By Kevin Dobbs
Montclair Advisors, LLC
One of the questions that I get quite often from firms that are starting down the path towards selling SaaS solutions, ‘should we use the same sales team to sell both our on-premise and SaaS solutions?‘ It seems like this would be easy and you should be able to definitely leverage your existing sales team to penetrate not only prospective accounts but also with existing customers.
No one wants to re-invent or re-invest in building out a new SaaS-specific sales team but this is critical to building out a successful SaaS business. What many executives overlook is that SaaS is not just a delivery model but it is really a truly different business model. I thought it might be helpful to use this table to illustrate those business model differences and why creating a specialized sales team is necessary.
Let’s review some of these important differences in each sales approach and how it affects the typical software sales rep:
Value Proposition: Traditional software is sold to solve a targeted business requirement and then customized to meet the specific needs of a customer.
SaaS takes a different approach. It is usually sold with the promise of lower costs, more rapid time-to-value and ease of use. This is accomplished using a standard system and configuration that is not tailored or customized for each customer. These are two very different value propositions and would be hard to expect every sales rep to be able to master both sales strategies. Keep in mind that these two value propositions also appeal to two very different buyers; business buyers and IT.
Procurement: Similiar to the value proposition, positioning the value of of a subscription purchase versus the actual purchasing of a software license are quite different. After the recession, and part of our new normal economy, most organizations are now leading with a the requirement of subscribing to software instead owning it. This allows customers to keep their more cash on their balance sheets and longer term, save on hiring staff to manage their internal systems inside of their own data centers.
Sales Cycles: Customers are also looking for just enough software to get the job done and are not usually looking to purchase a lifetime’s worth of functionality anymore. They want to purchase a small piece of functionality now and then grow their relationship with their software provider over time, once they know the software works and they are comfortable with this relationship. This means that SaaS sales cycles are going to be much shorter than traditional, on-premise software sales transactions.
Transaction Sizes: Because of the different buying behaviors associated with SaaS from traditional software, SaaS transactions tend to be much smaller. This means that a SaaS sales rep is going to need to close more deals, more frequently in order to make the same quota target that a perpetual license sales rep is assigned.
Pricing: Putting together proposals are always difficult, but asking a sales rep, or even sales management, to offer both license and subscription options is really complex. I think this is also not a great idea because it ultimately confuses the customer, since they will try and normalize the pricing for both options, which is hard to do. Comparing a SaaS solution to an on-premise perpetual license is like comparing apples to oranges, and your sales team needs to pick one of these solutions and really learn how to sell it.
Methodologies/Touch: Best-in-class SaaS sales organizations is a laser focus on Customer Acquisition Costs (CAC). Living with the reality that the majority of your revenues will come in over the life of any contract, it is imperative to keep your sales costs low. A SaaS model doesn’t lend itself to using the high-touch sales model, or engaging the ‘cast of thousands‘, to come in and get deals done. Most SaaS firms operate a lower-touch model using tele-sales, remote demonstrations, and many automated self-service tools to assist the sales team in getting deals done quickly.
Channels: Effective use of indirect channels is another way of lowering customer acquisition costs. Although some traditional software companies use channel partners to sell their products, it appears that the use of channels is really gaining popularity among SaaS providers. Many SaaS firms are complimenting not only their tele-sales capablities but also using partners to deliver value-added services as well.
Demos: Another way of reducing the cost of sales is to be more selective and smart about how customers are exposed to a software providers’ solutions. This is usually accomplished by showing the software either using a Web-based conferencing service or some type of self-service environment. This is quite a different approach than what was done with on-premise software, which was done in person and using a highly scripted demo.
Trials: In the past, if a customer wanted to get their hands on the software and really use it, the only way that can be accomplished was with a Professional Services team and a conference room pilot. Most SaaS companies allow prospective customers to play with their products by offering them a 30-day trial, after a simple self-service sign up and a quick tutorial. This automated approach is cost effective and allows a SaaS firm to manage potentially hundreds of product trials with very little support personnel required, and this is a great source of qualified leads.
Renewals & Customer Relationships: This is another contrast between the two models. In a traditional software company the customer relationship is usually dispersed among various functions including Sales, Support and possibly Professional Services. In SaaS firms the customer relationship and the renewal process are both very important, and usually have clear ownership, usually with the Account Management organization.
When you consider all of the differences in these two approaches to selling traditional software and software as a service, it is not reasonable to have the same reps trying to master selling both options. The best sales reps are always focused on selling, hitting quota, and earning commissions. Sales reps will sell what they are comfortable with and when considering a SaaS transition, it is best to create separate teams, with one that can specialize in the SaaS value proposition, solution, sales methodology and can make money on the SaaS-specific comp plan.
When firms make it simple for their reps to sell, you will get the sales momentum you are looking for in all of your lines of business. You don’t want your sales reps to be the ‘jacks of all trades and masters of none‘, because that isn’t the formula for SaaS sales success.
