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The Case for the Cloud

SaaS companies are popping up as frequently as banks and mattress stores. While the bank thing is somewhat logical, I can’t quite figure out how so many people are suddenly purchasing mattresses. But I digress. What’s the big deal about SaaS? It’s everything.

Software as a Service (SaaS) has changed how businesses operate and how employees work, which has, in turn, changed how our entire global economy functions. Instead of companies investing millions in on-premise software, hardware and the people required to customize, deploy and maintain it all, they are increasingly pushing these technologies to the cloud.

The cloud was like a giant life raft to many companies, particularly those of the smaller nature who often lacked the capital to invest in hefty on-premise software packages. The barrier to entry virtually disappeared. Companies of all sizes, however, can enjoy the same benefits of the cloud.

  • Less expensive up-front costs
  • Few to no IT resources required
  • No hardware requirements
  • Rapid implementation
  • Instant access to data 24/7/365 from anywhere with internet access
  • Mobile accessibility
  • Real-time data updates
  • No maintenance costs or requirements
  • Automatic upgrades with no downtime
  • Per-user, per-month fees vs hefty licensing fees

The Pitch

The cloud opened up a new frontier for software companies. R&D dollars began to focus on cloud applications to extend this new found functionality to companies. It also changed how value would be delivered to customers and users.

Customers and users may not be one in the same. Customers may be the CIO who makes the decision to purchase any cloud application for any department or team. Users are the individual employees who must find the value in the software to keep using, therefore justify renewing the SaaS contract year after year.

With this in mind, SaaS vendors must constantly prove their worth to both the decision makers and the users. This is a shift in perspective. In the past, vendors only cared about selling licenses. They didn’t care about if or how the software would be used.

In a recent article entitled, “Why The Next Generation of SaaS Will Look Like Facebook,” the author makes an interesting observation when it comes to how SaaS companies have to sell their products.

“Now companies didn’t have to convince someone to buy something. They had to convince them to keep using it.”

The value of SaaS is inextricably linked to how frequently a customer’s user base utilizes the software. The more the software is used, the more likely it is to continue to be used.


The Rub

SaaS vendors and customers must measure utilizationThe SaaS model makes it easier to abandon the software without a financial hit. Every year, the company can assess the value of the SaaS product and determine whether they want to continue paying for its use. Their decision isn’t influenced by the large upfront investment because there was no large upfront investment. They don’t have to concern themselves with whether they got the ROI they expected or not.

There is a giant caveat to all of this freedom, however. It means companies actually have to measure their utilization to know if they are getting any value from the SaaS application. The article mentioned above outlines how Facebook could teach SaaS companies a thing or two about growing their usage:

  • Facebook measures usage so they can optimize it for the existing product
  • Facebook builds new products to drive more usage
  • Facebook integrates with other apps so that even when people aren’t using Facebook, they’re still using Facebook

“You can’t get people to use your product more if you don’t understand how they already use it...the key is to identify what people are doing and want to do with the product.”

This goes both ways. SaaS vendors need to know this information to continually improve and grow their product to encourage increased usage. Companies (their customers and likely YOU) must also gauge utilization to understand if continued investment in the SaaS application is worth it. It’s a symbiotic relationship.


The One Thing: Measure Utilization

Many SaaS applications renew automatically, making it easy for SaaS vendors to retain customers and putting the burden of justification squarely on the shoulders of its customers. Being that most companies use multiple SaaS applications, it’s a good bet that they aren’t exactly paying super close attention to utilization. The contract auto-renews, for good or for bad.

Measuring utilization is critical and it goes way beyond logins. As the article purports, both vendors and user companies need to know if the cloud application is actually being used and how. What is it that employees are doing on the application and is it fulfilling all of their business requirements?

“Driving usage isn’t just about getting people to keep using the product you already have. It also means looking out for new opportunities on the horizon.”

Yes, vendors need user data to understand where they can grow these opportunities. And yes, company users need this data to see where they can extend a current application’s utilization so they get the most out of a single product, therefore a better return on their investment.

While SaaS vendors have their own business drivers and strategies, companies who purchase their subscription apps have theirs. Vendors can continue to deliver valuable products and functionality to their customers. Their customers can help vendors innovate while also ensuring they take control over their SaaS usage.

When companies can fully measure utilization using real-time data, they can make better decisions around which SaaS applications are really needed. The ease of SaaS makes it challenging for IT to control its procurement. Continual measurement ensures governance.


The Warning

“SaaS products are more and more likely to become irrelevant and die. If companies can’t get people to genuinely love using their product, they won’t be able to grow and users will move on.”

Vendors take heed. Users are fickle and you can bet if you’re not innovating, 10 other SaaS vendors just like you surely are. You must measure. Luckily for you, your cloud application gives you instant access to customer data.

User companies will benefit from this continual pressure on SaaS vendors to innovate, but only if they measure utilization. Stop paying for SaaS applications that have lost their luster. You need real-time insight into exactly who is using each cloud application, to what extent and if there are any duplicate applications in your estate.

Require more from your SaaS vendors and those who deliver on your demand will be the ones who will remain standing as they continually deliver functionality worth your investment.

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