Unlocking the Power of SaaS: Tips for Transforming Your On-Prem Business

Consumers drive innovation, and today's consumer exists in a world that expects everything to be available on-demand, anytime, and anywhere. Consider that many of today's blockbuster movies are released at home at the same time as in theatres, and those that are "only available in theaters" quickly make their way to the small screen. I remember when the first Star Wars movie came out in 1977 and didn't make it to video until five years later. The same holds true for expectations around software. In today's digital age, software-as-a-service (SaaS) isn't just a great business model, it's table stakes for customers across industries.

When you use a SaaS business model, you're always up to date on the latest version of something — be it software, infrastructure or some other business need. One of the key benefits of SaaS is its flexibility and scalability, which has transformed how organizations access and utilize software. This is fairly straightforward for "born-in-the-cloud" companies, but when it comes to on-prem companies moving to SaaS, maximizing the profitability and sustainability of a SaaS business model requires strategic implementation.

The global SaaS market is projected to increase at a compound annual growth rate (CAGR) of nearly 18% from 2024 to 2032, reaching a value of around $1.29 trillion by 2032. As more businesses move from on-prem servers to SaaS models, they free themselves from update cycles or integration every time a new version of software is released.

SaaS Benefits

Here are some benefits of the SaaS business model:

1. No more upgrade processes: One of the greatest benefits of moving to a SaaS-based platform is the time and energy saved by your customers in upgrading. You no longer have to plan for a full system upgrade to get the features you want for your customers, but can make them available as soon as they're ready for the platform.

Take the graphic design tool Adobe Photoshop. When Photoshop was first introduced it took more than a dozen floppy disks, for instance, to get it onto your computer. Over the first four years, Photoshop had three major upgrades, each requiring a full, new install. Now that Photoshop is SaaS-based as part of the Adobe Creative Cloud, reinstalls for new features such as generative AI aren't needed because they appear as a background update.

2. Multiple versions and flexible cost plans: One of the cornerstones of a successful SaaS implementation is providing customers with options. With a SaaS model, customers can tailor their subscription-based licenses with the features they need, ranging from a basic model to one with all the bells and whistles, and SaaS licenses may be scaled up or down depending on the subscription tier. This allows for the creation of adaptable cost plans, beginning with a starter plan to attract customers and gradually expanding with additional features to scale the business and broaden your customer base.

Whether it's adopting a freemium model or starting with a small subscription, the ability to build upon existing functionalities facilitates growth without the hassle of full installations or extensive setup processes.

3. Effective communication with customers: It's essential to keep customers up to date on everything you offer, operating with transparency as you foster trust. For instance, you want to notify customers when there are new features or changes to functionality, including when you make a feature obsolete. It's important to ensure customers understand why a capability is outdated because if they use it and it negatively impacts their system, they're going to blame you. By maintaining open channels of communication, businesses can mitigate potential disruptions to their customers' operations and demonstrate their commitment to providing value.

4. Act on customer feedback: User input and behavior offers a treasure trove of intel for improvement. Listening to customer feedback and proactively incorporating their suggestions into product development is essential for staying ahead in the competitive SaaS landscape. According to Gartner, "95% of companies have collected feedback from their customers," but "only about 10% use these suggestions to change their processes or improve customer service." Blackberry learned this lesson when it failed to adapt its phones to new technologies being put out by Apple and Android.

How do you get feedback from customers? There are many ways of collecting feedback, such as online forms and dedicated success managers, as well as more in-depth relationships like customer advisory boards (CABs). The important thing to remember is that you need to listen and then act. If you're not listening to your users, then your product won't reflect their needs.

5. User-friendly experience: Your SaaS solutions should be easy to set up and mobile-friendly because nowadays, business can be done anywhere. A frictionless user experience is critical for driving adoption and retention in the SaaS space because you want to get your customers up and running quickly and grow from there. For example, Dropbox offers an easy setup and doesn't require any special training.

Integrating seamlessly with other systems and platforms enhances the value proposition of your product, allowing customers to leverage existing tools and workflows.

Whether through custom application programming interface (API) integrations or low-code solutions, interoperability is important to the customer experience.

Being Part of a Bigger Ecosystem

Collaborating with a range of partners to offer products and services is important because no one solution can do it all. Along with assisting with the continuous evolution of SaaS offerings, ecosystems can help extend functionality and broaden market reach.

A cloud monetization platform provides the technology and expertise to help you run your SaaS business, enabling seamless transactions, flexible billing models and efficient revenue management. When customers buy your products, for instance, you want your system to easily connect into a payment platform from a third party, such as PayPal or Stripe. You can monetize your SaaS offerings effectively and scale operations with agility.

Measuring Success

With SaaS products, you can monitor your business in real time and analyze how products are being utilized. You can install triggers on your system to activate every time a significant event occurs, such as a button click, menu selection or transaction completion, enabling data tracking.

Going back to the Adobe Photoshop example, you can put a trigger on that software's generative fill feature so every time a customer clicks on that button you get information that can then be analyzed by product development and marketing teams. Gathering this type of information, coupled with direct feedback channels, such as CABs, gives you a comprehensive understanding of user requirements and possible enhancements. With these best practices you can position your company for sustainable growth and profitability with a SaaS business model.