Moving to SaaS by Margaret Menzies


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To compete in today's software services market, it's become essential for an IT company supply their applications via a Software as a Service (SaaS) model. Based on my experience leading SaaS development teams, I've written up some recommendations that can help a company successfully plan and implement a move into the SaaS arena.

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Moving to SaaS by Margaret Menzies

  1. 1. M OVING TO S AA SSome Practical AdviceTo compete in todays software services market, its become essential foran IT company supply their applications via a Software as a Service(SaaS) model. Based on my experience leading SaaS developmentteams, Ive written up some recommendations that can help a companysuccessfully plan and implement a move into the SaaS arena.Margaret A. Menzies10/27/2011
  2. 2. 10/27/2011INTRODUCTIONMoving to SaaS will require changes in how you do businessSoftware as a Service (SaaS) is no longer considered cutting edge from a business or softwaredevelopment perspective. Todays almost ubiquitous Wi-Fi and 3G services provide easyaccess to on-line applications via a web browser or mobile client. Combined with the trend touse cloud computing services to simplify infrastructure and lower IT costs, a softwarecompany now needs to make their offerings available via a SaaS to remain competitive in thesoftware application market.Most current software development literature and many blogs cover the basics for developinga SaaS based application. Many options are based around using Agile development methods,direct web marketing and a subscription sales model. Today two programmers with a goodidea working with a newlyminted MBA can easilylaunch a SaaS product with aminimal capital investment.But it can be difficult for anexisting company to convertan established desktopapplication to a SaaS offeringif there is not some realistictransition planning done inadvance. Establishing a newSaaS product or simplymoving a traditional client-server application to thecloud will impact all businessunits and can radicallychange how business isconducted. Thus SaaSproduct planning needs to beconsidered company-wide andnot be confined to productdevelopment.Over the past 10 years, I have been involved in a variety of SaaS development efforts. Ivemanaged development and support teams, acted as product manager and even created trialmarketing campaigns. Drawing on my experience, Ive put together some practicalrecommendations that should be considered when planning a SaaS application project. Theinformation is geared towards an existing small company of 10-100 people that already has aproduct or software development team, but can also be applied to a division of a largercompany. Its not a complete guide, but offers some advice and best practices to use whenplanning your own companys SaaS initiative. 1
  3. 3. 10/27/2011BEFORE YOU BEGINMake the SaaS move a company-wide objectiveManagement may make a decision to develop a SaaS offering, but all staff members need toaccept the idea. While everyone in a company may not be involved with the new SaaSapplication at the beginning, they need to know how the offering will be positioned on thecompany roadmap and what business implications it may have in the future. In particular,people will want to know how this will affect their tenure, and if their jobs will change oreven be eliminated.For example, if theres a consulting department that does product installations and upgrades,what will they do after their product moves to the cloud? Will their jobs be eliminated ortheir functions be converted to something else? If you have a transition plan for them, shareit from the start. Or admit that you dont know yet but youre working on the transition.Invite them to submit their suggestions on what to do. Being honest and up front with theinformation surrounding the decision to develop a SaaS offering will be vital in retaining keystaff members, especially technical staff.RECOMMENDATIONS1. Hold a company meeting or series of meetings to explain the plan.2. Solicit staff feedback and ideas on how to move to the SaaS model in their department or area.3. Give them a problem or challenge to solve as a group to encourage team building.4. Post the launch plan publically and regularly report on progress or changes.TRANSITIONING AN APPLICATIONWhat do you want to build and why?Dont start with just a development plan. A company needs to base the development aroundthe reason theyre making the move to SaaS. This can vary greatly from the need to producea new browser-based product to simply offering the existing client-server product as a hostedmodel. It helps to create a full business plan around the SaaS initiative so that all aspectsof the effort are explored including how to transition or move existing customers to a newproduct if thats a goal. Dont forget to consider staffing and new infrastructure costs alongwith how any new or revised subscription pricing may impact sales and marketingcampaigns.Remember too, that not all desktop applications will smoothly make the transition to thecloud. Calculation intensive applications or graphics intensive functions may still require adesktop client. Reporting and printing are also areas that can be tricky to move into a purebrowser-based form, especially if an existing application allows for a variety of data selectionand fancy formatting. This doesnt mean it cant be done, but features like this will takemore time in development. 2
