Secret To SaaS Success: Recognize That You're Not Selling Software

March 7, 2017

I've been working in the software industry for over 25 years. Pretty much my entire professional career (if you don't count that stint as a night clerk at Red Roof Inn).

Back in the late 1900s, when you sold software, you sold software. What your company produced was a large set of properly aligned bits (software). You then got those bits to your customers somehow (floppy disk, DVD, FTP, whatever). And, then those customers installed those bits on a computer of their choosing and if all went well, they'd get some value out of it. But, that wouldn't always happen. Often, they'd fail to ever install it and get it working. Or fail to learn it. Or fail to use it properly. Basically fail to get the value expected -- or the value promised, or sometimes any value. Ironically, the higher the purchase price was, the lower the chances of seeing success. History is replete with multi-million dollar software purchases that never saw the light of day. As an entrepreneur, this pains me. Most start software companies to make money, they start companies to solve problems.

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Now, fast-forward to today. It's 2017. Many software companies are now Software as a Service (SaaS) companies. What they produce is the same as before: A large set of properly aligned bits (software). Only now, instead of shipping those bits off to the customer somehow, they "host" those bits on the customers behalf and off the benefit of that software as a service.

Makes sense, right?

Now, naive folks that are new to SaaS often make the mistake of thinking they're still selling software. They're not. Because...

SaaS = Success as a Service

If you're in the SaaS business, the only way to survive in the long-term is not to just deliver software. It's to deliver success. You have to actually deliver the benefit that the software is promised to provide. And, if the customer fails to get that benefit then you have failed. Do not pass GO, do not collect $200.

The reason for this new bar is relatively straight-forward. Back in the old days, you got paid for your software upfront and though you wanted your customer to succeed, and maybe even labored to help them succeed, if they didn't succeed, well, such was life and you moved on. Today, if the customer doesn't succeed, they cancel. In a month, in a quarter, in a year -- but eventually, they cancel. And, more likely than not, if they cancel, you've lost money. The math won't work.

So, to survive and thrive in the long-term, you can't sell software, or even access to software, you have to sell -- and deliver -- success.

Let me give you a concrete example and some lessons learned from my company, HubSpot, which provides marketing/sales software. HubSpot is a textbook SaaS company. We're about 10 years old, and we're now public [NYSE:HUBS].

Here's what we invest in (because it works):

1. Onboarding. If you help customers get started with your product, they are more likely to do so. Ideally, your software is so simple and intuitive and easy that customers just get up and running and succeed on their own. But, if you have a relatively broad or sophisticated product, customers will often need help. In those cases, onboarding works.

2. Education. HubSpot has HubSpot Academy, which is a team that helps educate people on inbound marketing. Interestingly, they don't just invest in HubSpot customers, they educate the broader marketing industry.

3. Community. HubSpot hosts inbound.org, an online community built for marketers. It allows them to find the best content (curated by the community itself), discuss topics of interest, post jobs and find jobs. It acts as the premier professional network for marketers. The community has over 200,000 members now.

So, why does HubSpot spend millions of dollars educating and supporting marketers? It's simple. because we've realized that our success depends on the success of our customers.

We've learned and accepted that we're building a "Success as a Service" company.

Topics: saas

Written by Dharmesh Shah

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