SaaS, Support, and Owning the Customer Relationship

Since the beginnings of the software industry, Sales has claimed to own the customer relationship. Under the traditional premised-based model, the connection between company and customer is almost invariably transactional in nature, an exchange of up-front money for software licenses. Sales gets their commissions, and has but little interest in the customer afterward. The burden of extracting value from their technology purchase remains entirely on the customer, although software manufacturers have grudgingly been compelled to offer various forms of Break/Fix support. But while the SaaS/Cloud tsunami has swept away most of the traditional need for customer support, SaaS ISV management should think hard before rejoicing. The succeeding waves of change are redefining the product along with the nature of the transaction, opening the door to a new ownership of the customer and the relationship product — and that new owner could well be external to the company.

It Isn’t Over Yet

The accelerating shift to SaaS brings far more than just a new way of selling the same old technological features and functionality. The growing demand for interoperability will result in the plug & play ability to rapidly assemble modules from different manufacturers to create application suites. What is only starting to be recognized is that SaaS applications under this scenario are inevitably headed towards commoditization, where the features of product A are recognizably much the same as those of product B. The prices customers will be willing to pay for those module software licenses will decrease as competition exerts its force, and the remaining barriers to migration, almost eliminated by the removal of the required up-front bulk investment, are necessarily falling fast. The future profit picture for the sellers of software licenses is bleak indeed if code is all they have to offer.

The demise of the old bulk up-front profits-realization strategy took away much of the ability or motivation for a software manufacturer to field large sales forces. When the new strategy calls for the emphasis on sales via the web, where the contact between salesman and customer is minimized and the profit is both relationship-based and spread out over the long term, the old pattern of ownership is lost. Who is accountable now for maintaining that ongoing relationship, and whose performance review is based upon successful retention? In most SaaS companies, the accurate answer is: no one.

Who Will Step Into the Gap?