Software Business Blog

Over the past few weeks, we’ve probably convinced you that self-service is an option worth exploring. Self-service can increase customer satisfaction, pull leads out of “purgatory” and into active product use, and deliver more qualified leads back to the sales team. It’s clearly a win-win – but how can you make it happen?

Avangate has a simple 30-60-90 day plan for embedding self-service commerce into the sales process at any organization. It starts with preparation, continues with refinement, and ends by inserting usage-qualified leads back into the sales process. Here’s the process in brief – to dive into more detail, check out our lead-to-revenue management whitepaper.

30 days: Prepare the product for successful self-service

The first step in the self-service process involves breaking down a product into manageable modules. In order for customers to adopt self-service, there needs to be an extremely simple way for them to get started. By dividing the product into specific modules that cater to self-service, and pricing those modules appropriately, companies will set themselves up for success with the self-service channel. Product breakdown should be based on existing marketing data about customer signups, usage, and retention.

In addition to dividing the product up into manageable pieces, it’s extremely important to automate everything behind the scenes. Self-service can’t become just another route toward managed services, such that customers will have to wait for responses or assistance. Everything from currency adjustments to product changes should populate automatically, making sure self-service truly provides a service for users.

60 days: Get the self-service train running smoothly

After the product has been divided into parts that are manageable with self-service tools, and the behind-the-scenes aspects of the product are running smoothly, it’s time to expand self-service and make it more appealing to specific audiences. By combining the self-service usage data available from initial testing and early adopters with existing customer data, companies should be able to create and market to specific personas who can benefit from self-service in different ways. Understanding the self-service customer’s needs will help companies expand the self-service channel and drive more customers this route.

90 days: Recapture UQLs for direct sales

Following a period of extended product usage, self-service customers will often be ready to upgrade to a more advanced version of the software. Depending on the self-service modules available, they may be able to do this on their own, which is obviously desirable. However, customers may also reach the point where they need something more than what’s available through self-service. These customers should be passed back to the sales team as usage-qualified leads, or UQLs.

UQLs are uniquely qualified because they have done something that few other prospective customers do: told the sales team exactly what they want, without saying a word. Simply by looking at what the customers do with the product and how often they use it, the sales team has a wealth of information that can be used to develop a customized upgrade plan for these usage-qualified leads. And while usage information is most relevant for customers who have used the product, it can also be extended to other prospects, giving salespeople a better understanding of all of their leads, across the board.

This easy 30-60-90 day plan can take almost any organization from zero to self-service in just three short months. Combining the tips in this blog post with the in-depth advice from Avangate’s lead-to-revenue management whitepaper will help all kind of software companies transform their sales process and increase customer satisfaction.

We’ve learned why online self-service is the answer to the modern software sales dilemma. Providing self-service tools helps empower modern software buyers to make independent decisions about what to use and how. But while self-service has the obvious benefit of increasing customer satisfaction, it also has some unexpected ripple effects. These include a new boost for sales and marketing, valuable data for everyone in the organization, and better alignment between channels. Here’s a little more about each benefit.

1. Sales and Marketing Shine in New Ways

For too long, marketing has had trouble tying its activities directly to revenue. But self-service allows companies to link customer activity more closely to marketing efforts. It’s easier to see which webinars drive downloads and which emails spark more usage – or even convince customers to upgrade. A clearer link between marketing efforts and customer activity helps marketing shine and show its true value.

Sales likewise benefits from the self-service channel, which provides it with a pipeline of unique “usage-qualified leads” that are clearly interested in the product, able to use it, and very likely to upgrade or expand their usage in the future. This makes sales’ job much easier – not only do salespeople know that these leads are interested in the product, they also know exactly how they’ve used the product, and how they can guide these customers to achieve additional success.

2. Data Streams Build into Performance Waterfalls

In addition to helping sales and marketing perfect their game, the mass amounts of data generated by self-service tools boost performance across the organization. Whether it’s time spent on a particular feature that tells the product team to focus, or tricky maneuvering around free trial rules that shows finance where the bottom line stands, self-service provides a wealth of data about real user behavior that aids all departments – without overtaxing any of them.

3. Channel Alignment Streamlines Operations

Although channel sales can sometimes get neglected in a SaaS-focused company, self-service is actually a fantastic way to strengthen any sales channel. By identifying and promoting the features and offers that appeal most to users in a particular channel, channel sales partners can get greater leverage out of a product and increase returns significantly. It’s an easy way for each channel to become better at what it does best.

There you have it: self-service is a major advantage throughout the organization, from sales and marketing to product and finance – even in the channels. Plus we hear customers like it too. Stay tuned to learn more about how you can actually put self-service tools into action.

We’ve established that the software sales landscape is changing – creating a new world where vendors must tailor the software sales process to individuals. But every software buyer has slightly different needs. So how can companies cater to all types of tastes without breaking the bank to build a different experience for each customer?

