There are five key SaaS delivery related challenges before ISVs today:
1. Product Evolution
The SaaS model is as promising as it is challenging for ISVs. The primary challenge is product evolution. ISVs are not very keen to re-engineer their products because they still contribute to the bottom line. Their clients need to use their core solutions which have been built over years if not decades. To align themselves with evolving customer needs is an uphill task for most ISVs.
They have either multiple products acquired inorganically or products that have been developed by diverse teams. The skills required to re-engineer these products may no longer exist within the company, thus hampering the ISVs’ ability to remain competitive. Typically, an ISV may take anywhere between 18 and 36 months to re-engineer a package. This is an unacceptable time frame in an era where cloud and mobile technologies are changing businesses overnight.
What about the fact that ISVs have bought smaller companies to meet the SaaS demand? Doesn’t this solve the problem? To an extent it does; but each of their products is a different business line. The challenge before them is to integrate these heterogeneous products in an easy-to-consume op-ex model.
2. Customer Retention
Customer retention in a SaaS delivery model is possibly the biggest nightmare before an ISV. Customers don’t want to get locked in by an ISV. They want solutions that make it easy for them to switch products as well as migrate from a provider when necessary. This means an ISV must adhere to standards that enable a quick switch or migration. In such an environment, how can an ISV retain customers? The only way is to demonstrate continuous improvement in the service and to guarantee product and service innovation. For ISVs, long used to selling entire technology stacks with all components and licenses, this is a dramatic change. On one hand they need to ensure that if a customer wants to switch, the cost is extremely low, and on the other, they must continuously add value to the product and force customers to continue with their service.
3. Building Customer Insight
ISVs develop solutions through a wide understanding of industry needs. They don’t have access to individual customer usage patterns and therefore they are unable to build customer insights. This has left them feature-focused rather than business-focused. In a SaaS universe this handicap doesn’t exist: ISVs can track customer usage patterns and make rapid adjustments to their product and service to match customer needs. This means building real-time analytics capabilities. However, analytics may not be their core competency. In such cases, the ISV needs assistance from an SI – in fact, SIs build their business through an understanding of clients’ needs.