Archive for the 'SaaS' Category

The as-a-Service partnership as a long-term journey

September 21, 2019

As an XaaS (Anything as a Service) provider, you engage your customers for at least the term of your contract, but your real goal is to keep them with you for much longer than that.

If your billing model is fully or partly usage-based, then not only are you motivated to keep your customers longer-term, but you are also motivated to ensure their successful and increased usage of your product or service, because more usage translates to more revenue for your business.

This is why I like the usage-based billing model. It motivates service providers to provide better long-term service to their customers, whilst it also gives more power to the customers, where they can take their business elsewhere, if they’re not getting the service levels or value for money they desire.

When my company Datagate signs up a new client for our billing solution, we view it as a commitment to a very long-term partnership. Our own charge model is based on a small percentage of what our clients bill, so our success is mathematically linked to their success.

We invest heavily in providing services and support for our clients and the ongoing improvement of our product. I see this as an investment in generating more business for our clients and us, rather than as just an overhead cost. The average Datagate client grows their business by 22% per year and so as long as we keep our churn rate to be minimal (as it is), then our revenue would grow by about 22% each year, even if we didn’t make any new sales.

My recommendation to any business that has a recurring revenue model, is to include at least some usage-based component to your billing, because it will drive better behavior in your client relationships and increased revenue growth opportunities for your business.

Good luck on your XaaS journeys!

Integrations key to business software success.

July 25, 2019

These days it seems like most, if not all technology products are getting smaller and more powerful, smaller and faster, smaller and less expensive, smaller and smarter, smaller and better connected.

In business software we’re seeing the same trend, away from the large monolithic systems of old, towards smaller, more targeted “apps” with a specific purpose. These apps connect to other apps and work together to form a larger overall “integrated solution”.

I first noticed this “smaller and connected” trend a few years ago when I worked in the ERP industry. We started seeing smaller accounting systems being used by larger and larger businesses. How could this happen? The answer was and is that the smaller accounting system is plugged into add-on solutions that enable the combined solution to cater to the specific requirements of the industry or user.

In the case of my company’s Datagate Billing Solution, we’ve decided on a product strategy where we focus on the rating and billing piece of the solution for telecom and other utility resellers, and leave the accounting, CRM, and business management functions to other popular solutions dedicated to those purposes. This means each software company focuses on what it’s good at and the integrations between the software packages enable them all to work as a single “integrated” solution.

Being integrated with other popular software products also increases our appeal to prospective customers who already use those products. This in turn leads to partnerships with those software vendors, as per the topic of my previous blog article.

Strategic partnerships as a high-growth strategy

June 26, 2019

One of the most common mistakes made by early-stage businesses, is going it alone and trying to do everything themselves.

Strategic partnerships can be a cost-effective and efficient way for a business to add channels to market, brand value, access & relevance to customers, localization and other strengths to their business proposition.

Partnerships will only work when both partners win from the partnership.

To identify potential partners, businesses should identify and understand what value the partner will add for them and in-turn, what value they will add for their partner. Sometimes it’s simply an exchange of margin and additional sales reach, other times it might be adding functionality to their product offering and opening new market opportunities together that the partners may not be able to address on their own.

Ideally, there should be a signed partnership agreement, to define the details of the agreement and hopefully prevent any misunderstandings later on.

To illustrate how strategic partnerships work, consider the example of my company Datagate.

Datagate is a SaaS billing solution for businesses who sell usage-based and subscription-based services, such as as telecom services, water, electricity, cloud services etc.

Datagate’s primary market is Managed Service Providers (MSPs) who sell telecom services. We recognized that a larger, more established software business called ConnectWise also targeted MSPs, has a compatible offering to Datagate that does many awesome things, but not what Datagate does (bill telecom services) and has regular conferences that we can sponsor and a partner program we can join.

We partnered with ConnectWise in 2017, signed up to their partner program, and built extensive integration functionality into the Datagate product to enable Datagate to share data and inter-operate with ConnectWise. Then we sponsored a booth at ConnectWise’s IT Nation conferences in 2017 and 2018 (we will be back in 2019) and this put us in front of thousands of potential MSP customers who use ConnectWise. There is no way we could have reached that size of specialized audience (who were genuinely interested in our product), without our ConnectWise partnership.