  4. 4. 10/27/2011Its also tempting to hold an initial SaaS release until it is close to being on feature paritywith an existing client-server application. Dont! It will take too long to match an existingproduct feature set, which is probably a moving target anyway. Plan for incremental releasesthat start with a core foundation of features you can market and build up on this base. Movecustomers using the desktop or client-server product to the SaaS application as the keyfeatures they need become available. It may take some time, but along the way youll be ableto market whats currently available in the SaaS application to new prospects whiledemonstrating to existing customers that youre serious about your cloud commitment.RECOMMENDATIONS 1. Start the planning process by outlining a business plan for the SaaS application. Keep it simple and lightweight, but make sure to consider your potential new customers and set expectations for current customers about how they may or may not want to transition. First agree on the plan, then create a project timeline. 2. If a SaaS rewrite of your existing product is your goal, review the current feature set carefully. Feature development should be prioritized based on what you identify as your success criteria. Identify the core value, what makes your product different or what your existing customers like. Then find-out what it is going to take to re-create that functionality using a SaaS model. 3. Be ready for change. As development progresses, technical issues may cause delays or UI plans may need to be re-worked to deal with alpha and beta feedback. If there is a delay, having backup plans to swap features or enhancements can help mitigate the overall problem. 4. Strongly consider a "soft" launch. Its easier to deal with changes or delays if the product is unveiled slowly to a limited audience or a select group of customers. Use their feedback to fine tune the application and make it stronger. This also gives marketing and sales staff longer to use the product themselves and which can aid in their efforts. 5. Finally, like launching any product, getting a SaaS effort off the ground takes time, so be realistic about the timelines and revenue expectations.TRIALS AND SUBSCRIPTIONSKeep sign-up and subscription plans simpleOne of the reasons to build a SaaS application is theability to provide low-cost evaluations of yourproducts. A SaaS application can have a"Freemium" subscription model that allows someoneto use a certain set of features free indefinitely or fora specific time period. A trial model is usually fullfeatured but time limited. After a certain date, acustomer login will no longer work and he/she willbe asked to pay. 30 and 10-day trial periods arestandard. Both models may also have a limit onhow much data may be created or how much storage may be used. 3
  5. 5. 10/27/2011Trial sign-up should be as easy and fast as possible; name, email address and password arestandard. About the only thing that should be required is an email address although askingfor a name helps provide personalization in the application. Safeguards against spam botsshould be built in, such as typing in words or a phrase or confirming the account via an emaillink, but the key is to get prospect into the application and using it ASAP.Trials are often fully automated and will not involve any direct intervention by sales staff.An on-line registration form takes care of everything. Yet if a product requires a sales rep tostart the trial, it should feature some special system configuration or personalized training asa perceived value-add to counteract any set-up delay. What type of trial model is used shouldbe a decision made by marketing and sales in consultation with development, to make surethat any conditions or restrictions can be implemented.Trials should always have follow-up. This can be a series of automated emails containingtips on how to use the product or emails and/or phone-calls from sales reps. Example: • an email sent automatically on sign-up that has some getting started info • an email sent 3 days later that cites information on how other customers use the app • a personalized email from a sales rep with purchase information sent after 7 days • an email sent 3 days before the end of the trial period warning of the expiration and repeating purchase infoA trials follow-up email system can be built in the SaaS application or managed through acompanys CRM system (if the sign-up process is linked into a companys CRM system).RECOMMENDATIONS 1. Establish a flexible subscription model so it can be easily tweaked or changed. Hard code as little as possible! For example, make it possible for a customer support or sales rep to easily extend a 30-day trial period or add more users over a trial subscription limit. 2. Manage subscriptions through a database so that any changes or additions can be easily made and tracked. 3. Plan for subscription upgrades and downgrades from the start, particularly downgrades. Do some "what if" scenario planning to be ready for change requests especially regarding lower limits in data storage and what to do with saved information that may go over a new limit imposed after a downgrade. 4. Ideally trials and new subscriptions should have wizards or walkthroughs available when a user first enters the application. If not available when the application initially launches, these should be added ASAP afterwards. 5. Link the trial mechanism to a CRM lead system. When a new trial is created on the SaaS site, create a lead in the CRM system. A system for how the lead is processed within the CRM system should be established, especially as it regards trial follow-up emails and customer contacts. 6. Make any follow-up email system easily editable so the emails can be updated with new information and special offers. Localized trial emails are a big plus. 7. Dont set up too many subscription plans! Keep them simple. Dont give customers "special" subscriptions which differ from those publically available. Make special deals with pricing, not the functionality or subscription mechanics or the system gets too unwieldy to manage. 4
