Competing in the Next SaaS Wave

© 2013 Amity

Customer Success: Competing in the Next SaaS Wave

An analysis of the Pacific Crest 2013 SaaS Survey

Executive Summary

What the Survey Tells Us

The Next Wave: From Enterprise SaaS to Personal SaaS

© 2013 Amity

Executive Summary

There is a move towards lower-cost acquisition channels, which leads to:

• smaller deal sizes;• shorter billing periods; and,• significant increases in churn.

Trial-based selling is becoming standard.

Customer cash flow is at increasing risk.

High growth companies are more effective at renewals and upselling.

A new wave is hitting the SaaS industry, and …

What the 2013 Survey Told Us

Customer Success is now the key to long-term growth and profitability.

© 2013 Amity

Pacific Crest, along with David Skok of Matrix Partners, has conducted an annual survey of private SaaS companies since 2010. Pacific Crest is an investment banking firm with a strong focus on SaaS.David Skok is a highly respected authority in the SaaS industry.

What the Survey Tells Us

The key takeaways about:1. Customer Acquisition2. New Customers vs Customer Base3. Churn

Links to Paul’s in-depth analysis, as well as the original survey, are

available on the last slide.

© 2013 Amity

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Field Sales Inside Sales In ternet Sales Channel Sales Mixed

Primary Mode of Distribution(1)

201

2 G

row

th R

ate

44%

26%

90%

80%

50%

Use of Low Cost Acquisition Channel is Accelerating

The SaaS Industry’s growth is accelerating.

Driven by broad adoption of the cloud, and mobile.

41% median growth last year, 47% expected this year.

90% 2012 growth rate was experienced by companies who mainly use internet distribution.

‘Land and expand’ and organic growth gaining momentum.

Use of low cost acquisition is expanding across deal sizes.Model is splitting into high- and low-cost strategies.

Trials generate one third of all new ACV.1/4 to 2/3 of respondents use trials of some sort.

Average Deal Size is getting much smaller.SMB and VSB fastest growing segments.

2011 Median: $37.5K2012 Median: $24K2013 Median: $20K

© 2013 Amity

40%

35%

30%

25%

20%

15%

10%

5%

0%Less than$2MM

$2MM-$5MM

$5MM-$10MM

$10MM-$15MM

$15MM-$25MM

$25MM-$40MM

$40MM-$60MM

2012 GAAP Revenue

= Bottom 50% Growers= Top 50% Growers

% N

ew A

CV

fro

m U

pse

lls

Greater than

$60MM

6%5%

10%

13%15%

25% 25%

10%

15%18%

15% 15%

30%

35% 35% 35%

Upsell to Existing Customer

$1.00

$0.90

$0.80

$0.70

$0.60

$0.50

$0.40

$0.30

$0.20

$0.10

$0.00New ACV

fromNew

Customer

Renewals

$0.92

$0.17 $0.14

Leveraging the Existing Customer Base

Renewal commission is now standard practice: 50% paid in 2012, increased to 76% in 2013.

Highest growth companies rely on upsells.

ROI: 109% 588% 714%

Renewal/upsell is highly profitable: Acquiring new customers

is expensive.

On average, companies are realizing 20% of new ACV from upsells.

The fastest-growing companies report significantly higher % than the slower growers.

© 2013 Amity

Other, 17.5%

Seats, 37.7%

Usage or transactions,

28.1%

Sites, 7.9%

Database size, 3.5%

Total Employees, 5.3%

Revenue Churn has Almost Doubled

Customer cash flow is at increased risk:

Billing period has dropped from one year in 2012 to 3 months in 2013.

Consistent with lower-cost acquisition and smaller deal size.

2/3 of revenue is consumption-based.

>20%

15-20%

10-15%

5-10%

<5%

0 5 10 15 20 25 30

11

7

11

11

26

2011 Median: 5%2012 Median: 5%2013 Median: 9%

© 2013 Amity

Implications for Customer Success

Successful companies are cultivating their existing customer base.

Trial-based acquisition and organic growth requires a Customer Success approach, not traditional Sales.

Managing churn is a critical success factor for today’s SaaS company.

SaaS companies are differentiating on their ability to provide personalized service.

In fact, the whole SaaS industry is evolving from an enterprise focus to a personal focus . . .

Customer Success is now the key to long-term growth and profitability.

© 2013 Amity

The Next SaaS Wave: Enterprise SaaS to Personal SaaS

© 2013 Amity

High CAC methods:Outbound

Field salesHigh touch

Forklift model

Invisible,disempowered

users

Buyer-focused

SaaS 1.0: Enterprise SaaSSaaS delivery, product model

Contract

Product-focused SaaS businesses use front office automation to manage customer acquisition.

