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SaaS Sales Transformation POV
From On-Premise to the Cloud:
Building the Sales Capabilities for High
Performance in Software as a Service
2 | SaaS Sales Transformation POV
Executive Summary
The rapid rise of cloud computing is
enabling a wide array of new business
models, including Software as a Service
(SaaS)–the business of providing hosted
software applications that customers
access remotely and pay for on a subscrip-
tion basis. Both traditional on-premise
software companies and new SaaS pure
plays are scrambling to stake their claim
in this new frontier. The market for SaaS
is certainly promising. According to the
Infonetics Market Research Firm, SaaS and
cloud-based security services will make
up nearly half of the managed security
services market by 2015. SaaS revenue
will grow dramatically worldwide, with a
CAGR of 23 percent from 2010 to 2015.
And the overall managed security services
market, which includes CPE, SaaS and
cloud services, will reach nearly $17 billion
by 2015.1
However, building a successful SaaS
business is challenging and requires a
business model that differs from the
traditional software business. Recent
Accenture research with senior executives
from software, hardware, and technology-
enabled companies confirmed that virtually
all companies are struggling to deal with
the operational complexity caused by
anything-as-a-service (XaaS). In fact,
in most cases the launch of new XaaS
businesses strains a company’s operational
ability to deliver and scale, and requires
a completely new set of go-to-market
strategies and operational processes. As
the general manager of a cloud business
unit explained to us, “We are going 100
mph and the cliff is 10 miles away. We go
‘kaboom’ in just a few quarters unless we
get our operations functioning quickly.”
Accenture’s previously published paper
“Where the Cloud Meets Reality: Scaling
to Succeed in New Business Models”
highlights the findings of our XaaS
research and offers recommendations
for building and scaling the overall cloud
operating model. The paper identifies eight
distinctive XaaS capabilities (Figure 1) that
are critical to building the SaaS business.
This paper builds on that foundation by
taking a closer look specifically at the sales
capabilities—and their interface to service
and support capabilities—required for SaaS.
As on-premise software companies
begin offering SaaS options, there are
many dimensions of sales to rethink
and redesign, from the sales model and
incentives to sales process, tools, channel
strategies, and pre/post-sales support.
Based on our research and years of
client experience, we identified seven
recommendations for on-premise software
companies as they rethink and redesign
their sales capabilities to win in the world
of SaaS (Figure 2).
Redesigning the on-premise sales
model to capture a fair share of the
software-as-a-service market can be a
significant undertaking. To create the
sales engine to successfully serve both
offerings, technology companies need
a clear understanding of the differing
requirements and a coherent design. This
report aims to help technology providers
address this challenge.
1
http://www.mspnews.com/msp/articles/161659-cloudsaas-market-near-17-billion-2015-according-infonetics.htm
SaaS Sales Transformation POV | 3
Figure 1. Critical Capabilities for SaaS
Figure 2. SaaS Sales Recommendations
Customer
Insight
Segment your SaaS customers: Leverage analytics and market research to segment customers based on
specific SaaS criteria and their readiness and desire for SaaS products
Agree on a sales model: Decide whether to leverage the existing sales model or design a new model for your
SaaS business-each model has its own implications that needs to be carefully addressed
Align sales talent: Hire and re-train talent to adapt to the fast and frequent changes in the sales cycle
(including pre/post sales)
Align sales incentives: Design an incentive model that is based on subscription revenue, renewals and
customer retention
Update sales processes and tools: Re-design sales processes and supporting tools to allow for flexibility
that is required by the varying process and sales cycle (mostly driven by customer's current state and
desired state) in the SaaS business model
Design a comprehensive Channel Strategy: Design an optimized multi-channel approach that is inclusive
of SaaS products and includes a value proposition for the partner ecosystem in the new SaaS business model
Recalibrate on customer experience as an important responsiblity of the sales force: Update sales
process to be inclusive of the support phase, so the seller is involved throughout the lifecycle of the
SaaS product and takes accountability for nurturing the customer for growth
Sales Model &
Incentives
Sales Process
& Tools
Partner
Strategy
Post Sales
Support
1.
2.
3.
4.
5.
6.
7.
Portfolio
Management
Product
Development
Ecosystem
Management
Customer-
Centric
Technology
Delivery
Selling &
Channel
Management
Pricing,
Contracting &
Billing
Financial
Management
Service and
Support
Applied Analytics
Well-documented capability need Common capability blind spot Innovation opportunity Focus Areas
Customer Experience
Making Big Bets to Win in SaaS
Recognizing that the market for SaaS is
promising, traditional software companies
are making “big bets”, either by building
their own SaaS offerings or by acquiring
SaaS companies. SAP, Oracle, and Microsoft
are just three of the largest software
companies aggressively moving to SaaS—
according to Oracle’s President Mark Hurd,
time is of the essence. “I hate to say the
ships have sailed, but if your ships aren’t
in the water halfway across the ocean
already, you’re going to have a hard time
catching up.”2
While the traditional players are placing
their bets to win in SaaS, the new pure
SaaS companies are rapidly gaining market
share. Salesforce.com posted revenue of
$2.27 billion for the full fiscal year 2012,
an increase of 37 percent over 2011. Or
consider Google.3
In a recent investor call,
Google executives noted that the company
now has more than 5,000 customers
signing up to Google Apps every day.4
The
Backupify Blog estimates that Google Apps
has 50 million total users and that roughly
30 million of those business users pay for
Google Apps, as opposed to using the free
version. At that rate, Google Apps is close
to the $1 billion revenue mark.5
It’s no wonder that new entrants are
showing success against the behemoths
of the enterprise software market. The
new entrants are building their operating
models to be optimized for SaaS, while
traditional software companies must
make changes to virtually all areas of
their existing organization—from R&D
and innovation, to sales, billing, customer
service, human resources and finance.
Furthermore, traditional on-premise
companies must balance the growth of
their SaaS business against declining
demand for traditional software.
One area of significant difference between
traditional software and SaaS pure play
models lies in the cost of sales. In 2011,
some of the biggest pure play brands in
SaaS—including RightNow, salesforce.
com, Success Factors and NetSuite—spent
more than 40 percent of their revenue on
sales and marketing (Figure 3). In contrast,
traditional software behemoths SAP AG,
Oracle and Microsoft averaged half that
relative spending, hovering around
20 percent.
While some of the difference can be
attributed to the sales and marketing costs
of building and establishing new entrants
into the market, there are fundamental
differences driven by the SaaS business
model. The essence of the SaaS model is
volume, speed, and continuous adds and
renewals. As a result, scaling up the sales
and support to capture more (net new)
customers and driving volume is key. This
increases the customer acquisition and
retention cost of the SaaS model which
is required for driving sustainable and
profitable growth.
Based on our experience working with
industry leaders in both on-premise and
SaaS models and deeper analysis of their
sales and marketing functions, we have
observed that go-to-market strategies and
sales operations of on-premise companies
are ill-equipped to serve both business
models effectively. The fundamental
characteristics of each business are too
different and the existing sales model
and sales force will struggle to serve
the purpose of both businesses. Unlike a
traditional software business driven by
upfront licensing, the SaaS subscription
model depends on a sales organization
that continually nurtures customers and
incrementally adds and protects revenue
over time through seat licensing. Therefore
as traditional on-premise companies
expand their way into the SaaS market
through acquiring other SaaS companies or
building their own SaaS products, they will
need to carefully and intentionally adjust
their sales model and scale up their initial
investment in sales and marketing to be
able to drive sustainable growth for the
business.
