Over the past 30 years, cost accounting in software companies has always been a troubling issue. In the turmoil of the startup process, finding the “bandwidth” to do accurate collection and assessment of cost data is understandably difficult. Unfortunately, this lack at the beginning has tended to set a pattern that perpetuates itself. How much are we spending to acquire customers? There is no generally established and accepted methodology for determining customer acquisition costs, nor for how often the process should be done. As a result, few companies can accurately say how much it cost them to acquire a given customer. The effect of fuzzy acquisition cost data is compounded by the near-total lack of any authentic methodology or process for measuring actual retention costs. While there is enough revenue data so that successful companies have a view of their profitability, the lack of a solid cost foundation reduces effective decision-making to “guesstimation” when it comes to retention issues.
The profits-realization strategy of traditional software companies tends to obscure the lack of authentic cost data by the large bursts of profit infusions from new sales. The connection between retention and long-term profitability is given much less emphasis. For SaaS companies, however, the importance of customer retention is sharply increased, and the lack of effective cost accounting methodologies and intervals is a serious threat to long-term corporate viability.
There have been some good articles on the variables to consider in calculating customer acquisition costs for SaaS companies, and on the importance of doing so both regularly and by customer. Joel York’s 
For more than 25 years, we’ve been hearing that Service quality is going to be the new competitive advantage, that Customer Centricity is the new industry paradigm, or that Customer Experience is to become the key factor in gaining and keeping customers. But despite all the hoopla and hyperbole, the truth is that little has changed in the technology industry over the years. Companies still race to get products out the door and to capture market share, and Support still gets to deal with the consequences. All along, at the end of the day, it has all been about selling the technology. Take the money and run. However, we’re finally coming to the end of that day, and that market reality. The industry is moving into a new era — call it Software as a Service, and/or ‘Cloud Computing’ — whatever the label, the game is changing, and with it, the old requirement for some begrudged level of Customer Support. What will that mean for you and your company?
It’s time for some answers.
When you take the desktop operating system layer out of the Support equation, and condense all of the myriad instances of application programs and databases into one, and put the result at last where you can monitor it in real time — what happens to the expensive need for Support teams? Do they just go away? Or, freed at last from the treadmill of endless Break/Fix incidents, will there be a new role? And a new profession — this time, about enhanced Profitability?
The beginning point of The SaaS & Support Project was the realization that while the advent and proliferation of the SaaS model over the past few years has been bringing dramatic changes both to the market and to the software vendor organization, the full realization of the impact of the “SaaS tsunami” is yet to come. Sales and Marketing strategies, compensation and deployments have had to be reinvented. It’s a whole new ball game in Engineering. But the most profound changes of all are happening in the area of Customer Support, affecting both the size and the nature of the workforce as well as the tools that will be needed.
The Work Begins
There was a great deal of interest in the Project from the start. Three key professional associations signed on as Sponsors: The Association of Support Professionals (ASP), the 
Software & Information Industry Association (SIIA), and the newly formed TechAmerica.org all encouraged their memberships to participate in the research. 
OpSource provided strong support in helping to promote the project through its 
newsletter and email channels. CodeBaby created a digital character, “Sage,” to explain the purpose and the 
details of the project and to help turn visitors into participants.
"Sage"
The first step in the work was to design a thorough research survey form that would probe and measure what was actually happening in the back rooms of SaaS vendors under the label of “Support.” The survey instrument dealt with four key factors: Strategy, Process, People and Technology.
Strategy: There are eight basic types of revenue conduits inherent in the Software As A Service Model income stream. How many are typically in play in a SaaS vendor? To properly identify hybrid firms, those who offer perpetual software licenses or who are open-source companies as well as SaaS vendors, the selection included these options as well. The survey then asked about the patterns of customer ownership, retention practices and the principal perceived causes of churn.
Process: A Customer Support group is essentially a knowledge inventory operation, with access channels, repository sources and fluctuating levels of demand. The research looked into different types of access channels, operational hours and case/request volume levels, asked about center performance metrics and the impact of self-support or “community support” being experienced by the respondent companies. What role did the vendor’s Channel partners play in Support?
People: Staffing levels were a key aspect of the study. How many reps were involved, and how were they deployed in the organization? What role did outsourced agents play? Who “owned” the Support team, and was it a cost center or authentically run as a profit center? How were staffing levels determined, and what were the key performance metrics used to evaluate line reps and their managers? How long did it take to train a new rep enough to be effective, and what is the typical duration of a support career?
Technology: The Contact Center Technology Suite is at the heart of any Support program, and includes three main groups of tools. The first is Access Channel Management, dealing with the flow of requests/cases into the center through the various conduits. The second key area is the management of the cases and of the knowledge repositories. The last group is concerned with the management of the center as a whole. What tools do SaaS vendors use, and how are they different from what is typical for a traditional software vendor?
The SaaS & Support Project Report 2009
The written Report of the Project’s findings for 2009 has been published, and is available through several channels. For members of The Association of Support Professionals (ASP), the Software & Information Industry Association (SIIA) and/or TechAmerica.org, complimentary copies may be downloaded from the members-only areas of the respective websites of these organizations.
You may also get a copy of the TSSP Report for 2009 by becoming a Member of the ongoing Project, and also receive a copy of the Report for 2010 when it becomes available towards the end of the year. To become a member, click here.
Revised: April 6, 2010