They can start by taking a lesson from the world’s largest convenience store chain: 7-Eleven. With more than 50,000 locations worldwide, 7-Eleven makes its motto – ”Fast, convenient” – work in every market. At 7-Eleven, people can get (almost) anything they want, fast. Some people need Skittles, others want a Gatorade, still others want both. Even among the people who want Slurpees, some want cherry, some want lime, and a select few want to combine every single Slurpee flavor to make a distinctive concoction. At 7-Eleven, all these folks get what they want and pay in their currency of choice, fast.

That’s because 7-Eleven makes all its products available on the store floor, in places that are convenient for people to find quickly. And anyone can mix up a custom Slurpee – they don’t have to wait for a Slurpee specialist to create one. The pricing for each size of Slurpee is the same, no matter the flavor. It’s a simple self-service model that software companies could stand to imitate.

To help customers get started with self-service, software companies need to break their products into distinct components that can be combined in different ways. For Slurpees, these components are size/price and flavor (and a lot of different straws). For a software product, components might include a marketing module and a sales module, each of which could be available in trial or enterprise versions.

Buyers then must be able to select and combine (almost) any components they want, even if a Fanta–Root Beer–Pepsi flavor grouping sounds questionable to most. And buyers should be supported throughout the process, with clear instructions on how to pour a Slurpee or import data using a software tool.

Obviously, software can get a little more complicated than Slurpees. But the basic principle still holds. By offering the right options and making it easy for customers to combine them, companies can rescue customers from lead purgatory by letting them mix up their own Slurpees – er, software! – and move closer to becoming a customer.

Once people have tried mixing Slurpee flavors, most don’t go back. Similarly, once people have customized a software product to their liking, they may be converts for life. People who have used their free trials to build custom setups have acquired enough knowledge and interest to become what are called “usage-qualified leads.” Rather than the traditional “sales-qualified lead,” which needs to meet particular budget requirements, usage-qualified leads get closer to purchase through an interest in using the product.

With the help of self-service tools, usage-qualified leads are able to upgrade to full-fledged customers on their own, eliminating the need for a long, complicated sales cycle. So by providing the self-service components and instructions to empower buyers to complete a sales process on their own, companies can “mind the gap” and get more leads to become customers. That’s a tasty proposition!

MochaDocs provides an innovative, SaaS-based Contract Management solution that helps anyone manage contracts easily. The solution won Avangate’s Business of Software scholarship competition in 2013. We recently talked with Rob Postma, founder of MochaDocs, about his company and his BoS experience.

Q1. Why SaaS – what attracted you in this business model?

At MochaDocs, we were attracted to the SaaS business model for multiple reasons, both financial and technical. On the technical side, multiple factors make SaaS worthwhile. There’s no need for version tracking – all our customers run on the same solution. SaaS also offers fast bug fixing – there’s no need to send out patches, and we can fix bugs on the fly. This means more happy customers due to fewer bugs. Finally, SaaS is quick to get up and running – users can activate the software within seconds.

On the financial side, well, the world is our marketplace. We can deliver software across borders on the fly. Of course, that would be valid for any electronically distributed software. But SaaS is disruptive due to its (upfront) lower pricing; because of SaaS, total cost of ownership (TCO) for customers is dropping dramatically.

We can also accelerate growth much faster as a SaaS company. I see financial benefits here both for us and for our customers.

Q2. You’ve worked in the software industry before – what’s your perspective on how the buyer has shifted over the years, including their expectations on how to interact with a software company and with SaaS-based services?

We’ve identified several changes in buyer behavior related to SaaS, many having to do with speed and simplicity. SaaS buyers want to start using the product quickly, without investing a large amount of money up front. Actually, free trials are a must today, at least in our industry. They prefer to avoid large, complex implementations, because they perceive them as risky, and they want a simple, intuitive solution that meets their business requirements.

Because our buyers are typically the business owners, and not from the IT or purchasing department, they don’t want to read a manual or pay for information – they just want to get started quickly, using something that works. Finally, SaaS buyers expect to be able to access the solution from anywhere in the world – instantly, without installation or setup.

Q3. Related to how you approach and interact with buyers, what would you say is your biggest challenge today and what are you doing to solve it?

The biggest challenge we’ve had was to shift our mindset and efforts from sales to marketing. I believe Avangate phrases this “marketing is the new sales” – that’s so true!

We’ve already built a powerful cloud platform with all the components needed to manage any contract, simple or complex. Instead of hunting for customers with cold calls, we invest in creating and sharing content – specifically contract management information – educating customers about what they need and ultimately why our solution is different and better.

