The growth of XaaS solutions is among the fastest-growing segments across the technology industry. In fact, Salesforce alone grew by 56% from $161B in January 2020 to $251B in September of 2021.
You’ve decided to transition your business to a subscription model, and you already understand the impact it will have on your business and partners ecosystem. You know that you will be able to better engage with customers, provide them with a better overall experience, and drive more sustainable, long-term revenue growth.
But you must first take steps to ensure that your customers do not suffer because of this transformation. It will take several years to migrate your entire organization to a subscription model, but there are ways to continue to grow your customer base while you make the change. In this blog, we’ll tackle how to communicate this transformation successfully to your customers, how to remain flexible, and ensure that you are actively growing during your XaaS transformation.
1. Tailor Your XaaS Transition for Your Audience
It’s vitally important that you understand who, in your customer’s organization, you are selling your services to. Each potential buyer has a different driver, and you need to tailor your message appropriately.
For example, the CTO might easily see the long-term advantages of investing in a more user-friendly and advanced interface. For the IT manager, it might look like a lot of short-term work but with potential long-term benefits.
Know Your Change Champions
Once you know your audience, it is important to determine your “change champions.” That same IT manager may see the advantages of certification programs for things like cloud management, Azure, or AWS, and you can incentivize them by offering these to their staff for free. The CTO may be driven more from a cost perspective. So, transitioning from a CAPEX expense to an OPEX expense, free training for their teams, or highlighting the operational improvements that they will experience from the transition are ways that you can incentivize the deal.
Best Practice: Spend time doing your research and building the persona of your change champions. This will ensure that your teams hit all of the pain points, incentives, keywords they use, and how they determine success, whether that’s operational efficiency or revenue-related.
Choose Your First Customers to Migrate Carefully
Another key to success is to start small with your XaaS transformation. Look for those customers who are likely to adopt XaaS quickly. Choose a specific offering that could easily translate to a subscription model and start with a small-to-medium-sized customer. Troubleshoot any issues with this customer, build a case study around it, and use the data you gather from the process to prepare your team to tackle more product/service offerings with larger enterprise clients.
Best Practice: Do not offer customization with this first offering. Customization will inevitably dilute the benefits of your XaaS offers and will make it more difficult when rolling out upgrades.
Determine Your Price Positioning
As you get started with smaller accounts, use the experience to determine your price positioning. Will you offer lifetime license options or an annual subscription? Or perhaps some combination of the two? Once you have these in place, you can motivate customers to make the change to XaaS with subscription discounts, free training, or unique feature offerings.
Best Practice: Once the migration is operating smoothly, utilize more vigorous push methods like an increase in maintenance costs for the non-XaaS version or through establishing a deadline when it will no longer be supported.
2. Be Flexible and Stay Ahead of Customer Expectations
One of the biggest challenges in transitioning to a XaaS offering is remaining flexible. You may not even know exactly what your customer needs and wants early on. It’s therefore important to simplify communications around packaging, pricing, and even contract and subscription terms. Respond to customer feedback swiftly and be open to adopting requests.
Package Your Offering Based on Customer Need
If your customers do not get the value they desire from your product, they’re going to quickly move on to your competition. Do your due diligence to understand usage and adoption metrics to focus on the specific aspects that your customers use and get the most value from. This will enable you to make a much more informed decision when it comes to packaging and tiering your product/service offering.
Best Practice: Tailor your product/services so that your offering is not bloated with features the customer does not need or won’t use. Offer several alternate paths to “level up” your product/service offering based on the business models of the companies you serve.
Keep the Process Frictionless
The goal of XaaS is to create a frictionless customer journey experience, especially when it comes to onboarding, adoption, and making modifications, like renewing, upgrading, or even canceling their subscription. Ensure that your team pays particular attention to the onboarding experience and creates a seamless process for every path of your customer journey mapping. If your customer does decide to cancel their subscription, ensure that you capture why they decided to cancel. This will better inform your product development and go-to-market strategy.
Best Practice: Make sure that, especially during the transition period, you have always-on availability for everything from disaster recovery to device operations and technical support. Always be accessible.
3. Provide an Infrastructure That Ensures Your Team’s Long-term Success
Migrating your business to a subscription model is not an overnight change – it’s an ongoing process that can take up to three-five years. The result will be a more efficient, flexible, and customer-centric ecosystem – but alignment between your business, partner ecosystem, and the customer will determine the overall success of the migration. Creating a roadmap is a great place to start – and it all begins, like many transformative business decisions, with the C-Suite. Ensure your leaders are aligned and committed to the vision and transition to keep every department on track, on time, and rowing in the same direction.
Focus on Long-Term Solutions Instead of Short-Term Tradeoffs
This level of change in your business requires alignment and cooperation within every department, from finance and legal to marketing, sales, and product development. One key to ensuring alignment between departments is to create a cross-functional team to tackle the migration and keep the company focused on the end game that your leadership envisions.
These “change agents” will implement new processes, migration timelines, your cloud infrastructure implementation, training, and constant communication to ensure every department has a clear understanding of their new roles, the benefits, etc.
Best Practice: Utilize your change agents to train your teams on demonstrating those benefits of the transformation to your partners and customers. This will help also foster a company culture that embraces and drives the transformation.
Redesign Your Teams for Success
Because a subscription model is focused primarily on your customer’s post-sales experience, you will need to implement sales training and place a new focus on customer success. During the transition, it is a good idea to hire an additional sales/customer success/renewals team to manage the new customer journey experience. They will work in conjunction with your change agents to lay the foundation that your current sales team will use moving forward.
Best Practice: Do not try to migrate your entire sales org over to your new model initially, either hire a transition team that already comes with the experience and expertise you hope to transfer to your current sales team or use a small team to navigate this new landscape. If you use a few members from your current sales team as the customer success pioneers, ensure that you have a robust compensation plan to offset dips in commission your team may be used to.
You Do Not Have to Face the XaaS Transformation Alone
The transition to XaaS is filled with pitfalls, but more than that, opportunities for sustainable, long-term growth. To take full advantage of it, you need to create a comprehensive roadmap with clear goals, milestones, use cases, and plans for your internal team to become transformation champions.
You will need to stay flexible and nimble, responding to customers’ needs, wants, and pain points that you might discover along the way. But don’t just focus on your customer. Support your internal team through the transition as well and focus on redesigning and revising your process and incentive systems to make it as smooth as possible. ServiceSource has helped several leading technology businesses actively grow the wallet share of their install base while navigating this transformation to a subscription model. Please reach out to a ServiceSource expert today to learn more about how we can help.