Datagate America’ s banner for ConnectWise IT Nation

The value to Datagate in this partnership is access to large volumes of relevant and interested sales prospects. The value to ConnectWise is that Datagate adds telecom billing functionality to their product offering, enabling sales for them that otherwise wouldn’t have happened. Datagate is also a regular sponsor and participant for their conferences.

Among Datagate’s many valuable partnerships, another is with Wolters Kluwer and their CCH SureTax offering. CCH SureTax is a powerful cloud-based tax calculation solution that calculates and adds all the various telecom taxes to telecom invoices generated by Datagate. This is challenging in the United States, because of all the tax jurisdictions (federal, states, counties and cities) that have taxes that must be applied to telecom invoices and remitted to the appropriate authorities.

The value to Datagate of the CCH SureTax partnership is that it enables us to service the US telecom billing market, safe in the knowledge that the complex telecom tax calculations are handled correctly. Through that partnership, we also gained partnerships with their tax & compliance partners who help us offer an easy and tax-compliant package to our respective customers. CCH SureTax and their partners gain access to more clients from Datagate’s sales and our ConnectWise partnership.

These are just some of the strategic partnerships that Datagate has formed to build its international sales. I believe that a strategic partnership strategy can be one of the best ways to scale a business and can it be applied to most industries.

Vancouver as an ANZ beachhead to North America

May 10, 2019
Vancouver’s other airport

When high-growth businesses from Australia and New Zealand (ANZ) look to expand their presence into North America, they have a range of cities to choose from. Sometimes they don’t even need to choose a single location, when staff can work remotely from different locations. When they do need to choose a beachhead location, most will choose a west coast city within easy reach of ANZ. This will ideally have a major airport close by that has good access to the rest of North America and of course New Zealand or Australia.

My SaaS billing software company, Datagate (which was established in New Zealand), looked at all the following location criteria for setting up a new presence in North America, to complement our existing sales office in Jacksonville, Florida and extend our reach from our base in Auckland, New Zealand;

  • Good time-zone overlap with New Zealand (we still have a many of our customers, partners and key staff located in Auckland, New Zealand).
  • Good time-zone overlap with the North American continent (our major focus and we have customers, partners and prospects spread throughout the wider USA).
  • Some workday time overlap with Australia and the UK (where we also have important customers and prospects).
  • Easy access to a major airport, whereby we can take a single flight to most major cities in North America, UK, Europe, Australia and of course New Zealand (multi-leg flights with stopovers are far more time-consuming and energy-draining)
  • Ease of getting established (incorporating a company, setting up bank accounts, renting premises, telephone systems, utilities etc).
  • Good public transport.
  • The costs of running a business are not overly high.
  • A great place to live, where we can easily attract talented, high-grade employees.

We ended up choosing Vancouver, Canada, ahead of other west coast cities that also met our time-zone and accessibility criteria. We liked that we could set up here relatively quickly and everyone we engaged with was positive, friendly and very helpful.

For me personally, the speed of getting established in Vancouver was boosted by my dual citizenship of Canada and New Zealand, but regardless of this, Vancouver still stacked up well as a place to live and work in North America.

Canada Place

The shift to Vancouver from Auckland, New Zealand has been a positive experience for my wife Lee and I. Vancouver is a beautiful, vibrant, multi-cultural city, surrounded by water, snow-capped mountains and the great outdoors. We live near our office in the downtown city area, where everything we need is within walking distance, including a train to the airport. People here are friendly, helpful and welcoming of newcomers.

From a business perspective, we’ve found it easier to communicate with our North American customers, prospects and partners for longer periods of the day than we could from New Zealand, plus it’s been very convenient to have closer access to the conferences and trade shows that we regularly attend.

Coordination and collaboration with our US sales office in Jacksonville, Florida has also improved greatly. American customers no-longer say our time-zone is “on the dark side of the moon”.

It was fast and easy to register a British Columbia company and open an account with the Royal Bank of Canada (RBC), who can handle both Canadian and American banking. American business is easy from here and most Canadian establishments are experienced at supporting businesses that operate in the USA.

We’ve had great assistance in getting set up here from New Zealand Trade & Enterprise (NZTE), Nick Fleming the New Zealand Trade Commissioner, Callaghan Innovation and our local Canadian immigration consultants Sas & Ing.

Lee on the Vancouver waterfront

My advice to high-growth businesses from New Zealand and Australia, who want to set up in North America is… make sure you check out Vancouver!

