The increasing share of ProServ in SaaS Revenue

Read an interesting stat yesterday.

“One-in-two SaaS companies charge for professional services. For these folks, ~15% of revenue comes from Professional Services.”

India, having garnered significant revenue from IT services, is witnessing a transition towards SaaS. While many companies lean towards a pure product-oriented approach, India's cost advantage in terms of resources makes SaaS+ an attractive proposition. Professional services, though not always recurring, are definitely a good source of cash flow for these companies.

Service offerings can include:

1. Implementation fee: This is usually a one time fee paid in the beginning for onboarding the customer to the platform
2. Managed services fee: This is needed in case the customer needs a continued support for using the platform.
3. Consulting and advisory: This is needed if customer needs some best practices in terms if using the platform and some services above what the product is offering

Having services revenue can significantly improve companies’ gross margins if they are doing the implementation themselves. This, of course, is applicable to companies where there is a need of some handholding or the software is very customised for each customer.

A lot of companies however, don’t provide professional services by themselves. In such cases, customers have to often work with SIs to get the software implemented and more often than not, the fee of implementation outside is higher than the software itself. For example, customers usually need a BI tool developer along with the BI tools or a Salesforce agency to help create reports on Salesforce.

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