15 Jul 2013 Overcoming the challenges of the old school software sales model
I recently made some comments about Basware that were somewhat critical. It was positive, constructive criticism. I wanted to point out that Basware was ideally placed to become a monster. With one of it’s largest competitors sidelined somewhat by their acquisition by SAP, Basware could fall into the trap of becoming complacent – indeed, I have , from personal experience seen hints of this on the horizon.
But I overlooked something – something that to an observer from outside of their organization could go unnoticed. It is the astonishing turn-around that Basware has performed, the foresight they have shown making that change and the energy and determination they have exhibited in completing it.
An old school software sale, in simplistic terms, goes like this. The software company charges up front for a license then charges 20-30% of the value of the license to provide on going support. More and more companies prefer a newer model whereby the software is bought as a service. You pay a monthly amount for as long as you use the software. The software as a service (SaaS) model has in recent years become a standard commercial model and a few years ago Basware recognized it as the way of the future.
Now, for a new technology business, establishing a cloud based service is kind of easy (winning new business and scaling it is their challenge) but for a large established business to change from old school to new school is massively complex – and risky – and the reality of this was brought to life for me when I met Basware’s CEO, Ese Tihila, last week.
“It’s not just the price structure that has to change.” He explained. “Moving from a traditional software licensing model to a SaaS model requires fundamental change that effects every part of the business”
I’ll be honest – I thought it was as simple as changing the pricing model. I’d never really thought about it to be frank. It’s only when the CEO of a business that has successful accomplished the transition explains the journey that you can fully appreciate how big a deal it is. You’re not selling on premise apps any more. You need to support a cloud model – than in itself requires a complete infrastructural change. The delivery model is turned on its head. And there’s a totally different support model. No longer are you providing 3rd line support only, you need to provide 1st, 2nd and 3rd line support. This requires significant organizational change. And last but not least is the sales model. The old school model allowed you to motivate a sales guy with a commission on a sale but the new school only allows you to reward successful delivery – that drives a fundamentally different set of behaviors.
If I was to anthropomorphize Basware I’d say it is a calm, professional and successful – and that could be misinterpreted as complacent. What is hidden behind that calm professional and successful exterior is the visionary and determined leadership that has taken Basware to a position where it can thrive and compete with the newer, younger, talented and aggressive new players that have shaped the cloud together with the new school software sales model.
Pete Loughlin can be found on twitter @peteloughlin