Posts tagged ‘Martin Moran’

Podcast with Martin Moran, ServiceSource

Cloud Proof Your Customers

Martin Moran, EVP of Global Selling Services provides answers to big questions in this Cloud Podcast: How exactly do you put a value on and quantify the business benefits of the cloud? Why is a subscription business model becoming the future for cloud-based business? What benefits does it bring to businesses? How does a business navigate the cultural shift to selling in the Cloud? Why is vendor lock-in is becoming a thing of the past? What does that mean for the industry as a whole? What is the role of predictive analytics for cloud vendors?

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A Cloud on the Horizon and a Fork in the Road Pt.3 #cloudwf @servicesourceEU

A Practical Guide to Transition your Business into the Cloud – Pt.3

Martin Moran, Executive VP Global Selling Services, ServiceSource

Transform, compete, and succeed in the Cloud

If 40 percent of a technology company’s revenue and 50 percent of profits are derived from existing customers, shouldn’t this essential revenue stream be the primary focus of any cloud transformation initiative? Too often, companies place their resources and efforts on gaining new customers – based upon old habits from a premise-based world – rather than engaging existing customers and getting them to buy more.

As we’ve seen from Apple Computer’s success – and the disappointment from Kodak – reinventing a business takes a holistic approach. For premise-based IT vendors making the transition into the cloud, culture, data management and best practices are the foundational underpinnings of any successful recurring revenue business. As they examine their current state and plot a course for the future, companies should place equal emphasis on each discrete component.

Culture

Establishing a renewals culture does not happen overnight. Many companies in transformation often succeed at adopting new technologies and processes or launching new solutions. At the same time, most fail to transform themselves completely because the culture is unwilling to break with the past. In fact, most leading IT companies have jump-started their “SaaS renewal” sales cultures and support organizations through an infusion of new blood via merger or acquisition. Here are some of the top culture characteristics of a SaaS renewal company:

  1. Relentless focus on minimizing churn: A SaaS subscription culture is ongoing and never-ending, characterised by customer engagement, and delivering an exceptional experience – with a constant eye on customer attrition.
  1. Value selling approach:In the past, sales always focused on the “ABCs” – Always Be Closing. In a SaaS world, a salesperson is driven by the motto “a little leads to more” – sell a little, show value, and earn more business. As upgrades are offered and new features added to the SaaS offering, sales reps have an opportunity to strengthen the customer relationship and increase the value of the account.
  1. New vehicles for engagement: SaaS also affords providers with additional ways to enhance the cloud experience. These vehicles can include gamification, and self-service and on-demand capabilities. With a new focus on end-users comes several new ways to drive adoption and usage. Who closed the most deals today? Who had the most satisfied customer service experiences for the day?

Data Management

SaaS and recurring revenue businesses both rely on accurate data to fully understand customer behavior and proactively prevent churn. Unfortunately, every company is awash in company data located in a variety of data silos across the enterprise. In fact, it takes 350 times as much data – across sometimes 5 to 7 different systems – to process a single renewal than a new sale. In addition, basic usage data from SaaS applications don’t always paint an accurate picture of when a customer is about to churn.

With an optimised data management practice, SaaS companies can improve their sales productivity by 25 percent while maximising their recurring revenues. Ultimately, managing the sheer volume and breadth of data associated with existing customers and transforming into actionable analytics becomes a Big Data effort and requires:

  1. Data focus: To accurately predict customer churn and maximise renewals, your data must also be accurate, renewal-ready and align with your business objectives. Many companies are tracking the wrong data or haven’t determined how to use their existing customer data.
  1. System integration: To support recurring revenue activities, many companies must straddle data that’s housed across CRM, ERP, entitlement and other systems. Many companies still rely upon intricate, but manual spreadsheets.   Connecting the dots between these systems can be a painstaking and manual process for sales teams. A typical sales team spends less than 45 percent of their time selling because they are gathering, cleaning and prepping data for calls. Renewal data that’s integrated into a central repository will improve its integrity for analysis, while reducing the toll taken on sales resources.
  2. Drive data velocity: Every successful SaaS provider requires immediate and actionable insight into customer activity. Here, “data velocity” is vital and encompasses built-in business rules, automation and new ways to store and access data. Most importantly, the data needs to be translated into insightful KPIs that drive renewals business while minimising churn. Even for established SaaS vendors, accessing customer usage data is important. Often, this data is trapped in home grown systems that only provide usage updates on a monthly basis.