A challenge and an opportunity at the same time is that the Contract Management market isn’t mature, so most of our competitors lack vision and strategy. So we want to take the lead in boosting the Contract Management market by showing what it means to manage contracts in the cloud, and how much time and money it can save. Establishing ourselves as leaders in the marketplace is very important to us.
We’ve already solved three major challenges towards reaching the global Contract Management market, and we’ve done that simply by integrating with Avangate: cloud subscription management, cloud revenue management and cloud affiliate management. So we can truly focus exclusively on our customers and go to market activities.

Q4. What pressure is there to keep changing and innovate?

Innovation is key to our core business. We have developed a solid and innovative approach to Contract Management, and we’re changing the Contract Management marketplace dramatically with our clear vision for managing contracts in a new way. We are focusing on innovation every single second of the day, seven days a week, 365 days a year! The pressure is on to reach our goal: become #1 in eContract Management.

Q5. If you were to give one piece of advice to your fellow software entrepreneurs, what would that be?

Stop building solutions that the customers supposedly “want”. Start building solutions that customers need!

You will help your customer much more by having a clear and innovative vision for the best way to do something.

Q6. You won the Avangate BoS scholarship and attended the Business of Software conference in Boston. Share with us one or two takeaways from that event that made you think “that was worth my time.”

Just two days at the BoS conference gave us two years of work! On the flight back, I drew up the business plan for the next two years. We’re going to be busy!

Want to share your start-up story here? Happy to continue our interviews with innovative companies – comment here and we’ll be in touch!

As the title says it as well, this is the second part of a blog post series that provides an overview of how SaaS can reshape a company’s finances in multiple areas, from the high-level business model implications to support and compliance. We’ve already covered aspects such as the benefits of onboarding in SaaS or renewal and upgrades, while in the current post we’ll dive into maintenance and support, compliance, partner relationships as well as revenue recognition. The purpose of it all is for software companies to understand how SaaS will transform their business, from a finance pov and more.

Maintenance and Support

SaaS savings are often envisioned as stemming largely from shared server space. Installing software on a multi-tenant database “in the cloud,” rather than on onsite servers, certainly represents a significant reduction in monthly hosting bills, not to mention server maintenance. A multi-tenant model also enables SaaS providers to maintain and update only one central version of the software, making maintenance less complicated and expensive both internally for the vendor and for external customers. Multi-tenancy may involve some upfront costs to the vendor to create the redundancies and server capacity that will accommodate traffic spikes and enable effective disaster recovery. However, these costs to the vendor will stabilize over time as they are spread out over more and more customers, and having a SaaS software provider manage server capacity is typically much cheaper and more convenient for customers than having to do it themselves.

Using a SaaS provider allows clients to focus on their unique core competency. SaaS vendors that provide responsive services and meet appropriate uptime guarantees can ease a great deal of strain on client IT budgets as well as on employees. And because many SaaS contracts are inclusive of service, upgrades, and support, clients gain multiple benefits at a greatly reduced cost.

In another financially advantageous tactic, SaaS vendors often take a “self-service” approach to support, empowering customers with the tools and APIs they need to accomplish almost anything with the software components provided, and fostering customer interaction to share best practices. This approach allows scaling and saves vendors money in terms of fielding and managing high volumes of support requests, and also eliminates vendor time and availability as roadblocks to customer achievement. However, self-service definitely doesn’t mean abandoning customers. Many SaaS vendors use proactive “customer success managers” to train customers thoroughly in the software and coach them personally through the best practices and tactics that will help achieve specific business needs. SaaS companies often also foster large customer communities or “ecosystems” where clients share their strategies and tactics, helping each other along with little or no additional cost to the vendor. This model eliminates the need for vendors to provide “siloed” support to clients developing their own individual custom solutions.

• Vendor benefits: Distributing costs throughout clients, empowering clients with self-service
• Client benefits: Diminished IT obligations, more business tools for success

Standards Compliance

Along with relieving customers of the need to have an internal IT organization or spend lots of money on servers, SaaS providers can also achieve certifications such as SSAE 16 and ISO27001 and maintain uptimes that meet established service level agreements. The ability to use one provider certified under these standards alleviates the need for individual organizations to scramble for certification, enabling the cost-effective provision of standards-based services. The upfront effort necessary to achieve certification may be a hidden cost of SaaS, but it’s also a hidden savings, relieving customers of the burden and cost of achieving certification on their own.

As SaaS systems collect more and more user data, it becomes more and more important for SaaS providers to adhere to data privacy regulations. Approaches for doing so may range from Safe Harbor self-certification to passing involved HIPAA audits. This can involve a great deal of upfront preparation and costly, time-consuming compliance efforts—but it’s ultimately more effective for one SaaS provider to spread out these costs of compliance over many customers than for each customer to achieve costly compliance independently. SaaS providers that meet data integrity and privacy standards provide their customers a service that goes beyond mere software tools to encompass information security.

