Establishing and growing a successful service business is no easy feat.
Building a successful SaaS product is one way to unlock a new level of potential for significant scalability and to diversify your revenue streams. Securing product- and subscription-based revenue is like shifting into high gear.
Of course, there needs to be demand for a software solution. No matter how good the product, you should have a wide potential customer base that can justify the tremendous effort of creating it. There must be potential for scalability and sustainable revenue.
SaaS offerings are as varied as the markets they serve, but all the truly successful products have one thing in common: a foundation of expertise. Before launching a SaaS product, a company must accumulate enough domain knowledge in a particular area to design a useful product. Service providers are in a great position to do that.
I recently went through this process as CTO of QuesTek Innovations. Our goal was to convert over 25 years of materials engineering systems, models, and educational materials into our first SaaS product—Integrated Computational Materials Design, or ICMD®. Here are some of my takeaways from the process:
Outsourcing is OK
Building an optimal SaaS product is a continuous process even after launch. You want to make sure the foundation is built with great care, but staying in your lane is important. A successful service business doesn’t necessarily translate to other avenues.
Service companies with a proven track record of operational efficiency, in addition to a loyal and satisfied customer base, are strongly positioned to successfully develop and launch a SaaS. It helps if the company is doing things in a unique way. It’s not necessary to be a complete outlier, but some uniqueness in the way you approach your work is likely to lead to a more differentiated and innovative SaaS offering.
What is not required is the technical ability to create a SaaS product. It would be great if a company had software engineering and cloud computing expertise in house—we did not in the beginning—but that work can be easily outsourced to a third party. Do what you do best and hire the rest.
Cybersecurity is an issue–plan for it out before you scale
One of the biggest obstacles and challenges we faced when building our SaaS was cybersecurity. Our company repeatedly contracts in highly regulated spaces, like defense, so cybersecurity has always been paramount. Still, just how much further we needed to take it to launch a SaaS product was surprising.
Cybersecurity has many different requirements: there is regulatory compliance from commercial spaces as well as differing government regulations for things like data and privacy. These rulings can be very different and tricky to follow. Different companies within the same industry and location, or even within overlapping jurisdictions and industries, might have different requirements to follow.
Anticipating the range of your market and all potential compliance issues is critical. When you build a SaaS product, you want to create something that fits all customers. That’s crucial for scalability–and cybersecurity is one of the more challenging aspects of achieving it. Different clients and customers have different cybersecurity requirements depending on their own policies and locations.
Never stop testing and improving
QuesTek used ICMD® for about two years before it was released to the marketplace. Testing out software repeatedly before selling it is mandatory. There needs to be full in-house belief and trust in a product before it’s introduced to the world. To achieve that requires all the functionalities be tested and working as intended.
If you run a successful service business, you’re probably used to hitting deadlines and wrapping up projects and contracts. One of the main differences with a SaaS product is the release date is not the end date–frankly, there is no end date.
We continue to make extensive use of our SaaS product internally, constantly making sure it’s working as it’s supposed to and as we planned. By using our product daily, we’re also more in tune with what features and functionalities our customers might want to see next.
As we approach a year since launch, we’re listening to our users and adjusting. We’re conducting iterative development so that we can solve issues as they come—and we don’t plan to stop.
Engineers on the sales team make the difference
Sales is a complex process for any fledging SaaS. It’s not always easy to get a product off the ground, especially in a specialized B2B marketplace. Once word gets out about a truly great product, and its features really attract and retain customers, eventually it’s the product that makes the sale.
But not in the beginning.
Keep open and honest communication with the sales team–they’re on the front lines with customers. Similarly, you want to make sure you can rely on that team to collect the right information as well as to offer guidance on product use. We’re fortunate to have a team that includes experienced engineers who are now customer-facing salespeople. People who know the product can sell it.
Customers and customization
While your product is a singular tool, every user is unique. Strike a balance between enabling customization for every possible use case and overcomplicating the product.
For example, our users represent industries from energy to aerospace to medical to automotive. The goals of manufacturers building reusable rockets for space exploration are very different goals from those of an automaker, for example. How they use the tools of the SaaS is also going to be very different.
When you create a product and introduce it to a customer, they’ll likely say, ‘That’s great, but can it do this?’ Depending on the industry, ‘this’ can be extremely varied.
You want to be able to cater to most of the customer’s requests and requirements, but it’s important to stop short of crossing over into a bespoke situation where you’re building a specific version of your software for each customer. That entirely defeats the purpose of the SaaS product and its scalable features. Finding common ground is a huge challenge, but it’s a hallmark of successful SaaS products.
Continue to educate the customer
When you have a SaaS product with a lot of options and potential for customization, educating the customer is essential. They need to know how to use the product, of course, but the goal should be full optimization and integration into existing workflows.
We built ICMD® for flexibility. While it can be easily adapted for individual customers, it’s a specialized product. Instead of reconfiguring its capabilities, we always offer our companion service of a customized onboarding and training process either online or in person. That way, our client learns its limitations while they discover all its uses.
Also, if the customer wants additional customization or requests something that deviates from the standard, it’s wise to offer professional services along with the product, like ongoing training and technical support. Excellence in service is what got you this far, and it must continue.
Find the right price
How do you properly price a new product when there’s no comparable offering to measure against? SaaS products can range in pricing from tens of dollars to millions. If the price is too high, it will certainly deter some customers. If the price is too low, you put yourself at risk of cannibalizing your own service business by providing your technology at a lower rate. It’s important to strike a balance and build a proper revenue model.
We’re learning as we go. The most important part in the early going is to listen to your customers—all your customers—so you can find the common voice.
Continual improvement
Don’t expect perfection. Every software has bugs. Even the biggest corporations in the world are constantly releasing patches to address vulnerabilities and deficiencies. Any service business should be prepared for continuous internal and external maintenance for the software’s life.
Know your company is doing something right if you’re in the position to create a SaaS product. Like any major undertaking, there will be challenges along the way. Overcoming those challenges and making a quality product that pushes boundaries and breaks barriers is what transforms a successful service business into a technology leader.
Jiadong Gong, PhD, is CTO of QuesTek Innovations, a leader in materials innovation. They recently launched ICMD®, a comprehensive digital platform for materials engineering and design.
