thinklogic’s Digital Acceleration and Response Team (DART) specializes in advising CTOs and product management leaders on their roadmaps, rapid prototyping to bring a business case to life, and carrying out large-scale implementations. Located in Los Angeles, with years of experience in enterprise verticals like manufacturing, commerce and banking, Thinklogic is your trusted partner for end-to-end digital transformation programs.
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