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Accenture from-on-premise-to-the-cloud

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  • 1. SaaS Sales Transformation POV From On-Premise to the Cloud: Building the Sales Capabilities for High Performance in Software as a Service

2. 2 | SaaS Sales Transformation POV Executive Summary The rapid rise of cloud computing is enabling a wide array of new business models, including Software as a Service (SaaS)the business of providing hosted software applications that customers access remotely and pay for on a subscrip- tion basis. Both traditional on-premise software companies and new SaaS pure plays are scrambling to stake their claim in this new frontier. The market for SaaS is certainly promising. According to the Infonetics Market Research Firm, SaaS and cloud-based security services will make up nearly half of the managed security services market by 2015. SaaS revenue will grow dramatically worldwide, with a CAGR of 23 percent from 2010 to 2015. And the overall managed security services market, which includes CPE, SaaS and cloud services, will reach nearly $17 billion by 2015.1 However, building a successful SaaS business is challenging and requires a business model that differs from the traditional software business. Recent Accenture research with senior executives from software, hardware, and technology- enabled companies confirmed that virtually all companies are struggling to deal with the operational complexity caused by anything-as-a-service (XaaS). In fact, in most cases the launch of new XaaS businesses strains a companys operational ability to deliver and scale, and requires a completely new set of go-to-market strategies and operational processes. As the general manager of a cloud business unit explained to us, We are going 100 mph and the cliff is 10 miles away. We go kaboom in just a few quarters unless we get our operations functioning quickly. Accentures previously published paper Where the Cloud Meets Reality: Scaling to Succeed in New Business Models highlights the findings of our XaaS research and offers recommendations for building and scaling the overall cloud operating model. The paper identifies eight distinctive XaaS capabilities (Figure 1) that are critical to building the SaaS business. This paper builds on that foundation by taking a closer look specifically at the sales capabilitiesand their interface to service and support capabilitiesrequired for SaaS. As on-premise software companies begin offering SaaS options, there are many dimensions of sales to rethink and redesign, from the sales model and incentives to sales process, tools, channel strategies, and pre/post-sales support. Based on our research and years of client experience, we identified seven recommendations for on-premise software companies as they rethink and redesign their sales capabilities to win in the world of SaaS (Figure 2). Redesigning the on-premise sales model to capture a fair share of the software-as-a-service market can be a significant undertaking. To create the sales engine to successfully serve both offerings, technology companies need a clear understanding of the differing requirements and a coherent design. This report aims to help technology providers address this challenge. 1 http://www.mspnews.com/msp/articles/161659-cloudsaas-market-near-17-billion-2015-according-infonetics.htm 3. SaaS Sales Transformation POV | 3 Figure 1. Critical Capabilities for SaaS Figure 2. SaaS Sales Recommendations Customer Insight Segment your SaaS customers: Leverage analytics and market research to segment customers based on specific SaaS criteria and their readiness and desire for SaaS products Agree on a sales model: Decide whether to leverage the existing sales model or design a new model for your SaaS business-each model has its own implications that needs to be carefully addressed Align sales talent: Hire and re-train talent to adapt to the fast and frequent changes in the sales cycle (including pre/post sales) Align sales incentives: Design an incentive model that is based on subscription revenue, renewals and customer retention Update sales processes and tools: Re-design sales processes and supporting tools to allow for flexibility that is required by the varying process and sales cycle (mostly driven by customer's current state and desired state) in the SaaS business model Design a comprehensive Channel Strategy: Design an optimized multi-channel approach that is inclusive of SaaS products and includes a value proposition for the partner ecosystem in the new SaaS business model Recalibrate on customer experience as an important responsiblity of the sales force: Update sales process to be inclusive of the support phase, so the seller is involved throughout the lifecycle of the SaaS product and takes accountability for nurturing the customer for growth Sales Model & Incentives Sales Process & Tools Partner Strategy Post Sales Support 1. 2. 3. 4. 5. 6. 