TSIA's T&S 50 Index tracks the 50 largest technology and services companies, while the TSIA Cloud 40 tracks the performance of the 40 largest born-in-the-cloud companies. The trend is clear—the commoditization of technology over the past decade has taken significant profits off the table for the vast majority of technology providers. At the same time, customers are demanding new consumption models and shareholders are pushing for recurring revenue streams that demonstrate predictability of results.
Did you know that less than 20% of technology-as-a-service (XaaS) business deliver, or see a pathway to consistently delivering, acceptable operating profit, even with scale? Many are surprised to hear that Salesforce, the quintessential SaaS company, first demonstrated GAAP operating profits in 2018, a full 19 years after its founding in 1999.
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Source: TSIA T&S 50 & TSIA Cloud 40 Indeces. Q4, 2018
The Impact on Product Management Practices
What do these trends mean for Product Management leaders who are guiding their organizations to lead the way with new revenue recognition methods, business success KPIs, customer expectations and obligations, and new customer engagement models?
How will Product Management define their offers, price for value, refine their go-to-market strategies, and drive in-market success as they prescriptively lead their offerings towards profitable growth in the consumption economy? What are the proven methodologies and cross-organizational handshakes that truly matter?
The road to XaaS success is achieved through:
- Designing and pricing “as-a-service” offers, built around helping customers achieve specific business outcomes
- A go-to-market and model that cost-effectively drives value-based sales, customer adoption, expansion, and renewal
- A data driven process across the entire organization
The road to XaaS success is achieved through designing and pricing ‘as-a-service’ offers, built around helping customers achieve specific business outcomes.
The Challenges for XaaS Product Management
Since the release of Technology-as-a-Service Playbook, I've interviewed dozens of Product Management leaders to identify the top organizational and operational topics they were dealing with in the XaaS economy (listed below).
Top 10 XaaS Product Management Challenges:
- What is the economic engine for a profitable XaaS offer?
- How does XaaS development differ from traditional technology?
- What are the best methods for pricing XaaS offers?
- What KPIs drive Product Management behaviors in XaaS?
- What is the optimal Product organizational design for the XaaS business?
- What technical capabilities should the product have to accelerate adoption and expansion?
- What telemetry does the product need to optimize the total customer experience?
- How must the organization adapt to the faster product delivery cadence?
- What are the new cross-functional handshakes necessary for XaaS in-market success?
- What are the effective methods of driving transition to XaaS business models?
These challenges are significant and require new frameworks and organizational muscle to be developed and mastered. The Product Management leaders further revealed the immaturity of practices that influence recurring revenue, such as customer journey mapping (just 35% do it) and the influence of product consumption analytics on the product roadmap (just 15% do this).
Just 35% of Product Management teams participate in customer journey mapping and just 15% use available product adoption analytics for product roadmap decision-making.
Lastly and most importantly, the research also revealed a critical pattern: While the product promise is created by Product Management, these leaders have no consistent operational benchmarks correlating proven practices to business results in a XaaS business model. They also don’t have a peer leadership community to address the “business of product management”, that is, the organizational imperatives in defining and delivering scalable and profitable XaaS offerings and driving in-market-success.
Introducing TSIA's Newest Research Practice: XaaS Product Management
Based on these challenges, practice trends, immaturity of XaaS Product Management practices, and the very clear unmet need, TSIA has launched a XaaS Product Management research practice. With it comes the XaaS Product Management community, which assists product leaders in transforming and optimizing their operations by applying research for proven frameworks and practices that fuel their XaaS revenue growth and profitability.
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Accelerating XaaS Product Management operational excellence.
I am delighted to lead this research practice, whose members consist of some of the most innovative and successful technology companies in the industry, including: Autodesk, Axway, Cisco, Ciena, Gainsight, Intelerad, IMPLAN, Hologic, JDA Software, SeaChange International, ServiceNow, SMART Technologies and more. Guided by an accomplished group of industry executives on the XaaS Product Management Advisory Board, the practice is focused on to identifying and prioritizing the patterns of success for XaaS growth and profitability.
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Some of the members of TSIA’s XaaS Product Management community and research practice.
Product Management teams are the stewards of growth and profitability, and all growth and profitability lever paths ultimately link back to their decisions. Every business, product, and cross-organizational decision in XaaS makes an impact on the customer experience, on the Sales and Service engagement, on business scale, and on profitability. Every decision can be a positive impact or a negative impact, but it does have an impact one way or another. Every decision counts.
If your company can benefit from having Product Management leadership in active conversation on the in-market success of the technology to drive growth and profitability, please do invite them to connect with me to hear more about how TSIA and the XaaS Product Management community can help. If you are already a TSIA member, please contact your member success manager to arrange a briefing with your Product Management leadership.
A critical part of the benefit for members is the community of product management leaders. Membership provides a unique opportunity to network, share strategies, best practices and learning opportunities. Twice a year at TSIA's Technology & Services World (TSW) conferences is a content and engagement-rich environment uniquely focused on the business of Product Management. No other event offers an equivalent experience for product management leaders.
In the Product Management track at TSW, you'll learn:
- Proven economic engines for profitable XaaS offers
- The role of Product in the customer engagement model
- Crafting the complete product experience and offers
- Data-driven frameworks for achieving profitable growth
- Effective cross-functional handshakes for XaaS in-market success
- Essentials of a product-led growth strategy
- Customer journey analytics success playbook
- How changing customer expectations and obligations are altering how we develop products
And much more!
If your company can benefit from having Product Management leadership in active conversation on the in-market success of the technology to drive growth and profitability, please do invite them to connect with me to hear more about how TSIA and the XaaS Product Management community can help. If you are already a TSIA member, please contact your member success manager to arrange a briefing with your Product Management leadership.
Here’s to Product Management strategic and operational excellence for XaaS business growth and profitability!