Scaling Enterprise ISV Growth with Product Diversification

Independent software vendors (ISVs) that only sell one solution will lose 70% of their clients over the span of 2 years. It is for that very reason that SaaS companies need to be constantly adapting to changing consumer preferences and pursuing new ISV growth strategies.

ISVs are far and wide, having grown from roughly 10,000 (globally) a decade ago to nearly 200,000 today. The increased availability of cloud technology and lack of capital requirements required to become an ISV have fueled the rapid expansion of this sector. But there’s just one problem. The market is becoming increasingly saturated, and growth is becoming the biggest barrier to ISV success.

This blog explores different avenues ISVs can explore to increase client retention, create incremental revenue growth, and simultaneously drive extra value to core product offerings.

ISV Market Overview

The market for ISVs (and SaaS) specifically is one of the fastest growing and most lucrative in the world. Here’s what you need to know.

State of the (ISV) Union

According to ISVWorld, there are just under 200,000 software vendors in the world. These vendors can be broken down into dozens of cohorts, some of the largest include: ERP & process management, accounting & taxes, data management, content & web, as well as sales and marketing.

isvs by industry cohort

Source: ISVWorld

These 200,000 SaaS companies represent a 20x market growth over the past decade, and that growth can be explained by SaaS adoption. According to the Google Accel Report, the combined SaaS spend is forecasted to hit 132 billion dollars by 2020. Each of these ISVs are vying for their share of that MASSIVE market opportunity.

smb saas adoption

So, how can you maximize your share?

The Top 3 ISV Growth Strategies

If you’re an ISV, then you’re likely facing a few points of contention. Data from SaaSX cites that these are the three primary items that ISVs struggle with: 

    1. Cost of Acquisition (CAC). The median cost for a SaaS company to acquire a dollar of new revenue is $1.18.
    2. Upsell Strategy. Only 54% of SaaS companies treat upselling and add-on sales as high priority.
    3. Client Churn. Around 70% of ISV client will churn over a 2 year span if only sold a single product.

Fortunately, data from our ISV Retention Study determined strategies to best combat these challenges while simultaneously identifying new growth opportunities.

1. Sell More Products and Services

The reality is simple. The businesses that you’re selling to are looking for a single solution provider. You might have the best sales platform in the world, but your clients still need solutions to help them with marketing, finance, HR, basic business operations, and much more.

The only problem is that most of your clients don’t have time to be managing payment to 10 different SaaS solution providers for 12 different solutions. And with 200,000 solutions to choose from, they definitely don’t know which solutions would be best for them. That’s why 51% of SMBs are looking for a single solution provider, or a cloud broker.

This explains why ISVs are losing clients at an alarming rate, and also explains why providing more products and services to meet more needs is the best remedy to client loss. 

Data from Vendasta’s ISV Retention Study demonstrated that a single solution would garner a retention rate of only 30% over the span of 2 years. It then proved that adding one more product to that offering would increase retention rates by 20%, and selling that same client 4 products would catapult that retention rate up to 80%.

isv account retention

That’s the power of selling more products and services.

2. Incremental Revenue Growth

Selling more solutions is clearly important, but it can’t be at the cost of your core product or service offering. That’s why you need to deploy a strategy that earns incremental revenue growth. Incremental revenue growth is the process of stacking new lines of revenue on top of the revenue you’re already generating.

It looks like this:

incremental revenue growth

There are a few tactics that can help you realize this type of incremental revenue growth:

  1. Develop new SaaS solutions to meet different consumer needs
  2. Look to solicit vendor integrations with other SaaS companies/providers
  3. Adopt rebrandable cloud solutions through a cloud services brokerage

The problem: Developing additional cloud products is high risk and high cost, with serious delays to market. Soliciting individual reseller partnerships with other SaaS providers can be timely, and can also serve to dilute your brand value.

Fortunately, there are cloud broker platforms that are built to enable ISVs to instantly start adding rebrandable SaaS solutions to their offering. No development cost, instant go-to-market, and no brand dilution. 

Some of the most common solutions to rebrand and resell through cloud broker platforms pertain to: sales and marketing tools, business applications, email, collaboration, and finance. 

However, the key for ISVs when adding new products or services to their existing offering is to ensure that the new solution(s) align with your existing software offering. The consequence of improper alignment can be revenue loss, fragmentation, and brand dilution.

3. Provide Compelling Proof of Performance

Selling your value is one thing, but until you can actually prove your value to clients, you will never fully gain their trust. Reporting is the gateway to better client trust and extended client lifetimes. In fact, our ISV Retention Study demonstrated that after three years, companies who were provided with proof of performance for at least half of their lifetime showed a 38% increase in retention.

proof of performance

Another interesting finding within our ISV Retention Study was that adding Google my Business reporting when paired with new marketing solutions proved the capability of increasing retention by a whopping 47%.

Final Thoughts

The more solutions ISVs are able to provide to their clients, the stronger their relationship becomes. The better you are able to align new solutions with your existing offering while minimizing toil, the better equipped you will be to generate incremental revenue growth. And the better the performance of your offering, and the better your ability to showcase that performance, then the less reason your clients have to leave. Combined, you have the Rosetta Stone of the ISV world.

isv growth rosetta stone

Download the full ISV Retention Study and discover performance based solutions that driving incremental revenue growth for enterprise ISVs today.

About the Author

Brock is a Former Marketing Analyst at Vendasta with a passion for the more creative things in life. He also answers to Archie - for obvious reasons... And when he's not putting his fingers in paint, or saving Riverdale, he can usually be found asking Google one of the many more embarrassing "how to" questions.

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