  6. 6. 10/27/2011 8. Decide how to handle code escrow requests. If you offer this service, make this its own subscription or or-add on cost or that it is included in a higher priced subscription.PRODUCT DEVELOPMENT TECHNIQUESAgile works - but only if you actively support itGoogle "SaaS product development" and youll find a plethora of information on how to goabout organizing development and selecting tools for SaaS applications. The articles usuallymention some current development best practices such as incremental releases, automatingtesting and using current standards for data integration and exchange. Agile methodologiesare often recommended for rapid prototyping and for delivering frequent releases. Fromwhats currently available, Ive listed some advice that Ive found particularly useful in actualpractice.RECOMMENDATIONS 1. Use an Agile process like Scrum for product delivery. Make sure your team understands how to create user stories from requirements and how the overall process really works. Hire or train a person committed to the process and who will keep it going after the initial enthusiasm wanes. 2. Make sure your product management and marketing teams are also trained in how the Agile process works. They will need to work tightly with development and understand how to help organize and expand the requirements/user stories. 3. Integrate your QA team tightly with engineering and automate your build and test systems right from day one. The cost of creating widespread automated tests is more than made up the time and effort it saves in speeding up release cycles. 4. Promote peer programming and testing on a regular basis. While this may initially slow the pace down, the benefits of stronger, less defect prone code will outweigh any delays. Its also an inexpensive way to provide cross- functional training. As the team gets more comfortable with the peer process, the pace will usually pick up again. 5. Have members of the development team help out with product support on a regular basis. They should be encouraged to help write FAQs, answer customer questions in a forum or assist support staff in troubleshooting. The more real-world feedback and experience they get with customers, the better. 6. Consider using prebuilt components and/or open source for both the product and testing. Theres no value in coding a java pie chart generator when there are hundreds on the market to choose from. Using open source code may require you to acknowledge it in some way, so make sure to note if you do so and then have product management take care of correctly providing the legal documentation. 5
  7. 7. 10/27/2011BUILDING YOUR DEVELOPMENT TEAMBe smart about new hires and using existing staffYour current development and QA staff may have the skills you need and its always good formoral to use them on a new project. In particular, developers with superior object orientedskills or advanced computer science degrees usually can quickly learn a new language or usetheir skills somewhere on to a web based initiative. However, its highly likely that youllhave to hire new staff, especially if youre moving to a new server platform or doing acomplete rewrite in another language. Be prepared to make changes in the team, especiallyif youll be putting an older product in maintenance mode to focus on the new SaaS initiative.RECOMMENDATIONS 1. Dont make SaaS development a skunk works project. This will only serve to alienate any new SaaS developers who will usually need support from current engineers for a transition effort. Co-location is preferred as long as the different teams have space to collaborate and work together without disrupting one another. 2. Dont split a developers time between an older project and the new SaaS application. There can be a transition period from one project to another but have them focus on just one; they will not be productive if they have to keep switching back and forth. 3. Hire good graphics and UI help. An easy-to-use, interesting UI will set your application apart in the market and keep users happy, but it usually doesnt come cheap. Consider using independent contractors instead of design firms or hiring staff to keep costs down. 4. Dont try to outsource the SaaS development effort if you havent done outsourcing before or dont currently use it. New projects with constant change are the worst to try to outsource, especially if you dont have an outsourcing system already set-up. 5. Forming a new team is a good time to update developer job descriptions and change or reset their objectives and goals. 6. Dont settle for filling positions with mediocre talent or youll have mediocre results. Hiring exceptional people may cost more, but it will be worth it.HOSTINGSelect and manage with careA wide variety of hosting companies have sprung up in the past few years making it easier tofind the services you need. The company you select to host your application should be able toprovide a variety of CPU options, system monitoring and backups. They should offer a goodSLA and understand that youll be hosting a commercial application, not just your officeExchange server. Bigger firms are not always better. Make sure that if you go with a smallerfirm that they have a contingency plan for handling your data and applications should theyencounter business problems or go out of business. 6