Best Practices

Maximising SaaS renewals while minimising attrition requires a focused sales discipline and methodology incorporating proactive customer contact to demonstrate value. Unfortunately, nearly 45 percent of customers do not renew because they believe they were not contacted for a renewal.   Best in class SaaS companies employ the following best practices to align the organization – and beyond – around renewals to tap into the full potential of their sales team while maximising customer lifetime value.

  1. Time-bound methodology: In a renewals or subscription sales environment, time is the enemy. SaaS providers must work backwards from the expiration data of a renewal – early engagement at least 120-90 days before expiration is the window of opportunity. And, frequent touch points with the customer should occur prior to initiation of the renewals process.

  2. Real-time reporting and analytics:As discussed, SaaS environments collect valuable customer usage data. By leveraging this data, in conjunction with direct customer feedback, SaaS vendors can anticipate churn, improve cross-sell and upsell, and forecast renewals. Most importantly, analytics supporting renewal activities should be actionable to meet impending renewal deadlines.
  3. Empower and incent the sales teams: Provide the sales and support organizations with the essential systems and incentives they need to accomplish their respective goals.
  4. Lead the channel: Many companies rely upon the channel for up to 90 percent of their sales. So, IT vendors embracing the new SaaS opportunity must lead their channel partners through the cloud transformation. Like their direct sales force, SaaS vendors should provide the same tools, information, and support to their channel partners to ensure long-term success.

Conclusion: The road ahead

IT vendors transforming themselves from a premise model to a SaaS model have the opportunity for a more predictable and sustainable business.   Throughout this journey into the cloud, every IT vendor faces significant risks and is examining their business for answers, hoping to take the “right” fork in the road.

Thankfully, every business can learn from history and today’s successful SaaS businesses for guidance along the way. First, companies must realign their businesses around the renewal opportunity and extract maximum value from their existing customer base – not the next big sale. To accomplish this objective, companies must create an engaged sales culture that demonstrates ongoing value to their customers. Finally, a good combination of proactive engagement, renewal-ready data, actionable analytics, and best practices will provide the foundation for profitable customer relationships – and ultimately a successful transformation into the cloud.

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A Cloud on the Horizon and a Fork in the Road – Pt.2 #clouldwf @ServiceSourceEU

A Practical Guide to Transition your Business into the Cloud – Pt.2

Martin Moran, Executive VP Global Selling Services, ServiceSource

In part one of our series we looked at the challenge of cloud transformation, and asked the question of whether traditional technology companies are ready to become successful SaaS enterprises. Here we explore what a successful SaaS company looks like in our new cloud economy.

New business models and changing mindsets

The cloud throws a sizable monkey wrench into an entrenched business model – and culture – that’s comfortably thrived for over two decades. In a premise-world, customers buy hardware or software and receive ongoing support from the IT vendor through yearly payments – based upon typically 18-20 percent of the list price of their total spend.

In today’s pay-as-you-go, cloud, or subscription economy, companies focus less on selling discrete “things” and more on gaining longstanding customers and recurring revenue.   IT vendors aren’t the only industries and companies affected by this shift. Companies such as Netflix, Spotify and Zipcar are redefining how entertainment, music and rental cars are consumed.

Realigning and reorienting to a new business model creates significant ripple effect across a company. As seen in Figure 1, the business drivers for a subscription or cloud model are markedly different than traditional premise-based hardware and software.

Figure 1: Renewals vs. Subscription business challenges

Upon initial sale of a solution, premise-based software /hardware vendors move to the “next big opportunity” and rely upon their renewal revenue stream – which is typically the lifeblood of the earnings model. This model is characterised by consistency, high profit margins and aligned with key customer satisfaction metrics. Vendors will offer varying levels of service associated with upgrades, bug fixes and support in return for a yearly annuity payment from the customer. Typically, IT vendors make 40 percent of their revenues and 40 – 50 percent of their profits from hardware and software renewals.

In a cloud/subscription model, preventing churn – not new product sales or renewals – drives the business. Since companies can easily swap vendors in the cloud, SaaS providers are always at risk of imminent replacement. As such, subscription models must demonstrate value – early and often – and drive increased adoption. End-users that derive real utility and value from the cloud service become engaged customers and open to additional functionality provided by upgrade modules.