• Vendor benefits: Distribution of costs
• Client benefits: Assurance of standards compliance and data privacy

Relationships with Resellers and Systems Integrators

Even in the SaaS world, channels are becoming more important, not less as they increasingly provide the specific buying context and information that customers need to make a buying decision. Going further, customers not only want to buy in context, but also be supported over time by the channel that sold them – whether providing guidance to get the most from the service, but also finding other add-on solutions and associated services. ISVs therefore need the channel to play a greater role in not only distributing their SaaS solutions, but to own the relationship with the end-customer beyond the first sale.

ISVs need of course to invest in technology to support the channel: portals, APIs, marketing tools, etc. As with vendors’ own client relationships, resellers and SIs will benefit from support tools that focus on empowerment, not obstacles, in making best use of solutions. Resellers and SIs thus become partners in building a customer ecosystem, not rivals competing for customer dollars. The better trained a reseller or SI is in the core SaaS system, the more business can be brought in—beneficial for both the initial vendor and these channel partners.

• Vendor benefits: More business from these channels
• Client benefits: More engaged service and better resources from resellers and Sis, better overall solution/ ecosystem

Revenue Recognition

Subscription models can significantly change how companies manage their revenue. While the typical model for on-premise software installation was to charge a large amount of money upfront and recognize the revenue immediately, the shift to subscription-based SaaS models brought with it a need to recognize deferred revenue. Because SaaS works for customers every day, revenue can be recognized on a deferred basis as well. Upfront cash flow, ongoing subscription contracts, and deferred revenue (cash collected and accounts receivable minus recognized revenue) create an attractive financial model for SaaS while clearly recognizing what has already been paid. Offbook backlog (total contract value less collected cash and outstanding accounts receivable) also figures into the total funds coming into SaaS. These accounting models are attractive to SaaS vendors and investors alike, and significant investor interest is often prompted in new SaaS companies or when existing companies switch to SaaS.

Accounting models for SaaS can vary, but many companies find that a standardized 30-day month makes sense for accounting for revenue on a regular basis, rather than dealing with month-to-month fluctuations in number of days. Revenue recognition was previously complex, but now many SaaS solutions exist built specifically to recognize revenue from the SaaS model. And SaaS has positive financial implications for the customer as well, in terms of a more rapid ability to recover investment in the system. Initial investment is typically lower and time to implementation is shorter, saving money from all perspectives.

• Vendor benefits: Deferred revenue, investor interest
• Client benefits: Ongoing service, affordable prices

The financial benefits of SaaS extend far beyond shared servers, encompassing more rapid and less costly implementations, closer customer relationships with more resources, seamless upgrades and affordable maintenance, and—perhaps most importantly—an empowered ecosystem of devoted vendor representatives, clients, resellers, and SIs, all interested in building tools, modules, and features that will boost the bottom line, improving vendors’ ability to provide better tools and services for all customers.

Another successful Affiliate Summit West is over. As always, the stats prove that the event continues to be a must-attend for any affiliate marketer. Kudos for Shawn and Missy for putting this one on!

Getting back to our game: this event brought even more proof that Avangate continues to take our role of thought leader in the digital goods and online services markets seriously and deliver on our promise of leadership. Our presentation on 5 Steps to Accelerate Your Affiliate International Expansion had a great turnout, proving that businesses really strive to gain exposure in territories that have great potential for growth. And what simpler way to achieve this exposure than to use performance marketing? Find more details on how to get started in the presentation.

Further confirming Avangate’s prominence, the Blue Book list of Top 20 Affiliate Networks for 2014 was recently released. Avangate is now #11 on the list, having advanced 3 positions compared with 2013. And if we look at the list from a vertical perspective with regard to software and cloud services, we’re actually number 1, ahead of our direct competitors in the digital goods space – a great place to be, we think.

At Affiliate Summit West, the entire digital goods and online services ecosystem seemed to be present at our software networking dinner on Sunday and the feedback was positive. From industry thought leaders and bloggers to affiliates, merchants, and service partners, the Avangate Software Networking Dinner has quickly become a reference event within the vertical, creating new business development opportunities for most and a good time for all.

As for the big picture, I spoke to a lot of summit attendees interested in expanding their presence into new regions or gaining incremental revenue from affiliate networks. Bigger companies are also considering optimizing their current affiliate stats by activating more affiliates and getting new local partners. This is where our dedicated affiliate program management services come into the picture to ramp up programs. Smaller merchants want to get as much exposure as they can, hence the multitude of monetization solutions offered within the software field in particular.

To wrap up, I would say that Avangate’s presence at the Summit delivered great value for people interested in affiliate sales in the digital goods space, and we will continue to be a resource in the future. If you don’t want to wait until the next affiliate event for guidance, let us know how we can help you right now!