As COVID-19 disrupts economies worldwide, software as a service (SaaS) business leaders are working hard to ensure they weather the storm with grace.
What if it were possible, however, to do more than just survive?
The recession that began in 2008 crippled some businesses and shuttered others. Mass layoffs, closures, and strained credit left a ripple effect that made recovery painfully slow or impossible for many.
Despite these challenges, 14% of public companies actually grew during the last recession. According to SunTrust, this was because they:
- acted early
- took a long-term perspective, and
- focused on growth, not just cost cutting.
How can SaaS businesses learn from these lessons and not just survive, but thrive in the months and years to come?
A wide range of crisis experiences
Retail, travel, mobility, and advertising businesses have been overwhelmingly blindsided by the pandemic. Social distancing has put these industries at a severe disadvantage compared to those with more digital technology literacy and work-from-home capability.
SaaS businesses, for example, are more likely to be thriving. Effective crisis response and safety protocols paired with familiarity with, and openness to, remote work have launched many software providers to the economic forefront. Understandably, software providers in food delivery, video conferencing, video entertainment, and healthcare are particularly busy.
Whether your SaaS business is unbelievably busy or lying in wait for a surge of demand as things re-open, now is the time to position yourself for success in the post-COVID economy. You can follow the lead of the 2008 recession growers by taking the following steps.
1. Engage in scenario planning.
In a recent Technology Service Industry Association (TSIA) webinar on post-crisis success, President and CEO J.B. Wood and Executive Director and Executive VP Thomas Lah detailed the need to plan for multiple possible scenarios in the months and years to come.
For example, Wood and Lah suggest that we may be quickly moving to an era of extreme remote services and very virtual organizations over the long term. Some evidence of this can be seen in the rapid rise of telehealth and remote teams in the last few months. Other trends to watch for are the growing use of artificial intelligence and virtual delivery.
Additionally, and perhaps the trickiest part of scenario planning right now, is figuring out what the timeline to recovery will be. Since we can’t be sure how quickly things will restart, leaders need to plan for multiple possible timelines and multiple possible levels of demand. This will depend on many things, such as government responses to new virus outbreaks and public sentiment around safety.
As a result, leaders should plan for a spectrum of possibilities: from a rapid reopen weeks from now and high demand from cabin-fevered customers, to a cautious and slow reopen spanning a year or more and reluctant customers. Considering all possibilities helps SaaS businesses plan to thrive.
2. Prioritize digital transformation.
The businesses most prepared for the current crisis were ones already engaged in, or at least planning, a digital transformation. For some businesses, in fact, the economic slowdown may provide the perfect opportunity to temporarily close and implement new technologies before reopening.
For others, the slowdown might mean taking time to research solutions or tweak existing solutions to better meet the needs of the ‘new normal’ coming our way.
This bodes well for SaaS solution providers. As new industry segments finally move to cloud-based technology, SaaS businesses may find new markets for their tools. And while our industry is obviously ahead of the game, it’s also important not to become complacent.
The rise of XaaS, or everything-as-a-service, cannot be ignored. Technological developments are now moving at light-speed; it’ll take work to avoid getting left behind.
3. Reassess your sales strategy.
Wood and Lah predict a ‘sales metamorphosis’ is underway. For example, sales cultures that typically involve “wining and dining” customers are already adjusting in the age of social distancing and reduced travel.
And even though distancing and restricted travel won’t last forever, the average consumers’ increased familiarity with digital marketplaces will. This will have lasting repercussions on the way people and companies buy—a pre-existing trend launched into hyper-drive as everyone shops from home.
For years, shoppers have increasingly walked themselves further down sales funnels without personal assistance from sales associates. They conduct their own research via online content and reviews, and test out free trials or freemium pricing on software for themselves. As this trend rapidly increases, Wood and Lah expect to see more architected sales structures involving remote selling and digital technology.
This approach, they predict, will lead to less effort spent on landing big customers. Instead, effort will go into landing plenty of good-fit customers and growing them over time. This will take strong customer success management, or CSM. Already, most SaaS leaders sense a blurring of the lines between sales and CSM today.
This makes choosing the right CSM roles is critical for SaaS businesses moving forward. It also means these CSMs will be expected to drive expansion revenue and have more commercial responsibility.
4. Use data.
At every step of the way on this journey forward, data will be the key to success. It’s the only way to keep up with the rapidly changing digital landscape.
To survive and thrive, take time to identify what indicators will help you understand the state of the crisis at every stage. Track these indicators and use them to inform decision making. Keep in mind that meeting customers’ needs is still central to success, so one goal of data collection and analysis should be to better understand those needs and whether they’re being met.
Keeping an eye on customers through data will also help you make better predictions as we move towards a XaaS economy. Customer data can inform pricing strategies and product development and create long-term customer loyalty that secures revenue for years to come.
Making SaaS business growth possible in a time of crisis
There’s a reason why investors like recurring revenue business models: they tend to weather recessions well.
Traditional businesses charging the full cost of a product up-front lose customers who are trimming spending. Subscription businesses like SaaS, on the other hand, provide more affordable access in the short-term, and have better customer loyalty long-term as recurring revenue fuels product improvements over time.
For this reason, SaaS businesses are already well-positioned to survive the economic impacts of a pandemic landscape and play a central role in digital transformation efforts.
To thrive, however, leaders must plan for success and prepare for the changes ahead.