Even across SaaS companies, differences managing churn exist (see figure 2). For example, enterprise SaaS companies providing ERP and CRM capabilities, the primary challenge is managing eventual churn over an extended period of time, requiring deeper discovery into adoption and utilisation rates. For the utility SaaS vendors providing lightweight services such as collaboration, immediate churn is the primary focus.

As such, the utility SaaS vendors require immediate utilisation and segmentation analytics combined with more frequent customer touch points. To maximise recurring revenue with a focus on preventing churn, SaaS vendors are now faced with a host of unique challenges not typically seen within a premise-based world.

Specifically:

  1. Responding to a more demanding customer base: Premise-based customers have invested a lot in time and money in their hardware, and software deployments – swapping out vendors also takes significant time and expense. Contrast this scenario with the lower switching costs and reduced time associated with a SaaS deployment. As a result, SaaS providers must demonstrate continuous innovation and rapidly respond to customer needs.
  2. Focusing exclusively on adoption: For a SaaS company, closing the sale is only half of the battle. To protect the recurring revenue stream associated with any new sale, the SaaS vendor must now ensure frequent utilisation and value-recognition from the customer.
  3. Gaining more insight from the customer base, more often: SaaS applications allow vendors to capture more data on end user. This day-to-day data becomes a strategic component to manage the customer relationship and associated recurring revenue streams.
  4. Using data to be able to predict churn before it happens: Using customer data, SaaS vendors need predictive analytics and insight. With an accurate picture of the customer base – including “early warning” systems when customers are unhappy – SaaS vendors can better prevent churn and attrition while maximising recurring revenue.

In our final blog we will look at how to successfully transform, compete, and succeed in the Cloud – from fostering a new culture, proper data management and best practices.

A Cloud on the Horizon and a Fork in the Road – Pt.1 #clouldwf @ServiceSourceEU

A Practical Guide to Transition your Business into the Cloud – Pt.1

616[2]Martin Moran, Executive VP Global Selling Services, ServiceSource

Throughout history, we’ve seen many examples of companies – or whole industries – confronted with the stark new realities associated with emerging technologies and shifting market trends. Faced with strong resistance and insurmountable challenges, these companies needed to make some very painful decisions to reinvent themselves and remain relevant.

Several years ago, both Apple and Kodak were confronting daunting challenges in rapidly changing marketplace. Kodak, the preeminent camera company, was quickly facing obsolesce with the advent of digital cameras. In the same way, Apple faced obsolescence from the personal computer industry dominated by the Wintel (Microsoft +Intel) monopoly.

Standing at the crossroads, Apple and Kodak asked themselves: Where is the market going? Is my existing business model still relevant? Will my employees and sales force adapt to a new culture? Are my internal systems and technologies aligned? And most importantly, will my customers follow?

Apple embraced innovation and made bold moves, rethinking its core business model, culture and internal processes. Kodak, on the other hand, only took half-measures – even though they held critical patents for digital cameras. We know how this story played out within the marketplace resulting in one spectacular success, and the other in bankruptcy.

Today, we’re witnessing a similar transformation within the technology industry. The rapid ascent of cloud computing has fundamentally turned the IT industry on its head. In particular, the legacy software and hardware vendors, which have dominated the past two decades with premise-based business models, are facing pressure by faster, more nimble best-in-class software as a service (SaaS) companies.

As companies increasingly replace application, server and networking infrastructure with cloud services, existing IT vendors are facing a dwindling IT spending pie. Similarly, the cloud-based delivery of software is democratizing the technology spend, allowing employees and managers to whip out their credit cards and procure services from the emerging class of SaaS providers, without going through IT.

In 2012, cloud subscription revenues experienced a whopping 22.7 percent average growth rate.[1] Compare these double-digit growth rates with flat growth for companies whose primary revenue streams today are in on-premise technology and maintenance and support revenues.[2] As companies become more reliant on cloud-based resources and less dependent on traditional IT, vendors are now facing a their own fork in the road. Although the impact on established vendors is slight today, by 2016, the pain will be visibly evident[3].

With an eye to the future, traditional software and hardware vendors are acquiring nimbler SaaS startups, creating new SaaS solutions, and rapidly moving their legacy technology offerings into the cloud. But, are these changes enough to transform today’s technology companies into the successful SaaS companies of tomorrow?

In the next installment we explore how new business models demand new mindsets.

Tag Cloud

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