Mural Ventures Blog

Software-as-a-Service: the danger of not knowing what you don’t know

2008-09-17T17:45:00Z

When companies are considering the move to include a Software-as-a-Service (SaaS) solution, there tend to be two groups: those who know they don’t have the necessary expertise and often don’t know what questions to ask, and those who think they have the necessary expertise, when really they don’t. Which do you think is in a more dangerous position? There are a few companies out there that do have the expertise, but this means they also already understand the significant differences between on-premise and on-demand software. In any case, here are a few items to check yourself against to see what you know, what you need to know, and how to get started.

Experience has shown that software companies most often need help with three main areas: Web-Centricity, Customer Value Realization Shift, and Agile Product Development. You may already be dealing with these, but remember that the game is different with SaaS. Even if your company is already in-market, it’s worth examining how SaaS changes the rules, since some of the items below can be applied to any software solution.

Web-Centricity

The first major lesson that many companies miss about SaaS is this: Software-as-a-Service is not a new way of delivering software, it’s a fundamental difference in behavior from a buyer perspective. This new buyer behavior is called web-centricity, or we say a buyer is “web-centric.” It’s a way of defining how your customers want to interact with you. As an example, I could be considered a web-centric buyer while my grandfather would be a web-agnostic buyer. I use my computer and the internet to do just about as much in my life as I can, while my grandfather is just starting to learn about attaching photos to emails. He will pick up the phone or go to the library to answer a question or solve a problem; I go straight to the web, and more importantly, I want to do everything relating to my inquiry on the web. For my next vacation, I want to research vacation spots, compare rates, read testimonials, book the hotel and flights, pick my seats, ask questions, get responses, and add my trip information to my calendar all through the web. It’s essential to note that if I’m moving forward with a booking and suddenly have no choice but to pick up the phone, it’s very likely that rather than picking up the phone, I will just click a few more times and find a travel site that will allow me to complete my transaction online. That company just lost my business because their site wasn’t geared to how I wanted to buy travel services; it was less web-centric than I am.

A web-centric buyer can buy anything, not just SaaS, but the nature of SaaS means that buyers are much more likely to be web-centric. A company may have extensive pay-per-click advertising campaigns, search engine optimization, and additional advertising through cross linking and white paper farms all pointing to a beautiful website with all the information a potential customer could ever ask, but if that’s where the online experience stops that’s where the web-centric user may leave.

Even without SaaS in the picture, a web-centric buyer wants to buy the software online, download it, and then get the activation code within a few moments by email. If they have questions they want a click-to-chat feature or at least an email address. If they have problems with their new software, they want to access tech support through a similar click-to-chat feature and reach a tech who can connect to their computer and see exactly what is on the screen. Of course sometimes a phone conversation is still best, but a web-centric buyer wants all the options.

Too often I see companies that are short-changing themselves. Not only should a customer be able to do everything through your website, but their web experience should add value and make them happy to continue working with you. Companies need to tailor their user experience to how the user wants to interact with you.

On a much simpler note, having a stellar website is more important than ever before. A recent survey showed that when shopping for a SaaS vendor, 38% of customers shortlisted several companies based on their website and then contacted only those vendors.

If your current website, business and marketing plans, and customer service are not geared to web-centric buyers, you may be losing business you never knew was there. If you create a frictionless experience where your customers feel comfortable and happy, not only will they stay, they’ll tell their friends how wonderful you are.

Customer Value Realization Shift

Simply put, when utilizing a SaaS model, your customers need to get value from your product before they even buy it. In traditional software models, you usually have a sales person with charisma and skill who can create the perception of value for the customer. The customer sees value, makes the investment, and trains everyone on the new software. By the time they actually start realizing value they are already invested, so even if they realize less value than anticipated, as long as your customer service is tolerable, they’re more or less locked in.

