Top 3 Reasons its Hard to Sell SAAS

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| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Top 3 Reasons its Hard to Sell SAAS

Software-as-a-service (SAAS) is the new buzz in 2009. hit a $1B in sales so its the poster child. Google is the other golden child of SAAS pushing is Apps and Gmail to businesses. For me, even hosted email is SAAS.

I am a referral agent for IKANO who is a Google Apps aggregator. , I am having trouble selling service providers on moving to Gmail and Apps. The overall ROI certainly makes the migration appealing, when you take into account Postini anti-spam licensing, server lease, power consumption, collocation space, email server licensing costs, maintenance and support. Seems like the ROI would make it a slamdunk but it is not.

Top 3 Reasons its hard to sell Google Apps:
  1. FOG
  2. Control
  3. Change
FOG is fear of Google. For ISP's, Google is a competitor. Not really, but techies seem to find bogeymen behind every door. Which leads to reason two: Control. Techies have to be able to see the box (server). I call it humping the box. But the service providers have to have total control over the server or they can't sleep at night. Afterall, they are techies, who can run a server better than them? However, if you want to make the transition from techie to businessman, you make decisions based on what is best long-term.  Hey, Nuvox moved to Google Apps - and uses it to get appointments by telling every prospect: "We are partnered with Google. Can we meet to talk about that?" Appointments up 25%.

And finally the change thing. No likes change, especially when we have so much going on around us. It's the same reason that businesses are taking so long in the sales cycle - fear of change. But making No Decision is still making a decision.

You will hear other objections like:
  • I just bought the server
  • I just upgraded to version and paid for it.
  • I just re-cast my Postini contract
The servers can be re-used for something else. The sunk cost on the software can probably be re-claimed by the move to Outsourcing.

Today, I was talking to a salesperson for Hosted Exchange. We agreed that there are big obstacles to people buying into hosted email - whether Exchange or Gmail.
  1. Change
  2. Headcount
  3. ROI

Again the fear of change is number 1. No one wants to make a decision for it to turn out wrong. No one wants to make a decision because CYA right now may mean you keep your job. But in some cases, making the decision could save your company because SAAS is a cost saver in many cases.

This leads us to Head count. An IT manager isn't going to move to SAAS right now because he will lose the budget justification for his head count (number of employees in his department). Maybe Tech One-Twenty spends only half a day each day on email issues. If you outsource it, what do you do with Tech One-Twenty? He can start working on priority projects or long term initiatives (if he has the skill). Likely, he will need to be let go - and someone has to pick up his half-day of work. Dilemma.

Finally, there is the ROI (return on investment). In some cases, there may not be a return enough to make the move. Even calculating the total cost of ownership (TCO) may not be enough if there is an IT staff.  But if the business doesn't have an IT staff, then moving to SAAS should be a no-brainer.

So how do you sell 40M paid mailboxes on Zimbra? One small business at a time. SOHO and every business with 50 employees or less. Or businesses with old servers or software (like Exchange 2003).

We did discuss that the customer acquisition cost is large. If the sales cycle is 6 or 7 months, a sales person is spending about 4 hours or so on contacting the client to get to the close. then maybe another 3 hours to demo, propose, paperwork, and survey. Provisioning is about 8 hours. So 100 email boxes is costing you 15 hours of labor. At $25 per hour average for a $50K salary, that's $375. But it is really about $488 when you consider that salary is only 70% of it. If you move them to Gmail/GApps the profit is $10 per user / mailbox per year. That's $1000 from $488. That doesn't include ongoing support costs. Just something to think about. 

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1 Comment

Its even more harder to push SaaS ERP softwares, esp with the IT department. I agree with the fear of Control thing. In my experience of marketing SaaS ERP, its always the IT guys who want to kill the idea in the first place.

But once you get through the decision makers, the levels of CEO, CFO, Presidents - its not hard to close a deal.

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