4 Principles To Make Your SaaS A Great Service

Turning a software from a product into a service will bring big changes. The business model. The organisational model. The financial model. The culture. If SaaS is a true service all will be different. SaaS leaders need to understand why a service is different. And build a company which supports these principles. This applies to SaaS for SMEs and right up to enterprise scale. Now is the time to get ahead of the field.

I worked for the world’s leading professional services organisation for 30 years. The leadership of the firm invested much effort to try to turn services into products. There was a belief that so called repeatable solutions would be more profitable and easier to sell than customised services. On the front line dealing with clients every day my partners and I knew the truth. The companies we served did not want a product. They wanted a professional service. Bought from people they knew and trusted. Delivered with care to high standards. Designed to solve their problem and only their problem. 

In those markets products could not replace services. Now I am providing world class small business consulting to SaaS startups. I spend my time helping companies that want to turn a product into a service. The difference is SaaS is succeeding.

Service Is Not Just A Different Way Of Charging For Product

SaaS is a service. The acronym stands for software as a SERVICE. This may seem obvious. But it is not well understood in the software industry. Both established players and startups are entrenched in a product mentality. The mindset seems to be that SaaS is just a different way of charging for a product. The billing changes but everything else remains the same.

B2B Services are not products. Behind the revenue model the way we sell, create and deliver services is different. Service organisations talk of partners and colleagues not managers and workers. Execution is by methods and approaches not by processes. We provide services to clients not customers. The whole culture is different.

4 Principles For Great B2B Service

The software industry is in transition between a product mentality and a service culture. If you run a B2B SaaS business you need to know what makes a great service:

• Service is continuous. Once a product sells it becomes the buyer's problem. Unless there is a defect the new owner uses and maintains it. Services providers deliver throughout the life of the service. For some types of software this may lead to challenges with the subscription model.  Subscription dominates the SaaS landscape today but may not be appropriate for everything.
• Service is personal or tailored. Products are standard and come in a limited number of forms. The buyer chooses which suits him. A service designed and built for the buyer. This applies even to simple services often see as low value. Think of a haircut as an example. Many components are standard. The salon, the chair, the equipment. Even the stylist. But, unless you sign up for the Marines, the service is personal.
• Service sells through relationships. It is personal and ongoing not transactional. Of course there are repeat customers for many products. But each sale is a transaction. Whereas delivery of one service leads into the next. Which builds on all previous services. This transforms the sales model. One obvious difference. In most service industries the person who leads the sale is also part of the delivery team. Think about the implications of this for the organisation and roles in a SaaS business.

Service is professional. There are standards and behaviours expected of the people who deliver it. These vary across a wide range. But every client has expectations of their service provider. Whether a lawyer, a nurse or a plumber. The buyer expects the people to maintain the quality and reputation of their industry.

How Will The Financial Model Change?

SaaS will transform as these principles become part of the business model. This will affect the financial picture as well as the operations. The outcome on the finance side could be interesting. Services are lower margin than software. On the other hand they are higher than most typical product industries. As competition increases in SaaS there is bound to be an impact on margins. Most analysts today argue that professional services are low margin. The advice is keep them to a minimum. But could the service approach be the key to retaining strong margins in the long run?

SaaS For SMEs

All this applies to SaaS for SMEs as much as enterprise players. Remember the hairdresser example. Just because your client is small does not mean they don’t expect service. In fact it applies more for an SME. A large company has the resources to adapt to a new IT system. An SME needs things that work just they way they want. 

The hairdresser example is useful in another way. Many of the component of your service can be the same for everyone. But you need to figure out where the tailoring takes place and how your SaaS delivers it. 

Next Steps

The SaaS business model will evolve and mature. This will change organisations, job titles and the way software is sold. The SaaS recurring revenue model will also change as business alters and competition intensifies. When SaaS dominates the software industry it will be transformed from the nascent form we see now.  

If you have a SaaS startup now is the time to get ahead of the field. To get the best SaaS thinking and advice, sign up for our regular newsletter. And watch out for our tools and guides coming soon.