With SaaS, everything you do needs to add value to your customer. If customers don’t see real value during the trial they won’t buy; if they buy and then don’t see the value they anticipated, the barriers to exit are much lower than with traditional software. When I say “everything you do,” I mean much more than customer service; I mean everything. Of course, customer service and support is very important, but so is how they get to customer service, your website, and most importantly your product itself. Developers are great people and we need them, but when it comes to your user experience, developers are the wrong people for the job. When building your product you need to understand who will use your product, what their problems are, how can you fix them, which personas are more important than others, all while also considering usability, user experience, and design. In many ways, your product should be your greatest sales tool. The entire experience of interacting with not just your product, but your entire company needs to be focused on shifting the value curve ahead and accelerating your customers’ “time to value.”

I mentioned above that the web-centric buyer wants to interact with your site and your company in a certain way. The secret to these interactions is that the experience needs to work and it needs to work well. The person answering the phone, the chat, or the email needs to actually be able to help the person without escalating the problem, without wasting time by reading a script, and without adding frustration to the situation. Your product may be the best on the market, but if dealing with your company adds stress to your customers’ day, eventually they’re going to switch. If they experience these kinds of issues during a free trial, you can be sure they won’t buy. If their experience is great during the trial and then deteriorates once they start paying, you can be sure they won’t stay long, and they’ll tell their friends too.

I’ve seen companies that take a “white glove” approach to their customers’ experience have great success. Not only have they invested in a great product and customer experience, they pro-actively contact new and trial customers to see if they have questions, teach them about what their product can do, and make sure they’re getting the most value as quickly as possible. You can imagine how happy a customer would be when they can use the product better and know that a cheerful, helpful person is only a click or call away.

Of course, the company and product need to add real and increasing value in the long-term as well. Some companies may be surprised at how willing happy customers are to giving specific, useful, and free feedback to help you improve. It may not be considered often, but when happiness is an active component of your business plan and customer experience, the side effects can be amazing.

Agile Product Development

A secret to SaaS success is to get something out there quickly and then with your happy customers’ feedback, improve and grow your offering piece by high quality piece. Too often a company wants to build the best software solution ever conceived and spend months mapping out every possible variable and creating every possible feature. Of course, this is always an option and some companies have resources to do this, but an agile or “scrum and sprint” approach will get you to market a lot faster.

The basic concept behind scrum and sprint, is that you build something small and simple, yet high quality, and go to market as soon as possible. Once you’re in market you openly seek feedback and suggestions from customers for improving your product. Throughout the entire process you build a backlog of items, features, and additions that you eventually want to add onto your product. Often companies will release in “beta” mode to attract more trial customers and allow feedback from a broader range of users. Your team meets every day for a quick “scrum” meeting to discuss any feedback received, ideas for improvement, and progress towards your next milestone. In this model, the time between releases is short, from a couple of weeks to a few months. After you complete a sprint you look at your backlog and determine the next small piece that you will add to your product and the timeline in which you will be able to complete it.

The point of this method is to get to market quickly, then build up your product piece by piece, releasing early and often. Of course this process should include all aspects of quality, usability, user experience, and web-centricity as mentioned above to insure that your business, not just your product, is growing in the right direction.

Bottom Line

Many companies do on-premise software very well and their skills could be adapted to a SaaS model, but without truly understanding the differences with SaaS, the trial-and-error road to discovery will be long and costly. The areas presented here: Web-Centricity, Customer Value Realization Shift, and Agile Product Development are a litmus test for seeing what the rules are in the world of SaaS. Developing maturity as a SaaS provider ultimately involves a large set of activities across key process areas such as Business & Financial Management, Application Architecture, Hosting Architecture, Operations & Support, and Go-To-Market Effectiveness. Being a successful SaaS provider means “owning” the entire value-chain for SaaS – something that many software companies are ill-prepared to do immediately on their own.

When companies make the proper investments, they can tap the vast potential of Software-as-a-Service. The road to SaaS success starts with an honest look at oneself and the dedication to learn what you don’t know, ask the right questions, then set out to build the best product and customer experience possible.

