SaaS: Adapt or Lose Out
What On-Premise Software Providers Need to Know About Transitioning to Software as a Service (SaaS)
Life was great until the cloud came around. Your software was installed and ran on computers based at your customers’ premises and was sold as a license. You got large payments up front when contracts were signed, typically followed by ongoing, high margin fees for maintenance contracts. Now with software applications moving to the cloud, your leadership team and board are likely concerned and struggling with many questions, including:
- When should you try to become a Software as a Service company? Should your legacy license model and a new SaaS model co-exist? Should you stick with the old business model that you know best?
- If you do transition to a SaaS-based business model, how do you manage the cash flow, accounting and resource transition?
- How much do you need to invest in SaaS capabilities, and what will the payback period be?
- How will you be able to provide the same customer experience on which your customers rely?
In seeking answers to these questions, know that SaaS is not a passing fad. Don’t try to convince yourself that you can weather the storm and continue with only your tried-and-true perpetual license model until SaaS comes and goes. Today, 69% of businesses are using at least one cloud-based application; for instance, for customer relationship management (CRM), payroll administration or supply chain management. The trend toward cloud-based software applications is projected to continue, with global spending on SaaS expected to rise to $127 billion by 2018.
At FTI Consulting, we recognize that although conversion is a complex and transformative undertaking, SaaS can create multi-dimensional opportunities for growth and long-term value creation for your organization and customers. This brief whitepaper explores the impact of a SaaS transition on legacy business models, organizational structures, core capabilities and profitability of perpetual license software providers. It also provides our thinking on best practices for moving forward with the transition.