With a legacy customer base moving toward Cloud at multiple, differing and volatile paces, traditional ISVs adding to or transitioning into Cloud business models are financially vulnerable. They need to protect and prolong legacy revenues and relationships, while building Cloud-based business fast and solidly enough to compete and grow – typically with very different costs, business models, partner relationships, and more.
Problem is, there haven’t been many (if any) useful models or approaches developed to address this. Until now, that is.
Saugatuck has been working with independent software vendors (ISVs) for most of its history, identifying and analyzing changes in business conditions, technologies, adoption patterns, and ecosystems that affect the ISV business model. The IT business focus remains our core research emphasis. Almost every established ISV that we talk with faces a set of substantial challenges in this vein, i.e.: As we move our own business toward Cloud, how can/should we manage our legacy customers and revenue streams?
To help guide ISVs, Saugatuck has developed a simple management model that includes four strategic tenets and associated activities. This blog post boils down the core tenets as follows:
- Migrate. In our model, “Migrate” means to lead, enable, and support customers as they shift from using and relying on traditional software to Cloud-based software doing the same basic things. Customers are unlikely to simply switch to something new unless they see and understand significant business benefits (e.g., measurable operational improvement, cost reductions).
- Extend. Extensions are typically Cloud-based, LOB-specific functions and features that layer on top of, or fill in gaps within, legacy solutions, systems, and processes. Think of them as stepping stones to ease customers into hybridized Business and IT environments – environments that are emerging anyway, so ISVs should be working with customers to make it happen.
- Move. In some cases, what customers are using today has only a tenuous link to what they actually need to do, and they would benefit greatly from an entirely new solution/process/system. Given that your software is both key to that inefficiency and their ongoing business, why not leverage both? Moving customers to offerings that are more modern, more capable, more flexible, more relevant, and which streamline their operations, reduce their costs and/or otherwise enable growth/improvement, is a perfect approach to retaining and growing revenues and relationships.
- Enhance. Enhancing an ISV offering via OS improvements, UI improvements, APIs (e.g., touch, voice, simplification, mobility, gamification) can stimulate/generate improved use, improved utility, improved satisfaction, improved retention and growth.
Obviously, there’s more, including guidance for ISVs built on our decade-plus of research and experience in their business models and realities.
This blog originally appeared at Saugatuck Lens360.