1. 1 Scott Sehlhorst 14 August 2008 @ 10:01 am

   Thanks Paul, for the kind words and the link!

   Great insights about customer leverage and a desire to pay a flat fee.

   As to being locked in, which I call the Hotel California Effect, that’s a huge issue for license and subscription purchasing models. I used to work for an ERP-software vendor where that was always a concern. After 8 years in that industry, I’ve come to personally believe that the ability for customers to leave with an absolute minimum hassle is a “must have” product offering. Not because everyone knows to demand it, but because it is the right thing to do.

   Thanks again,
   Scott

2. 2 Mark Parker 14 August 2008 @ 4:31 pm

   Hi Paul,
   Your points are valid, though I feel attitudes from vendors and customers have matured in the 6 years we’ve been in the SaaS space.

   Data lock in is still a concern, though any vendor that doesn’t have an export option is foolish. Salesforce.com went down this road for many years until they realised their partners had written API calls to circumvent the lack of functionality. In my experience, data lock in is more a concern for customers who are slow payers or who decide they want to discontinue with the service but can’t be bothered telling the vendor – this generally happens when there is a change of leadership or when user take-up fails (due to poor leadership). This is a big risk for vendors as they’re caught in a situation where the customer has used the service and achieved a benefit but now don’t want to pay for it.

   We’ve seen this a few times and to be honest we’ve had to take a hard line and demand payment in order to get access to data. When situations have reached this point (only 3 times in 6 years) the relationship is dead so we’ve let the customer go anyway. We changed the language in our subscription agreements to be simpler - we convey a simple message of reasonableness - most businesses get this message and accept that fact. Where customers don’t get this message – you don’t want them anyway because they are usually poorly organised, and are more trouble than they are worth (they generally sell via the model of sales anarchy)

   I kind of agree and kind of disagree with your comments regarding leverage. It really comes down to how you position the pricing structure and how you negotiate. As you’d be well aware, some deals are better to walk away from. A lot of it will come down to the relationship also. Many big companies talk long and hard about relationships and partners – but then try and screw the vendor at renewal time. We’ve tried a number of approaches to this from having contracts that auto-renewed for an equivalent term to contracts that simply rolled onto a month-by-month contract at the end of the initial term. The most successful has been the later, as it just keeps going and people tend to forget about it.

   cheers
   Mark

3. 3 Dr. Jim Anderson 12 September 2008 @ 7:21 am

   Paul, I can’t remember the movie that it’s from, but I believe the right expression for talking about SaaS is “…this changes everything!” Both you and Scott bring up a very good point: once a customer is using a SaaS that has a good export function, the company’s relationship with the cusotome is forever altered. The customer can walk away at anytime so the concept of an “existing customer” really has no meaning any more. Your competion is going to create tools and services that make moving from you to them even easier and then they’ll go after your customers because they have already pre-qualified thenselves.

   This means that SaaS companies are going to have to come up with new ways to “hook” their customers (in a postiive way). I don’t think that the solutons will neccessarily be technical solutions. I’m guessing that pricing will play a big role in this. Mark’s post indicated that there is a lot of work that can be done here. Perhaps giving a discount for a customer who “renews” long before his contract is up will become the norm.

   - Dr. Jim Anderson
   Blue Elephant Consulting - The Accidental PM Blog

4. 4 David Locke 6 October 2008 @ 12:04 pm

   There is a time in the technology/product lifecycle when moving off the desktop to SaaS is critical. This is the transition to Moore’s late mainstream market. You might want to do it immediately after Moore’s tornado. The reason is that it is at these points when competition becomes price-based. It is also correlated to the demo of instutionalization, aka pre-IPO, when the MBAs you hire will come in with cost minimization efforts. And, it is also when you’ve become a commodity.

   SaaS is the ideal way to achieve task sublimation, which eliminates feature bloat, geek-facing controls that non-geeks have no use for, and inadvertantly it creates a new product for the new market you face when you transition to late market.

   Some administrative functions like license management can be moved to SaaS at anytime. Doing it before you get to the late market is helpful as a training mechnanism for moving everything to SaaS later. It gets your customer’s ready.

   It provides you with a platform for service expansion, mass customizaiton, and one-to-one marketing.

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