Datagate’s integration certified by ConnectWise in time for IT Nation

October 5, 2018

ConnectWise-Manage-Certified-Integrator

This week Datagate‘s integration to ConnectWise Manage was officially certified by ConnectWise’s Invent Program.

This is great timing, because Datagate will be attending and sponsoring a booth at ConnectWise’s IT Nation event in Orlando, Florida from November 7th to 9th.

We will present Datagate at IT Nation as the ideal telecommunications billing platform for MSPs and CSPs that use ConnectWise Manage.

For our American customers, we’ve also integrated Datagate with Wolters Kluwer’s CCH SureTax telecommunications tax engine for calculating all the taxes applicable to billing communications in all the state, county, city and federal jurisdictions in America.  CCH SureTax is now bundled and included in the price of Datagate for all our American customers.

I’m really looking forward to IT Nation this year.  In addition to sponsoring a booth, Datagate will also be hosting a breakout session at 2:30pm on Thursday  Nov 9th, with our panel of experts on US telecommunications billing, tax and compliance to talk about how we can make selling telecommunications easy, profitable, safe and compliant for ConnectWise MSPs in America.

 

 

 

 

 

 

Telecommunications billing, tax and compliance in the USA

September 23, 2018

Managed Service Providers (MSPs) the world over are taking the business telecommunications market by storm.

Computers and phones have converged, voice services are now just an application on your computer or smartphone, so it’s only logical that businesses prefer the simplicity of sourcing their telecommunications solutions from their trusted MSPs.  It’s great recurring margin for the MSPs and better service for their customers, with a single point of supply and support for their ICT services.

In most countries, it’s easy for MSPs to sell and bill telecommunications; they just plug their PBX or upstream telco provider into a SaaS telephony billing system (like Datagate) – and plug that into their accounting system – and away they go!

In the USA however, there is more complexity to it for MSPs who want to sell telecommunications.  Every state, county and city jurisdiction has the ability to add taxes and surcharges to the telecommunications bill, depending on where the calls are made from. In addition to that, there are various registrations and other compliance requirements, some of which are also dependent of where their telecommunications customers are located.  In short, American MSPs need good expert help and advice, along with a billing system that can handle all the taxes to ensure they stay out of trouble and meet all of their compliance obligations.

At Datagate, we’ve made it easy for MSPs to bill telecommunications anywhere in America and still be able to sleep at night.  We’ve teamed up with the top authorities on tax, Wolters Kluwer to include CCH SureTax with every American implementation of our Datagate billing solution. We chose CCH SureTax, because when it comes to tax calculations, you have to get it right, no matter what the complexities.

L to R: Greg and Mark from Datagate, Ben, Evan and Mark from Wolters Kluwer

In addition to Wolters Kluwer, we partnered with two of the best telecommunications tax & compliance consultancies in America; GSA and Telecom Professionals Inc. These two specialist consultancies have the experience, skills and expertise to ensure that MSPs using Datagate and CCH SureTax get their taxes calculated optimally & correctly and are fully compliant in the jurisdictions within which they operate.  They can even help MSPs get out of trouble if they have been selling telecommunications in the past without being compliant.

American telecommunications tax and compliance doesn’t have to be a roadblock if you’re got the right partners with the right expertise on your team.  We’ve packaged that all together for our American customers of Datagate.

The Appeal of Usage-based Billing

May 30, 2018

One of the strongest drivers of customer satisfaction is a customer’s perception of value for money.  Value for money is judged by how much a customer pays in return for what value they receive as a product or service.

Environmental and Ambient Data

Applying this logic to service billing models, we can deduce the following patterns;

Fixed Recurring Charges

With fixed recurring charges, the customer will perceive good value for money when their service usage is high in relation to the fixed service charge, but will perceive bad value for money when their service usage is low in relation to the fixed service charge.

In this model, the service supplier wins if service usage is low and the customer’s value for money perception is low, the service supplier loses if the service usage is high.

It can also be said that the supplier wins when the customer loses and the supplier loses when the customer wins.

The pricing of fixed recurring charges tends to be limited by what the customers with low service usage will be prepared to pay, within their perception of value for money.

Usage-Based Charges

With usage-based charges, customers should perceive a consistent level of value for money, regardless of the amount of service usage.  The overall cost of the service will be proportional to the level of service usage. In theory, the value for money perception should be similar regardless of whether customers are high or low service users.

The pricing of usage-based services should therefore not be restricted by a value perception of a subset of customers, but rather the value perception of all customers.

