Traditional software companies are building next generation cloud-based software products that can be delivered in the SaaS model. Cloud-hosted, subscription model is becoming the norm and enterprise customers with traditional products are pressurizing their product companies for the same. I believe we are reaching an inflection point of switching from license model to the subscription model. According to a report from the Software Equity Group, public SaaS companies had an impressive YoY growth of 31.2% in Q2 2016.
It is expensive to build a new product for the cloud. In most cases, the new product has to be written almost from scratch with limited or no reuse of code from the legacy software. It also takes many months to years to release and stabilize the product. While the focus of the engineering team is to build world-class software and take it live, more often than not, I have seen that not enough planning or thought goes into the process of on-boarding existing customers to the new platform.
It is one of the major pitfalls in the process of building a next-gen product. In reality, one can realize ROI only if majority of the existing customers switch to the new platform and start paying for it. In my experience, I have seen that on-boarding a new customer is easier than upgrading a legacy product customer. The reason lies in the complexity of migrating data and legacy customization done in the legacy product implementation. Typically, there are different versions of the legacy product in the installed base with different database schemas. That means every customer upgrade is a custom project with no predictable timeline and tends to be expensive. The high cost of upgrade is one of the most common reasons for clients to not do away with their legacy products.
Our recommended approach is to build a framework and processes for the migration, and do the upgrades in factory model – thus the name “Upgrade Factory”. We recently helped a client who was facing similar challenges. The product had five different variants with different database schemas. After a thorough analysis of the installed base, we designed the data migration framework and processes for migration. We came up with three migration plans—Gold, Silver and Platinum—each with committed timeline and a fixed price. This helped the sales team close deals faster. It also significantly improved the rate at which customers are on-boarded to the new platform.
It always helps to have a strategy to on-board current customers early in the cycle and the factory model is a cost-effective and efficient solution.