Gone are the days of purchasing software once and using it until you no longer need it or it no longer works. In today’s fast-moving world, software companies focus on growing the customer base and improving recurring revenue, which typically means transitioning to subscription monetization and Software-as-a-Service (SaaS) deployment models.
SaaS is appealing because it enables producers to understand customers throughout their lifecycle, facilitating engagement with customers throughout their software journey and offering the opportunity to expand market share. SaaS also provides insights into customers’ usage patterns and data.
When making the transition from on-premises deployments (in which applications are installed locally) to SaaS, focusing on the customer journey is essential for success. Consider the following six best practices in order to support customers’ needs—and to help meet your revenue goals.
- Create the Right Team to Support Your Customers’ Journey
Retention and renewal rates are important; together they signal how much value your customers receive from your software. Gross retention rates above 90% generally indicate a healthy product and a healthy customer success rate. Yet customer churn is one of the biggest barriers to growing annual recurring revenue, as found in the Revenera Monetization Monitor: Software Usage Analytics 2023 report.
SaaS touches many teams in an organization—meaning that there are many pieces that are important for preventing churn. The success of your transition to SaaS will depend on your organizational structure and responsibilities. Everyone in your organization must understand their roles and goals in supporting customer retention.
Begin by establishing an ideal team. This includes project managers, product owners, the customer success team, the sales team, the IT/data team, and those who head up financial, CRM, and ERP programs. When everyone understands how they can support the transition, the chances of a successful transition and of customer retention improve.
- Centralize Entitlement Management to Support Your Quote-to-Cash Integration
Entitlement management—how the access to software, content, devices and systems is administered—is central to your quote-to-cash (QTC or Q2C) process. It helps communicate fulfillment and revenue recognition data with other systems, as well as usage and renewal data that’s central to driving business success. Capturing accurate dates and maintaining them through your system is crucial to customer success and your renewal process; this usage and renewal data is central to driving business growth.
When your entitlement management talks to your integration framework—such as your Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) system, and licensing system—you can capture centralized data. This centralized approach allows you to answer important questions about who, what, where, when, and how your software is being used. These answers provide crucial information about how to support your customers, grow your software monetization initiatives, and support the transition from on-premises to SaaS.
- Transition with a New Software Release
To support customers through a transition in deployment models, provide a definitive separation between what is on-premises and what is SaaS. Don’t migrate within a software version; instead, do it with a new software release.
Set hard dates for customer support transition; communicate these clearly to your customers. For example, if in three years your on-premises versions will no longer be supported, state it definitively. Additionally, don’t be afraid to maintain those deadlines. If you move them out, you’ll never get to the next step toward your end goal; you’ll also have the additional need to maintain historical versions of your software for a long time.
- Consider the Impact on Renewals
Because SaaS is often monetized through a subscription model, be sure to consider the impact of SaaS on your renewals process. For example, does it make sense to have enterprise agreements or standalone contracts for customers with multiple SaaS packages?
You may have customers who lean more to one approach or the other. Enterprise agreements work very well for customers who prefer to have a single end date per year across their renewals. In contrast, some customers may have multiple standalone SaaS packages, perhaps expiring monthly. In this case the frequent reminders and renewals may create confusion and friction that could negatively impact the overall customer experience – perhaps identifying a valuable opportunity to offer an enterprise agreement. This may require prorations to align renewals to a single date, for example.
- Be Prepared for Pushback from Customers
Change can be difficult. Customers commonly push back on changes. Hard cutovers are particularly challenging for customers. Software companies will do best with the transition from on-premises to SaaS if they put themselves in their customers’ shoes and understand the transition as part of their overall hybrid offerings. What questions are you likely to be asked? Prepare for those questions and establish processes to answer and support those inquiries.
Common issues may include customers negotiating renewal rates or disputing their start dates. A successful QTC process will help support the transition and provide clarity to support customer inquiries.
- If Your Process Isn’t Working, Don’t Be Afraid to Pivot
Last, but absolutely not least: be willing to try new approaches. Adjust operations to ensure that they remain customer-centric. Always communicate with your customers. By working with customers who will provide feedback, you will have access to useful insights that can provide guidance about how to improve your processes to support greater customer retention during the transition to SaaS, and once it has been implemented.
