We meet many smart and capable people are automating their businesses—whether it’s car mechanics streamlining diagnostics, speech translation improving accuracy through AI, or energy broking optimising trades. Many of these firms create bespoke products to make their operations more efficient, effectively evolving into a Business Management System (BMS) for their niche.
As they develop these tools, some hit gold and realise a much wider market if they build out to a full-fledged SaaS product. But transitioning from a tech-enabled service firm to a global SaaS business isn’t straightforward. Here are some common pitfalls that can derail even the best-intentioned companies:
Key Challenges in Transitioning to SaaS
- Distraction – The tech team struggles to prioritize maintaining core business operations (generating revenue) and developing SaaS tech that hasn’t yet been proven.
- Governance & Reporting – Managing a SaaS product requires a different level of governance, and tracking what the team is doing becomes more complex for investors.
- Infrastructure Limitations – The platform may not have been designed as a SaaS product, leading to single points of failure, technical debt, and UI workarounds.
- Talent & Specialization – SaaS businesses need dedicated expertise in areas such as product management, DevOps, and security—skills that service firms often lack.
- Security & Compliance – Running a SaaS platform globally requires significant security investment, including compliance with data privacy laws, uptime guarantees, and threat mitigation.
It’s not that this transition is impossible; plenty of companies have done it. However, the discipline required in SaaS isn’t always evident in a service-based firm, where priorities shift more fluidly based on client needs.
The Tell-Tale Signs of a Struggling Transition
One common sign of difficulty is when management oscillates between different product visions during investor or client conversations. They might switch between discussing their service-driven revenue model and their SaaS aspirations, making it difficult for stakeholders to see a clear growth path. This lack of focus can make it hard to justify treating the SaaS initiative as a startup within an established services firm.
To succeed, these teams need help simplifying their roadmap, ensuring they maximise value from their expenditure and effort.
Areas to consider when making the services to SaaS transition
- Not addressing the core pain points:If the SaaS product doesn’t solve a significant problem for customers, it will struggle to gain traction, even if the services firm has a strong reputation in their industry.
- Poor user experience:A clunky or difficult-to-use interface can quickly deter potential customers and lead to high churn rates.
- Insufficient marketing and sales strategy:Transitioning to SaaS requires a different approach to marketing and sales, focusing on customer acquisition through online channels and subscription-based pricing models.
- Lack of technical expertise:Building and maintaining a robust SaaS platform requires a skilled development team, which might be missing in a traditional services firm.
- Resistance from existing clients:Existing clients accustomed to the traditional service delivery model may be hesitant to switch to a subscription-based SaaS solution.
- Inadequate customer support:A successful SaaS business relies heavily on excellent customer support to retain users and address issues promptly.
- Failure to adapt pricing strategy:Not properly aligning pricing tiers with the value proposition of the SaaS product can lead to customer dissatisfaction.
- Neglecting product development and innovation:In the fast-paced SaaS market, continuous improvement and feature updates are crucial to stay competitive.
Successful Transitions From Tech-Enabled Services to SaaS
- ServiceTitan – Built initially for a niche audience (plumbing and HVAC service providers), ServiceTitan transformed from a bespoke service tool into a robust SaaS platform for managing field service businesses. This is very similar to the firms we assess during Tech DD, niche offering for a specific market.
- Shopify – Not 100% services but started as an e-commerce store, Shopify built an internal tool to manage online sales. Recognising its broader potential, the company pivoted to become one of the largest e-commerce SaaS platforms globally.
- Toast – Initially a tech-enabled restaurant point-of-sale (POS) service, Toast scaled into a complete SaaS platform, offering cloud-based management tools, analytics, and financial integrations for hospitality businesses.
The Reality: No Set Rules
There’s no universal formula for success. I recently worked with a two-person startup that built a fully secure, global product from day one. Despite minimal resources, their clarity of vision guided them to a solid, scalable product.
The key for tech-enabled firms eyeing the SaaS path is discipline—balancing innovation with operational excellence, securing the right talent, and ensuring a product-market fit before scaling. Executed right, the transition can unlock massive value. Done wrong, it can drain resources and stall both the core business and the SaaS ambition, and create confusion for all.
