Moving From On-Premises to SaaS: Product Management Implications

Though many newer organizations are building their products as software as a service (SaaS) from the beginning, a large number of many of our clients’ customers – and a large percentage of their current revenue – relies on on-premises versions of their software. For most of these organizations, a major priority is to migrate their technology – and customers – to the SaaS platform and put more focus and resources toward their SaaS offerings.

Product management fundamentals such as understanding customer needs and following an established innovation and go-to-market process are consistent regardless of the type of offering or the way it’s delivered, but the shift from on-premises to SaaS has some implications for product management. Here are four major considerations for product management leaders managing the transition from on-premises to SaaS:

• SaaS increases the focus on agile development. Though agile development approaches can certainly be adopted for on-premises and installed software, the move to SaaS is frequently parallel with a move to, or increased reliance on, agile. For product management, agile provides the ability to react and adapt more quickly due to customer requests, competitive pressures or newly identified customer needs. However, an emphasis on agile often has unintended consequences – product managers and product owners may focus on the next sprint or release and neglect core product management principles like defining a product strategy and planning the future roadmap, or the emphasis on reacting quickly may result in a lot of incremental improvements rather than major innovation. To obtain the benefits of agile development, product management must implement it in a way that enables product managers to be successful in an agile environment.
• SaaS requires a different approach to launch. In an on-premises world, every new product release typically requires a customer to download and install an upgrade (in some cases, software must still be sent to customers through the mail!). The move to SaaS obviously provides significantly more flexibility for product teams to automatically push out releases and upgrade customers with little to no effort. Combined with the shift to agile development, this usually means product teams want to adopt a more frequent release cadence. However, in many situations, frequent releases may be less beneficial – or even detrimental – to customers and sales teams who can’t keep up with the rapid release cycle. Marketing and customer success teams, in particular, are often not kept up-to-date on release plans, so they are overwhelmed and caught off guard by frequent releases. Launch best practices such as implementing standard launch tiers, following a strategic launch planning process and aligning launches with a campaign calendar become that much more important in a SaaS model.
• SaaS requires changes in pricing and packaging strategy. Though the functionality of an on-premises product may not differ significantly from that of a SaaS version of the product, pricing and packaging will nearly always be different. My colleague Lisa Singer discusses the implications of the move to SaaS for pricing in her blog post “Six Changes Product Managers Must Consider When Pricing a SaaS Product.” However, establishing the appropriate SaaS pricing is only one piece of the puzzle. Organizations that want to transition their existing customers from on-premises to SaaS often pay much more attention to the technical migration of customers to the new platform than the nuances of migrating customers to a new pricing model. If this pricing transition is communicated and managed inappropriately, it will drive customers to seek out and switch to competitors rather than migrate to the new platform.
• SaaS requires a different set of metrics and approach to measurement. All products in the market should have an offering dashboard that consists of a range of metrics used to monitor performance. Metrics such as revenue and win rates apply for all types of products, but the move toward recurring revenue causes some metrics to increase (or decrease) in importance and new ones to be added to the measurement mix. For example, monthly recurring revenue (MRR) or annual recurring revenue (ARR), churned MRR/ARR (%), and percentage of total users that are engaged are key measures of the ongoing health of a SaaS product. Additionally, rather than measure what percentage of customers have upgraded to a new version (because all customers are automatically upgraded to the newest “version” when it’s released), SaaS product dashboards should focus on measures of product usage and engagement – metrics that were often not possible with on-premises software that was installed on site and behind a firewall.

Product management leaders need to be mindful of other considerations when migrating to SaaS, and this switch certainly has implications for marketing and sales as well. Learn more about how to manage change in an on-premises and SaaS world.