As I wrote in my earlier posting, implementing a SaaS delivery model for your software product is more than just hosting servers and storing data.  In order to make SaaS happen at your organization, you first need to adjust your perspective, since this new model is all about renting as opposed to selling.  Your customers are now tenants rather than owners.  Think of how different your expectations are when you are a renter vs. an owner.

If you’re an owner and your furnace needs to be replaced, you call the furnace company who tells you to call the electrician to do some new wiring and then the plumber to run some new gas lines and then tells you that the new furnace is backordered.  If you’re a renter, you call the landlord and say, “Fix the furnace!” and you are done.  The furnace company, the electrician, the plumber and the coordination are all handled by the landlord.

As a Product Manager, you are not going to be the one running around and getting the servers, storage, routers and hubs to run your software, but you ARE going to be the one budgeting for all of it.  Budgeting incorrectly for a SaaS migration can cause you major headaches, so you have to understand what you’re doing.  If you set the budget too low, the product doesn’t perform and you lose customers and reputation.  If you set the budget too high, you sit around with wasted capacity and have to explain your excessive purchases to some very angry executives.

That said, the impact of moving to SaaS is in no way limited to sizing the technical infrastructure. You are turning your revenue model from a one time payment (license plus implementation services) along with yearly maintenance to a multi-year subscription agreement with a revenue stream that is inherently more predictable. This will have a huge impact on almost every part of your company including sales, finance, R&D, support and services.

• The customer’s expectations have changed, so policies, procedures and people must be put in place to manage those expectations differently.  Customers are increasingly asking to have their service expectations quantified with a Service Level Agreement with penalties for poor service.
• The model for the sales team is going to change dramatically also – they won’t necessarily know how to sell services– and it is your job to ensure that they are armed with the right knowledge and sales collateral.
• Your customer delivery has to change.  Just as you wouldn’t invest significant money customizing a rental apartment for your use, companies don’t want to have to invest large amounts of money and resources in setting up and customizing your product for their use.
• The finance organization must come up with an accurate cost accounting and billing system to ensure that revenues are properly captured and the SaaS operation remains profitable
• The IT department is used to supporting they internal infrastructure, but now they will be responsible for managing the client facing infrastructure which leaves significantly less room for problems.

If you’re starting to wonder why anyone would migrate their products to SaaS, there are significant benefits.

• You are in control of the whole system.  You don’t have to worry about product failures due to installation issues, problematic customer infrastructures or any other hardware setup issue.  It’s your software running on your hardware.
• If you set it up properly from the beginning, you can have perfect data on customer usage of your product.  You can see how individual customers are using the system on a transaction by transaction basis and you can create trend analyses based on all of the usage patterns of all of your users.  Even better, you can use a customer’s data to locate inefficiencies in their workflow and create new products to address the need.
• You decide when your customers upgrade – they will always be on the version that you want them to be because you own the system.  You will never have to wait to roll out a new billable feature because your customer’s IT department is too slow and you will never be forced to spread your support staff over multiple product versions.
• You can add an element of stability to the company revenue stream.  The subscription based model can be very attractive to your company’s investors because it is now a more predictable revenue stream.

Do the benefits outweigh the costs?  We’ll figure that out as we explore managing the changes and maximizing the benefits of your SaaS implementation.