Some of the most common questions that
many companies are wrestling with as
they enter the hybrid business model with
on-premise and SaaS products include:
•	 How should I build my target market
and segment my customers?
•	 What should my channel strategy be?
•	 How should I build my sales model and
sales team?
•	 How should I organize and incent my
sales force?
•	 How can I reduce my sales cycle and
drive higher volume/close rates?
•	 How can I increase the overall profit-
ability of my SaaS offering through
lowering cost of sales?
Through research and years of client
experience, Accenture has identified seven
recommendations to help on-premise
software companies rethink and redesign
their sales capabilities for SaaS.
2
Gallant, John, “Oracle’s Hurd brims with confidence about SaaS, social and cloud”, Network World, July 16, 2012. http://www.networkworld.com/news/2012/071612-
hurd-260928.html
3
http://www.sfdcstatic.com/assets/pdf/investors/Q412_Press_release_Final_financials.pdf
4
http://www.crn.com/news/cloud/232600247/google-apps-a-1-billion-business.htm;jsessionid=IDSJ3pxTMj0qE2WwKHLr4Q**.ecappj03
5
http://blog.backupify.com/2012/01/26/who-uses-google-apps-are-large-companies-pushing-it-to-a-billion-dollar-business/
4 | SaaS Sales Transformation POV
1. Segment your SaaS
customers
Leverage analytics and market research
to segment customers based on their
readiness and desire for SaaS product.
Most technology companies define their
customer segmentation and coverage
model by historic license spend and total
on-premise product revenue by customer.
They also operate a tiered sales coverage
model based on customer size and spend,
with larger businesses getting more
dedicated coverage. However, Accenture
has found that because customers are at
very different stages of readiness, SaaS
sales coverage models are best defined by
customer’s readiness and desire for SaaS
adoption, which is significantly different
for large enterprise vs. small business
Figure 3. Sales & Marketing Spend as a % of Revenue 2011
customers. In addition, SaaS providers
will have new ways of accessing customer
data through customer’s continuous usage
stream once they have an initial set of
seats. This data can provide valuable
insights into customer motives, behaviors
and attitudes in making the right
nurturing and follow-up decisions for
subscriber growth.
Another consideration for on-premise
software companies entering the SaaS
world is the target market itself. While
on-premise software companies typically
focus on large enterprises to drive
substantial software licensing per account,
small and medium sized businesses (SMBs)
are showing significant interest in SaaS,
and the small business market for SaaS
is projected to grow significantly in the
next several years. For example, salesforce.
com’s significant growth initially came
from a strategy to focus on startups and
small companies. Mark Benioff, Chairman
and CEO of salesforce.com recommends,
“Segment the market: [There is] huge
opportunity in very small companies.
Very small companies are progressive
in supporting the new technology.”6
Therefore, the coverage model must be
focused on each sales rep touching a large
volume of customers to drive subscription
volume, and replace customers lost through
switching. This approach then must be
supported by high volume lead generation,
telemarketing, and telesales activities.
SaaS Sales Transformation POV | 5
6
Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry, Marc Benioff
http://www.amazon.com/Behind-Cloud-Salesforce-com-Billion-Dollar-Company/dp/0470521163
18%
20%
20%
22%
22%
29%
29%
30%
32%
32%
33%
35%
36%
37%
37%
38%
38%
42%
43%
47%
48%
51%
Oracle
Akamai
Microsoft
SAP AG
Sybase
Intuit
BMC
Dassault
Mentor Graphics
Mcafee
Adobe
Novell
Taleo Corp
Saba
Red Hat
Autodesk
Citrix
Symantec
RightNow
Success Factors
Salesforce
NetSuite
Pureplay SaaS
SAP Acquired Q4 2011
Oracle Acquired Q4 2011
Oracle Acquired Q1 2012
Attachmate Acquired Q3 2010
Intel Acquired Q1 2011
SAP Acquired Q2 2010
traditional on-premise licensing. However,
as the company grew, the complexity of
managing two very different business and
operating models became a serious burden.
So RightNow “flipped the switch” and
became a cloud-only company.8
According
to David Vap, RightNow’s chief solutions
officer, three operating model issues were
top-of-mind for RightNow’s management
team when they made the switch: sales
strategy and incentives, contracting, and
revenue recognition.
Having a mixed cloud and on-premise
portfolio led to conflicting priorities
for the sales force, and RightNow saw
the recurring revenue provided by SaaS
as allowing for a more effective sales
compensation plan. Vap commented about
having SaaS and on-premise offerings,
“How do you incent a rep to sell both,
and to have an equal incentive to sell
on-premise perpetual versus hosted? It’s
very difficult to construct a comp plan.
Switching to SaaS gave us more power in
the sales cycle. If we sold a deal last week
versus selling it this week the revenue
that accrues to us is that many days over
365 times the deal size. It’s all ratable
revenue. There isn’t as much pressure to do
unnatural things at the end of the quarter.”
In addition to simplifying the sales model,
moving completely to the cloud also
helped to eliminate duplicative contracting
approaches and simplified revenue
recognition for RightNow’s finance teams.
RightNow also found that, without the
internal distraction of maintaining two
operating models, it was able to serve its
customers better and improve the overall
customer experience.
While many companies’ business designs
wouldn’t allow them to make as bold a
move as RightNow did, the challenges that
led RightNow to move entirely to the cloud
are broadly instructive on the challenges
companies face offering their product
through both channels.9
3. Align sales talent
Hire and re-train talent to adapt to the fast
and frequent changes in the sales cycle
(including pre/post sales).
Another significant area of change for
traditional software companies is sales
representative training. On-premise
companies must develop a curriculum and
training rhythm to allow sellers to always
have the most up-to-date information
regarding the SaaS product features,
release cycles, value generated, and
post-sales support.
As SaaS products endure frequent change,
the sales rep needs to stay educated
on the features that are being added
and how the product is changing. Thus,
instead of an on-premise software seller
getting educated once a year on average,
tied to a product refresh cycle of one to
three years, the SaaS sales reps must go
through training multiple times per year
to be able to keep up with faster product
release cycles. The SaaS sales rep must
be able to provide more pre-sales support
to educate customers on the benefit of
migration to the new SaaS offering and
constantly demonstrate agility, scalability
and flexibility of the product.
Oracle has recently added 3,300
salespeople to offer a broad product
portfolio designed to give customers
the choice of SaaS, private cloud and
on-premise versions of its apps. To help
reps succeed in selling the full portfolio,
Oracle is fortifying its sales force by
process and subject area, such as human
capital management (HCM).10
2. Agree on a sales model
Decide whether to leverage the existing
sales model or design a new model for
your SaaS business. Each model has its
own implications that need to be carefully
addressed.
Given that SaaS revenue generation occurs
with each new or renewed seat subscrip-
tion (and not up-front license fees), the
essence of the SaaS sales model is seat
volume and speed. According to Steve
DeMarco, VP of Business Development
at Xactly, “Selling and marketing an
on-demand application is much different
than selling on-premise solutions. The days
of making multi-person, face-to-face sales
calls are over; that approach is just too
inefficient and costly.”7
Instead, Xactly is
constantly looking to creatively market and
sell its products in innovative ways, both
over the phone and by using the Internet.
