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Competing in the Next SaaS Wave

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  • 1. © 2013 Amity Customer Success: Competing in the Next SaaS Wave An analysis of the Pacific Crest 2013 SaaS Survey Executive Summary What the Survey Tells Us The Next Wave: From Enterprise SaaS to Personal SaaS
  • 2. Executive Summary There is a move towards lower-cost acquisition channels, which leads to: • smaller deal sizes; • shorter billing periods; and, • significant increases in churn. Trial-based selling is becoming standard. Customer cash flow is at increasing risk. High growth companies are more effective at renewals and upselling. A new wave is hitting the SaaS industry, and … What the 2013 Survey Told Us © 2013 Amity Customer Success is now the key to long-term growth and profitability.
  • 3. © 2013 Amity Pacific Crest, along with David Skok of Matrix Partners, has conducted an annual survey of private SaaS companies since 2010. Pacific Crest is an investment banking firm with a strong focus on SaaS. David Skok is a highly respected authority in the SaaS industry. What the Survey Tells Us The key takeaways about: 1. Customer Acquisition 2. New Customers vs Customer Base 3. Churn Links to Paul’s in-depth analysis, as well as the original survey, are available on the last slide.
  • 4. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FieldSales InsideSales InternetSales Channel Sales Mixed Primary Mode of Distribution(1) 2012GrowthRate 44% 26% 90% 80% 50% Use of Low Cost Acquisition Channel is Accelerating The SaaS Industry’s growth is accelerating. Driven by broad adoption of the cloud, and mobile. 41% median growth last year, 47% expected this year. 90% 2012 growth rate was experienced by companies who mainly use internet distribution. ‘Land and expand’ and organic growth gaining momentum. © 2013 Amity Use of low cost acquisition is expanding across deal sizes. Model is splitting into high- and low-cost strategies. Trials generate one third of all new ACV. 1/4 to 2/3 of respondents use trials of some sort. Average Deal Size is getting much smaller. SMB and VSB fastest growing segments. 2011 Median: $37.5K 2012 Median: $24K 2013 Median: $20K
  • 5. 40% 35% 30% 25% 20% 15% 10% 5% 0% Less than $2MM $2MM- $5MM $5MM- $10MM $10MM- $15MM $15MM- $25MM $25MM- $40MM $40MM- $60MM 2012 GAAP Revenue = Bottom 50% Growers = Top 50% Growers %NewACVfromUpsells Greater than $60MM 6%5% 10% 13% 15% 25% 25% 10% 15% 18% 15% 15% 30% 35% 35% 35% Upsell to Existing Customer $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 NewACVfrom NewCustomer Renewals $0.92 $0.17 $0.14 Leveraging the Existing Customer Base Renewal commission is now standard practice: 50% paid in 2012, increased to 76% in 2013. Highest growth companies rely on upsells. © 2013 Amity ROI: 109% 588% 714% Renewal/upsell is highly profitable: Acquiring new customers is expensive. On average, companies are realizing 20% of new ACV from upsells. The fastest-growing companies report significantly higher % than the slower growers.
  • 6. Other, 17.5% Seats,37.7% Usageor transactions, 28.1% Sites,7.9% Databasesize, 3.5% Total Employees, 5.3% Revenue Churn has Almost Doubled Customer cash flow is at increased risk: Billing period has dropped from one year in 2012 to 3 months in 2013. Consistent with lower-cost acquisition and smaller deal size. © 2013 Amity 2/3 of revenue is consumption-based. >20% 15-20% 10-15% 5-10% <5% 0 5 10 15 20 25 30 11 7 11 11 26 2011 Median: 5% 2012 Median: 5% 2013 Median: 9%
  • 7. Implications for Customer Success Successful companies are cultivating their existing customer base. Trial-based acquisition and organic growth requires a Customer Success approach, not traditional Sales. Managing churn is a critical success factor for today’s SaaS company. SaaS companies are differentiating on their ability to provide personalized service. In fact, the whole SaaS industry is evolving from an enterprise focus to a personal focus . . . Customer Success is now the key to long-term growth and profitability. © 2013 Amity
  • 8. © 2013 Amity The Next SaaS Wave: Enterprise SaaS to Personal SaaS
  • 9. High CAC methods: Outbound Field sales High touch Forklift model Invisible, disempowered users Buyer-focused SaaS 1.0: Enterprise SaaS SaaS delivery, product model Product-focused SaaS businesses use front office automation to manage customer acquisition. Seat-based pricing Heavy adoption of traditional CRM Management platforms Large contracts, long billing cycles Competition: SaaS vs on-premise apps High switching costs Value based on cost savings © 2013 Amity
