Successful Customer Service is Essential to Making Money with Software as a Service (SaaS) Offers

Software as a Service (SaaS) offers are the core of the cloud computing business. If they’re to deliver on their promise of profitability, Independent Software Vendors (ISVs) must implement and maintain successful customer service programs.

Most of the money to be made with SaaS offers occurs over time. Installation charges never accompany the SaaS monthly subscription charge. Neither are customers committed to a minimum SaaS subscription period. So the costs ISVs incur building SaaS offers, and finding customers willing to pay a subscription charge, must be recouped over the term of subscription.

The actual minimum length of a customer subscription required for an ISV to achieve profitability from a SaaS offer also depends on competition in the market. When Google Apps are available to small businesses from Verizon, a major telecommunications provider in the United States, at nearly no cost (we recently noted Verizon providing special offers to small business customers to entirely offset the monthly cost of the Google Apps plan), then Microsoft has to limit the monthly charges across the range of its Office 365 plans. Lower monthly prices for the small business customer make for a longer time to payback for Microsoft.

All of these factors make it critically important for ISVs to keep customers subscribing for at least the minimum subscription term. Successful subscriber retention programs need to complement an attractive set of SaaS features with a level of customer service high enough to satisfy subscriber needs, while protecting the bottom line of the ISV.

It’s surprising to us to note how few ISVs appear to understand this point. Customer service is the only tool ISVs can use to engage with subscribers over time, but either the cost of providing this feature is too high, or management just decides subscribers truly do not require it. Opting to leave out a customer service program from a SaaS offer can be a fatal mistake.

If you operate a SaaS business and have observed a high churn rate across your subscribers, you should carefully review your customer service program. IMB Enterprises, Inc. has a considerable amount of expertise and can help your efforts. Please contact us to learn more.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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