7. Portfolio Management Product Development Ecosystem Management Customer- Centric Technology Delivery Selling & Channel Management Pricing, Contracting & Billing Financial Management Service and Support Applied Analytics Well-documented capability need Common capability blind spot Innovation opportunity Focus Areas Customer Experience 4. Making Big Bets to Win in SaaS Recognizing that the market for SaaS is promising, traditional software companies are making big bets, either by building their own SaaS offerings or by acquiring SaaS companies. SAP, Oracle, and Microsoft are just three of the largest software companies aggressively moving to SaaS according to Oracles President Mark Hurd, time is of the essence. I hate to say the ships have sailed, but if your ships arent in the water halfway across the ocean already, youre going to have a hard time catching up.2 While the traditional players are placing their bets to win in SaaS, the new pure SaaS companies are rapidly gaining market share. Salesforce.com posted revenue of $2.27 billion for the full fiscal year 2012, an increase of 37 percent over 2011. Or consider Google.3 In a recent investor call, Google executives noted that the company now has more than 5,000 customers signing up to Google Apps every day.4 The Backupify Blog estimates that Google Apps has 50 million total users and that roughly 30 million of those business users pay for Google Apps, as opposed to using the free version. At that rate, Google Apps is close to the $1 billion revenue mark.5 Its no wonder that new entrants are showing success against the behemoths of the enterprise software market. The new entrants are building their operating models to be optimized for SaaS, while traditional software companies must make changes to virtually all areas of their existing organizationfrom R&D and innovation, to sales, billing, customer service, human resources and finance. Furthermore, traditional on-premise companies must balance the growth of their SaaS business against declining demand for traditional software. One area of significant difference between traditional software and SaaS pure play models lies in the cost of sales. In 2011, some of the biggest pure play brands in SaaSincluding RightNow, salesforce. com, Success Factors and NetSuitespent more than 40 percent of their revenue on sales and marketing (Figure 3). In contrast, traditional software behemoths SAP AG, Oracle and Microsoft averaged half that relative spending, hovering around 20 percent. While some of the difference can be attributed to the sales and marketing costs of building and establishing new entrants into the market, there are fundamental differences driven by the SaaS business model. The essence of the SaaS model is volume, speed, and continuous adds and renewals. As a result, scaling up the sales and support to capture more (net new) customers and driving volume is key. This increases the customer acquisition and retention cost of the SaaS model which is required for driving sustainable and profitable growth. Based on our experience working with industry leaders in both on-premise and SaaS models and deeper analysis of their sales and marketing functions, we have observed that go-to-market strategies and sales operations of on-premise companies are ill-equipped to serve both business models effectively. The fundamental characteristics of each business are too different and the existing sales model and sales force will struggle to serve the purpose of both businesses. Unlike a traditional software business driven by upfront licensing, the SaaS subscription model depends on a sales organization that continually nurtures customers and incrementally adds and protects revenue over time through seat licensing. Therefore as traditional on-premise companies expand their way into the SaaS market through acquiring other SaaS companies or building their own SaaS products, they will need to carefully and intentionally adjust their sales model and scale up their initial investment in sales and marketing to be able to drive sustainable growth for the business. Some of the most common questions that many companies are wrestling with as they enter the hybrid business model with on-premise and SaaS products include: How should I build my target market and segment my customers? What should my channel strategy be? How should I build my sales model and sales team? How should I organize and incent my sales force? How can I reduce my sales cycle and drive higher volume/close rates? How can I increase the overall profit- ability of my SaaS offering through lowering cost of sales? Through research and years of client experience, Accenture has identified seven recommendations to help on-premise software companies rethink and redesign their sales capabilities for SaaS. 2 Gallant, John, Oracles Hurd brims with confidence about SaaS, social and cloud, Network World, July 16, 2012. http://www.networkworld.com/news/2012/071612- hurd-260928.html 3 http://www.sfdcstatic.com/assets/pdf/investors/Q412_Press_release_Final_financials.pdf 4

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