Blogs From the Front IV – SaaS and New Product Introduction

Shown, early radar towers in the UK during WW II  The introduction of radar was a significant game changer, both offensively and defensively.

In prior posts, here, here and here, I reported about my random survey of "front-line" B2B Marketing troops in Eastern Massachusetts during the last two weeks of January 2010.  Their main concern is the lack of available monies, either internal funding or credit.  Perhaps recognizing the cost of customer acquisition, they are focusing on extracting more money from their existing customer base.  They are dabbling in or trying out social media/networks but are not yet convinced that these new tools can be monetized as effectively as the ones that they know.

In this last post about my survey, I will cover two related aspects, Software as a service (SaaS) and the rate of new product introduction.

For those companies in my survey that sell software or a combination of software and hardware, virtually all are looking at providing it as a service.  This does mean that they are doing it, or will do it in 2010.  Rather, it means that they are looking it as another way to capture revenue.

All I talked to recognize both the cultural and economic impact of moving from providing software, either installed or “shrink-wrapped” versus providing it as a service.  In the service model, Customer support looms large; this potentially requires adding heads, which translates into higher fixed costs.  In addition, questions regarding hosting, SLA’s etc. need to be resolved. At the same time, there is the potential for a revenue drop-off as what is being purchased is a fragment of what was being sold.

Bottom line, some companies will offer their software products as a service in 2010, perhaps more in 2011.  The bulk will continue to examine it as though it were a new channel of distribution, but put off implementation due to the cost implications.  There does not appear to a universal ground swell or consensus that this is now the way to go.

Equally interesting were the conversations around new product introductions.  As the economy tightened in 2008 and extended into 2009, many companies cut their Marketing departments, but did not make proportional cuts in their development organizations.  The result is that they have ready, or coming, new products and releases.  The question facing many of the Marketers is; “Is this the best time to launch new products/services?”

Not surprisingly, some companies are holding back.  The reasons are varied, “We are in the midst of up-selling the customer base, a new release will confuse this.”  “The new release is good, but not great, we won’t get back the expense of launching now, as it won’t generate that much incremental revenue.”

Those that are launching are doing so either because of competitive pressures (catch-up) or because they have new significant differentiators which they feel with drive additional market share.  Of course, not launching results in any added revenue from the product being lost, as well as related revenues…service, consulting, etc.

Bottom line, there will not be a wave of new product introductions in 2010.  Those that come to market will either be catch-up defensive plays or significant game changers.  The threat to a CMO is that one of his/her competitors launches a game changer, which is well received by the CMO’s installed base.

What would you do if this happened to you?  Is pricing your only recourse?

RHM  3/11/2010

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