To the uninitiated, SaaS, or Software as a service is one of the few important commodities that have emerged in the recent past. It is already known that the future lies in cloud computing, but how does COVID-19 change that perception? Or does it change at all? One of the challenging aspects induced by the pandemic is that we have relied increasingly on technological solutions. Now, more than ever, there is virtual work, e-commerce on-demand delivery, and telemedicine. But wasn’t that all existent beforehand? Going ahead in this new normal, what changes the scenario? What makes it distinctive from the present?
What Changes Must Be Noted In The Transition From The Old To The New?
SaaS and cloud computing have already taken considerable strides in replacing legacy software, but the present pandemic has reinforced that. What is vital to realize is that the SaaS model has come with the vision of an “always-on” model. But the companies still operate on an “always be closing” mindset.
Custom signs of a majority of these companies lie in the transition from the on-premise to the cloud model. Despite the transition, these companies always put sales at the pivot of their business operations. The assumption behind this is that consumers will react similarly to the on-premises software. They will largely take care of themselves and contact the company on a need-to-need basis.
This has majorly changed with the pandemic situation because now the consumer cannot be relied upon for self-care and preservation. The onus has shifted mainly on to the companies to forge a symbiotic relationship based on their needs. The focus of SaaS is that the service must generate recurring revenue. This is not doable with the earlier approach.
However, with the advent of cloud technology, that is about to change.
As indicated by the COVID-19 scenario, consumers can not be taken for granted, especially in such a crisis. As companies turn to cut corners and costs and fire people on spreadsheets and data analysis of revenues, the impact is different. Customers will consider whether they truly need you, especially if you relinquish support at the first sign of trouble.
The need of the hour is to realize that though the pandemic may not last, its impact and takeaways are here to stay. The realization that business models are not just revenue-centric has struck a chord with all. Now more than ever, consumer success, churn, and retention is not only matters of priority. They are essential for existence.
What Changes Between the Old SaaS World and Now?
Today, most companies analyze the client’s demands to be a temporary redaction or an anomaly of sorts. As people are increasingly staying indoors, companies are worried that the present surge in access or demands will fade or not. The imperative question, therefore, is whether COVID-19 is the catalyst for a permanent change for SaaS? Or is it a temporary elective like an in-home haircut? To support the argument that SaaS is entering a “new future,” the following four rationales can be advanced-
The Future Is In the Cloud
In the contemporary space, it would not be farfetched to argue that the future of SaaS is shrouded in Cloud. No, that is not a pun for a doomsday call. Instead, it shows the brilliance of software and AI integration into Cloud computing. What was predicted years earlier is already incumbent upon us. We need not look at 50 years from hence to predict the shape or the outline of SaaS. Cloud Computing is THE future, and it is here, NOW!
You can consider any tech giants in today’s era, from Zoom to Airtable, and you can sense a pattern. Companies are already transitioning to place client familiarity at the core of the business models. Sales are merely an ancillary outcome, but the larger obsession is regarding the implementation and activity metrics. They are measuring as well as optimizing the churn from the first day itself.
Emergent and new startups are pushing for integrating Customer Success Manager before hiring sales personnel. This is the right step for older businesses to emulate from such companies, touted as the future.
Rising Customer Expectations
The amount of pressure in the business and management teams is evidence of the paradigm shift in the companies’ outlook. It is slowly beginning to take shape and reset the yardsticks on what to expect from your vendors. From the tech’s appreciation, the focus has shifted to its utility to the prospective company.
Thus, more and more companies ask, not whether the tech is excellent, but if they need it at all. Executives are now concentrating on the end-result and asking questions like- What value does this tech add to the business? If your company is not falling into this fit, the current marketplace could prove extremely challenging.
In the future, on this route, in the post-COVID era, it can be understood that the consumers are habituated with this power of the SaaS model. Thus, the accountability to newer standards for vendors would change drastically.
The Supremacy of Frequent Revenue Streams
Simultaneous to this paradigm shift, vendors, too, are shifting their focus. They eventually realize that returning streams must be regularly fed in the new normal. This is the reason that will cause churn rates to climb up.
All of these corporations have emphasized the growing importance of churn reduction.
Management teams in the corporate bigwigs have to realize that revenue will not merely “recur.” It needs investment from their end to make it happen! This is why most personal and public SaaS corporations estimate a downward trend of the Gross Renewal Rate. These contain companies that sell to larger entities with the conventional “stickier offerings.”
The Importance of Retention
In the March Quarterly analysis of equity research reports on SaaS stocks, Morgan Stanley noted that renewal rates are vital to sustainable growth. The higher and more durable these renewal rates are, the better it is for sustaining your company’s momentum. It significantly prevents a downward spiral and loss of overall growth and revenue growth.
The report further elucidated that large enterprise-focused vendors would sustain the renewal rates better than the small and medium scale businesses. The investors in these companies are also beginning to show signs of change. Insofar that these investors are concerned, more pertinent questions on retention, churn, and consumer success is being asked. It is highly unlikely that the post-COVID era will see these questions being stopped.
Finally, SaaS companies are beginning to understand the importance of growing in the client base instead of the sales. Firms must realize that sales teams must redirect their energies to focus on expansion and churn rather than revenue figures. The older model has begun to lose its relevance, and the crisis has shown the need to dispense with objective targets. It is imperative to memorize that the revenue streams are a corollary of general goodwill and churn.