Product Management Tidbits

Shifting from Product to SaaS - Before you Start!

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I suspect many software product managers have already experienced introducing a SaaS offering to either replace or complement existing solutions. I also suspect that many more are either considering doing so or are currently engulfed in the complex and difficult transition period.

If you are a product manager making the shift, the transition period is probably the toughest career challenge you will face. Unless your company was founded with a SaaS model from the start, adopting a service model suggests you will have to reengineer, retool and retrain the entire company. I think everyone will agree (PMs - please remove your capes for a moment), this mandate goes beyond a product manager's scope of responsibility. As a thought leader and market expert, product managers can map out a strategic path, a go-to-market strategy and a service that delivers great customer value --- but unless the rest of the company is on board and behaving like a service company --- the likelihood of either you or your company succeeding is almost zero. No, it is zero.

The crux of the problem is getting your company's cost structure in-line with the new business model. Armed with influence and a magic wand that seldom works, product managers are not empowered to drive this vision to fruition. So, how can a product manager help?

1. Do your homework. The SaaS buzz continues to grow --- but it's not for every company or solution. Your solution may be too complex, service intensive or your target market may not be homogeneous enough to support the model. If you haven't already, build a business case complete with pro forma financials. Is the grass still greener on the other side?
   
2. Have a discussion with your top executive. Explain the nuances and challenges the new model presents. No need for a deep dive --- focus on ensuring that your total cost of service (TCS) is less than the lifetime value of a customer. Consider a healthy margin and you have the dynamics to drive home your point. Just make sure they don't misunderstand aligning cost with a chainsaw and a deep round of layoffs. This is less about headcount and more about fostering a service orientated culture and providing the systems and skills to support it.
   
3. Point out the risks and opportunity cost of not taking decisive action. Increased time to market, a narrowing market opportunity, and a rapidly decreasing run-way are good examples. Without an acceptable cost structure, a value added service engine and a sales and marketing strategy to match --- you may find that each new customer is actually costing more money than they contribute.
   
4. Provide thought provoking articles, blogs, etc. that address the topic head on. Here is one example:
   
   SaaS Competitive Advantage - SaaS Economics 101 e-Book http://chaotic-flow.com/2009/05/04/saas-competitive-advantage-saas-economics-101-e-book/
   
5. Repeat steps 1-5.

Given the scope of change required and the potentially deep and disruptive impact on the business, it's imperative that your SaaS initiative have absolute support from the corner office.  The vision, leadership and message must come from the top down. It's not enough to control cost alone. You will need the infrastructure and behavior to perpetuate the model. Evidently, tough decisions will have to be made and not everything or everyone will survive.

Finally, if after several attempts to outline the intricacies of the business SaaS model, your actions are being politely dismissed or commitment is wavering --- you have two options. Update your resume and take your game to a company that "gets-it" or stick around and wait to be fired. When the product (service) fails miserably ---- you'll be the scapegoat.