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Measuring the Health of XaaS Subscription Renewals
What does your renewal engagement
model look like?
Chaos?
Or managed handoffs?
5
Three big questions to consider
What are the forces that create erosion and growth with recurring revenues?1
2
3
What metrics should we use to measure the renewal of subscription revenues?
How can I assess our subscription performance relative to the industry?
6
What are the forces that create erosion and growth with recurring revenues?
Question #1
TSIA XaaS Revenue Waterfall
7
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Source: TSIA SRG Cloud Benchmark Study
8
Forces that create revenue erosion
Downsells
Customer Churn
• Small group of users that don’t engage• Customers that go to a competitor’s platform
• Discounting at renewal• Reduction in number of users• Reduction in system compute time utilized• Removal of XaaS products from subscription
plan• Downgrade from fee-based support/adoption
services to free
TSIA XaaS Revenue Waterfall
9
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Churn = 7%
$7m
Source: TSIA SRG Cloud Benchmark Study
10
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Churn = 7% $3mDownsell = 3%
$7m
Source: TSIA SRG Cloud Benchmark Study
TSIA XaaS Revenue Waterfall
11
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Churn = 7% $3mDownsell = 3%
$7m
Retention Rate = 90%
RETAIN
TSIA XaaS Revenue Waterfall
Source: TSIA SRG Cloud Benchmark Study
12
• Purchases of additional XaaS products (i.e. suite)
• Managed services wrapped around XaaS
• Project-based value-added services
Levers that generate revenue growth
Upselling
Cross Selling
• Upsell from free to fee-based support/adoption services
• Increase in number of users
• Increase in system compute time utilized
• Price increases / unwinding of prior discounts
13Source: TSIA SRG Cloud Benchmark Study\
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Retention Rate = 90%
Churn = 7% $3mDownsell = 3%
$7m
Upsell = 10%
$10m
RETAIN
TSIA XaaS Revenue Waterfall
Source: TSIA SRG Cloud Benchmark Study
TSIA XaaS Revenue Waterfall
14
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Retention Rate = 90%
Churn = 7% $3mDownsell = 3%
$7m
Upsell = 10%
$10mXsell = 15%
$15m
RETAIN
Source: TSIA SRG Cloud Benchmark Study
15
115%
$115m
100%
$100mEnd of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Retention Rate = 90%
Churn = 7% $3mDownsell = 3%
$7m
Upsell = 10%
$10mXsell = 15%
$15m
RETAIN
Expansion Rate = 25%
EXPAND
TSIA XaaS Revenue Waterfall
Source: TSIA SRG Cloud Benchmark Study
16
115%
$115m
100%
$100m
End of Year Revenue:
Total $’s End of Year
Starting ARR: Total $’s Available
to Renew at Beginning of Year
90%
$90m
RetentionDollars
UpsellDollars
Cross Sell
Dollars
Customer Churn Dollars
DownsellDollars
Retention Rate = 90% Expansion Rate = 25%
Churn = 7% $3mDownsell = 3%
$7m
Upsell = 10%
$10mXsell = 15%
$15m
YoY Growth Rate = 15%
RETAIN EXPAND
TSIA XaaS Revenue Waterfall
Source: TSIA SRG Cloud Benchmark Study
What is your retention rate?
What is your expansion rate?
What is your YOY growth rate?
Assess your XaaS Revenue Waterfall
Takeaway
18
What metrics should we use to measure the renewal of subscription revenues?
