Tuesday, 22 June 2010

SaaS Hosting - Transparency Critical

A great article at Joel York's SaaS Blog (Chaotic Flow) titled "SaaS Marketing Tips - The Truth Shall Set You Free", explains the critical difference in the sales process between selling traditional software and Software-as-a-Service. This difference is transparency, or lack of it thereof, on behalf of the software company and a sales process difference which can be applied to various as-a-Service companies including SaaS hosting providers.

Traditional software companies teach their sales employees "to avoid disclosing any more information than the minimum necessary to close the deal". Because of the one-time payment structure of those deals, it creates a short-term focus on both the deal and the relationship with your potential client. However, with SaaS services you can "try before they buy" and then, depending on the contract length, walk at any time if the service is not to your liking. This creates a long-term focus, making transparency and trust between the two parties more natural.

As Joel points out, Google AdWords is a great example:
"Ask yourself how much you spend right now on Google AdWords without ever having spoken to a sales rep. How does this compare to your own average selling price for online transactions? Now, ask yourself why. The answer is transparency, from company reputation to cost-per-click."

Whilst Joel's discussion centres on the software industry, It is true for all products that can also be services including SaaS hosting. This is seen with big ticket items like cars and houses as well as everyday purchases like music and books. The larger the purchase and commitment, the more risk involved and the less trusting the two competing parties become. Full transparency becomes the only logical play when dealing with Product-as-a-Service businesses, just as it is the only logical play when dealing with SaaS hosting providers.

Anyone familiar with the prisoner's dilemma (a game similar to a negotiation process) knows when the game is only played once (like purchasing a good such as a car) both parties have the incentive to "defect" or lie (it is the rational strategy). However, when the game is played multiple times for an amount of time unknown to both parties (like a subscription based service) the rational strategy is to "cooperate". This repetition in "games" creates the incentive to take the leap of faith into a cooperative strategy. If one party defects, the other will defect for the remainder of the negotiations and vice versa. With just one defection, there is no trust, and everyone is worse off for the rest of the series of games.

The as-a-Service model is built on this "repetition of games" trust and cooperation; while you might gain in the short term if you hide the truth, in the long term you will have lost a valuable relationship. This dedication to transparency is one of the lesser talked about benefits of not only moving your business to an as-a-Service company but purchasing from these types of SaaS hosting companies.

Many Software As A Service hosting companies see and live this phenomenon every day. When companies understand the value of transparency, they will have a conversation with all of their prospects to try to understand their needs. If the prospects' needs don't match what the SaaS hosting company offers, the company will let them know. There is no point for an as-a-Service company to sell something to a client that they don't need. That is not a win-win deal. The client will soon figure out that they don't need your service and move elsewhere. It creates unproductive work for both parties. This is something that all as-a-service companies should practice.

Consider this: have you seen an as-a-Service company succeed that isn't built on transparency and trust?
Online Tech owns and manages SAS-70 secure and reliable multi-tenant data centers across the Midwest. With a full range of colocation and managed dedicated server offerings for SaaS hosting services, Online Tech reduces IT data center costs, operational risks and downtime and insures their SaaS clients' servers are always on, always online, and always safe.

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