CS Expectations in On-Premise
If you Google the words “Customer Success” together with “on-premise”, you’ll get…not much. With Customer Success quickly becoming ubiquitous, the number of Customer Success organizations and roles have taken off at record rates. I’ve seen several presentations in which a nearly vertical graph has depicted the increase of Customer Success roles in recent years. However, if you dig into each of the roles and organizations, you quickly realize that most are focused on pure SaaS solution organizations.
In his book, B4B, JB Wood of TSIA showed that for at least the last 3 years, product (and hence traditional maintenance) revenue has been on the decline, while services revenue has been on the upswing. The reason for this phenomenon is the shift to usage based licensing and increased customer preference for on-demand solutions.
To be sure, keeping on-demand, use-as-you-please, and pay-as-you-go customers happy is a demanding task, and churning those customers takes a bigger hit on revenues than traditional perpetual license/maintenance models.
SaaS vs. On-Premise
However, the shift to pure SaaS models isn’t done and a full transition will take some time. So while SaaS customers are getting a lot of love and attention, what about our on-premise customers? Are they out of luck? I hope not. It is a mistake to think, even for a second, that you should just focus on your SaaS customers and forget the rest. Here’s why.
Most of your customers already have a blend of on-premise and SaaS solutions. They’re seeing a higher level of focus on Customer Success from their SaaS providers and reading the buzz all over the internet. This is going to raise their expectations of what Customer Success looks like from all vendors – SaaS and on-premise. Let them down, and your solution is on that list of items they want to re-evaluate each time the bill to renew arrives. If your solution isn’t a sticky and strategic ERP product, you’ll be re-evaluated out pretty quickly.
Also, chances are very high that while your organization has a large number of customers using your on-premise product, you are simultaneously developing a parallel solution that’s available via a SaaS model. There is also a high probability that you would like to have your existing customers migrate to the SaaS solution when the time is right. They will, if they have a high level of Customer Success as your on-premise customer. Otherwise, you guessed it, time to re-evaluate.
The Case for On-Prem Retention
Your maintenance stream is one of the highest margin revenue streams coming into your company. While your organization may be starting to transition a portion of its business to a SaaS revenue model, the short term revenue impacts of that change will be bumpy for the bottom line. Maintaining very high retention rates with your on-premise customers means a predictable maintenance revenue stream to help balance out any bumps in the SaaS transition
For many companies serving the government, banking or other high security organizations, delivering their solutions via the on-premise licensing model may be the only option your customers will accept (at least for now). While maybe slow to make decisions and change, these are still your customers and deserve your attention.
At the end of the day, only one rule always applies, happy customers buy more. Whether on-premise or SaaS, if you show a positive revenue stream evidenced by use of your product or service, you customer will be open to broaching the topic of further investment. This is where Customer Success Managers can push an upsell or cross-sell agenda.
So how does a Customer Success model work in the on-premise world? I would propose that it shouldn’t differ much from what we’re seeing in the SaaS world with a few modifications you might need to make to ensure you can scale.
The Life Cycle of a On-Premise Customer
In the on-premise world, depending on the size of the account, the sales team would dive in, make the sale, and send off the consulting team to implement the solution. After a successful onboarding, companies wouldn’t touch the customer again until the 90 days before their maintenance contract expires. All of a sudden, the customer matters again! They need to renew, and the deeply transaction focused renewals team comes in to ask for the renewal. If the account is strategic, the sales team was likely engaged with the customer helping resolve some issues along the way in the hopes of selling the next big deal. But most customers can go largely ignored after their sales and implementation cycles are completed.
By now, it should be clear this is simply not enough to retain today’s tech savvy customers. Companies with high numbers of on-premise customers need to adopt more of the Customer Success models being used by their SaaS counterparts. Your organization may not invest as much in protect maintenance revenue as it would subscription revenue, so you may need to run lean. Hopefully, by now I have convinced you that the benefits of Customer Success far outweigh the costs. In my next blog, I’ll talk about some specific ways you can add more punch to your on-premise Customer Success program.
Anna is the VP of Customer Success at Flexera Software. She has over 20 years of experience in the Customer Success and Renewal management space. Her accomplishments have been attained through systematic attention to the most efficient customer engagement and on-boarding models, a focus on customer stratification, building online renewal portals, and creating other operational efficiencies that enable all Customer Success professionals to work easily with their customers. Prior to Flexera, Anna held management roles at Oracle where she spent 10 years building and evolving several renewals teams. When she’s not working in Customer Success, she’s trying to save the world – one animal and tree at a time.