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CloudExpo® Blog: Article

Why SaaS Vendors Must Offer Automated Sign-On to All Business Customers

It is much more than a security issue

First, let's define what I mean by automated sign-on. Some call it federated sign-on, others just single sign-on. For business customers it means that they use their corporate network sign-on and user directory to manage access to an external application. Automated sign-on requires user management to be automated as well; otherwise end users do not get access automatically.

Typically, automated sign-on is regarded to be something troublesome and costly, which slows down rollouts, adds complexity and requires involvement from customer IT organizations, something that SaaS vendors often want to avoid at any cost. Most of the solutions on the market are very complex, and require investments and expertise from both SaaS vendors and their customers, so the fears are not without ground. As a result, many SaaS vendors only offer automated sign-on when they cannot avoid it.

However, automated sign-on can be one of the most important tools in meeting some of the most important business objectives for a SaaS business:

  • engaging customers and keeping them
  • minimizing unit costs

Let's have a closer look at how automated sign-on can help.

Engaging customers and keeping them
Engaging new, revenue generating users is a must if you want to grow your SaaS business. However, people are very reluctant to spend time with sign-up forms. According to a study by Blue Research covering UK consumers, only 14% of them were sure to sign up, the rest would at least hesitate. Signing up to business applications is typically more complex, due to information related to billing and access rights, so the numbers are definitely not higher. Automated sign-on helps you get rid of the sign-up form, as most of the information needed can be found in the customer's user directory, and can easily be transferred to your application as part of sign-on.

Engaging customers is important, but keeping them is even more important. As customers pay per usage, the break even for a customer might be several months or even years, which means that loyalty is business critical. According to research by Frederick Reichheld of Bain & Company, businesses which improved customer retention rates by as little as 5% saw increases in profits 5% to 95%.

How loyal are end users? According to research from Totango, half of paid SaaS customers do not actually use the applications. What happens to your business when they stop paying as well?

How can automated sign-on help you improve loyalty and retention rates? According to the previously mentioned study covering UK consumers, 90% of them had left a web site if they forgot their password or login info, instead of answering security questions or re-setting their password. The login screen is obviously a major threat to loyalty, and automated sign-on helps you eliminate that threat.

Minimizing unit costs
The other part of a successful SaaS equation is minimizing unit costs. Shared resources and automated management helps minimizing unit costs, whereas anything specific to a certain customer or an end user threatens to increase them significantly.

Manual user management is a major challenge to unit costs. The personnel turnover in a typical organization is about 10%, and organizations are restructured every 2-3 years. From a user management perspective this means that at least half of all user profiles have to be updated every year. If your helpdesk takes care of these updates, the cost can be 5% of the revenue per user. Password resets add to these figures, studies have shown that the number of password resets per week can be as high as 10% of the number of employees in an organization.

You can of course outsource user management and the costs related it to the customer. However, then the most critical gatekeeper to your application will be someone who you have no control over, and who has no real incentives to drive revenue for your application. As a result, maintaining user profiles in your application is likely to be a relatively low priority, which leads to slower engagement as well as incorrect invoicing information leading to increased costs for settling those invoices.

Automated user management solves all these issues. Every time a user signs on to the application, up-to-date information from his own organization is transferred to the application, minimizing the need for manual user management. According to my experience, well over 90% of user management can be automated this way.

Conclusion
Automated sign-on is business critical to SaaS vendors serving large and mid-sized customer organizations. It brings significant and measurable improvements to the most important objectives of a SaaS business: driving engagement and usage, fighting churn and minimizing unit costs. And you get improved security as a bonus. Obviously automated sign-on is something any growth oriented SaaS vendor should push, if only there was a solution that could be used to serve most of their customer base (shared resources) and which demands as little as possible per customer rollout (unit costs).

If you are interested is such a solution, read more here.

More Stories By Kjell Backlund

Kjell Backlund, CEO of Emillion, is a seasoned software business entrepreneur with over 20 years experience in international business. He founded Emillion in 2001, with the vision that automating sign-on and user management would be essential to the success of SaaS and Service Desk applications(www.emillion.biz).

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