Wednesday, August 02, 2006

Chronicle of a Death Foretold (II)

or 'How to aSaaSinate your Business' (part 2) (view part 1)

Cracks were starting to show.
The operations team complained that they are drowning in customer requests and are not keeping up with hardware and hosting requirements. The business growth was accommodated by throwing bodies at problems:

Adding a new customer consisted of setting up a new environment, provisioning resources, filling out an excel sheet with the customer information. Adding users to the system needed manual intervention and any administrative function required a Customer Service Representative (CSR) to process a change request.

Billing also was managed through an excel sheet, since the financial model did not integrate with the perpetual model’s existing financial systems; so any modification required manual labor.

The CSRs, who often escalated to the Operations team, handled customer-specific configuration requests with an-ever lengthening resolution time.

By now, the operations team was handling 35 customers with hundreds of users. Combined, they consumed 35 dedicated systems, and were becoming increasingly unhappy with the responsiveness and degradation of the service levels. Some angry calls were received at the helpdesk center.

An upcoming release of the perpetual version, with exciting new features was starting to look like a nightmare. The field had already installed it in about 50% of the customer base, but the hosted services still had the old version. The upgrade date was being postponed time after time, as they could not figure how to simultaneuosly upgrade 35 different systems. One option was to do it incrementally, but that would mean that they had to maintain two different versions, and keep track of which customer had which version.

Curt and Diane lamented that the whole SaaS trial was going to blow up in their collective face. It was clear that they must stop accepting new customers and quickly get technical solutions. By now, the operations team had accumulated vital knowledge of how to do things ‘right’ but that demanded R&D, QA and Services resources.

Diane reported to Sanjib and he called a meeting with the executive team. Diane laid out the plan, showed the growth rates, enthusiastically presented the huge opportunities and requested a commitment from the C-level to make the new model a success.
Bill, VP R&D explained that his resources are stretched thin because of all the ‘real’ customers out there, a new release that is way off schedule and still many issues with the last release that has half his team working with QA to resolve some serious bugs. He couldn’t see how more than three dedicated people would be available to look at an on-demand solution. In any case they won’t have anything ready in the next two quarters.
Joana, the CFO, suggested that if they hiked the price of the service to make the margins, that would justify enlarging the allocated funds of an endeavor that has, so far, just been bleeding the company.
Raul, VP of customer services, claimed that his team was getting a disproportionate number of calls from the SaaS customers, and his CSRs were not really equipped to deal with the users’ requests. He needed a dedicated team just to deal with the hosted customers and he does not have the budget for it.

Sanjib, who was a cautious supporter of the SaaS initiative, realized that he was only partially informed of the state of affairs and faced a true dilemma. He knew that BizEye could not abruptly drop the service, loose face and 35 customers, but he understood that the SaaS solution was not realizing the promised economies of scale and, with the current state of affairs, his best case scenario was to break even.

He assigned Diane, Joana and Bill to a committee to review possible options and report within two weeks, and he required from Diane a post-mortem on why such a promising prospect has turned into a nightmare.

Curt sat in the corner, biting his fingernails.

Next posting: Conclusions

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