Legacy Software Vendors: It’s Time to Adopt SaaS

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The economic model behind hardware and software procurement is changing dramatically, shifting from physical installations to a more value-based, outcome-driven approach. Rather than purchasing an entire suite of products, customers want to only pay for what they use. They also require more flexibility to create their own customized technology ecosystems. Software-as-a-Service (SaaS) platforms provide new opportunities for software vendors, as there is a greater demand for products that can be used at any time from any location. 

Migrating to the cloud does require significant financial and organizational investments, which is why businesses often postpone modernizing legacy software. However, the circumstances of the COVID-19 pandemic have forced many businesses to look for ways to digitally transform themselves in order to survive. Traditional businesses are also now competing with a wave of cloud-first startups who are free from the constraints of on-premise infrastructure — giving them considerable benefits in terms of being able to adapt and scale at speed.


“In 2020, the average company used 137 unique SaaS apps on average. That is a 30% increase from 2018.” (Blissfully)

 

Benefits of Migrating to the Cloud

(1) Flexible Product Management Strategy

Traditional software vendors gain flexibility by running their products as a service. In a competitive world, this flexibility becomes one of the leading levers for both winning new customers and for growing business with existing users. SaaS also enables software vendors to introduce or eliminate features more rapidly based on customer feedback.

Cloud-native startups are already testing their offerings in production by collecting data about the market and target audience, and then implementing the product updates in accordance with the users’ needs — sorting out what works and what does not. Subscription-based models create more opportunities for teams across an enterprise (Marketing, Sales & Pricing, Customer Support) to have more valuable interactions with end users.

(2) Improved User Experience

The personalized user experience that becomes available with a SaaS model helps products stand out. Moving to the cloud enables software vendors to provide users with a seamless experience across devices, simple service registration, and smart onboarding. An intuitive and minimalistic information architecture when releasing new updates helps users easily navigate through a product’s functionalities. Interactive real-time KPI dashboards are another way to boost user engagement and highlight the application’s value.

(3) IT Cost Optimization

Migrating an offering to the cloud promotes greater scalability and elasticity. Software vendors can scale workloads automatically in response to business growth or fluctuations in traffic. Businesses can more easily manage their IT budgets by spinning up servers and shutting them down on-demand without sacrificing performance. 

This approach enables businesses to reach constant product availability without spending a fortune on infrastructure. For instance, for a small ecommerce startup, it would be a significant and unnecessary expense to purchase enough servers before Black Friday and run them through the whole year. The scalability and flexibility of SaaS delivers cost savings not available with traditional infrastructures.

(4) Reliable Revenue Stream

Modern consumers prefer to have flexible and reasonably-priced software options, so they will often choose a SaaS solution compared to making a large purchase. By adopting a subscription-based model, software vendors will have a predictable and recurring revenue stream. Businesses can grow their profits by increasing their subscriptions or raising the subscription price, as compared to a one-time software purchase.


“61% of organizations plan to optimize the existing use of cloud (cost savings), making it the top initiative for the fifth year in a row.” (Flexera)

 

 

Approaches for Digital Transformation

Moving to a SaaS model is much more involved than just choosing a cloud infrastructure provider; often it requires a complete reinvention of the entire business, including Marketing, Sales, and IT Operations Management. Here are two approaches that traditional businesses can take to safely transition to SaaS:

(1) Create SaaS Twins of Traditional Desktop Products

Instead of restructuring the entire organization, some traditional businesses choose to transition to SaaS incrementally, such as offering a cloud-based version of an already successful legacy solution. This way, traditional businesses can experiment with SaaS through a dedicated team and a limited segment of clients who are willing to “beta test” the new offering.

(2) Create New SaaS Product Line

In other cases, when traditional companies have a brand-new business idea to bring to market, they choose to create a whole new business unit with its own culture and go-to-market strategy. This approach helps avoid many transformational challenges, such as integration with a legacy architecture. Gartner recommends that traditional businesses move new products and customer contracts to the cloud first, and then convert existing customers to keep acquisition costs low. With this approach, businesses may consider building an organization dedicated to SaaS and leveraging off-the-shelf capabilities and services.


 “All new software entrants and 80% of historical vendors are offering subscription-based business models.” (Gartner)

 

 

How to Get Maximum Value from Your SaaS Product

(1) Design for the Cloud

Businesses must look beyond a “lift-and-shift” software approach to redesign their product’s core capabilities in the cloud. Instead, they should review the entire cloud (often multi-cloud) ecosystem and consider how their solution needs to be refactored or rebuilt. Software created through a traditional IT paradigm (i.e., monolithic and static) and with limited capacity (i.e, a few data centers) must be reevaluated in terms of how it can adopt the dynamic features of the cloud, leverage distributed microservices-based architecture, and implement cutting-edge big data and AI technologies.

(2) Focus on User Experience

A good SaaS design not only has to satisfy users’ aesthetic tastes, but also give them access to the product’s most important features quickly and effortlessly across both desktop and mobile devices. Users demand an intuitive navigation system with diversified pagination and clear data visualization. With numerous competitors on the software market, businesses must ensure that their content representation is personalized, eye-catching, and minimalistic at the same time. 

Every newly added feature must bring value to the customers without making application usage more complicated. For subscription-based businesses, retaining users is key, so offering customers easy sign-up and onboarding processes, advanced search options, and helpful support tools can help win in this battle.

(3) Be Agile & Deliver Frequently 

Cloud-based platforms extend Agile’s rapid, cost-effective, iterative development approach to areas where long and expensive development cycles used to dominate. Today, business stakeholders can see a demo of their SaaS product after just a few 2-week sprints. An Agile approach to software delivery aims to add value incrementally. With every iteration, an Agile team will introduce the product’s most important features as quickly as the market demands them — deferring the “nice-to-have” features for future deployments. The credibility of Agile development, combined with the opportunities of a SaaS business model, drives a solution’s success.


“Investors are likely to back SaaS startups as their capital is statistically efficient: 49% of all SaaS funded by VCs and completed an exit, raised less than $10m before their successful exit.” (CB Insights)

 

How GlobalLogic Can Help

The first step to any successful migration to the cloud is assessing your portfolio and organization to identify what needs to be changed — and how to do it. This task can be daunting, which is why it’s advisable to partner with a cloud migration specialist like GlobalLogic to get started.

GlobalLogic’s Cloudwave® offering combines domain experts, our unique methodology, and a purpose built assessment tool to help traditional businesses understand which of their applications they should migrate and which they should retire, which treatments to use, which deliver the greatest business benefit, and which should be prioritized first. This enables them to establish their baseline, identify quick wins, and gain actionable insights into their overall change program at minimal cost. We also provide a detailed cloud transformation roadmap, reference architectures, and best practices to seamlessly migrate to the cloud.

After identifying their cloud readiness from both a product and enterprise perspective, businesses can either choose to continue their digital transformation journey themselves or partner with GlobalLogic to migrate their apps and systems. With a dedicated Cloud Center of Excellence; in-house digital accelerators; and advanced consulting partnerships with AWS, Microsoft, and Google Cloud, we enable our customers to rapidly adopt, scale, and optimize their cloud solutions.


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Anna Kvitka

Senior Analyst, Sales Enablement

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