2020: The Last Stand for Legacy Technology Vendors
Procrastination. We can all empathize with the concept. Sometimes it means putting off the project fixing a broken light at home for another week. Or sometimes, it is staring at a challenging email and promising yourself that you’ll get to the response later.
For legacy enterprise software companies, this game of “kick the can down the road” often plays out in terms of their strategy around “transformation.”
100% of software companies started before the cloud emerged have a stated strategy to move to the cloud and SaaS “over time.” The question is, over what time?
The decision isn’t easy. For many companies, the short-term revenue and profits (hello EBITDA!) of the traditional on-premise license software business model is hard to beat. That’s doubly true since many on-premise software companies carry the weight of massive debt loads due to recent Private Equity deals.
In parallel, many clients of on-premise companies are pleased to keep those workloads on-premise. The license + maintenance business model works well for legacy applications. “If it ain’t broke, don’t change it,” as they say. Customers are happy to ride their enterprise applications down the old model as long as they can.
The challenge is that these same clients, in parallel, are launching 100% of their new initiatives in the cloud. And the legacy vendors aren’t even getting called during this process.
So from the vantage point of a historically-on-premise software company:
- Financials are better in the status quo
- And my customers are happier
- So why change?
In reality, as with the slowly shrinking polar ice caps, these businesses are being melted from below, without them even realizing it. The new sales cycles happen largely without their knowledge. And the customer migrations to the cloud are planned without their involvement. When they realize what’s happening, it’s often too late.
We all know that the chaotic year of 2020 has only accelerated the move to SaaS and the cloud.
So this year is likely make or break for the transformations.
The companies that eschew the long-term for the short-term will quickly fade into becoming historical footnotes alongside Digital Equipment, Wang Computer, and General Magic (if you haven’t heard of those companies— – that’s the point).
The software leaders that lean into the opportunity 2020 presents will make it to the other side by focusing on the 5 critical elements of the transformation:
- Investor / Board Transformation: If there is ANY year to convince your investors to bet on the cloud, it’s 2020. There has never been a more significant spread between valuations of cloud-based and on-premise software companies.
- Product Transformation: Businesses that lean into the transformation realize they need to rethink their development processes to be more data-driven (using analytics) and customer-centric (incorporating client feedback). In short, they need to focus on Product Experience as a part of the Customer Experience.
- Go-to-market Transformation: One of the biggest challenges these companies face is around rethinking the way they sell and market. This often involves implementing a more robust digital approach to the buyer journey and retooling the sales team for lighter weight ‘land and expand’ models.
- Customer Experience Transformation: Close to my heart, these businesses need to realize that the majority of their revenue and customer lifecycle will happen after the sale in these new recurring revenue models. As such, many of these businesses will make a significant investment in Customer Success.
- Cultural Transformation: Perhaps most complex, these companies need to rethink their approach to company culture. This means moving to models that are more transparent, authentic, and, in our words, Human-first.
2020 is a big year for everyone. It might be the last year for companies to cross the proverbial chasm into the new world of SaaS and the cloud. The vendors that don’t take advantage of the opportunity will most certainly be left behind.