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7 Questions You Need to Ask Before Transitioning to a SaaS/XaaS Model

7 Questions You Need to Ask Before Transitioning to a SaaS/XaaS Model

2020 was a tumultuous and spectacular year for many businesses. We saw three+ years of consumer behavior change happen in a single year, collapsing the gap between B2C and B2B buyers. Whether buyers purchase subscription workout equipment or an enterprise software product, it’s now all about speed, convenience, and remote.  

As a result of the changing buyer and pressure from stakeholders, several global leaders, like Cisco, IBM, and Dell, are migrating their businesses to 100% subscription/consumption-based. There are several ways a SaaS/XaaS model can set your business up for long-term growth. But is your business ready to make the switch?  

Moving to a subscription model may not make sense for your business. We put together seven key questions you need to consider before taking the leap.  

1. Does My Business Need to Transition? 

After years of serving customers in the same way, it’s time to reevaluate your business model. Take a deep dive into how your business currently operates. Ask yourself and your colleagues:  

  1. What value is your service currently providing your customers?  
  2. Are you seeing high customer churn?  
  3. Is your business a competitive threat in your industry? 

When you see your business model’s strengths and opportunities, you can more easily determine if it’s time for your business to evolve. 

2. What Will Change for Our Customers if We Switch to SaaS/XaaS? 

Understanding your customers’ needs is fundamental before you transition to a SaaS/XaaS business model. Your existing model is already working for your recurring customers. Will switching to a SaaS/XaaS model make working with you challenging for them?  

Consider how your customers budget and what levels of service they’ve come to expect from you. Some important things to keep in mind that you should ask yourself and your colleagues:  

  1. Is your service or product mission critical?  
  2. How would your customer experience change if you switched to SaaS/XaaS?  
  3. What unique value propositions could you offer when your business starts offering more hands-on support? 

3. Can Our Business Support a SaaS/XaaS Model? 

If your business doesn’t have the infrastructure to support new delivery methods or higher customer expectations, adopting a new business model may be more trouble than it’s worth. 

Moving to a subscription model demands a massive operation and mindset shift. Consider the changes you’ll need to put in place to offer an excellent customer experience. There may be an overlap between your current team’s responsibilities to simultaneously handle perpetual and subscription, or you may temporarily need to implement two separate teams.  

Some additional questions to ask are:  

  1. Do you have job families and role types to handle the additional customer success motions and workload inherent to the subscription model?  
  2. Do you have a clear map of the shift in responsibilities/relationship between sales, onboarding, and renewals? Who owns what until the migration is complete? 
  3. Do you need to create a policy program around your renewals program?  
  4. Do you need new technologies to optimally capture product usage, onboarding metrics, customer sentiment, etc.?
  5. Is your current infrastructure aligned to handle the change of how your customers use your products, finances like billing and budget, customer support, legal, etc.?

Becoming a services company means investing in the customer and consistently demonstrating value to gain loyalty throughout the lifecycle. How you measure success will change dramatically, so consider whether your company is ready to make those shifts.  

4. Can Our Business Weather Financial Changes? 

Introducing a new business model can have a substantial impact on your bottom line. With the proper infrastructure and operational support, a subscription model will:  

  • Improve recurring revenue 
  • Strengthen planning capabilities  
  • Make your business more competitive in the marketplace 

But even if the benefits of switching to SaaS/XaaS are clear, your business leaders may not be ready to see a change in your revenue stream. 

Reflect on whether your company can swallow the fish—or risk a temporary revenue drop and operations cost increase—to transition. Moving to a SaaS/XaaS model takes time, and you may lose some customers in the process. Luckily, by switching to this model, the lifetime value of your customer will dramatically increase, offsetting any losses you may incur. 

Constantly communicating with your business leaders and board members is essential when you’re considering making the transition. Make sure to properly budget, so financial changes don’t come as a surprise. 

5. Will SaaS/XaaS Change the Way We Sell? 

Switching to SaaS/XaaS involves a significant shift in your go-to-market strategy. Often, the sales process in a perpetual model won’t sustain SaaS/XaaS growth.  

Evaluate how your sales metrics will change with the transition. Now, making the sale is just the beginning; maintaining a customer relationship becomes the new target.  

Some questions you’ll need to start asking are: 

  1. What processes would need to change for your sales team to keep up a high monthly renewal rate? 
  2. How are you tracking customer health in a subscription world? 
  3. What frequency would you begin to track NPS? 
  4. How do you ensure the success of your onboarding program? 

Learn how you are currently tracking your KPIs and which KPIs you’ll need to begin monitoring to measure and understand the effectiveness of your customer success and renewals program.  

6. How Well Do You Know Your Customer? 

Stop and think: How important is your product to your customer? 

You need to understand how your customer uses your product to know if a subscription model is right for your business. But it’s hard to understand how they see your product without the right technology to measure customer success and satisfaction. 

We find that the best method to gather the voice of the customer to achieve long-term success is to perform recurring, quality customer health checks, where an individual engages with a customer and measures their sentiment, product/service usage, goals achieved, etc.  

Start speaking with customers now to better understand the role your product plays in their organization. Once you know how they use your product, you can see if a SaaS/XaaS model will serve their needs better.  

7. When Do I Need to Notify My Customers If We Switch to SaaS/XaaS? 

Switching to a SaaS/XaaS model isn’t only a massive change for your organization; it can be a significant transition for customers, too.  

If customers have already made your product part of their yearly budgeting, they’ll need ample time to prepare to finance a recurring subscription model. Designing a thoughtful transition timeline can give your customers time to gain the approvals they need to continue working with you. 

Performing detailed account planning with all internal stakeholders that touch the customer (including account execs, finances, product, and legal) is required before customer outreach to understand customer budgeting and decision-making processes properly.  

Is your business ready to make the jump? ServiceSource has the holistic experience with customer journey management and mapping to guide you through this challenging process. Schedule a call today to learn about best practices and what you’ll need to do to make the change as seamless as possible for you, your customers, and your partners.  

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