November 3, 2017 | Authored by: Kevin Cancilla
What to consider when transitioning to a SaaS subscription model
According to research from Accenture, digital products will make up 25 percent of the world's entire economy by 2020. Many businesses want in, and some decide to enter by transitioning from selling licenses to monetizing their software as a service. Any change introduces friction for both consumers and investors - especially when said change involves billing and revenue. If you're one of the many businesses that plans to move your product to a SaaS platform, you need to consider how to best reduce disruption and ease apprehension among customers and investors alike.
How people respond to SaaS transitions
The year after Adobe announced it planned to change its Creative Suite product to SaaS, the company's stock plunged 35 percent, according to the Harvard Business Review. It's clear such a major changed worried investors, and customers were just as upset. In 2013, just after the announcement, Wired reported over 5,000 people signed a petition requesting that Adobe continue selling licenses.
Now, however, the situation has reversed. The company's stock has nearly tripled from its lowest point following the announcement, and Creative Suite remains the industry leading creative software.
Based on this success, it's clear that while transitioning to a SaaS platform may be a financial disruption in the short term, it can become a significant benefit if handled correctly.
What to consider when announcing your SaaS transition
Although subscription monetization strategies are the way of the future, your customers and investors won't be swayed by that fact alone. As long as you transition strategically, you reduce friction and can ensure the best long-term outcome.
First, decide whether your SaaS platform will be a completely new product or a conversion of an existing one. It's easier to get customers and investors immediately on board if you're creating something new, but your current products also have a familiarity and level of customer satisfaction that shouldn't be discounted.
Next, consider whether it's best to build your own infrastructure or partner with an external provider. According to the Harvard Business Review, companies that work with external developers saw their stock price increase 2.9 percent when announcing the transition.
Similarly, decide how you will handle subscription billing. Switching to SaaS requires a complete organization of your payment structure, which drains IT resources from your core product and can frustrate customers if the system is buggy. In such cases, it's arguably best to partner with a third-party subscription billing service capable of integrating with various SaaS products. This way, your company can take advantage of existing infrastructure that is flexible and proven to work.
Which billing platform is right for B2C subscriptions?Download