In early May, Waterstone participated in TSIA’s Technology Services World conference in San Diego. As always, the conference provided an excellent opportunity to connect with friends and colleagues, comparing notes and lessons learned for an industry in which change only seems to be accelerating.

This year, the spring conference drew nearly 1,200 people from a wide range of tech companies and segments. Based on the content of the sessions as well as the robust hallway conversations, there was a consistent theme around evolution. Key dynamics such as cloud, subscription models, and shifting customer experiences are forcing companies to evolve across at least five different dimensions:

1. The Challenging Environment Is Driving a Transformation in Offerings

We have a 30-year habit in which, if you lose a customer you change something. In the cloud economy, that is already too late. If we lose one customer we’ve already lost a dozen before we can do anything.
DataLink Representative

Across the board, conference attendees described a challenging environment defined by falling product growth and margins, alongside struggling service organizations. While the adoption of
SaaS business models over the past few years has helped drive growth, it has also made it easier
for customers to drop products that are not adding sufficient value.

A transformation in offerings is underway driven by companies seeking to expand their product and service portfolios to drive adoption and stickiness. Companies described efforts to design new offerings built around usability and ease of adoption. Monetization strategies are being revamped, providing a mix of tiered packages and a la carte structures aligned with how customers use the product.

Despite these pressures, there is strong internal resistance to change. We heard of marketing divisions wanting to “SaaS-ify” existing offerings without the requisite operational changes as well
as sales teams requiring consistency with the traditional pricing structure. Rooted in these experiences, conversation was pragmatic and frequently started with, “How are you going to
take this back home?”

 

2. Focus Has Shifted from Closing the Sale to Adoption

The biggest challenge is actually neglect. If a customer bought a product and they haven’t learned how to use it and it hasn’t become useful for them every day or every week then they have already ‘decided’ to stop paying for it long before you remind them they have 90 days left.
– Infor Representative

With growing competition and lower barriers to churn, a central imperative for SaaS businesses is to ensure customers adopt the products, find them useful, and renew subscriptions. TSIA’s “land, adopt, expand, and renew” framework is driving an evolution within the traditional sales, support, and services teams:

  • Sales team changes: Autodesk was one of several companies that reported on splitting sales into two groups: one focused on landing and expanding with named accounts and the other focused on adoption and renewals across geographic regions. The handoff between the two teams is formalized with a customer-approved adoption plan.
  • Support team changes: Companies as varied as Informatica, HPE, and Red Hat spoke in near-unison about support teams embracing predictive tools, customer communities, and expanding education.
  • Service team changes: Professional services teams are moving into increasingly high-touch services aimed at helping customers succeed in achieving business goals.
  • New groups focused on education: Different from training, education “puts the product’s features and functions into context.” These new content offerings focus on achieving outcomes and on trends in the customers’ business. While most companies we spoke with offered education as a part of higher tier services packages, some reported success as an independent offering.

 

3. Reducing Churn Isn’t Enough

Renewal is an outcome, not an event.
– Autodesk Representative

 

Customers that upgrade won’t leave you.
– Infor Representative

Although adoption of multi-year deals is increasingly widespread, the typical 90-day notification is not sufficient to drive renewals. During the conference, we frequently heard first-hand cautionary tales of high churn in product renewals managed by business units or traditional warranty renewal teams. In addition to a focus on driving product adoption and accompanying high-touch services, companies already making these changes described the critical importance of building out capabilities that differ from the traditional warranties.

  • More complex renewals process. TSIA noted that successful renewal efforts can preserve 90% of prior year revenues, losing 7% to churn and -3% to down-sales. However, the SaaS renewal process involves contracts larger and more complex than faced in traditional maintenance agreements. This complexity calls for a dedicated team, as well as a strengthened hand-off between services, Customer Success, and renewal teams.
  • Complexity creates opportunity for revenue growth. Each renewal event presents an opportunity to deepen a relationship or change a loss leader. TSIA data showed that additional expansion efforts could drive +10% upsell and +15% cross-sell revenues from the prior year, more than offsetting typical declines. At the conference, we spoke to companies building renewal teams around former sales reps and professionals with negotiation experience.
  • Success requires having the right offering structure in place. Each company and speaker had their own approach, but all emphasized the importance of tiered offerings, complementary training and education packages, and/or services credits to offer new value during the renewal process.

 

4. Support Is Being Automated

Customers don’t want their hands held, they just want the issue taken care of.
– Informatica Representative

 Across multiple industries, companies described a transformation in customer expectations of support that prioritizes speed to resolution, even when it creates new demands on customers.

  • More willing to accept self-help and community-driven solutions if the answer can be easily determined and implemented. In some cases, companies described re-designing products to support feature discovery and easier self-help functionality. Development of communities – a powerful tool to reduce support and build enthusiasm – constituted its own track at the conference.
  • More willing to accept automated solutions provided that the answer is fast and clear. Autodesk’s MASE (machine-assisted service engagement) initiative increasingly handles repetitive requests for information and known issues. Informatica’s support team partnered with engineering to introduce predictive escalations and other automated tools that ensured faster time-to-resolution for demanding customers.
  • More likely to expect/demand rapid resolution. New flexibility and opportunities to address customer needs, however, is only possible through the paramount importance on speed to resolution. Throughout the conference, we heard that “customers just want the product to work” – shortfalls in customer expectations can quickly turn into customer churn.

 

5. Focus on Outcomes

Customer Success is when customers achieve their desired outcome through interaction with your company.
– WBD Group Representative

 Facing a high risk of churn and increasing market pressures, conference attendees heavily attended conversations on building the customer’s intended business outcomes into the heart of the customer experience. Across dozens of discussions, three requirements were evident: collaborative goal setting as part of the sales process, ongoing engagement with measurable results, and flexibility that keeps up with the customer requirements.

  • Collaboratively setting business goals that go beyond ROI assertions for the product, but tie directly into the customer’s intended business outcomes. Measurable progress in tool adoption and business goals are defined, and the customer-approved plan is handed off to the support team.
  • Measuring adoption and progress in tandem. Autodesk was particularly forward leaning, selling three years of services and training credits up front and measuring the Customer Success manager on how well these credits are being used. Compensation for these new roles focused on retention and account growth, with the sales team being rewarded for net new sales only.
  • Providing a flexible offering that can be adjusting as needed. Flexibility is at the heart of the SaaS model. While much of the conversation was defensive in nature – market pressures, risk of churn, increasingly demanding customers – most of our conversations came back to the opportunity inherent in the increased flexibility of a SaaS offering.

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About the Authors
TJ Devine

TJ Devine is a former Manager at Waterstone. During his time at Waterstone, TJ advised clients on new offering design and launch, product roadmap development, strategic pricing, behavior-based segmentation, new market entry, and organizational effectiveness. Heworked with leading hardware and software providers, consulting with internal strategy, product management, external marketing, and professional services teams.