Selling SaaS Vs On-Prem Solutions in the Channel
The focus of our recent Channel Mechanics webinar “How to Take your SaaS Solutions to Market via the Channel”, was to look at some of the key differences when it comes to selling SaaS vs On-Prem solutions through the channel. As a prelude to the panel discussion, Channel Mechanics VP Sales, John McArdle, debunked some of the myths surrounding the similarities of On-Prem selling vs SaaS sales motions.
As a Channel Advocate with over 30 years’ experience, John McArdle has worked with a number of tech companies that have crossed the divide from On-Prem selling to SaaS sales. And over the course of those journeys, he has come across several myths. Myths he feels must be strongly busted, for a vendor to successfully transition to sell SaaS vs On-Prem solutions.
Two Myths Around Selling SaaS Vs On-Prem
- Selling SaaS solutions is exactly the same as selling On-Prem solutions and
- An On-Prem product offered as a subscription is the same as a “born-in-the cloud” SaaS solution.
To bust these two lingering myths, John identified three key areas where selling SaaS is very different to selling On-prem.
3 Key Differences Between Selling SaaS Vs On-Prem
When it comes to terminology, the language spoken around selling and buying On-Prem is very different to that of SaaS. For an On-Prem sale, John hears buyers and sellers using commercial terminology such as pricing, number of licenses/seats, new license prices, renewals pricing, reinstatement fees, end-user license agreement (EULA), Not for Resale (NFR)/Demo licenses, Capex.
However, for SaaS, the terminology changes entirely. “Instead of pricing, buyers and sellers talk about fees, both annual recurring revenue (ARR), and monthly recurring revenue (MRR)”. John also sees the whole area of commercial contracts switching from just a simple EULA to Cloud Services Term Agreements, Service Level Agreements (SLAs) and Data Processing Agreements. “This change in language terminology brings with it a change in deliverables exchanged during the contract/commercials sales stages. This can really impact the sales lifecycle timeframes with increased buyer teams involved, additional documents exchanged and extended review cycles”.
2. The Buyer Questions.
Secondly, John sees buyers of SaaS solutions asking much different questions during the sales cycle. “Typically for On-Prem it’s a captive (i.e. in-house) solution deployment. Therefore, the buyer is responsible for the infrastructure as well as purchasing the actual software or additional equipment that they want to deploy to fulfil their particular business need. But with SaaS procurement a whole different set of questions and deliverables are involved”.
For example, when you buy an On-Prem product, you are responsible for the integration, configuration, deployment, operations and any future upgrades. So, when new vendor releases become available, when to implement new product features is fully within the buyers control. However, when you purchase a born in the cloud SaaS solution, you may not always have that choice. “With some platforms the buyer can switch new features on and off. But for many SaaS solutions, you may only get visibility of new features included when the new release comes out. This can have implications for your business if you are automatically on the latest release by default when it comes out ”.
In addition, when it comes to selling SaaS solutions in the current business environment, security is paramount for both access and data. “Buyers are asking many more questions around your security credentials for your SaaS offering. Are you SOC2 compliant, ISO 27001 certified? Where is data being held – is it in a GDPR zone for example?”.
3. The Buyers are Different.
When Vendors transition from On-Prem to SaaS sales, John believes the buyers for this new offering, are very different. With SaaS sales, John sees “many more personas involved”. For example, with a typical On-Prem sale, IT have a significant influence on the buying decision and the evaluation selection. In addition, Line of Business, Divisional Managers and Procurement are all involved. But in the world of SaaS, more and more he sees “the Information Security Team, Operations, Finance, Legal and Compliance teams involved. They may have had some involvement with On-Prem sales also, but these personas are definitely more prevalent in the world of SaaS “. Finance will want to understand the Opex and Capex side of any purchase so they can align with their accounting rules and practices.
Whilst the “business functionality” of On-Prem and SaaS solutions offerings may be exactly the same, from a buyers perspective they are NOT the same offering. One is a tangible product (which could become an asset) and the other is a service. Therefore, it is important for SaaS vendors to learn the new terminology around how to sell and position their offerings. In addition, they must know what buyer questions are being asked and by which personas. They must then ensure they inform, educate and enable their Channel Partners sales teams to become successful at selling these SaaS offerings to your mutual target end customers. SaaS selling has become a team sport, because SaaS buyers procure-as-a-team!
Download the full webinar here: “How To Take your SaaS Solutions to Market via the Channel”