Social Media has changed the world of selling online; have you noticed?

2008-06-02T15:39:00Z

Remember that chapter in your business textbook about the sales model? It probably looked something like this:

For the most part, this model is still valid. All of these things still happen. The small, yet important difference between then and now is the result of social media, especially with web-centric and Software-as-a-service products. Before, a sales rep would handle just about every step of the process. He would discover new customers, then work with them as they asked questions and evaluated the product, and eventually convince them to purchase the product. As long as you had a good sales team that could connect with customers, you did well. And as long as you kept them supported well enough, they would stay.

Google is the new Account Rep

Fast forward to today. Like I said, these areas are still the same, but now instead of a skilled sales rep interacting with your current and potential customers, you have a computer screen. What do I mean? Well, what did you do the last time you were interested in a particular item or service? You probably looked it up on Google. After you found the company’s website, you probably also looked at the other links your Google search returned, including blog and feedback posts by others who had already used the product. Assuming you were still interested, you signed up for the trial version, and started playing around with it. You may have even checked out more blogs and message boards to ask specific questions about the product of other users. Finally, you decide you like the product, so you click the activate link, enter your payment info into the site, and purchase the full product.

Sound familiar? Did you notice that you went through the first 3 areas without ever interacting with an employee of the company who makes the product? As many people know, my customer telling you I’m great is much better than me telling you I’m great. The opposite is also true. A company may have a feedback section of their own, but as Bruce Temkin points out in his Bank of America example, you should still look in more than 1 place before drawing your own conclusions.

So customers are more empowered than ever with information about not just your product, but your company and the way you have treated others. Kinda scary. What does it mean?

“I bought it because I use it”

For starters, we’ve moved to a new level of buying. A customer will buy your product because they’re using it and it does what they want, rather than using a product because they bought it. Also, notice the immense impact these changes have on how important the Support area has become. It was always a good idea to keep your customers happy, but now it’s required. You want your customers to become raving fans. Raving fans tell their friends and post blogs and feedback to share with anyone who will listen. They do your marketing for you for free. When a potential customer does that initial Google search, you want them to see the blog posts from your raving fans. If you have angry customers instead of raving fans, guess what that initial search will bring back.

Customer Service is the new marketing. Companies need to start treating customer service as an investment rather than an expense. The necessary “White Glove” level of service required to create raving fans is more expensive in the short-term, but in the long term you not only spend less supporting current customers, but their free word-of-mouth marketing will help you add more customers.

Without taking away from the importance of Support, let me say that all is not lost with Discover, Evaluate, and Purchase. You still have a chance to make an impact.

Discover: Online marketing is more important than offline marketing. Youtube, Facebook, and Wikipedia have moved into the top 10 most visited sites (www.alexa.com). If your marketing efforts can’t be found with a search engine, a lot of customers are missing you.
Evaluate: Your micro-site must deliver. The web has kind of given us all ADD (http://www.useit.com/alertbox/9710a.html). We spend an average of less than a minute on a page, reading fewer than 12 words or so before we decide to click on to something else. Your site and pages need to be focused and do the job they were intended to do. This sometimes means breaking corporate branding guidelines.
Purchase: If someone can buy your product without ever interacting with a human, then they can certainly not buy it that way too. The great blog postings and feedback may have convinced a potential customer to download the trial, but now your product has to sell itself. You must have the best product on the market, and for reasons other than price.

The New Sales Model

When you take into account the changes resulting from Social Media in the world today, the Sales Model looks more like this:

Things have changed, but the new rules allow for many new and exciting ways to grow and enhance your business and marketing strategies. It also means that companies who can’t keep their customers happy aren’t going to do as well as their competitors with raving fans.

