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Due to the pandemic, organizations of all sizes have had no choice but to accelerate their digital transformation journey. They urgently need new tools, functions, and services to adapt to the new normal. SaaS vendors and emerging ISVs that can meet these needs are now grabbing market share.

ISVs are developing rapidly, adopting Software as a Service (SaaS) as their core product strategy, and continuously expanding their scale to meet market demand. This requires them to fundamentally change their value chain to smoothly transition to the SaaS model.

The software field has undergone a fundamental change from one-time license pricing to overdue deferred expenditures. 

Therefore, the global SaaS market valued at USD 23.88 billion in 2014 is expected to reach USD 164.29 billion by 2022. With the increasing popularity of SaaS products in the fields of customer relationship management, human resource management, and service management, traditional ISVs need to reshape and transform themselves to develop and deliver software as single-point solutions and services instead of traditional packaged products.

Exponential Innovation 

Let us be clear: even before the pandemic, the software field was a hotbed of innovation. Hyper-vertical software providers have done an excellent job of creating business applications that directly meet business needs, which seemed to be changing so frequently so often. However, as the pandemic’s control over the world has increased, the way people work and collaborate has changed almost overnight. Fortunately, the cloud provides exactly what we have all been talking about: elasticity, on-demand, and easy accessibility.

In fact, according to Gartner’s data, the entire cloud market is expected to grow from US$257.867 billion in 2020 to US$306.948 in 2021, and US$36,4062 in 2022!

In this growth process, due to the continued shift from locally licensed software to subscription-based SaaS, and of course the impact of the pandemic has forced companies to adopt new software collaboration tools in which SaaS remains the largest market segment. In order to keep up with market demand and ensure sustainable growth, SaaS and ISV providers need to do more than just provide a flexible, pay-as-you-go consumption model.

Redesigning the Value Chain of SaaS Companies

Transformation to the next generation of SaaS comes with its own challenges. A few key challenges are: The first challenge is the competition from SaaS companies in the new era. These companies have no legacy products, and are more agile, and respond faster to market demands. Secondly, due to the lack of scale and talents for new custom software product development, the increasing demand for SaaS products poses challenges. In addition, supporting IT systems have not fully adapted to rapid growth. Third, ISVs’ existing technology and IT system equipment are insufficient to extract insights about customer retention. 

To ensure a seamless transition to the SaaS model, companies need to transform their traditional value chain and reposition software product development, business operations, revenue recognition, finance, sales, marketing, product services, and support. The five key steps in the transformation process are:

    • Prepare for ongoing customer relationships, not one-time sales
    • Prepare for changes in revenue recognition and cash flow by adjusting the financial system and overall financial management practices
    • “SaaSify” products and pivot product strategies by hosting products in the cloud, re-architecting SaaS, and building products from scratch
    • Make IT more versatile by changing the IT systems that run the business (including customer management, metering, billing, and revenue recognition)
    • Handling complexity through self-configuration, ongoing support, and customer intelligence to facilitate seamless onboarding

The Need to Adapt to a New Era of Hyper-Customization/Personalization

ISVs and as-a-service companies are facing a set of challenges of their own. Their customers have higher expectations and higher demands. In all industries, users expect software to make their lives easier, do their jobs better, and help them perform daily tasks more effectively. They want these experiences to be effortless and frictionless. Often, ISVs and as-a-service companies can rely on Managed Service Providers to manage their products & enhance customer experience.

SaaS and ISV vendors must be able to meet these expectations and provide simplified, customer-friendly products and experiences. But let’s be honest: the customer experience of many SaaS vendors is still quite disconnected. In addition, providing these experiences while satisfying customers’ desires for new products and updates is not as simple as it seems.

In Conclusion

It is not uncommon to encounter some resistance to the idea of migrating to a newer and better platform. COVID-19 continues to be like a tornado, pushing business transformation into the air—we are no longer in the dark. Suppliers can work hard to keep up with demand for the next five years and operate, just keep it as it is. Or, they can take a closer look at their SDLC and the broader process, and ask where they can optimize.

More and more SaaS applications have created huge growth opportunities for product companies. As companies move to a SaaS model, they need to transform their value chain, which requires changes in their products and IT strategy. The fierce competition in the SaaS market has put tremendous pressure on product companies to launch products using the SaaS support model. The SaaS-based subscription model provides opportunities such as anytime, anywhere availability, shorter implementation cycles, higher agility, and competitiveness. If you too are looking for custom software, kindly reach out to us today to collaborate, co-create, and co-innovate digital solutions for you.

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Nitin Tappe

After successful stint in a corporate role, Nitin is back to what he enjoys most – conceptualizing new software solutions to solve business problems. Nitin is a postgraduate from IIT, Mumbai, India and in his 24 years of career, has played key roles in building a desktop as well as enterprise solutions right from idealization to launch which are adopted by many Fortune 500 companies. As a Founder member of Pratiti Technologies, he is committed to applying his management learning as well as the passion for building new solutions to realize your innovation with certainty.

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