While these subscription-based characteris-
tics differ considerably from licensed-based
economics, that may, or may not, warrant
running two distinct sales models (one for
traditional on-premise license sales and
one for SaaS). In Accenture’s experience,
the best approach is highly dependent on
the individual organization. Creating two
distinct sales models can be very complex
and expensive to manage. However, if a
single sales model is leveraged for both
offerings, it’s challenging to effectively
compensate the sales force without biasing
them toward selling one offering over the
other (Figure 4).
RightNow Technologies, a provider of
SaaS customer experience software, is a
compelling example of how managing two
conflicting sales models can add complexity
a company’s operations. When founded
in 1997, RightNow offered customer
contact solutions across multiple channels,
generating 15 percent of revenue from
6 | SaaS Sales Transformation POV
7
”The 7 Secrets of SaaS Startup Success - saleforce.com whitepaper”
8
RightNow does maintain a few on-premises installations for government customers that require it, but this represents a very small portion of RightNow’s revenue. 		
RightNow was purchased by Oracle.
9
To read the full case study on RightNow Technologies, see Accenture’s white paper, “Where the Cloud Meets Reality: Scaling to Succeed in New Business Models”.
10
Gallant, John, “Oracle’s Hurd brims with confidence about SaaS, social and cloud”, Network World, July 16, 2012. http://www.networkworld.com/news/2012/071612-
hurd-260928.html
Figure 4. Benefits and Challenges of Sales Model Approach
Description Benefits Challenges
One sales model Scale and expand the on-premise sales
model and sales force to also serve the
SaaS business model
•  Faster to scale and setup
•  Less organizational
complexities
•  Consistency of customer
experience
•  Conflicting sales goals and
incentives for sellers
•  Potential mismatch of sales talent
to the specific needs of the SaaS
business model
Separate sales
models
Design a specific sales model for the
SaaS business that is independent of the
on-premise sales model
•  Direct alignment of sales
goals and incentives
•  Clarity on sales objectives
•  Internal complexity and potential
conflicts
•  Potential impact to customer
experience
•  Additional time and Investment
required to setup the new sales
model
SaaS Sales Transformation POV | 7
Salesforce.com recommends, “When it
comes to motivating your sales teams
with incentives that are not tied to large
deals, the key is coming up with other
metrics for measuring success. In defining
what these metrics should be, look at
those that support your most important
goal: customer loyalty. Examples might
include event participation, recruitment of
reference customers, speed of implemen-
tation, adoption rates, or low rates of
attrition. Once you know what to measure
you can decide what to reward. At that
point, the typical incentives will do the
trick.”12
5. Update sales processes
and tools
Re-design sales processes and supporting
tools to allow for flexibility that is required
by the varying process and sales cycle
(mostly driven by customer’s current state
and desired state) in the SaaS business
model.
The SaaS and on-premise sales processes
share many characteristics. For example,
companies must establish account plans
and manage opportunities through the
sales process in both operating models.
However, in the SaaS model the sales
process and sales cycle can have significant
variability. For a small customer the sales
process could be as quick as an initial sales
call, a proposal, a contract and launch.
But if a large company is moving its first
application to the cloud, the sales process
could be very long. Therefore, companies
must transition from a universal sales
process for all solutions to a differentiated
sales process expecting shorter sales cycles
for SMB customers and longer sales cycles
for large enterprise customers. In creating
new sales operations, efficiency and volume
are critical design objectives.
4. Align sales incentives
Design an incentive model that is based
on subscription revenue, renewals and
customer retention.
As companies build their SaaS sales
model, the structure of the sales incentive
system is a critical consideration. The
incentive system in the SaaS environment
is significantly different than a traditional
annuity-based model. Further complicat-
ing matters, when traditional technology
companies offer SaaS products as well
as on-premise solutions, there are often
conflicting incentives for the sellers who
are accountable for selling both on-premise
and SaaS products. When moving into
SaaS, Accenture has found that traditional
software companies must move from sales
compensation paid on the basis of the unit
price of the product to a seller incentive
compensation model that is designed based
on a subscription revenue model, renewals
and customer retention (similar to Financial
Services or Insurance businesses).
A key basis for Xignite’s sales incentive
model is lifetime value of the deal instead
of unit price of the product (since there is
no unit price). According to Joel York, “In
a subscription business with a recurring
revenue stream, the value of the deal is
not as clear-cut as the price of a software
license. The true value of a subscription
deal is the present value of the future cash
flows, which amounts to summing up all
the recurring revenue over time, taking
into account churn, and discounting it
by your cost of capital. When it comes to
designing our SaaS sales compensation
plan, we can use ANY measure of recurring
revenue (MRR, QRR, ARR) that is propor-
tionate to lifetime deal value. We do not
need to calculate the absolute lifetime
value for the deal, because the commission
percentage will scale up or down as needed
to make sure we payout the target sales
compensation.”11
8 | SaaS Sales Transformation POV
Accenture Seven Design Principles
for SaaS Sales Incentive
Compensation
1.	Incent cloud capture by making the
cloud business a specific part of
incentive compensation
2.	Drive mix of cloud and CPE by using
similar measures and pay mechanics for
CPE
3.	Plan measures that drive contract term,
seat volume and revenue
4.	Design simple, scalable, transparent
commission mechanics (e.g. rate x
volume = pay)
5.	Align pay to commitment and
deployment by having sales credit
triggers that include multiple events
6.	Support sales credit for both company
hosted and partner hosted sales
7.	Protect core business and profitability
through prioritizing opportunities and
measuring overall impact
11
http://chaotic-flow.com/
12
”The 7 Secrets of SaaS Startup Success - saleforce.com whitepaper”
interactions. Cloud Sherpas is among the
largest consultants stressing Apps, and
it claims to have moved over one million
people to Google Apps.13
Overall, these resellers are pursuing a
business that initially looks like traditional
reselling, but in fact works along different
lines. “Moving to the cloud is a whole
different model,” says Michael Cohn,
the founder and senior vice president of
marketing at Cloud Sherpas, “Google is
offering us a recurring revenue stream.”
Mr. Cohn estimates there are about 2,500
independent companies and individuals
involved in the Google Apps ecosystem.14
For companies that have traditionally
sold extensively through indirect channels
there is a risk that all channel partners will
not be equally able to sell the SaaS value
proposition. Until that gap closes, rather
than reaching far and wide with channel
partners, companies may want to consider
being more selective about which partners
they allow to sell their SaaS offerings and
make sure those partners are fully enabled
to succeed.
Bart van der Horst of GigaOm recommends
segmenting and rewarding partners for the
role they play. “Some partners are more
suited to influence (strategy consultants,
for example), while others are more-trusted
advisors because they have a technical
capability like hosting. Technology partners
can trial new solutions on the early-
adopter market. Rewarding partners for
developer activity is another segmentation.
The developer partners can develop stickier,
localized and specialized solutions. These
are key differentiators for the partner as
well as the vendor. Last but not least is to
segment on growth potential.”15
There are numerous approaches available
to optimize the in-direct sales channel
in support of SaaS. But for companies
operating in both the on-premise and
SaaS markets two things are clear: It is a
complex undertaking, and it is critically
important to success.
6. Design a comprehensive
channel strategy
Design an optimized multi-channel
approach that is inclusive of SaaS products
and includes a value proposition for
the partner ecosystem in the new SaaS
business model.
