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SaaS and the CI

Savant’s new Software as a Service model heralds a shift in the industry that presents challenges and opportunities for dealers.

When Savant announced that it was converting its home automation system to a Software as a Service model in September 2021, industry eyebrows were raised, chins were scratched, and heads were tilted. Yes, SaaS is nothing new to custom integrators — especially those who sell home security services — but, while there are components of automation systems that are available as a SaaS, typically around remote management, having the whole-home platform in that model was a big step for both the manufacturer and its dealers.

SaaS Illustration
Getty Images

“The software model has always been important to us,” says Angela Larson, senior VP, service & customer operations, Savant. “Our focus from day one has been to develop a software model that delivers both industry-leading dealer profitability, as well as an industry-leading consumer experience. The home is a living, evolving space, and the technology we all deliver must keep pace with that.”

Savant’s Essentials Subscription provides significant and unique benefits, including access to the latest software with no additional fees, addressing quick bug fixes, ease of serviceability, plus access to the latest and greatest software features. But even with all those benefits, it does not mean that the transition is an easy one for integrators and their clients.

“The trick to the SaaS model is to make sure the core system has few, if any, barriers to upgrading and to running on the latest software, all while making system upgrade and maintenance events a profitable and desirable business model for the integrator,” adds Larson. “Integrators across the board are seeing the value of a service model in their own businesses. The Savant subscription model complements those integration companies that already have an annual or multi-year service model and supports those that are just starting their service journey.

“We’ve had incredible adoption from our integrator base on new projects. When an integrator approaches a homeowner to talk about a new system, they now have opportunity to talk about the realities of system maintenance and enhancements over the life of the home. Having the confidence to assure a homeowner that their smart home will be better tomorrow than it is today is a powerful tool.”

That evolution was made clear last September when Savant announced significant updates to its core Essentials Subscription that included Savant Home Back-Up & Restore, which ensures secure cloud-based storage of key parameters and settings of the smart home; Savant Home Manager, which allows homeowners to have access to key system status visibility and user-management capabilities; and the Savant Intercom Service, which is coming spring 2023 and provides room-to-room communication throughout the home without the need for dedicated intercom server hardware.

SaaS - Savant Intercom Service
Savant Intercom Service, coming spring 2023, provides room-to-room communication. It is available as part of Savant’s Essentials Subscription, without the need for dedicated intercom server hardware.

“The main challenge has been getting dealers to go backward and explain those benefits to installed projects,” says Larson. “That can be an uncomfortable spot for dealers — how do you take existing business and evolve it into a new service and software model? We are dealing with this by focusing on new features like the Intercom Service that integrators can profitably deliver across their entire install base at a software level. In this economy, upgrade opportunities that don’t require invasive hardware or infrastructure changes will be valuable to integrators.”

Changing Minds

Changing the way you have done business for nearly 20 years would be a challenge for any company, but in custom integration, where the dealers work closely with the manufacturers, it is especially difficult.

“Savant has a 20-plus-company advisory council that is made up of integrators of all shapes and sizes — some are big national integrators, and some are small local-market integrators,” says Larson. “The advisory council helped us think through how to implement this strategy so that it could be a win for everyone.”

Still, she admits, it was not easy. “We had some tense calls,” she says.

One of those advisory council members was Mathew Lavin from Metro 18, an integration firm that covers numerous cities across the U.S. He also recalls the initial conversations being tense. “At first everybody hated it,” he says.

However, as a large integration firm with a system in place for recurring monthly revenue, in the end the adjustment to SaaS was not that big of an adjustment. “We sell to the high-net-worth set, and they’re comfortable writing checks for large amounts of money, not small amounts of money,” says Lavin. “It’s far easier to ask for $500,000 than it is for $500 — they don’t like the sensation of hands in their pockets.

“How we sell with this business is much more of a turnkey, all-inclusive package — even before the Software-as-a-Service exploration. My first reaction to Savant’s change was that they were never going to get our clients’ credit cards. We sell networking and cameras that have software licensing associated with them, as well as our service and support, in three-year packages. Our feedback to Savant was, if we must sell Software as a Service for the Savant system to get all the features we want, then we will package it in three-year increments with all the other things that we sell. It becomes part of that total proposition.

“Most of our clients get it,” he adds. “They know they are buying a solution.”

In addition to creating a three-year subscription plan, Savant and its advisory council also adjusted which items would be considered part of the core solution and which would be subscription feature add-ons.

