Dec 21, 2015
The growing shift toward subscription-based software sales presents both challenges and opportunities for vendors in the customer communications management (CCM) sector—where on-premises licensing has previously been the norm. This blog post explores the impact of CCM as a Service on these vendors.
Software as a service (SaaS) allows end-users to access business-critical applications on demand, and is often complemented by platform as a service (PaaS), in which software libraries enable users to develop their own applications on scalable architecture, or by infrastructure as a service (IaaS), where the computing and data capabilities are rented. Whether they are delivered by public or private cloud networks, managed locally or remotely by the vendor or the customer, the common factor to all these IT provisioning models is that users pay on a subscription basis related to usage, and are offered rapid scalability to suit demand, rather than requiring a large upfront investment in hardware and/or software licenses.
Many software vendors are shifting from a license-based on-premise model to subscription models delivered via the cloud. The different approaches vendors are using include offering individual functionality elements or modules, ‘light’ versions of the conventionally licensed products or complete cloud-based versions.
Vendors Feel the Impact
While the low initial investment and ‘only pay for what you use’ approach embodied in SaaS arrangements appeal to customers, the impacts—both financial and logistical—on vendors are significant. An increased focus on ongoing support will change the nature of the customer relationship, while the removal of large up-front licensing fees when customers sign up (replaced by more regular, but smaller monthly or quarterly subscriptions) will impact cashflow planning.
These shifts in revenue stream will require a new approach with respect to existing licenses and contracts, as well as in terms of funding R&D and sales operations. R&D planning will need to focus more on delivering functionality where pricing pressures have the least effect and on the areas where enterprise customers recognize the vendor’s differentiating value. SaaS competition is most likely to come from products that support business processes common across many enterprises.
Adopting a continuous improvement R&D model will be crucial to keep costs in line with the changed nature of the revenue stream. SaaS supports this approach particularly well and has the added benefit of not burdening R&D with support for multiple platforms and versions. Enterprises are looking to gain more from the software they already have and to avoid further large up-front investments, so vendors will also need to develop their product offerings to support an ‘a la carte’ approach to on-demand functionality and pricing models.
There will need to be increased focus on customer experience and product usability. This will certainly impact R&D, but also marketing, service, and support functions. These functions are becoming key differentiators between competing SaaS offerings. Product functionality should be viewed in the larger context of how the software service helps the enterprise optimize a business process.
Walking the walk
Some CCM vendors have already shifted toward selling subscriptions. For instance, Doxee takes a partner-based approach built around its native cloud platform to manage the entire CCM lifecycle and has been strongly expanding its partner network. HP has recently announced HP Exstream Cloud Production for business services from composition to collaboration, delivery and analysis. Similarly, GMC Software Technology is offering its Inspire Cloud suite as a collection of apps to enable support across customers’ business ecosystems and devices.
Thunderhead is another vendor that has managed the transformation from conventional on-premises licensing to a SaaS supplier via its ONE Engagement Hub, which saw strong growth since it was fully launched in 2014. Inventive Designers has addressed the requirement for unbundling in Scriptura 8.0, and now offers what it calls a ‘smart wallet’ of point solutions that customers can choose from. Usability has also been improved, by adding graphical user interfaces to the underlying set of APIs.
Talking the talk
InfoTrends continues to closely track these CCM market developments via our Customer Engagement Technologies advisory service. As part of our annual primary research, We will further explore the opportunity for CCM as a Service across countries in North America and Western Europe. This first wave of CCM as a Service is only the start of a long-term trend that more closely aligns IT expenditures by enterprises and business value created.
Associate Director, Customer Engagement Technologies Advisory Services
Clients of InfoTrends’ Customer Engagement Technologies advisory service have full access to the research findings cited within this blog post. We will soon be launching our 2016 Annual State of the Customer Engagement Technologies Market Survey, where clients will have an opportunity to weigh in on the questions we ask. For more information on how to gain access to the results, contact Jennifer Skerrett at email@example.com today!
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