NonTech companies are on the hunt for fresh revenue streams, aiming to derive up to 50% of their income from new businesses and products by 2026. McKinsey ‘s latest report suggests that Software-as-a-Service (SaaS) could be the golden ticket for these incumbents, propelling them toward this ambitious goal.
In a world where digital transformation is no longer optional, SaaS can be a digital goldmine that could reshape the future of NonTech incumbents.
Let’s dive into the details…
Why SaaS?
The SaaS sector is not just growing—it’s booming. Many companies are aiming for 50% of their revenue to come from new businesses and products by 2026. The problem? Most aren’t on track to hit that target. Enter SaaS, the potential game-changer.
The SaaS Boom: A $10 Trillion Revenue Opportunity
Currently valued at $3 trillion globally, it’s projected to surge to a staggering $10 trillion by 2030. With median revenue growth rates of 22% (and top performers hitting 40%+), it’s no wonder traditional companies are salivating at the prospect.
In the U.S., public SaaS companies with revenues over $100 million have a median growth rate of 22%, with the top quartile hitting above 40%. These numbers aren’t just impressive—they’re indicative of a thriving market with immense potential.
Read SaaS Market Set for Explosive Growth: $423.2 Billion Expansion Predicted by 2028
Why SaaS is the New Black for Old-School Companies?
- Lightweight Champion: Lower overhead and logistical costs than physical products.
- Cloud Nine: Partnering with major cloud providers for the heavy lifting.
- Scala-bility: Easy to scale, thanks to its digital nature and cloud elasticity.
The SaaS Advantage
SaaS brings more to the table than just impressive revenue potential. Its asset-light nature translates to lower overhead and logistical costs compared to traditional physical products. By partnering with major cloud service providers, non-tech companies can offload complex technical work. Moreover, the inherent scalability of SaaS, amplified by cloud technology, means rapid growth and adaptation are within easy reach.
Navigating the Transition: Six Key Focus Revenue Areas
Here’s where it gets interesting. Transforming from a traditional company to a SaaS operator isn’t just about slapping some code together. McKinsey identifies six key focus areas for success:
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Innovate Through Rapid Test-and-Learn Cycles
Traditional product development cycles often fall short in the fast-paced world of SaaS. McKinsey recommends a shift towards iterative, customer-centric development. The Washington Post Company’s Arc XP platform exemplifies this approach. By co-creating with initial users, they refined their product to support a diverse range of clients, including large players like Canada’s Globe and Mail.
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Capitalize on Existing Digital and Data Assets
Non-tech companies often underutilize their digital and data assets. Recognizing the hidden value in these resources can open new revenue streams. Anheuser-Busch InBev’s BEES platform is a prime example, transforming existing data into a powerful B2B SaaS e-commerce platform.
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Plan for Scale from Day One
Scaling SaaS products requires a flexible and dynamic road map. Johnson Controls’ OpenBlue platform showcases the importance of a well-thought-out plan, enabling the company to sequentially roll out connected solutions and expand their service offerings.
Discover How SaaS Empowers Businesses to Deliver Omnichannel Customer Service
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Target Talent by Going Deeper and Wider
The competition for SaaS talent is fierce. Non-tech companies need to explore unconventional talent sources and focus on candidates’ interest in their specific sectors. Engaging with communities like GitHub or hosting hackathons can attract diverse talent pools.
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Orient Pricing and Selling Around Product Usage
SaaS products offer unique pricing flexibility based on feature usage and customer value. This model demands a shift in sales strategies, emphasizing customer success throughout the sales journey. McKinsey’s research shows that an omnichannel approach is crucial, with eight in ten B2B decision-makers finding it more effective than traditional methods.
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Protect the Funding, Focus on Leading Growth Metrics
Sustained funding and a focus on leading indicators are vital for nurturing new SaaS businesses. Metrics like net retention and the volume of interested leads should guide investment decisions. Partnering with external experts can also provide valuable insights and additional capital.
Success Stories: Old Dogs, New Tricks
Need proof? Look no further than these traditional companies making waves in SaaS:
- The Washington Post’s Arc XP: From newsroom tool to powering 1,900+ sites globally.
- Anheuser-Busch InBev’s BEES: Turning beer data into a B2B e-commerce powerhouse.
The Road Ahead: Challenges and Opportunities
While the SaaS path is promising, it’s not without its hurdles. Traditional companies must overhaul their product development processes, rethink talent acquisition, and even reconsider how they measure success.
But for those willing to take the leap, the rewards could be substantial. As McKinsey puts it, launching new SaaS businesses needs to become a priority for nontech incumbents looking for growth.
The Bottom Line
In the digital age, even the oldest dogs can learn new tricks – and those tricks might just involve a lot of coding. As traditional companies eye the SaaS market, we’re likely to see a new breed of tech players emerge. The question is: Who will successfully make the leap from legacy to cloud-native?
One thing’s for sure – the race to SaaS supremacy is on, and it’s not just for Silicon Valley anymore. Grab your popcorn (or your favorite legacy product) and watch as this digital drama unfolds!
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