Most technology companies sell product in
both direct and indirect channels making
sales channel management a difficult but
important challenge to solve for SaaS. In
the traditional on-premise software sales
model the reseller takes possession of the
product, resells it, is compensated for the
sale and assumes some accountability for
its success at the customer. In the SaaS
environment, there is no product to change
hands. Therefore, the reseller should not
be accountable for the specific terms and
conditions, security, and risk management
with the customer. In the SaaS world
the provider must accept more risk and
responsibility for such things as service
performance, data privacy and security
versus shifting that risk and responsibility
to partners.
In Accenture’s experience, companies
must redesign their channel strategy from
a comprehensive partner model to an
optimized multi-channel approach that’s
inclusive of SaaS solutions and includes
a value proposition and incentives for the
partner ecosystem regarding these new
solutions. Consider Google for example.
Google heavily leverages resellers for their
SaaS offering distribution. They leverage
partners to sell, implement and support
Google’s products rather than internal-
izing those capabilities. Among these are
Dito, SADA Systems, Appirio and Cloud
Sherpas. Each offers a somewhat different
approach. SADA is reselling both Microsoft
and Google products. Appirio offers Google
along with a broad range of other cloud
services for business, like salesforce.
com. Dito is making much of moving
companies to Google’s Chromebooks, which
are lightweight laptops built for cloud
SaaS Sales Transformation POV | 9
Case Study: Reengineering Sales
Incentives
A leading provider of electronic data
storage solutions adopted a cloud-based
recurring-revenue model. However, this
change revealed serious shortcomings in
the company’s approach to sales coverage
and incentives. Perhaps most telling,
more than 90 people were receiving sales
credit on a typical deal. The company
reengineered its sales incentive program
following an analysis of its coverage
model, sales-credit rules and governance
in the context of key sales engagement
scenarios. Over the course of three years,
incentive spend decreased from 5.5 percent
of revenue to less than 5 percent, while
revenue grew by 60 percent.
Note – above case study taken from
Accenture POV “Boosting the Effectiveness
of Sales Compensation”
13, 14
http://bits.blogs.nytimes.com/2011/11/25/consultants-in-the-cloud/
15
van der Horst, Bart, “How the cloud is disrupting the software distribution channel”, GigaOmPRO, July 11, 2012.
10 | SaaS Sales Transformation POV
7: Recalibrate on customer
experience as an important
responsibility of the sales
force
Update sales process to be inclusive
of the support phase, so the seller is
involved throughout the lifecycle of the
SaaS product and takes accountability for
nurturing the customer for growth.
Maintaining customer trust and
satisfaction is key in retention and renewal
in the SaaS environment given how easily
customers can switch to another provider.
Companies must move from customer
experience as a secondary measure
for business performance to customer
experience being the primary measure for
business performance–unhappy customers
equal lost customers.
In SaaS, customer experience is central
to how support and service are designed.
They are no longer “nice to have” for
driving customer satisfaction. They are
fundamental to driving customer
renewal and loyalty in all segments.
Thus, Accenture recommends that the
sales process be updated to be inclusive
of the support phase, so the sales person
is involved throughout the lifecycle of
the SaaS product and takes responsibility
for nurturing the customer for growth.
Furthermore, a well-defined customer
experience management model is required
to enable SaaS businesses to achieve the
customer satisfaction and retention
they desire.
Joel Book, ExactTarget’s Director of
eMarketing Education, credits his
company’s commitment to customer service
as the major reason for ExactTarget’s
consistently high annual renewal rates. He
describes ExactTarget’s success as hinging
on its ability to serve its customers better
than its competitors. To accomplish this,
ExactTarget invests heavily in its customer
service and support infrastructure, which
includes account managers, customer
Case Study: Sales Transformation
at salesforce.com
One of the distinguishing factors of a SaaS
business from the on-premise model is the
ease with which a customer can choose to
no longer be a customer. That ease signifi-
cantly heightens the pressure on a SaaS
provider to continually satisfy customers.
“We have to earn the customer’s business
again and again,” explained Hilarie
Koplow-McAdams, President, Commercial/
SMB Business Unit at salesforce.com.18
Salesforce.com employs similar sales roles
as most large software companies. It still
must set and retire quotas, design compen-
sation plans and calculate commissions,
and establish account plans and manage
opportunities. However, salesforce.com also
has developed a relentless emphasis on the
success of the customer and has instilled
this customer emphasis in its culture, to
the point that salesforce.com’s service and
support organization is called “Customers
for Life”—a moniker designed to emphasize
the point that salesforce.com’s well-being
hinges on customer retention.
support representatives, implementa-
tion specialists, deliverability consultants,
integration specialists, and strategic
services professionals.16
Steve Singh, CEO of Concur believes so
strongly in the importance of the customer
experience that he says investors should
focus on a SaaS company’s customer
retention rate, not contract lengths.
“I think it is a false sense of security to
look to three to five year contractual
commitments. If customers are dissatis-
fied with your service, they will stop using
it and stop paying the bills. Revenue
recognition becomes simple. Zero.”17
Salesforce.com finds that customer service
and support has taken on a very different
character than what is commonly seen
in the on-premise world. In the latter,
companies spend most of the time
answering technical queries or determining
why the software is failing to perform as
expected. Conversely, in the SaaS model,
with fewer technical issues to sort through,
organizations devote the majority of time
helping customers run their businesses
more efficiently. Customers are expecting
salesforce.com to be prescriptive in
its advice, which has additional talent
acquisition and development implications
for the customer service organization.18
As a final note in the design of the
customer experience, companies must
consider the role of channel partners in
the mix. Often technology companies
rely heavily on channel partners to
provide support to customers. While
this may still be desirable in the SaaS
environment, companies must have a
rigorous performance management process
for support and services partners since an
unhappy customer has few barriers
to switching.
16
”The 7 Secrets of SaaS Startup Success - saleforce.com whitepaper”
17
http://smoothspan.wordpress.com/2007/10/01/interview-concur%E2%80%99s-ceo-steve-singh-speaks-out-on-saason-demand-part-3/
18
Salesforce.com case study, Accenture, 2012
Conclusion
Redesigning the on-premise sales model
for SaaS can be a significant undertaking.
It requires a clear understanding of
the SaaS business requirements, and a
coherent sales model design that considers
sales processes, tools, incentives, channel
strategies, and pre/post-sales support.
Yet, as on-premise firms invest to become
real players in this new SaaS market, the
right sales capabilities are paramount to
success. Leading on-premise companies are
realizing that by effectively aligning sales
processes with the specific characteristics
of the SaaS business model and market
needs. With a clear strategy and transition
path from selling on-premise to SaaS or a
strategy to prioritize one product over the
other (aligned to customer’s needs), these
companies can close and deliver SaaS in a
way that rivals their pure play competition,
meets customer expectations and begins to
build customers for life.
SaaS Sales Transformation POV | 11
Other paper indications and bar
or QR codes align to the bottom
margins and columns.
About Accenture
Accenture is a global management
consulting, technology services and
outsourcing company, with more than
257,000 people serving clients in
more than 120 countries. Combining
unparalleled experience, comprehensive
capabilities across all industries and
business functions, and extensive research
on the world’s most successful companies,
Accenture collaborates with clients to help
them become high-performance businesses
and governments. The company generated
net revenues of US$27.9 billion for the
fiscal year ended Aug. 31, 2012.