With a usage-based charging model, the supplier and customer can both win at the same time.

Overall Revenue can be Higher for Usage-based Billing

My experience through working with Datagate’s clients, is that when a service supplier replaces a fixed price model with a usage-based pricing model, they can generally increase their overall revenue significantly.

This was demonstrated most recently in a case study for Texas-based Ranch Hill Water Supply Corporation, who achieved a 26% revenue increase after implementing a usage-based charging model, using Kamstrup measurement systems, Datagate billing and Xero accounting software.

 

Success with Usage-based Billing

April 3, 2018

bank-banking-blue-50987

With the rapid growth of the “as-a-service” business model and the abundance of new services enabled by the Internet and mobile apps, it’s fair to say that there has been a major mindset shift in the monetization of new businesses towards subscription and usage-based billing.

It’s easy to forget that other, more mature businesses categories, such as telecommunications, water, gas, electricity, news media and others, have been using subscription and usage-based billing for decades and have built up a substantial amount of experience, knowledge and I.P. in the subject – not to mention substantial recurring revenue streams!

My business, Datagate Innovation has learnt a lot from the telecommunications industry in particular, where it’s common practice to bill fixed monthly charges for fixed connections, usage charges for calls, texts and data, whilst also offering bundles of usage of various services for a fixed charge. We think this I.P. is invaluable, not only in billing for telecommunications and utility re-sellers, but also for the new and emerging business categories, such as Internet-of-Things, Software-as-a-Service and Artificial Intelligence, among others,

Datagate Innovation’s purpose in life is to help re-sellers maximize and grow their recurring revenue with fixed and usage-based billing, whilst minimize their billing costs through the use of our Cloud-based Datagate rating and billing platform.

The majority of Datagate’s clients are Managed Service Providers (MSPs) who re-sell telecommunications services and IT services to their business customers, but we are starting to get traction in other industry categories, such as electricity and water, who also work on a usage-billing basis.

This month Datagate published a case study for Ranch Hills Water Supply Corporation (RHWSC), who are based in Texas and are using Datagate to bill their water customers on a usage basis.  By shifting their billing to Datagate and a usage-basis, they increased revenue by around 26%, while cutting their billing time by around two thirds. Datagate was configured to receive water usage data from RHWC’s Kamstrup Ready Manager system and post the resulting bills to RHWSC’s Xero accounting system, after emailing them directly to the end customers.

The big opportunity we see for all service resellers today is the convergence of different types of usage-based services that can all be sold through a single reseller.  We are already seeing our clients combine IT and telephony, as well as telephony and electricity.  As long as it’s usage-based and we can get access to the usage data, then Datagate can bill it, on a single invoice.

The billion dollar CEOs – lessons in SaaS.

February 18, 2018

IMG_0778Last week I attended SaaStr Annual 2018 in San Francisco, the world’s largest SaaS industry event, with over 10,000 SaaS founders, VCs and executives in attendance.

The presentations were given by a selection of very successful founders, CEO’s, executives and investors from around the global SaaS industry.  I found myself referring to many of the CEO/founders who had achieved business valuations in excess of $1B as the “Billion dollar CEOs”.

SaaStr spanned three days, and I attended on behalf of my company Datagate Innovation as part of a 100 person delegation of SaaS entrepreneurs from New Zealand, organised by Callaghan Innovation and NZ Trade & Enterprise.  Our delegation also attended some excellent presentations from New Zealand SaaS business founders that have physically moved to North America and were generous in sharing their experiences of doing so.

For me, the value of participating in this delegation and attending this type of SaaS industry event, covered three main areas;

  1. Recognizing the common patterns, challenges, ups and downs of starting up a SaaS business. Despite my own experiences, it’s still good to hear of the billion dollar CEOs going through the same or similar challenges and reaching a massively successful outcome.  The value of this kind of psychological reinforcement cannot be overstated. In any industry it’s important to know what is normal and what is not, on the path to success. It also helps to know that you’re not alone and others face the same challenges as you on a daily basis.
  2. Learning new concepts, strategies, common metrics, KPIs and how the SaaS industry operates internationally.  It’s easy to get caught up in your own business, in your own locality without seeing the bigger, wider picture.
  3. Making new industry contacts.  I was fortunate to gain new American contacts at SaaStr and New Zealand contacts from within the Kiwi delegation itself.  Conferences like this are ideal to widen your business network, because you have so many people with a common interest from all over the world, in one place, at one time.