  • 10. SaaS 2.0: Personal SaaS SaaS delivery, service model USE Higher churn Moving into VSB & professional Commission on growth Buyer & user focused Lower CAC methods: Inbound marketing Inside sales Lower touch Smaller contracts, shorter billing cycles Digital engagement platform SaaS-native value proposition Visible, engaged users Self-service, trials, freemium DISCOVER Consumption pricing Competition: SaaS vs. SaaS Lower switching costs Bottom-up organic growth Traditional CRM inadequate Land & Expand/ Team-by-team adoption The model has evolved. Personal SaaS leverages the entire customer journey. © 2013 Amity
  • 11. The Seven Cornerstones of the New SaaS Business Model 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack © 2013 Amity
  • 12. 1. Economic Drivers SaaS 1.0: Enterprise SaaS 2.0: Personal Web adoption Consumerization of IT Lower CapEx Affordable experimentation, bottom-up growth Ease of use Collaboration Customer-vendor alignment User-vendor alignment 24/7 availability Multiple device access Empowered users. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 13. 2. Business Strategy SaaS 1.0: Enterprise SaaS 2.0: Personal Management platforms Execution platforms Enterprise Departmental, team and individuals Quarterly product cycle Continuous product cycle Field sales/professional services Self service New logo acquisition Leverage customer base Land, expand and organic growth. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 14. 3. Value Proposition SaaS 1.0: Enterprise SaaS 2.0: Personal CapEx vs. OpEx Accept credit cards Lower TCO Pay as you go Configuration, not customization Self serve Compliance Collaboration System of record System of engagement Collaborate and engage. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 15. 4. Customer Acquisition SaaS 1.0: Enterprise SaaS 2.0: Personal High touch field sales Low touch inside sales and self-service trials Outbound Inbound Pilots Free trials Involve professional services Community and content Complex contracts Cookie cutter terms of service Easy to try, easy to buy. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 16. 5. Customer Relationship SaaS 1.0: Enterprise SaaS 2.0: Personal Cost center Build relationship equity Call center Employee to person, customer advocates Break/fix Personal service Cost reduction Outcome-driven High complexity, involve IT Low complexity, avoid IT Low complexity, high engagement. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 17. 6. Customer Development SaaS 1.0: Enterprise SaaS 2.0: Personal Renewal cycle Continuous Procurement Operating champion Account management Customer success Negotiated upgrades Organic upgrades Depend on lock-in Continuously demonstrate value Continuous and organic. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 18. 7. Business Application Stack SaaS 1.0: Enterprise SaaS 2.0: Personal Departmental silos Cross-department layers Custom integration REST API Business intelligence Customer intelligence Product separate from business systems Product is the business system platform Managed by IT Managed by operating department and team Product and business alignment. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack
  • 19. The 7 Cornerstones of SaaS 2.0 Personal, accessible, engaged, organic. © 2013 Amity 2. Business Strategy 1. Economic Drivers 3. Value Proposition 4. Customer Acquisition 5. Customer Relationship 6. Customer Development 7. Business Application Stack Empowered users Land, expand and organic growth Collaborate and engage Easy to try, easy to buy Low complexity, high engagement Continuous and organic Product and business alignment
  • 20. 1. Generate Product Qualified Leads: Lower barriers to evaluation and adoption. 2. Use Inbound Marketing and Inside Sales: Focus on lower cost customer acquisition methods. 3. Align Product and Business: Horizontal layers over Departmental silos. 4. Focus on Personal Customer Success: High-engagement, personal service builds trust. 5. Scale Customer Engagement: Enable employee-to-people engagement throughout the customer journey. Easy to try, easy to buy, easy to engage. © 2013 Amity Competing in the Next SaaS Wave
  • 21. helps SaaS companies keep and grow their customers by: Removing time-wasting complexity from the customer success process, and Enabling customer-facing teams to spend more time engaging customers. Customer Success. Simplified. © 2013 Amity provides the only scalable customer engagement platform purpose- built for SaaS. www.getamity.com @getamity
  • 22. For more information contact: Paul Philp, Founder & CEO paul@getamity.com 647.927.8574 Thank You! Download the Pacific Crest Survey Send email View Paul’s Detailed Analysis