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The initial shock wave from the COVID-19 crisis has largely subsided. Sales and Customer Success leaders are now scrutinizing their forecasts, trying to figure out how to squeeze as much as they can out of the quarter. However, rather than getting lost in the minutiae of the moment, consider making big, bold moves that will set you up for success in the post-crisis marketplace. Now’s the time to make the jump to XaaS and subscription models, re-think your go-to-market structure, and make big bets on data and analytics. 

This post is the third of a series called “The COVID-19 To-Do List for Revenue Leaders,” and will compile and present some of the top insights from TSIA researchers and members, as they deal with the problems of the moment, and look to emerge stronger on the other side.

The Big Thing: Shifting to XaaS and Subscription Revenue Engines

Companies whose model is based on XaaS are far better off during and after the crisis than those who are not. TSIA Executive Director Thomas Lah explicitly calls out why this is the casein his timely and relevant paper, "Recurring vs. Transactional Business Models in an Economic Downturn." This excerpt is telling:

XaaS offers and business models have attributes that should be very attractive to technology providers at this unique point in time:

  • XaaS offers typically have capabilities to support customers remotely which is critical in a global pandemic. 
  • TSIA has a member company that sells to the healthcare industry. It quickly became apparent when COVID-19 hit that the capabilities of a new XaaS offer they were piloting would be extremely beneficial to all hospitals because it included the ability to remotely monitor technology utilization and make recommendations on asset deployment.
  • In a downturn, customers only want to pay for what they need. Purchasing technology capabilities as an ongoing service based on consumption is conducive to this requirement. 
  • Recurring revenues do not disappear as quickly as transactional revenues. From the customer’s perspective, cash becomes king at the beginning of a downturn. New project initiatives are the first item of business to be put on hold. This grinds the transactional business model to a halt. However, existing contracts for ongoing recurring services take much longer to turn off. This means recurring revenue streams take longer to disappear in a downturn. Again, look at the performance of traditional tech business models compared to XaaS business models post the Great Recession.

So, if you’ve been considering a shift toward XaaS but have been hesitant to go “all in,” now is the time to make the move. Often, companies are under so much pressure to hit the number that they won’t make the necessary steps toward transformation. However, the “number” is going to have to be adjusted anyway, due to circumstances far beyond anyone’s control.

Need help with your transition to XaaS? Contact TSIA.

This can provide you with cover to make these transformational changes that might otherwise be difficult to find traction or alignment on. It allows you freedom to change KPIs, compensation, org structure, and even your critical practices and customer engagement model. It is clear that subscription offerings are the way to achieve long-term growth. This crisis gives you the catalyst and the cover to make some of those big changes you know you need to make, but weren’t able to take on due to the short-term risk.

Rethink Goals and Targets for the Crisis...and Beyond

About 70% of Sales and Customer Success executives plan to adjust quarterly or annual targets due to the disruption. According to aTSIA poll conducted in late March around the COVID-19 crisis This represents another major decision point. Will you adjust your targets and goals simply to align them with lost time, or will you do something much larger and more strategic with your compensation? Can you shift your comp plans to reward and incentivize the selling of your subscription and XaaS offers?

For a good start, TSIA members can read this report on XaaS compensation models, and determine how aggressive they want to be in promoting their subscription offerings (and we suggest being very aggressive in this environment). Beyond that, pay attention to one of TSIA’s core mantras: “When the account grows, everybody wins.” That’s not a metaphor or a nice saying. Everyone who touches the customer should benefit financially when they increase their spend, be it in commission, MBOs, cash bonuses, or other creative incentives.

Make a Big Bet on Data and Analytics 

TSIA research is clear: Companies that effectively utilize data and analytics to prioritize prospects and to find new opportunities with existing customers grow at a substantially faster rate than those who do not. However, you can’t just approach the problem with data science. Sales, Services, and Product leaders need to be actively involved in telling their data and analytics teams what to look for and where to look for it.

For some insight on how to go about this, take a look at this report on data-driven selling, available to members and non-members of TSIA. While artificial intelligence may be the future of sales analytics, you can start by using human intelligence. Link common problems to your defined offerings, then ask how you’d know the customer is having a problem or challenge your offerings can solve.

Optimize Your Expansion and Renewal Model

As part of your COVID-19 response, it’s very possible that people on your customer-facing teams are going to have to play different roles and do different things than they’re used to. This presents a challenge, but also an opportunity to create a more LAER Efficient customer engagement model. For anyone who hasn’t seen TSIA’s LAER (Land, Adopt, Expand, Renew) model, read this blog post on LAER: The Roadmap to Efficient Growth.

Aside from the benefits that come from proactively driving adoption of your technology, LAER efficient sales models allow your highly-skilled (and highly-paid) sales executives to focus on the large new deals and cross-sells that only they can do, while taking some of the lower-complexity upsells and renewals off their hands to other resources. The goal is to optimize the entire customer lifecycle for growth. Since people are already expanding their roles and playing multiple positions due to the crisis, this is likely a motion you’ll want to continue in the post-crisis world.

Double Down on What’s Working

Once the economy starts rolling again, the temptation will be to return to normal as quickly as possible. The question for you will be, is it the old normal, or is there a “new normal?” As you deal with the crisis, you’re going to try new things, many of which will be borne of necessity. It will force you to develop new muscles and adapt your people, processes, and technology to meet the needs at hand.

At TSIA, we talk about business capabilities.Do you have the ability to regularly and systematically perform a motion that is a proven best practice? To help you, TSIA created this inventory list of critical COVID-19 related capabilities. If the new motion you found during the crisis is something that your customers like or made you more efficient, then you need to bake it into your process and technology as a sustained capability.

If it’s a larger change, like making the shift to XaaS or altering your customer engagement model, while you’ve got the cover of a downturn to make some big, substantial changes, you’ll need to reinforce these changes through your KPIs, compensation, organizational structure, and critical practices. Otherwise, these new muscles will soon atrophy and you’ll be back to the status quo soon enough, squandering your opportunity to change and grow..

TSIA is Here for You

We understand that our member companies, the technology industry, and the world at large have been impacted by COVID-19. Whether you are prepared for Revving or Retooling, now, more than ever, we need to work together to get through these challenging times. TSIA is committed to providing visibility as quickly as possible into the changing industry trends and practices that come as a result of COVID-19. Visit our Rapid Research Response Initiative resource page for more information.

If you have any questions related to how COVID-19 is impacting your organization, we’re here to help.

This blog is taken from TSIA’s report, “The COVID-19 To-Do List for Revenue Leaders.” It is available for both TSIA members and non-members.

Read Other Blog Posts from This Series

 
 
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Steve Frost

About Author Steve Frost

Steve Frost is the vice president and managing director of revenue research and advisory for TSIA. He also serves TSIA’s vice president of expand selling research. Throughout his career, he has held various leadership and business development roles at companies like Google, Netscape, and Loudcloud, helping them define their go-to-market strategy and business development tactics. Steve is dedicated to helping technology organizations grow their services, subscription, and XaaS revenue by optimizing their practices for growth throughout the customer lifecycle.

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