IMG_0784

The New Zealand SaaStr delegation, meeting at the Nasdaq Entrepreneurial Center, prior to SaaStr.

 

A few of my favorite take-outs from SaaStr and the American-based NZ SaaS businesses (that happen to apply to my business Datagate) are as follows;

“Nail It before you Scale It” 

The short concise sentence above sums up how SaaS companies should transition from their start-up stage to their growth stage.  I think in many ways it encapsulates the essence of SaaS.

During the “Nail It” stage, the focus should be on understanding your customer, building your minimum viable product (MVP) that addresses the needs and wants of your customer, determining your unique selling points, your messaging and your sales strategy.  Ideally you should work with a small set of early-adopter customers to refine your offering based on their real-world feedback.  Focus on understanding and maximizing the value you are creating for your customers, aim for minimum churn, maximum customer satisfaction – before you even start focus on major revenue growth.

Setting aggressive revenue targets too early will drive the wrong behavior from your team.  You don’t want to cut corners to get on to the next sale until you’ve nailed your product and your service offering.  Once your offering has reached “nailed it” stage, there should be no need to cut corners when you get to “scale it”.

Aggressive revenue targets should be applied only when you reach the “Scale It” stage, once you’ve nailed your product or service offering.  If you scale too early, you are effectively damaging your reputation and your future potential.

This “Nail It before you Scale It” approach illustrates why SaaS start-ups require such strong support from their investors in the early stages.

Notes from several of the Billion Dollar SaaS CEOs

It’s extremely important to “know your customer” and ensure that the messages you are putting out in sales & marketing resonate well with them.  One very successful serial CEO said that when he moved into a new business, one of the first things he would do is personally spend time with customers and end users to get a better understanding their needs and what value they were (or weren’t) getting out of his company’s product.

A lot of the on-line sales processes today are heavily automated. There are tools to track the on-line activity of prospects and keep them updated regularly with a stream of sales & marketing material so they won’t forget you! The amount and depth of research that can be done on prospects automatically on-line is staggering.

Sales & Marketing work differently in the SaaS world than in the conventional scenario. In SaaS, marketing operates more in parallel with the sales team.  Prospects bounce between marketing and sales throughout their buying journey.  The two functions, sales and marketing must work tightly together with a common unified message and strategy.

Your team dynamic, your culture and your brand are extremely important to the success of your business.  Don’t retain people who damage your team dynamic or harm your culture, regardless of how well they might perform on their own.  You will find it easy to attract good people to your business if you have a good culture, reputation and brand.

Diverse teams work better than mono-cultural, single-gender teams. Research has proven that on average, businesses with more diverse teams perform better. The top performing companies seem to have the highest diversity.  SaaStr themselves have their own diversity and inclusion program and claimed to have 45%+ women speakers at SaaStr this year and over 60% women + multicultural speakers.

IMG_0828

Entering the US Market from another country (such as NZ)

Seek to partner with a larger, established American business that targets the same customers as you do, but has a complementary product to yours (definitely not a competing product!). Make your product work well alongside their product and attend their trade shows to meet their customer base.  This is the quickest, easiest and most cost effective way to get direct access to a lot of your target customers.

Americanize your offering by working with your first early-adopter American customers to ensure your offering works well and is valuable for them. Every country has subtle (and not so subtle) requirements that differ from other countries (in the case of my business Datagate, we’ve had to do a lot of work with taxation and regulatory requirements for the American market).  Publish case studies of American customers using your product.  Testimonials from customers outside America are not as effective as American ones.

You need to build an American credit history by working through American banks and/or other institutions.  Credit ratings from outside America don’t count inside America.  Opening a bank account for your NZ-owned company can be difficult without an American credit history. It was suggested that it’s easier to open a personal bank account and use that first, to build up some history, allowing you to open a business account later on.

Due to the larger market size, you can be more focused on a narrower vertical market in America than you than you need to in a smaller economy such as New Zealand, where you tend to have to go wider to get enough sales volume.

It’s almost essential that the CEO of an American-focused business is located in America, in order to be taken more seriously by American customers, investors and banks.

American work visas can take a lot of time and effort to obtain, even if you are providing your own employment and employment to American citizens.  Don’t leave this until the last minute!

There might be challenges in getting into America, but it’s a huge market and well worth the effort.