  8. 8. 10/27/2011Its good to designate a staff member or small team for setting up and maintaining the entireapplication hosting environment at the data center. This responsibility can start off indevelopment and be a good job for a configuration engineer or someone responsible forbuilding and releasing client-server applications. The team can be extended to use customerservices staff, especially if round the clock monitoring is needed.RECOMMENDATIONS 1. In addition to a hosted production environment, at least two other hosted environments should be set up. This includes a "staging" or mirror environment of the production system. New releases are deployed and fully tested here before going into production. A QA test system that closely mirrors the production system should also be established. While it can be argued that a QA system can be set up and used internally, having one or more purely test systems in the cloud assures that the QA experience will adhere closer to the production system. 2. Youll need an individual or small team internally to handle data center monitoring and to do application updates and backup. This can be done by a developer, but a staff member currently working in a traditional IT manager role can also pick this up. If recruiting new staff for this work, consider targeting hosting companies to find people with the necessary skills. 3. Scalability should be a watchword when developing the SaaS application backend, including the costs associated with server and database licensing. Consider carefully if you want to develop on the Windows platform, as back end costs for scaling Windows and MS SQL servers can be much higher than a Linux or UNIX system. The same advice goes for Oracle systems. 4. Have a plan for application and code backup which includes a code escrow plan. If you have enterprise customers, theyll will want an escrow plan as insurance. 5. Build in automated system support tools into your application from the start. If something goes wrong, having good system monitoring with alarms or flags will cut troubleshooting time and service support costs significantly. 6. There are always going to be some companies or governments who do not want to use a SaaS application over the internet, despite any security you may build in. They will want to have a version installed on site for their use, either on pre-configured servers you provide or on their own equipment. If you want to pursue such sales, your hosting team should be ready to do these installations and be ready to support them. (However, an extremely high price for these services may serve as discouragement!) 7
  9. 9. 10/27/2011TERMS AND CONDITIONSA new license or usage agreement will be neededTerms and conditions for a SaaS application are different than for a licensed product. Oftenthese will include service up time guarantees and application upgrade conditions. Theseterms should be developed right along with the SaaS application and deployed as early aspossible.RECOMMENDATIONS 1. Make sure you are dealing with a legal firm that has some previous experience with SaaS agreements! You dont want to have to educate them. 2. Begin talking with legal staff well in advance of any alphas release. 3 months ahead is not too early to start. Have the final agreement or a beta agreement ready to use by beta launch, if not for an alpha launch too. 3. Make sure legal staff understand what the SaaS application will and will not do and what type of assurances and guarantees youre willing to provide when they write up the agreement. 4. Dont forget to cover code escrow if that will be provided. 5. The legal team should know how the terms and conditions will be accepted (check-box on-line or paper signature), and if the trial terms and conditions will be different from those for a paid subscription. This information may impact how the agreement is written or presented. 6. Make sure theres a user story or requirement written to incorporate the terms and conditions and how acceptance will work. Have someone in development share this responsibility with product management to insure that any agreement updates or changes are implemented in a timely fashion. 7. If your customer is moving from a licensed product to the SaaS offering, make sure that there is a checklist of any licensing differences that the customer should be aware of, especially if there are functional differences between the two applications. Sales and Marketing may want to make this part of any upgrade sales information. It can also be made part of a support knowledge base.WEB PAYMENTS AND ACCOUNTINGAutomated payment systems still need good planningPurchase mechanisms for many SaaS offerings are self-service, with the payment andinvoicing systems fully automated. This can cut down on accounting costs by reducingmanual payment processes but oftentimes will then require procedure changes to existingcompany billing and invoicing systems. Introducing credit card or PayPal processing willrequire new procedures to deal with problems and exceptions. Customers are also buyingservices not licenses. Bookkeeping practices to record them may now be different. Make surethat the accounting staff knows about these differences and is aware of what has to berecorded for all types of subscription or service sales. 8
