Achieving Scalable Annual Recurring Revenue Growth (ARR)

Achieving Scalable Annual Recurring Revenue Growth (ARR)

What is the best measure of product success in a recurring revenue business model? And how to you ensure that your organization engages in the most effective practices to drive product success at scale? As a product management leader, you will need to answer these questions, but where do you start?

Most would agree that the key to XaaS (anything-as-a-service) product success for any enterprise technology solution is when the customer declares it valuable to helping them solve a problem. Assuming that’s a given, do you have a repeatable approach to creating and delivering true value to highly satisfied customers that’s systematically repeatable over time?

If so, you are likely seeing positive Net Promoter Scores (NPS), growing Annual Recurring Revenue (ARR), and growing market share. The fruits of the Product Management team’s labors are realized in these scorecards, much to the pleasure of business leaders.

How Scalable is Your XaaS Growth Engine?

The lens of ARR growth, while essential to keep in focus, is a lagging indicator of success. To understand how scalable your XaaS (anything-as-a-service) growth engine is, you might ask yourself the following questions:

  1. Is the top-line recurring revenue growth growing faster than recurring expenses?
  2. Are you spending a lot to acquire new customers?
  3. Do you actually know your customer acquisitions costs (CAC)?
  4. Is the business “investing” in non-monetized services to get the customer up and running to the point of productivity or providing “free” customer success engagements to ensure customer is effectively adopting the solution?
  5. Is siloed thinking getting in the way of creating a shared view on how to scale the business?
  6. Does the organization have right-sized processes that underpin the ability to scale?

If the answer to any of these questions is “yes”, it’s worth examining your practices at a deeper level to assess your ability to achieve scalable ARR growth, and ultimately profitable growth.

The basic formula for accelerating scalable and profitable ARR growth is as follows:

  1. Establishing the strategy-informed revenue mix target
  2. Designing and pricing as-a-service offers, built to deliver quantifiable value and helping customers achieve specific business outcomes
  3. Establishing a go-to-market model that cost-effectively drives the repeatable customer engagement cycle of sales, customer adoption, account expansion and relationship renewal

Product Management is at the Epicenter of Impact

Growing recurring revenue demands a predictable and repeatable engine with Product Management steering the strategy, identifying that target revenue mix, designing and pricing the offers, and doing so in a way that enables the business to cost-effectively sell and continually growth the total customer lifetime value (CLV). There’s no other role that’s as uniquely positioned and equipped as Product Management to drive and design this strategic outcome.

Many XaaS (anything-as-a-service) companies deeply understand this. It’s no coincidence that the chief product management executive in the majority of SaaS (software-as-a-service) companies report directly to the CEO, according to TSIA’s 2019 Annual Organization Study. As stewards of growth and profitability of the business, these product executives, and their teams, are at the epicenter of impact within their businesses.

xaas product management is at the center of everything
The epicenter of impact.

In XaaS, every business, product, and cross-organizational practice makes an impact on one or more of the customer experience, sales and service effectiveness, revenue growth, operational scale, and margins. In XaaS, every decision large and small that Product Management makes can be an accelerator or decelerator on these metrics, and in turn on the scalable growth engine. Every decision counts.

Learn Proven Practices for ARR Growth at Technology & Services World

I hope you’ll join us! In the interim, be sure to reach out to TSIA today to learn how membership in our XaaS Product Management research and advisory practice can help address the biggest challenges in your ARR growth engine.

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