Bottom line, customer support is the new marketing. Social media has moved much of the control you used to have from your sales rep to the web. My suggestion is to start with an experience audit. See what it’s like for your customers to deal with you. If it’s not a stellar experience, get some help to make it that way. The best part about the new world of selling is that it runs on happiness. And who doesn’t like to be happy?

Cloud Computing? Legacy SaaS?

2008-04-24T02:51:00Z

In working with startup SaaS vendor Sonian Networks (www.soniannetworks.com) I heard the CEO, George Nichols, use the term "Legacy SaaS" to refer to those OLD SaaS providers who build and operate their SaaS offerings the old fashioned way -- you know, using actual servers and databases and what not.

The comparison between Sonian as a SaaS 2.0 company and existing SaaS 1.0 business is a good one. Sonian has built their entire offering atop the Amazon Cloud. Sonian uses EC2, S3, SDB, SQS and will soon be using the Amazon payment services as well. Here is a company that is literally betting the farm on the use of cloud infrastructure, and far from being on the fringe, this is quickly becoming the norm.

Sonian has been in full production with their offering since January of this year, and is literally the first company out of the chute with an enterprise-level SaaS offering built on the cloud. Sonian provides email archiving and compliance as a service, and because of their solid use of the Amazon cloud, they can literally scale to any number of customers and users without having to worry about having the guys in the data center rack another server, install software, test it, bla bla bla.

This IS the future of software-as-a-service where the computing infrastructure is also provided on-demand. Sonian's cloud-based infrastructure automatically scales up and down based on current load -- so they are never paying for computing infrastructure or storage unless they are actually using it.

Wow.

So the more that I thought about this, the more I realized that George wasn't only right about Sonian being a SaaS 2.0 company, he is also right to use the term "legacy" SaaS to refer to the SaaS 1.0 businesses. SaaS 2.0 business have an enormous competitive cost and scalability advantage over the "legacy SaaS" companies.

This Sonian case also highlights something about some (not all) SaaS 1.0 businesses that we've known for a while - that the operational part of running their SaaS business is left to Managed Hosting providers and isn't really integrated into their software product development team. With cloud computing, the product development team must have a deep understanding of the operational environment. The cloud "layer" logically sits above the operating system, but across the entire cloud computing environment, and therefore the SaaS developers have to have expertise in developing applications for the cloud.

SaaS Developer 2.0?

Ivan Croxford Explains BT Tradespace

2008-03-10T02:27:03Z

Check out this interesting interview on YouTube. My mate Ivan Croxford explains BT Tradespace as a mechanism for enabling social commerce....(read more)

Good News? Band News? TrialPay is One to Watch for Sure!

2008-03-08T18:32:39Z

I came across a very cool company the other day. It's called Trialpay and they have created a very clever affiliate solution with an interetsing angle on things. For anyone marketing SaaS applications to small businesses and consumers, i suggest you take a look at their story . Simple, powerful, and clever -- it seems to be a cool and easy way for SaaS vendors to potentially make an extra buck while leveraging the “bad news / good news" story wrought by the power of the modern web. The Bad News......(read more)

Social Commerce -- The Future of Word-of-Mouth Marketing

2008-03-07T03:02:40Z

Small Businesses (SMBs) are historically skilled word-of-mouth marketers. SMBs must transfer these skills from off-line to on-line distribution channels. SMBs who succeed in making this transition will grow faster -- more effectively promoting themselves, networking with prospects, and transacting commerce. To succeed in this transition, SMBs need access to simple and elegant tools. The companies who provide these tools to SMBs will pioneer the market for social commerce. These pioneering companies...(read more)

O'Reilly Conference Review: A Few Areas of Consensus...One Massive Opportunity for Social Commerce

2008-03-05T23:21:23Z

Over the past 2 days I attended the O’Reilly conference – Graphing Social Patterns . In the context of our collective efforts to foster and develop BT Tradespace and the social commerce proposition – this was a truly amazing event -- and I wanted to share a few high level observations. · The “Social Web” and “Social Commerce” memes are very HOT. Not just in the valley – but worldwide. The implications are potentially massive – and the key concepts inherent in the Tradespace proposition were repeatedly...(read more)

Will 2008 Be the Year of Social Commerce?

