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How to turn your software from ‘free’ to SaaS

Future as a service: Scale-up owner shares tips to transition from a free service to a profit generator.

When remote desktop access and support solution provider TeamViewer launched in 2005, the service was completely free to use. Over the past several years, however, the German company has turned a popular free software with over 1.8 billion downloads into a healthy software-as-a-service (SaaS) product, with billings in over 200 countries.

TeamViewer CEO Oliver Steil recently spoke at the WebSummit technology conference. where he discussed future-as-a-service products and how to deliver constant innovation as a SaaS business. Steil also spoke about how TeamViewer’s free service gradually achieved a revenue model where 98 per cent of billings have become subscription-based.

The transition from free to SaaS 

According to Steil, the key to that transition was building a loyal following early, and giving those users the freedom to find value in the service in unique and customizable ways.

“It’s an easily accessible piece of software that customers download and then build their application and use-case around it,” he said. “So they have this fantastic ability to connect every single device, in every country, and they take this connectivity and do something with it. They automate processes, they collect data, they control devices, and all of that has been developed over time by customers.”

From that popular free service, Steil explained how the company slowly but surely encouraged its users to find revenue-generating use cases for the product, before asking them to pay for it. “That lead to 550,000 paying customers of all sizes in all geographies,” he said.

Upon asking them to pay for the software as a service, Steil said customers fell into one of two groups. “One is the regular user — they like to be with you, pay for a license and always get the latest update. The other is the occasional user that drops out at some point, which is totally fine.”

Though it seemed like a natural transition for a cloud-based solutions provider, Steil was still afraid that not enough customers would sign up for a paid subscription. “They were used to paying once for a license and then they could use the license for a long time, so yes I was very fearful,” he said.

Test in smaller markets

Before flipping the switch and becoming a SaaS product in its two largest markets, the U.S. and Germany, Steil knew it was important for the company to first experiment with different pricing models in other, smaller markets.

“We did pilots in Australia, the U.K. and the Netherlands to determine the commercial model, pricing and buying behaviour of customers,” he said. “Once we knew how it worked and that we could adapt the processes of the company to it, then we changed aggressively.”

Steil added that once a company has a firm understanding of the ecosystem, and has the numbers to back up their pricing model, they can begin migrating their business towards a subscription-based company on a wider scale.

Put boots on the ground

Prior to switching to the SaaS model, TeamViewer operated entirely out of its headquarters in Germany. This provided Steil with a major learning — in order to expand and develop into a global SaaS company, organizations will eventually find it necessary to have a physical presence in key markets.

“We’re now going more local, because wherever we have a local marketing and sales team, the penetration is much higher,” he said.  Beyond the geographical expansion, Steil feels the company also has the potential to reach new customer segments as SaaS providers.

“We started in the SMB segment, but we’re really getting in the corporate and enterprise world as well,” he said. “The biggest growth is currently around IoT, where it’s about collecting data, getting smarter about your installed base of devices in different use cases and using this data to improve your production system.”

Steil admitted that he was fearful when making the transition. But he believes that if a software product has a loyal following, with users who have a business use case for which they rely on the product, they are most likely willing to pay for that software as a service.

 

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Jared Lindzon

Jared Lindzon is a freelance journalist based in Toronto, covering a variety of topics, including technology, careers, entrepreneurship, politics and music. His work regularly appears in major publications in Canada, the United States and around the world, including the Globe and Mail, Fast Company, Fortune Magazine, Rolling Stone, Politico, the Guardian and more.

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