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Software and SaaS Vendors are disrupting themselves

Software and SaaS Vendors are disrupting themselves

Introduction

Before Cloud, Saas, Social Business or any of the myriad of buzzwords currently common to our business day came Apple Inc. with their consumer orientated devices, iTunes and AppStore and changed the buying and consumption habits of people around the globe ... forever. 

This in turn, has impacted heavily on the expectations of these same consumers when transacting in their business lives, the result of which has substantially affected the commercial models and operational complexities of the business software industry.

In this paper, we will explore the impact that this has had on the software industry and how the disruption the industry itself is trying to create is in fact disrupting them at the same time. We will also look at how the internal systems of software vendors need to be enhanced to cater for this disruption so as to keep them relevant in this changing landscape.

We call it the 4 Pillars of Disruption and is centered around the following broad factors:

  • New and multiple sales channels being used
  • Deployment of new license types and revenue models
  • Changes in buyer engagement
  • The “Unanticipated” elements

 

Pillar 1 - Multiple Sales Channels

Whereas in the past the sales channel was a simple chain of events – it would typically go from vendor to distributor to reseller and finally to the end customer but that has now changed. While the legacy approach still exists, there is now also on-line, in-app and mobile transacting both directly with the consumer and indirectly through the supply chain. Then there are new go-to-market channels continually being created - consider that Google now offers a “Buy” button on search results.

These are all great for getting products (cloud or on-premise) sold but how do you  manage these sales and how do you enable and engage your resellers and distributors across all those channels ?

Pillar 2 - New License Types and Revenue Models

Gone are the days where you simply went out and bought a license to use a piece of software and installed it on your in-house computers.

Today there are a myriad of options including mobile licences, on-premise licences, subscriptions licences, cloud licences and hybrid licences with a growing scenario of having part of the license on-premise and part in the cloud.

The revenue models supporting these various license types only add to the complexity. Consider that in a single customer you could have on-premise products that are sold as subscriptions together with a cloud solution that is sold based on a multi-year contract (much like the legacy license model) and there could also be a cloud solution sold as subscription from an ISV.

So not only are there mix and match license types but also a range of revenue and billing methods to go with it.

This does provide choice for the market but how is this all managed in a way that protects the vendors product and revenue while engaging the supply chain and maintaining a quality and simple customer experience ?

Pillar 3 - Changes in Buyer Engagement

In the past customers would have typically engaged with their trusted advisers early in the sales cycle to work through their requirements, have solutions demonstrated and to have proposals presented.

Fast forward to today and what we find now is that customers engage much later in the sales cycle – they shortlist and do all kinds of investigation long before they start talking to the salesperson.

There are numerous reasons for this change in buyer engagement dynamic including the fact that millennials are taking up decision making roles and are comfortable with the new approach to selection together with the fact that the information available today is easy to reach and rich in content and social networks provide instant feedback. Not to mention that the process does not require a “pushy salesman”.

How does the software vendor track, understand and engage prospects and repeat customers before they pick up the phone to call the sales team ?

Pillar 4 - Unanticipated Challenges

Some considerations vendors may not contemplate in this changing landscape, include ...

Solution building

There’s an interesting statistic from IBM that 25 percent of all salespeople’s time is spent on solution building – trying to find the product/s that will enhance the core to deliver the customers solution. IBM also discovered that more than 65 percent of deals that are lost are lost because they could not find the solution.

Considering Pillar 3, if it is this difficult for a salesperson, then it is likely to be substantially more difficult for a customer.

Building the ideal customer solution would comprise the vendor products plus 3rd party (ISV) products and services (Partners). For cloud, this requires the ability to easily procure, provision and use multiple products from multiple vendors and ideally these should be included into unified license or subscription billing.

Brand Management

Third parties generate substantial revenue off the back of popular brands, however, the brand owner has little visibility of this and does not get to share in the revenue.

There is an argument to be had that it is because of these third parties that the brand is successful in the first place but based on our research, the investment made by the brand is exponentially higher than the contribution made by the third party ... in essence, while useful to have the third party involved, the brand would survive perfectly well without the third party.

Given the constant conflict between budgets and investing into the channel, vendors need to consider taking a share in the brand  revenue and using that to re-invest into the success of their channels.

Building Repeat Website Traffic

It is far cheaper and effective to sell to an existing customer than to find a new one. However, once a customer has purchased their solution there is no ongoing compelling reason for them to visit the corporate website. Spam and privacy rules are also making it really difficult to send outbound hooks and in the B2B environment, social networking does not drive traffic in the same way that it does in the consumer space.

In a study completed by CallidusCloud ... “Facebook and twitter do not bring in Leads” ... So to bring them back, new marketing and customer engagement strategies are needed.

E-commerce and Payment Processing

E-commerce is fundamentally changing B2B commerce. Businesses are continuing to shift resources from brick-and-mortar and other traditional sales channels to an e-commerce environment.

A recent study conducted by Forrester Research shows that 89 percent of B2B providers said adding e-commerce to their business increased annual revenue by 55 percent. Meanwhile, 81 percent said selling online drove up their average order value by 31 percent.

The benefits of E-commerce selling are big however doing this while offering multiple license types, different revenue models and extended sales channels needs a complete rethink of the operational systems of the organization.

E-commerce also brings with it the need to have every transaction paid. However taking into account multiple payment methods, multiple payment geographies, local legislation, risk and fraud management, PCI compliance and a multitude of other challenges, highlights the need to ensure that this is all made easy both for the vendor and for the customer.

For the complete report and solutions to the disruptive elements, download the White Paper here

 

 

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