2008-01-29T20:00:24Z

Jay Deragon is must read. He is completely fascinating and totally spot on. He even quotes Doc from "clue train" fame. Choo, Choo! More than anything he is tuned to the fact that "while social networks continue to grow exponentially the next growth curve will be driven by the holy grail of economics “, social commerce -- which has the potential to turn business models upside down and inside out -- especially inside of incumbent broadband providers....(read more)

Despite Challenges -- Telcos Remain Well Positioned to Play and Win on the Web...

2007-12-17T19:04:02Z

Anyone familiar with this blog, with me , or with my company will know that I am passionate about a few things – including my steadfast belief that global telcos and broadband service providers – despite being underdogs in the fight against facebook -- possess a unique and powerful legacy that makes them very capable of becoming a serious player in the race to blend online advertising and social networking. Over the past few years a number of different people – mainly VCs -- have reminded me that...(read more)

Phonebook vs. Ph-acebook – The Battle is Brewing

2007-12-13T02:11:20Z

The more I think about it, the more I am convinced that Facebook is a fascinating dichotomy – and far from a guaranteed success. On one hand, with a reported 60 million user generated profiles, thousands of third-party developers creating innovative new apps every day, and a $15 billion valuation – Facebook is clearly on fire. A true force in the business of “social networking” facilitating conversations among online communities of people. On the other hand, with revenue rumored to be strangely opposite...(read more)

Ph-acebook vs. Phonebook -- The biggest fight you've never heard of

2007-12-06T22:19:22Z

hold...(read more)

The Canary Sings an Apology -- Facebook CEO Says Sorry for Beacon Fiasco

2007-12-05T22:11:08Z

This just in from the WSJ. Mark Zuckerberg, the founder and chief executive of Facebook Inc., issued an apology -- delivered via the company's blog -- for mistakes the company made in rolling out the Beacon advertising system. In a purely naked post Mr. Zuckerberg wrote "We've made a lot of mistakes building this feature, but we've made even more with how we've handled them," Mr. Zuckerberg wrote. "We simply did a bad job with this release, and I apologize for it." With > 30 million users around...(read more)

Light Me Up a Cigar -- We're Going to the Fumoir

2007-12-04T23:22:58Z

Ivan Croxford , has started a blog . If you’re familiar at all with BT Tradespace and you’re interested in understanding some of the strategic drivers behind it – then I suggest you take a close look. The blog has a cool name – plus it provides a truly interesting perspective on how a self professed digital strategist, entrepreneur, and intrapreneur is capable of leveraging agile methodologies and sound market research to persuade a large, incumbent, and bureaucratic organization to rapidly innovate...(read more)

Facebook as the canary in the coal mine -- Where will it fly? Who will follow?

2007-12-03T18:06:30Z

Ben Kepes made a nice post here referencing BT Tradespace as potential player that could effectively follow the canary in the coal mine (a.k.a. Facebook) on the path toward big-time blending of “socially networked groups of people” with “small business advertisers looking for customers”. In the spirit of full disclosure, I personally and my company, SMBLive , are obviously betting that BT and other Telcos will indeed become significant and rightful players in the race to combine social networking...(read more)

How Facebook Ruined Christmas -- and Why Telcos Should Care

2007-11-30T15:55:09Z

The front page of today’s Washington Post states, “the merging of social networking and online advertising combines two of the most powerful forces on the Internet today”. Facebook -- with its eye popping $15 billion valuation -- is at the epicenter of this nascent, yet massive, opportunity. Every major company in the world should be playing close attention – especially incumbent telecom carriers whose core business is supposedly about “connecting people” and whose legacy leadership in “directory...(read more)