  10. 10. 10/27/2011RECOMMENDATIONS 1. The payment process should be planned and implemented as a cross-departmental effort. Someone in both development and accounting should be assigned to handle the feature development and do testing. 2. Automate as much payment as possible and provide a wide variety of payment methods (Credit card, PayPal, wire transfer, check). There will be costs associated with setting up the automation for all of these, but it will save time and administration costs in the long run. 3. Decide on payment methods early and dont leave the choice to just development or accounting alone! If you will be accepting credit cards, get information from different credit card processors such as World Pay on what the technical and administrative processes will be along with any fees. See what types of reporting and invoicing services they offer and the types of APIs and test systems they provide. Do both a business and technical review to select which one fits your requirements. 4. Check with your bank about credit card processing and any new invoice processing fees that you may now have as a result of adding a new payment mechanism. 5. Decide how to handle purchase order requests. Its extremely likely that you will get PO requests and need to have a way to handle them efficiently, whether it is automated or done manually. Even if you choose not to implement an automated system right away, make sure that the purchase process has a field blank for a PO or request number for customers to use for their own reference. 6. Decide how to handle resellers. Some firms cannot purchase software services directly and go through a 3rd party. Write up how youll deal with reseller inquiries and post this information prominently in any payment system you set-up. 7. Decide how customer invoicing will be done, what invoices need to be available on the web and who will have access to them. Make sure that the appropriate accounting, sales or customer support staff has access to the same invoices a customer may see to help with any purchase inquiries or issues.MARKETING AND SALESMake the most of your direct connectionLike development process, there is a lot ofinformation readily available on how to marketand sell a SaaS product. A key point worthremembering is that a SaaS application givesyou more access to data about product usage. Italso provides a direct customer feedbackchannel through the application in addition toemail. Use web based analytics and considerincorporating newer web based "customerexperience management tools" to help youcreatively make use of this direct channel,being careful of course not to abuse it. 9
  11. 11. 10/27/2011Subscription sales for SaaS applications are often self-service mechanisms, even forenterprise sales. Users today are accustomed to testing a product using an evaluationversion and then quickly purchasing a paid subscription using a credit card. The salesprocess should be as quick and easy as possible, even for enterprise customers.RECOMMENDATIONS 1. On the company website and support site, build in social networking tools like Twitter feeds, blogs or Google+ pages to aid in viral marketing efforts. However, only add the tools youll be keeping updated. If you add a Facebook link, then make an effort to read the comments and refresh the info there regularly. Same goes for any other social network. Theres nothing worse than checking out a Twitter feed and seeing the last tweet is over 3 months old. Consider adding a Social Media marketing person or expanding an existing marketing position to specifically plan and manage these social marketing initiatives. 2. Use Google Analytics or other CRM system statistics to keep track of which knowledge base articles, videos, or forum entries are being viewed. This can give you insight about product functionality questions or usage problems that can be fed back into new requirements or a marketing message. 3. If the SaaS application is intended to replace an older application, have an end of life plan for the older product and a timeline for migrating current customers to the new application. Share the timeline with them as appropriate and encourage them to give you feedback and suggestions to keep the experience positive. Its likely they may look around for another solution, but theres a good chance theyll stay with you if they feel they are being supported well. 4. Keep the subscription levels simple and easy to understand. If there are add-on products like an escrow service or premium support, use an automated shopping cart check out system to streamline the payment process and simplify invoicing.GOING MOBILEStart simple and make them look goodMobile applications are perfect companions for many SaaS applications. In todays market,not only can they provide convenience for a variety of users, but they can be showcased togenerate some additional publicity for a service. However, not all services extend well intothe mobile arena. Form factor, memory/data constraints and the adolescent nature of manymobile tools can cause development issues. Cost should also be a major factor whenconsidering a mobile app, as it may require a separate development effort apart from theSaaS development team or take away a subset of these resources.RECOMMENDATIONS 1. Do a quick cost/benefit analysis before launching a mobile app initiative. Make sure there is a real target audience and enough demand or marketing benefit to justify starting a project and maintaining it over time. 10
