01-29-10 | Blog Post

Transparency in SaaS, IaaS, and all as-a-Service Companies

Blog Posts

Recently, I was reading a great article by Joel York over at his SaaS Blog, Chaotic Flow. In his article, “SaaS Marketing Tips – The Truth Shall Set You Free“, he explains the critical difference in the sales process between selling traditional software and Software-as-a-Service: transparency or lack there of, on behalf of the software company.

Traditional software companies teach their sales employees “to avoid disclosing any more information than the minimum necessary to close the deal.” Because of the one-time payment structure of those deals, it creates a short-term focus on the deal and the relationship with your potential client. Where as with SaaS, one can “try before they buy” and depending on the contract length, walk at any time if the service is not up to their liking. This creates a long-term focus and transparency and trust between the two parties becomes more natural.

As Joel points out, Google Adwords is a great example:

“Ask yourself how much you spend right now on Google AdWords without ever having spoken to a sales rep. How does this compare to your own average selling price for online transactions?  Now, ask yourself why.  The answer is transparency, from company reputation to cost-per-click.”

While Joel focuses his discussion on the software industry, it is true for all products that can also be services. We see this with big ticket items like cars and houses as well as everyday purchases like music and books. The larger the purchase and commitment, the more risk involved and the less trusting the two competing parties become. Full transparency becomes the only logical play when dealing with Product-as-a-Service businesses.

Having studied game theory and negotiation in college, this makes perfect sense to me. Anyone familiar with the prisoner’s dilemma (a game similar to a negotiation process) knows when the game is only played once (like purchasing a good such as a car), both parties have the incentive to “defect” or lie (it is the rational strategy) but when the game is played multiple times for a amount of time unknown to both parties (like a subscription based service) the rational strategy is to “cooperate”. This repetition in “games” creates the incentive to take the leap of faith into a cooperative strategy. If I defect, the other party will defect for the remainder of the negotiations. If he defects, then so will I. One defection and there is no trust, and everyone is worse off for the rest of the series of games.

The as-a-Service model is built on this “repetition of games” trust and cooperation, that while I might gain in the short term if I hide the truth, in the long term, I will have lost a valuable relationship. This dedication to transparency is the one of the lesser talked about benefits of not only moving your business to an as-a-Service company but purchasing from these types of companies.

At Online Tech, we offer Infrastructure-as-a-Service, and we see and live this phenomenon every day. Although it may seem trite to say, one of our core values is “Win-Win or No Deal”. Right up front, we have a conversation with all of our prospects and try to understand their needs. If their needs don’t match what we offer, we let them know. There is no point for a as-a-Service company to sell something to a client they don’t need. That is not a Win-Win deal and the client will sooner, rather than later, figure out that they don’t need your service and move elsewhere. It creates unproductive work for both parties.

Transparency is key in our business and something we strongly believe is a key to our success.

Have you seen any as-a-Service companies succeed that are not built on transparency and trust?

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