Copyright © 2012 Accenture
All rights reserved.
Accenture, its Signature, and
High Performance Delivered
are trademarks of Accenture.
About the Authors
Additional significant contributors to
this report:
Tim Jellison is a Managing Director in
Accenture’s Communications, Media,
and Technology management consulting
practice, focusing on software and other
high tech clients. Tim has more than 20
years of consulting experience, advising
clients on new products and services,
operational processes, and organizational
change. Tim is also Accenture’s global
software industry sector lead. He is based
in San Francisco.
This document is produced by consultants
at Accenture as general guidance. It is
not intended to provide specific advice
on your circumstances. If you require
advice or further details on any matters
referred to, please contact your Accenture
representative.
Sanaz Namdar is an Executive in
Accenture’s Management Consulting,
Customer Relationship Management
practice in the Communications, Media,
and Technology industry segment. She
has over 8 years of experience in design,
development and execution of transfor-
mational sales initiatives helping clients
achieve business results and objectives. She
is based in Seattle, WA.
Todd Wagner is a client service group
managing director for Accenture’s
Management Consulting practice in
the Communications, Media, and
Technology industry segment. He has more
than 20 years of experience in helping
telecommunication and high technology
companies define and implement strategies
to improve marketing, sales, and customer
service performance. He is based in
Minneapolis, MN.

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Accenture from-on-premise-to-the-cloud

  • 1. SaaS Sales Transformation POV From On-Premise to the Cloud: Building the Sales Capabilities for High Performance in Software as a Service
  • 2. 2 | SaaS Sales Transformation POV Executive Summary The rapid rise of cloud computing is enabling a wide array of new business models, including Software as a Service (SaaS)–the business of providing hosted software applications that customers access remotely and pay for on a subscrip- tion basis. Both traditional on-premise software companies and new SaaS pure plays are scrambling to stake their claim in this new frontier. The market for SaaS is certainly promising. According to the Infonetics Market Research Firm, SaaS and cloud-based security services will make up nearly half of the managed security services market by 2015. SaaS revenue will grow dramatically worldwide, with a CAGR of 23 percent from 2010 to 2015. And the overall managed security services market, which includes CPE, SaaS and cloud services, will reach nearly $17 billion by 2015.1 However, building a successful SaaS business is challenging and requires a business model that differs from the traditional software business. Recent Accenture research with senior executives from software, hardware, and technology- enabled companies confirmed that virtually all companies are struggling to deal with the operational complexity caused by anything-as-a-service (XaaS). In fact, in most cases the launch of new XaaS businesses strains a company’s operational ability to deliver and scale, and requires a completely new set of go-to-market strategies and operational processes. As the general manager of a cloud business unit explained to us, “We are going 100 mph and the cliff is 10 miles away. We go ‘kaboom’ in just a few quarters unless we get our operations functioning quickly.” Accenture’s previously published paper “Where the Cloud Meets Reality: Scaling to Succeed in New Business Models” highlights the findings of our XaaS research and offers recommendations for building and scaling the overall cloud operating model. The paper identifies eight distinctive XaaS capabilities (Figure 1) that are critical to building the SaaS business. This paper builds on that foundation by taking a closer look specifically at the sales capabilities—and their interface to service and support capabilities—required for SaaS. As on-premise software companies begin offering SaaS options, there are many dimensions of sales to rethink and redesign, from the sales model and incentives to sales process, tools, channel strategies, and pre/post-sales support. Based on our research and years of client experience, we identified seven recommendations for on-premise software companies as they rethink and redesign their sales capabilities to win in the world of SaaS (Figure 2). Redesigning the on-premise sales model to capture a fair share of the software-as-a-service market can be a significant undertaking. To create the sales engine to successfully serve both offerings, technology companies need a clear understanding of the differing requirements and a coherent design. This report aims to help technology providers address this challenge. 1 http://www.mspnews.com/msp/articles/161659-cloudsaas-market-near-17-billion-2015-according-infonetics.htm
  • 3. SaaS Sales Transformation POV | 3 Figure 1. Critical Capabilities for SaaS Figure 2. SaaS Sales Recommendations Customer Insight Segment your SaaS customers: Leverage analytics and market research to segment customers based on specific SaaS criteria and their readiness and desire for SaaS products Agree on a sales model: Decide whether to leverage the existing sales model or design a new model for your SaaS business-each model has its own implications that needs to be carefully addressed Align sales talent: Hire and re-train talent to adapt to the fast and frequent changes in the sales cycle (including pre/post sales) Align sales incentives: Design an incentive model that is based on subscription revenue, renewals and customer retention Update sales processes and tools: Re-design sales processes and supporting tools to allow for flexibility that is required by the varying process and sales cycle (mostly driven by customer's current state and desired state) in the SaaS business model Design a comprehensive Channel Strategy: Design an optimized multi-channel approach that is inclusive of SaaS products and includes a value proposition for the partner ecosystem in the new SaaS business model Recalibrate on customer experience as an important responsiblity of the sales force: Update sales process to be inclusive of the support phase, so the seller is involved throughout the lifecycle of the SaaS product and takes accountability for nurturing the customer for growth Sales Model & Incentives Sales Process & Tools Partner Strategy Post Sales Support 1. 2. 3. 4. 5. 6. 7. Portfolio Management Product Development Ecosystem Management Customer- Centric Technology Delivery Selling & Channel Management Pricing, Contracting & Billing Financial Management Service and Support Applied Analytics Well-documented capability need Common capability blind spot Innovation opportunity Focus Areas Customer Experience
  • 4. Making Big Bets to Win in SaaS Recognizing that the market for SaaS is promising, traditional software companies are making “big bets”, either by building their own SaaS offerings or by acquiring SaaS companies. SAP, Oracle, and Microsoft are just three of the largest software companies aggressively moving to SaaS— according to Oracle’s President Mark Hurd, time is of the essence. “I hate to say the ships have sailed, but if your ships aren’t in the water halfway across the ocean already, you’re going to have a hard time catching up.”2 While the traditional players are placing their bets to win in SaaS, the new pure SaaS companies are rapidly gaining market share. Salesforce.com posted revenue of $2.27 billion for the full fiscal year 2012, an increase of 37 percent over 2011. Or consider Google.3 In a recent investor call, Google executives noted that the company now has more than 5,000 customers signing up to Google Apps every day.4 The Backupify Blog estimates that Google Apps has 50 million total users and that roughly 30 million of those business users pay for Google Apps, as opposed to using the free version. At that rate, Google Apps is close to the $1 billion revenue mark.5 It’s no wonder that new entrants are showing success against the behemoths of the enterprise software market. The new entrants are building their operating models to be optimized for SaaS, while traditional software companies must make changes to virtually all areas of their existing organization—from R&D and innovation, to sales, billing, customer service, human resources and finance. Furthermore, traditional on-premise companies must balance the growth of their SaaS business against declining demand for traditional software. One area of significant difference between traditional software and SaaS pure play models lies in the cost of sales. In 2011, some of the biggest pure play brands in SaaS—including RightNow, salesforce. com, Success Factors and NetSuite—spent more than 40 percent of their revenue on sales and marketing (Figure 3). In contrast, traditional software behemoths SAP AG, Oracle and Microsoft averaged half that relative spending, hovering around 20 percent. While some of the difference can be attributed to the sales and marketing costs of building and establishing new entrants into the market, there are fundamental differences driven by the SaaS business model. The essence of the SaaS model is volume, speed, and continuous adds and renewals. As a result, scaling up the sales and support to capture more (net new) customers and driving volume is key. This increases the customer acquisition and retention cost of the SaaS model which is required for driving sustainable and profitable growth. Based on our experience working with industry leaders in both on-premise and SaaS models and deeper analysis of their sales and marketing functions, we have observed that go-to-market strategies and sales operations of on-premise companies are ill-equipped to serve both business models effectively. The fundamental characteristics of each business are too different and the existing sales model and sales force will struggle to serve the purpose