Seat-based pricing

Heavy adoptionof traditional

CRM

Management platforms

Large contracts,long billing cycles

Competition:SaaS vs

on-premise apps

Highswitching

costs

Value based on cost savings

© 2013 Amity

SaaS 2.0: Personal SaaSSaaS delivery, service model

USE

Higher churn

Moving into VSB & professional

Commission on growth

Buyer & user focused

Lower CAC methods:Inbound

marketingInside sales

Lower touch

Smaller contracts, shorter billing

cycles

Digitalengagement

platform

SaaS-native value proposition

Visible, engaged users

Self-service, trials, freemium

DISCOVER

Consumption pricing

Competition: SaaS vs.

SaaS

Lowerswitching costs Bottom-up

organic growth

TraditionalCRM

inadequate

Land & Expand/Team-by-team

adoption

Themodel has evolved.

Personal SaaS leverages theentire customer journey.

© 2013 Amity

The Seven Cornerstones of the New SaaS Business Model

2. Business Strategy

1. Economic Drivers

3. Value Proposition

4. Customer Acquisition

5. Customer Relationship

6. Customer Development

7. Business Application Stack

© 2013 Amity

1. Economic Drivers

SaaS 1.0: Enterprise SaaS 2.0: Personal

Web adoption Consumerization of IT

Lower CapEx Affordable experimentation, bottom-up growth

Ease of use Collaboration

Customer-vendor alignment User-vendor alignment

24/7 availability Multiple device access

Empowered users.

2. Business Strategy1. Economic Drivers

3. Value Proposition4. Customer Acquisition

5. Customer Relationship6. Customer Development


© 2013 Amity



Management platforms Execution platforms

Enterprise Departmental, team and individuals

Quarterly product cycle Continuous product cycle

Field sales/professional services

Self service

New logo acquisition Leverage customer base

Land, expand and organic growth.





© 2013 Amity



CapEx vs. OpEx Accept credit cards

Lower TCO Pay as you go

Configuration, not customization

Self serve

Compliance Collaboration

System of record System of engagement

Collaborate and engage.





© 2013 Amity



High touch field sales Low touch inside sales and self-service trials

Outbound Inbound

Pilots Free trials

Involve professional services

Community and content

Complex contracts Cookie cutter terms of service

Easy to try, easy to buy.





© 2013 Amity



Cost center Build relationship equity

Call center Employee to person, customer advocates

Break/fix Personal service

Cost reduction Outcome-driven

High complexity, involve IT Low complexity, avoid IT

Low complexity, high engagement.





© 2013 Amity



Renewal cycle Continuous

Procurement Operating champion

Account management Customer success

Negotiated upgrades Organic upgrades

Depend on lock-in Continuously demonstrate value

Continuous and organic.





© 2013 Amity



Departmental silos Cross-department layers

Custom integration REST API

Business intelligence Customer intelligence

Product separate from business systems

Product is the business system platform

Managed by IT Managed by operating department and team

Product and business alignment.





© 2013 Amity

The 7 Cornerstones of SaaS 2.0Personal, accessible, engaged, organic.


1. Economic Drivers






Empowered users

Land, expand and organic growth

Collaborate and engage

Easy to try, easy to buy

Low complexity, high engagement

Continuous and organic

Product and business alignment

© 2013 Amity

1. Generate Product Qualified Leads:Lower barriers to evaluation and adoption.

2. Use Inbound Marketing and Inside Sales:Focus on lower cost customer acquisition methods.

3. Align Product and Business: Horizontal layers over Departmental silos.

4. Focus on Personal Customer Success:High-engagement, personal service builds trust.

5. Scale Customer Engagement:Enable employee-to-people engagement throughout the customer journey.

Easy to try, easy to buy, easy to engage.Competing in the Next SaaS Wave

helps SaaS companies keep and grow their customers by:

Removing time-wasting complexity from the customer success process, andEnabling customer-facing teams to spend more time engaging customers.

Customer Success. Simplified.

© 2013 Amity

provides the only scalable customer engagement platform purpose-built for SaaS.

www.getamity.com@getamity

http://www.getamity.com/

For more information contact:Paul Philp, Founder & CEO

[email protected]

Thank You!

Download the Pacific Crest Survey

Send email

View Paul’s Detailed Analysis

http://www.pacificcrest-news.com/saas/

http://www.pacificcrest-news.com/saas/

mailto:[email protected]

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Competing in the Next SaaS Wave

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