  12. 12. 10/27/2011 2. Keep your mobile platform options open. While some applications may lend themselves more to an Android app than Apple or Rim, the mobile market is changing fast enough that one platform may not be enough to reach your target customers. Consider using some of the current cross-platform mobile tools like Rho mobile or Corona. Building an HTML5 based app or hybrid app may also have appeal, especially if you dont want to deal with different app stores and multiple client updates. 3. Like the web UI, make sure any mobile application will have a clean and efficient interface that works well on a mobile device. Many browser layouts will not simply transition to a smaller format even if only tablets are targeted. Ugly or inefficient UIs on mobile devices are less tolerated by the press and users than web UIs, so prototype and iterate. Make sure the icon looks good too. 4. Start simple. Trim down the offering on the mobile device using a subset of the SaaS applications main features. Find out in advance what your mobile customers must absolutely have and build up using this feature set. 5. Plan on making regular updates to an app. Its become expected that a well supported app will have a development team that reacts quickly to problem reports and provides small enhancements on a regular basis. Regular updates also can provide good marketing content.CUSTOMER SUPPORTPlan to exceed their high expectationsCustomer support expectations tend to be higher for SaaS applications, even for businessusers with their own internal IT support staff. Because a user is connecting directly to avendors servers, the vendor is now seen as responsible for the application and needs toprovide the appropriate support services. Just as most SaaS applications are available 24x7,support services need to be there too. Users have come to expect prompt attention toquestions as well as having a searchable knowledge base, FAQs and video training. Live chatand web conferencing where a support rep can see a users desktop are now common amongtools employed for problem solving.All of these expanded forms of support need not be costly. Support can be made more self-service by having a well laid out website and automated tools for suggesting and findinginformation. Creating a customer "community" and "crowd sourcing" support wherecustomers can leave messages and interact with other customers is also a way to lowersupport costs along with building product fealty. 11
  13. 13. 10/27/2011RECOMMENDATIONS 1. Community forums, automated trouble tickets, web conferencing and video training are good to develop right along with the product. Use them to help process alpha and beta feedback and to gauge their effectiveness. 2. Consider offering regular contests or provide on-line games that users can play to keep them coming back to the support site. Many users like to show their proficiency in using a service or application. Consider building in features that can test expertise levels and give awards or badges for completing tasks or answering questions. 3. Dont build in your own trouble-ticket case handling system. If you dont already use a CRM or support application, consider linking in a inexpensive 3rd party SaaS based support system. Choose one with an API that allows you to modify their UI to match your branding and place specific information from the support knowledge base within your application. 4. Try to use a single login for the application and support system. It makes the process simpler for a user and gives the application a more polished and professional feel if everything appears to be in one system. 5. Good support sites have videos how-tos, so plan to offer them. You can host these easily on YouTube and link to them on your site if you dont want to host them directly. They dont need to be fancy, but you should script them in advance and make sure they receive some basic editing to assure good sound and picture quality. Keep them short, under 5 minutes to insure people will watch them all the way through. 6. Pay attention to any standardized text used in tech support emails. Personalize it and be as specific as possible about why the email is being sent, especially in the title. This will better insure the mail is opened and read all the way through.SUMMARYIm convinced that moving to a Software as a Service application model is necessary forestablished technology companies to compete in todays software services market. Thisdocument does not contain a full guide on how to accomplish everything needed tosuccessfully launch a SaaS application, but the practical recommendations Ive listed canhelp a company avoid some of the problems Ive seen arise in the past. Youre welcome to usethis information as you wish and to reproduce and distribute this document as needed, butplease credit me.If you have any questions or feedback about the information Ive presented, please contact meto discuss them further. I can be reached via email at, onTwitter @MargaretMenzies or on my mobile phone at +31 6 144 995 45. 12