of both businesses. Unlike a traditional software business driven by upfront licensing, the SaaS subscription model depends on a sales organization that continually nurtures customers and incrementally adds and protects revenue over time through seat licensing. Therefore as traditional on-premise companies expand their way into the SaaS market through acquiring other SaaS companies or building their own SaaS products, they will need to carefully and intentionally adjust their sales model and scale up their initial investment in sales and marketing to be able to drive sustainable growth for the business. Some of the most common questions that many companies are wrestling with as they enter the hybrid business model with on-premise and SaaS products include: • How should I build my target market and segment my customers? • What should my channel strategy be? • How should I build my sales model and sales team? • How should I organize and incent my sales force? • How can I reduce my sales cycle and drive higher volume/close rates? • How can I increase the overall profit- ability of my SaaS offering through lowering cost of sales? Through research and years of client experience, Accenture has identified seven recommendations to help on-premise software companies rethink and redesign their sales capabilities for SaaS. 2 Gallant, John, “Oracle’s Hurd brims with confidence about SaaS, social and cloud”, Network World, July 16, 2012. http://www.networkworld.com/news/2012/071612- hurd-260928.html 3 http://www.sfdcstatic.com/assets/pdf/investors/Q412_Press_release_Final_financials.pdf 4 http://www.crn.com/news/cloud/232600247/google-apps-a-1-billion-business.htm;jsessionid=IDSJ3pxTMj0qE2WwKHLr4Q**.ecappj03 5 http://blog.backupify.com/2012/01/26/who-uses-google-apps-are-large-companies-pushing-it-to-a-billion-dollar-business/ 4 | SaaS Sales Transformation POV
  • 5. 1. Segment your SaaS customers Leverage analytics and market research to segment customers based on their readiness and desire for SaaS product. Most technology companies define their customer segmentation and coverage model by historic license spend and total on-premise product revenue by customer. They also operate a tiered sales coverage model based on customer size and spend, with larger businesses getting more dedicated coverage. However, Accenture has found that because customers are at very different stages of readiness, SaaS sales coverage models are best defined by customer’s readiness and desire for SaaS adoption, which is significantly different for large enterprise vs. small business Figure 3. Sales & Marketing Spend as a % of Revenue 2011 customers. In addition, SaaS providers will have new ways of accessing customer data through customer’s continuous usage stream once they have an initial set of seats. This data can provide valuable insights into customer motives, behaviors and attitudes in making the right nurturing and follow-up decisions for subscriber growth. Another consideration for on-premise software companies entering the SaaS world is the target market itself. While on-premise software companies typically focus on large enterprises to drive substantial software licensing per account, small and medium sized businesses (SMBs) are showing significant interest in SaaS, and the small business market for SaaS is projected to grow significantly in the next several years. For example, salesforce. com’s significant growth initially came from a strategy to focus on startups and small companies. Mark Benioff, Chairman and CEO of salesforce.com recommends, “Segment the market: [There is] huge opportunity in very small companies. Very small companies are progressive in supporting the new technology.”6 Therefore, the coverage model must be focused on each sales rep touching a large volume of customers to drive subscription volume, and replace customers lost through switching. This approach then must be supported by high volume lead generation, telemarketing, and telesales activities. SaaS Sales Transformation POV | 5 6 Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry, Marc Benioff http://www.amazon.com/Behind-Cloud-Salesforce-com-Billion-Dollar-Company/dp/0470521163 18% 20% 20% 22% 22% 29% 29% 30% 32% 32% 33% 35% 36% 37% 37% 38% 38% 42% 43% 47% 48% 51% Oracle Akamai Microsoft SAP AG Sybase Intuit BMC Dassault Mentor Graphics Mcafee Adobe Novell Taleo Corp Saba Red Hat Autodesk Citrix Symantec RightNow Success Factors Salesforce NetSuite Pureplay SaaS SAP Acquired Q4 2011 Oracle Acquired Q4 2011 Oracle Acquired Q1 2012 Attachmate Acquired Q3 2010 Intel Acquired Q1 2011 SAP Acquired Q2 2010
  • 6. traditional on-premise licensing. However, as the company grew, the complexity of managing two very different business and operating models became a serious burden. So RightNow “flipped the switch” and became a cloud-only company.8 According to David Vap, RightNow’s chief solutions officer, three operating model issues were top-of-mind for RightNow’s management team when they made the switch: sales strategy and incentives, contracting, and revenue recognition. Having a mixed cloud and on-premise portfolio led to conflicting priorities for the sales force, and RightNow saw the recurring revenue provided by SaaS as allowing for a more effective sales compensation plan. Vap commented about having SaaS and on-premise offerings, “How do you incent a rep to sell both, and to have an equal incentive to sell on-premise perpetual versus hosted? It’s very difficult to construct a comp plan. Switching to SaaS gave us more power in the sales cycle. If we sold a deal last week versus selling it this week the revenue that accrues to us is that many days over 365 times the deal size. It’s all ratable revenue. There isn’t as much pressure to do unnatural things at the end of the quarter.” In addition to simplifying the sales model, moving completely to the cloud also helped to eliminate duplicative contracting approaches and simplified revenue recognition for RightNow’s finance teams. RightNow also found that, without the internal distraction of maintaining two operating models, it was able to serve its customers better and improve the overall customer experience. While many companies’ business designs wouldn’t allow them to make as bold a move as RightNow did, the challenges that led RightNow to move entirely to the cloud are broadly instructive on the challenges companies face offering their product through both channels.9 3. Align sales talent Hire and re-train talent to adapt to the fast and frequent changes in the sales cycle (including pre/post sales). Another significant area of change for traditional software companies is sales representative training. On-premise companies must develop a curriculum and training rhythm to allow sellers to always have the most up-to-date information regarding the SaaS product features, release cycles, value generated, and post-sales support. As SaaS products endure frequent change, the sales rep needs to stay educated on the features that are being added and how the product is changing. Thus, instead of an on-premise software seller getting educated once a year on average, tied to a product refresh cycle of one to three years, the SaaS sales reps must go through training multiple times per year to be able to keep up with faster product release cycles. The SaaS sales rep must be able to provide more pre-sales support to educate customers on the benefit of migration to the new SaaS offering and constantly demonstrate agility, scalability and flexibility of the product. Oracle has recently added 3,300 salespeople to offer a broad product portfolio designed to give customers the choice of SaaS, private cloud and on-premise versions of its apps. To help reps succeed in selling the full portfolio, Oracle is fortifying its sales force by process and subject area, such as human capital management (HCM).10 2. Agree on a sales model Decide whether to leverage the existing sales model or design a new model for your SaaS business. Each model has its own implications that need to be carefully addressed. Given that SaaS revenue generation occurs with each new or renewed seat subscrip- tion (and not up-front license fees), the essence of the SaaS sales model is seat volume and speed. According to Steve DeMarco, VP of Business Development at Xactly, “Selling and marketing an on-demand application is much different than selling on-premise solutions. The days of making multi-person, face-to-face sales calls are over; that approach is just too inefficient and costly.”7 Instead, Xactly is constantly looking to creatively market and sell its products in innovative ways, both over the phone and by using the Internet. While these subscription-based characteris- tics differ considerably from licensed-based economics, that may, or may not, warrant running two distinct sales models (one for traditional on-premise license sales and one for SaaS). In Accenture’s experience, the best approach is highly dependent on the individual organization. Creating two distinct sales models can be very complex and expensive to manage. However, if a single sales model is leveraged for both offerings, it’s challenging to effectively compensate the sales force without biasing them toward selling one offering over the other (Figure 4). RightNow Technologies, a provider of SaaS customer experience software, is a compelling example of how managing two conflicting sales models can add complexity a company’s operations. When founded in 1997, RightNow offered customer contact solutions across multiple channels, generating 15 percent of revenue from 6 | SaaS Sales Transformation POV 7 ”The 7 Secrets of SaaS Startup Success - saleforce.com whitepaper” 8 RightNow does maintain a few on-premises installations for government customers that require it, but this represents a very small portion of RightNow’s revenue. RightNow was purchased by Oracle. 9 To read the full case study on RightNow Technologies, see Accenture’s white paper, “Where the Cloud Meets Reality: Scaling to Succeed in New Business Models”. 10 Gallant, John, “Oracle’s Hurd brims with confidence about SaaS, social and cloud”, Network World, July 16, 2012. http://www.networkworld.com/news/2012/071612- hurd-260928.html