SaaS - Savant Home Back-up & Restore
Savant Home Back-up & Restore is one of the advanced features available with Savant’s Essentials subscription.

“There was some initial pushback and discussion around what is included in the subscription packages because some of the features they wanted to tie to the licensing were considered core requirements by the advisory council,” says Lavin.

“We’ve had to be unafraid to adjust where we got it wrong,” says Larson. “We will make changes and we’re not afraid to do that. That’s been a big point for us — just last month we reviewed the next phase of subscription with our council because this isn’t a one-time business model change. There’s constant evolution here.”

Success Story

With a year and a half behind it, Savant’s model is going strong, with dealers and their clients understanding the service and why it can work for everyone.

“We had to make it a win-win-win situation — it had to be a win for Savant, it had to be a win for the technology integrator, and it had to be a win for the homeowner,” says Larson. “For us as a manufacturer, it is more efficient when all our tech support calls are systems that work from the same software foundation. The same goes for integrators — the more they can keep their jobs on a unified software version, the better it is for their technicians who are troubleshooting in the field.

“Consumers are expecting things to improve over time. As an example, our phones get new features well after initial purchase. So, consumers are expecting their home technology to stay evolved with their lifestyle. As an industry, we are forced to deliver this model to our homeowners because they expect it.”

“We do most of our business in Northern California,” concludes Lavin. “Many of our clients are in tech and they see the big picture right away that Savant needs to monetize its software development costs to provide what these clients ultimately want, which are the features and services that Savant provides.

“I ended up in a satisfactory place where we can charge for it and have that experience feel natural for the end users. It all makes sense.”

Getting Started in SaaS

Adding Software as a Service costs to a client’s bill can be seamless if you already have a recurring revenue program in place. If not, Henry Clifford, owner of integration firm Livewire and co-founder of service company Parasol, offers some advice for those to who want to add a service component to their business.

“If integrators are serious about getting into a services mindset, it requires taking time to develop a solid, inclusive program,” says Clifford. “For example, our programs at Livewire include things such as 4sight [for remote monitoring of a Control4 automation system] that are rolled up inside of our services subscriptions because we don’t want to nickel-and-dime our customers. At the end of the day, customers are buying the integrator and its relationships.

“Also, make it easy to do business with you. If your customer can’t go on your website and sign up and put their credit card in and start subscribing, then that’s a huge mess. A lot of the calls to action that we’ve seen from integrators usually stop right at the one-yard line when what they should have is the ability to have that customer do business with them right then and there.”

For dealers looking for help getting started, Clifford mentions Parasol+, which is designed for exactly that. “We are dealing with a group of folks who have been unfortunately bludgeoned over the head with this messaging of RMR for years, with fair-to-middling results.” he says. “The idea behind Parasol+ was to create a concierge-level, hand-holding experience to not only get them into operationalizing something like Parasol in their business, but also get them into the services mindset.”

Parasol+ is a do-it-for-me platform that introduces Parasol’s services without any disruptions to the company’s workflows or load management. It offers access to RMR marketing tools and CRM integration services, as well as on-site or virtual check-ins from industry experts.

Once you begin selling services, the possibilities begin flowing in. “When the integrator decides to take control of their own plans,” concludes Clifford, “they have the latitude to then change the pricing and the offering and create options for new subscribers.”

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Accounting for SaaS

Recurring revenue means recurring billing, which can be difficult to manage. Matt Bernath, president of VITAL, offers the following pointers:

  • Get as many clients set up on autopay as possible — it is simpler for everyone.
  • Don’t offer monthly payment options; only offer quarterly or annual. This makes the process of managing billing easier.
  • Use the “recurring transaction” feature built into QuickBooks or other platforms such as iPoint, Recur360, Zoho Subscriptions, and many others.
  • One “gotcha” with autopay is managing the “dunning” process (payment failures and re-tries) and keeping up with changing/expiring credit card numbers. Find the system that automates and simplifies this process in alignment with your goals.
  • Be sure that you mark up the services adequately to cover the additional cost of admin and software. You should be making at least 50 percent margin on any services you resell for this reason.
  • The key is tracking who owes you what, recognizing that revenue properly (monthly), and having a system in place to audit that against what customers you are being billed for from the SaaS vendor.
  • Make sure you have a strong admin/bookkeeper — that is always a good payoff!

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