Question #2
19
49 Metrics
20
49 Metrics
47 Practices
21
49 Metrics
47 Practices
7 Modules
22
• Geography• Customer
Segmentation• Revenue mix• Sales channels
Company Demographics
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
23
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
Company Demographics
Business Results
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
24
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
• Renewal rate• Renewal cadence• Discount frequency• Discount depth• Price increases
Company Demographics
Business Results Renewal Capabilities & KPIs
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
25
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
• Renewal rate• Renewal cadence• Discount frequency• Discount depth• Price increases
• Coverage model• Renewal comp• Reporting
relationships• Adoption activities
Company Demographics
Business Results Renewal Capabilities & KPIs
Renewal Engagement Model
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
26
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Market analysis• Value proposition• Consumption
analytics
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
• Renewal rate• Renewal cadence• Discount frequency• Discount depth• Price increases
• Coverage model• Renewal comp• Reporting
relationships• Adoption activities
Company Demographics
Service Offer Development
Business Results Renewal Capabilities & KPIs
Renewal Engagement Model
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
27
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Market analysis• Value proposition• Consumption
analytics
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
• Renewal rate• Renewal cadence• Discount frequency• Discount depth• Price increases
• Coverage model• Renewal comp• Reporting
relationships• Adoption activities
Company Demographics
Service Offer Development
Business Results Renewal Capabilities & KPIs
Renewal Engagement Model
• Support & adoption deliverables by tier
• Support pricing• Premium/standard mix• Profitability of support
services
Free vs Fee-based Services
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
28
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Market analysis• Value proposition• Consumption
analytics
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
• Renewal rate• Renewal cadence• Discount frequency• Discount depth• Price increases
• Coverage model• Renewal comp• Reporting
relationships• Adoption activities
Company Demographics
Service Offer Development
Business Results Renewal Capabilities & KPIs
Renewal Engagement Model
• Autorenew terms• On-line renewals• Renewal operations• Automation via
technology
Frictionless Renewals
• Support & adoption deliverables by tier
• Support pricing• Premium/standard mix• Profitability of support
services
Free vs Fee-based Services
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
29
• Geography• Customer
Segmentation• Revenue mix• Sales channels
• Market analysis• Value proposition• Consumption
analytics
• Renewal waterfall assessment
• XaaS services growth
• % on premium services
• Renewal rate• Renewal cadence• Discount frequency• Discount depth• Price increases
• Coverage model• Renewal comp• Reporting
relationships• Adoption activities
Company Demographics
Service Offer Development
Business Results Renewal Capabilities & KPIs
Renewal Engagement Model
• Autorenew terms• On-line renewals• Renewal operations• Automation via
technology
Frictionless Renewals
• Support & adoption deliverables by tier
• Support pricing• Premium/standard mix• Profitability of support
services
Free vs Fee-based Services
Source: TSIA SRG Cloud Benchmark Study
New SRG Cloud Benchmark studySeven Core Modules
Source: TSIA SRG Cloud Benchmark Study
• Renewal waterfall assessment
• Coverage model• Renewal rate• Discount frequency• Discount depth• Renewal cadence
Managed Services
* Managed Services is an optional module.
Track key metrics in all seven categories
Implement technologies to track and measure performance
Measure what matters
Takeaway
31
How can I assess our subscription performance relative to the industry?
Question #3
32
120 Questions
11
925
14 16
Leverage SRG Cloud Benchmark Results!
28
Source: TSIA SRG Cloud Benchmark Study
10 key insights you’ll uncover with the
SRG Cloud Benchmark Study
34
Insight #1
What metrics should we use to measure the health of our subscription revenues?
35
Insight #2
How does our subscription renewal performance compare with other companies’?
36
Insight #3
How are churn and downselling affecting renewal rates?
37
Insight #4
How is upselling and cross-selling contributing to growth?
38
Insight #5
Where is the line drawn between free and fee-based support & adoption services?
39
Insight #6
How do my premium support & adoption offers compare with the industry?
40
Insight #7
Which adoption services correlate to higher renewal rates?
41
Insight #8
What role do account executives play with selling fee-based premium support & adoption services?
42
Insight #9
Are my costs to retain customers higher or lower than the industry?
43
Insight #10
What are the renewal practices of the pacesetter companies?
How do you compare to the industry?
How do you compare to your peer group?
Benchmark your XaaS business
Takeaway
What’s next?
Become a TSIA member and benchmark your XaaS business
Request a membership briefing