Can a SaaS Product Replace Your Traditional Business?
As more and more small-to-medium-sized companies are turning to cloud-based software business models, we must ask the question — can a SaaS product replace your traditional business? We believe if the correct technology is implemented at the right time, a company can successfully migrate to a SaaS model and gain a competitive advantage in the market. Keep reading to find out how and why.
Understanding SaaS
Before we delve into the how and why let’s just remind ourselves what SaaS actually is. Software-as-a-Service (SaaS) is a licensing software service that allows businesses to access its features through a web-based portal that can be used anywhere, at any time.
Pros of SaaS
SaaS is one of the most popular cloud-based services amongst businesses. In 2019, the Gartner report showed that $111 billion of IT spending has migrated from on-premises to the cloud. There are several advantages of cloud-based SaaS:
Opportunity: Cloud-based SaaS services put small businesses back in business. The software allows small players to capture the market slowly, and start-ups are currently thriving. The opportunity to adopt the latest technology and utilise it to your advantage is endless. Enterprise-class services can finally be developed by anyone and not just the big players.
Mitigate Expenses: SaaS can provide a real boost for business by mitigating operational expenses and maximising business productivity. Cloud-based SaaS solutions have fewer up-front and hardware costs than traditional ERP systems. This means revenue flow can be optimised.
Innovative Features: Cloud platforms introduce innovative features regularly. Your workforce can enjoy performing daily tasks in a timely, hassle-free manner. Software updates, new functionalities, and upgrades will be right at your fingertips the minute they’re released.
Remote Access: By removing software and hardware installation, your business can now function remotely. Running your business from the cloud allows for instant access to data from anywhere on any device. Not only does this improve collaboration, but the easy access to information also increases business efficiency.
Staying Relevant: Adopting a SaaS business model is a great way to stay relevant in an ever-changing, fast-paced world.
The Cons
SaaS certainly isn’t without its problems. Data security, slow conversion rates, and increased competition are the three biggest concerns amongst the industry:
Data Security: One of the biggest concerns that pop up when talking about transitioning from a traditional business model to a SaaS model is data security. Many punters believe that storing data in the cloud is a risk. However, data stored in the cloud is offered the protection of the service provider. While hardware can be physically destroyed, SaaS data is a lot harder to erase. That being said, SaaS offerings are not immune to data loss.
Increased Competition: With new organisations entering the market all the time and the ability to compete against leading market players, the competition in the SaaS world is high. This also means customers can jump from one provider to the next with no company loyalty.
Slow Conversion: You might find that it’s taking a while to convert your customers once you’ve made the transition. In the SaaS model, a lot of time is devoted to courting your customers before they invest in your product.
Preparing for the transition
Transitioning your business from a traditional model to a subscription-based service isn’t done with the flick of a switch. Planning for the migration is key as every aspect of your entire software business is about to change. Our top tips for transitioning to SaaS are:
- You don’t have to convert all customers and products at once. Set an achievable and manageable goal to convert 50% of your existing customer base within a set time.
- Improve the value of your software before you announce the transition. For example, offering a try-before-you-buy program allows for great UX testing.
- Learn from those who have gone before you. Plenty of businesses have already transitioned from traditional platforms to cloud-services, don’t make the same mistakes as your competitors.
- Expect to dedicate an entire year to the transition. The depth of the migration to a SaaS business model is huge, and the change will likely take close to 12 months from ideation to execution.
- Create a Program Management Office (PMO) to handle the planning and execution of the transition. Your PMO should have representatives from finance, legal, engineering, IT, and more (the more opinions, the better in this case).
- You must understand the operational requirements of crossing into the SaaS model world. Rethinking the operation of sales, production, support, finance, and more is key.
To summarise, while there are understandably some drawbacks to the SaaS business model, we predict that most new businesses joining the market will offer a subscription-based service instead of using the traditional model. Before you make the leap, we suggest you first decipher whether you’re in a position to compete in the SaaS market. Also consider if you’re prepared to manage the growth that could potentially be right around the corner. Cost-efficiency, scalability, innovative functionalities, and a predictable revenue stream are all tempting reasons to execute your SaaS business model transition.
