I'm in the middle of a fascinating study by Robert Breza of RBC Capital Markets entitled "On Demand Evolution, Volume II: Insights and Best Practices at Leading On Demand (SaaS) Providers." The research details the characteristics and best practices of successful sales operations and R&D at SaaS companies. I share some of its central findings because many of the same principles apply to open source, as both leverage subscription-based business models.
Just as barriers to open-source adoption continue to go down, so, too, do barriers to SaaS adoption. Indeed, some of the same factors may be driving increased acceptance of subscription-based software purchases. Forty-four percent of RBC's survey respondents indicated "no major concerns with SaaS adoption," which is up from 35 percent in a similar survey from Q1 2008.
But someone still needs to sell these products/services. One suggestion from the report is that subscription-based vendors should segment "hunters" (new license salespeople that are paid a higher commission) and "farmers" (renewals and upsell salespeople, generally paid a lower commission) early in the company's growth. Such vendors should also focus more on the long-term value of a customer, not the short-term initial contract payout:
The company is more concerned with farming the customer than they are with negotiating that initial contract. An effective and "sticky" product coupled with an efficient sales model should be able to drive customer retention above 90% while revenue retention is at or above 100%. (10)
Many of these companies (Omniture is a prime example) opted to start with "mid-grade" salespeople early on (Think: inside sales), later moving to "high-grade" sales people once the market opportunity was better defined. The idea is to start with more junior, hungry salespeople to prove out the market, and then bring in more expensive headcount to "reap" in the market once it has been established.… Read more