  • 7. Figure 4. Benefits and Challenges of Sales Model Approach Description Benefits Challenges One sales model Scale and expand the on-premise sales model and sales force to also serve the SaaS business model • Faster to scale and setup • Less organizational complexities • Consistency of customer experience • Conflicting sales goals and incentives for sellers • Potential mismatch of sales talent to the specific needs of the SaaS business model Separate sales models Design a specific sales model for the SaaS business that is independent of the on-premise sales model • Direct alignment of sales goals and incentives • Clarity on sales objectives • Internal complexity and potential conflicts • Potential impact to customer experience • Additional time and Investment required to setup the new sales model SaaS Sales Transformation POV | 7
  • 8. Salesforce.com recommends, “When it comes to motivating your sales teams with incentives that are not tied to large deals, the key is coming up with other metrics for measuring success. In defining what these metrics should be, look at those that support your most important goal: customer loyalty. Examples might include event participation, recruitment of reference customers, speed of implemen- tation, adoption rates, or low rates of attrition. Once you know what to measure you can decide what to reward. At that point, the typical incentives will do the trick.”12 5. Update sales processes and tools Re-design sales processes and supporting tools to allow for flexibility that is required by the varying process and sales cycle (mostly driven by customer’s current state and desired state) in the SaaS business model. The SaaS and on-premise sales processes share many characteristics. For example, companies must establish account plans and manage opportunities through the sales process in both operating models. However, in the SaaS model the sales process and sales cycle can have significant variability. For a small customer the sales process could be as quick as an initial sales call, a proposal, a contract and launch. But if a large company is moving its first application to the cloud, the sales process could be very long. Therefore, companies must transition from a universal sales process for all solutions to a differentiated sales process expecting shorter sales cycles for SMB customers and longer sales cycles for large enterprise customers. In creating new sales operations, efficiency and volume are critical design objectives. 4. Align sales incentives Design an incentive model that is based on subscription revenue, renewals and customer retention. As companies build their SaaS sales model, the structure of the sales incentive system is a critical consideration. The incentive system in the SaaS environment is significantly different than a traditional annuity-based model. Further complicat- ing matters, when traditional technology companies offer SaaS products as well as on-premise solutions, there are often conflicting incentives for the sellers who are accountable for selling both on-premise and SaaS products. When moving into SaaS, Accenture has found that traditional software companies must move from sales compensation paid on the basis of the unit price of the product to a seller incentive compensation model that is designed based on a subscription revenue model, renewals and customer retention (similar to Financial Services or Insurance businesses). A key basis for Xignite’s sales incentive model is lifetime value of the deal instead of unit price of the product (since there is no unit price). According to Joel York, “In a subscription business with a recurring revenue stream, the value of the deal is not as clear-cut as the price of a software license. The true value of a subscription deal is the present value of the future cash flows, which amounts to summing up all the recurring revenue over time, taking into account churn, and discounting it by your cost of capital. When it comes to designing our SaaS sales compensation plan, we can use ANY measure of recurring revenue (MRR, QRR, ARR) that is propor- tionate to lifetime deal value. We do not need to calculate the absolute lifetime value for the deal, because the commission percentage will scale up or down as needed to make sure we payout the target sales compensation.”11 8 | SaaS Sales Transformation POV Accenture Seven Design Principles for SaaS Sales Incentive Compensation 1. Incent cloud capture by making the cloud business a specific part of incentive compensation 2. Drive mix of cloud and CPE by using similar measures and pay mechanics for CPE 3. Plan measures that drive contract term, seat volume and revenue 4. Design simple, scalable, transparent commission mechanics (e.g. rate x volume = pay) 5. Align pay to commitment and deployment by having sales credit triggers that include multiple events 6. Support sales credit for both company hosted and partner hosted sales 7. Protect core business and profitability through prioritizing opportunities and measuring overall impact 11 http://chaotic-flow.com/ 12 ”The 7 Secrets of SaaS Startup Success - saleforce.com whitepaper”
  • 9. interactions. Cloud Sherpas is among the largest consultants stressing Apps, and it claims to have moved over one million people to Google Apps.13 Overall, these resellers are pursuing a business that initially looks like traditional reselling, but in fact works along different lines. “Moving to the cloud is a whole different model,” says Michael Cohn, the founder and senior vice president of marketing at Cloud Sherpas, “Google is offering us a recurring revenue stream.” Mr. Cohn estimates there are about 2,500 independent companies and individuals involved in the Google Apps ecosystem.14 For companies that have traditionally sold extensively through indirect channels there is a risk that all channel partners will not be equally able to sell the SaaS value proposition. Until that gap closes, rather than reaching far and wide with channel partners, companies may want to consider being more selective about which partners they allow to sell their SaaS offerings and make sure those partners are fully enabled to succeed. Bart van der Horst of GigaOm recommends segmenting and rewarding partners for the role they play. “Some partners are more suited to influence (strategy consultants, for example), while others are more-trusted advisors because they have a technical capability like hosting. Technology partners can trial new solutions on the early- adopter market. Rewarding partners for developer activity is another segmentation. The developer partners can develop stickier, localized and specialized solutions. These are key differentiators for the partner as well as the vendor. Last but not least is to segment on growth potential.”15 There are numerous approaches available to optimize the in-direct sales channel in support of SaaS. But for companies operating in both the on-premise and SaaS markets two things are clear: It is a complex undertaking, and it is critically important to success. 6. Design a comprehensive channel strategy Design an optimized multi-channel approach that is inclusive of SaaS products and includes a value proposition for the partner ecosystem in the new SaaS business model. Most technology companies sell product in both direct and indirect channels making sales channel management a difficult but important challenge to solve for SaaS. In the traditional on-premise software sales model the reseller takes possession of the product, resells it, is compensated for the sale and assumes some accountability for its success at the customer. In the SaaS environment, there is no product to change hands. Therefore, the reseller should not be accountable for the specific terms and conditions, security, and risk management with the customer. In the SaaS world the provider must accept more risk and responsibility for such things as service performance, data privacy and security versus shifting that risk and responsibility to partners. In Accenture’s experience, companies must redesign their channel strategy from a comprehensive partner model to an optimized multi-channel approach that’s inclusive of SaaS solutions and includes a value proposition and incentives for the partner ecosystem regarding these new solutions. Consider Google for example. Google heavily leverages resellers for their SaaS offering distribution. They leverage partners to sell, implement and support Google’s products rather than internal- izing those capabilities. Among these are Dito, SADA Systems, Appirio and Cloud Sherpas. Each offers a somewhat different approach. SADA is reselling both Microsoft and Google products. Appirio offers Google along with a broad range of other cloud services for business, like salesforce. com. Dito is making much of moving companies to Google’s Chromebooks, which are lightweight laptops built for cloud SaaS Sales Transformation POV | 9 Case Study: Reengineering Sales Incentives A leading provider of electronic data storage solutions adopted a cloud-based recurring-revenue model. However, this change revealed serious shortcomings in the company’s approach to sales coverage and incentives. Perhaps most telling, more than 90 people were receiving sales credit on a typical deal. The company reengineered its sales incentive program following an analysis of its coverage model, sales-credit rules and governance in the context of key sales engagement scenarios. Over the course of three years, incentive spend decreased from 5.5 percent of revenue to less than 5 percent, while revenue grew by 60 percent. Note – above case study taken from Accenture POV “Boosting the Effectiveness of Sales Compensation” 13, 14 http://bits.blogs.nytimes.com/2011/11/25/consultants-in-the-cloud/ 15 van der Horst, Bart, “How the cloud is disrupting the software distribution channel”, GigaOmPRO, July 11, 2012.
  • 10. 10 | SaaS Sales Transformation POV 7: Recalibrate on customer experience as an important responsibility of the sales force Update sales process to be inclusive of the support phase, so the seller is involved throughout the lifecycle of the SaaS product and takes accountability for nurturing the customer for growth. Maintaining customer trust and satisfaction is key in retention and renewal in the SaaS environment given how easily customers can switch to another provider. Companies must move from customer experience as a secondary measure for business performance to customer experience being the primary measure for business performance–unhappy customers equal lost customers. In SaaS, customer experience is central to how support and service are designed. They are no longer “nice to have” for driving customer satisfaction. They are fundamental to driving customer renewal and loyalty in all segments. Thus, Accenture recommends that the sales process be updated to be inclusive of the support phase, so the sales person is involved throughout the lifecycle of the SaaS product and takes responsibility for nurturing the customer for growth. Furthermore, a well-defined customer experience management model is required to enable SaaS businesses to achieve the customer satisfaction and retention they desire. Joel Book, ExactTarget’s Director of eMarketing Education, credits his company’s commitment to customer service as the major reason for ExactTarget’s consistently high annual renewal rates. He describes ExactTarget’s success as hinging on its ability to serve its customers better than its competitors. To accomplish this, ExactTarget invests heavily in its customer service and support infrastructure, which includes account managers, customer Case Study: Sales Transformation at salesforce.com One of the distinguishing factors of a SaaS business from the on-premise model is the ease with which a customer can choose to no longer be a customer. That ease signifi- cantly heightens the pressure on a SaaS provider to continually satisfy customers. “We have to earn the customer’s business again and again,” explained Hilarie Koplow-McAdams, President, Commercial/ SMB Business Unit at salesforce.com.18 Salesforce.com employs similar sales roles as most large software companies. It still must set and retire quotas, design compen- sation plans and calculate commissions, and establish account plans and manage opportunities. However, salesforce.com also has developed a relentless emphasis on the success of the customer and has instilled this customer emphasis in its culture, to the point that salesforce.com’s service and support organization is called “Customers for Life”—a moniker designed to emphasize the point that salesforce.com’s well-being hinges on customer retention. support representatives, implementa- tion specialists, deliverability consultants, integration specialists, and strategic services professionals.16 Steve Singh, CEO of Concur believes so strongly in the importance of the customer experience that he says investors should focus on a SaaS company’s customer retention rate, not contract lengths. “I think it is a false sense of security to look to three to five year contractual commitments. If customers are dissatis- fied with your service, they will stop using it and stop paying the bills. Revenue recognition becomes simple. Zero.”17 Salesforce.com finds that customer service and support has taken on a very different character than what is commonly seen in the on-premise world. In the latter, companies spend most of the time answering technical queries or determining why the software is failing to perform as expected. Conversely, in the SaaS model, with fewer technical issues to sort through, organizations devote the majority of time helping customers run their businesses more efficiently. Customers are expecting salesforce.com to be prescriptive in its advice, which has additional talent acquisition and development implications for the customer service organization.18 As a final note in the design of the customer experience, companies must consider the role of channel partners in the mix. Often technology companies rely heavily on channel partners to provide support to customers. While this may still be desirable in the SaaS environment, companies must have a rigorous performance management process for support and services partners since an unhappy customer has few barriers to switching. 16 ”The 7 Secrets of SaaS Startup Success - saleforce.com whitepaper” 17 http://smoothspan.wordpress.com/2007/10/01/interview-concur%E2%80%99s-ceo-steve-singh-speaks-out-on-saason-demand-part-3/ 18 Salesforce.com case study, Accenture, 2012
  • 11. Conclusion Redesigning the on-premise sales model for SaaS can be a significant undertaking. It requires a clear understanding of the SaaS business requirements, and a coherent sales model design that considers sales processes, tools, incentives, channel strategies, and pre/post-sales support. Yet, as on-premise firms invest to become real players in this new SaaS market, the right sales capabilities are paramount to success. Leading on-premise companies are realizing that by effectively aligning sales processes with the specific characteristics of the SaaS business model and market needs. With a clear strategy and transition path from selling on-premise to SaaS or a strategy to prioritize one product over the other (aligned to customer’s needs), these companies can close and deliver SaaS in a way that rivals their pure play competition, meets customer expectations and begins to build customers for life. SaaS Sales Transformation POV | 11
  • 12. Other paper indications and bar or QR codes align to the bottom margins and columns. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Copyright © 2012 Accenture All rights reserved. Accenture, its Signature, and High Performance Delivered are trademarks of Accenture. About the Authors Additional significant contributors to this report: Tim Jellison is a Managing Director in Accenture’s Communications, Media, and Technology management consulting practice, focusing on software and other high tech clients. Tim has more than 20 years of consulting experience, advising clients on new products and services, operational processes, and organizational change. Tim is also Accenture’s global software industry sector lead. He is based in San Francisco. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. Sanaz Namdar is an Executive in Accenture’s Management Consulting, Customer Relationship Management practice in the Communications, Media, and Technology industry segment. She has over 8 years of experience in design, development and execution of transfor- mational sales initiatives helping clients achieve business results and objectives. She is based in Seattle, WA. Todd Wagner is a client service group managing director for Accenture’s Management Consulting practice in the Communications, Media, and Technology industry segment. He has more than 20 years of experience in helping telecommunication and high technology companies define and implement strategies to improve marketing, sales, and customer service performance. He is based in Minneapolis, MN.