ST4 | Sandeep Mittal On Transforming A Service Business Into A SaaS

Discussion Topics: Sandeep Mittal On Transforming A Service Business Into a SaaS

• Why you should consider transforming your service into product
• What to prepare for transformation
• The impacts of transformation on clients and stakeholders
• Lesson learned and tips for transformation

Transcript: Sandeep Mittal On Transforming A Service Business Into a SaaS

So Sandeep, thanks a lot for joining us today on the ShopTok podcast. Before we begin, would you like to give us a brief introduction to yourself and maybe to your business?

Thanks for having me here.

But we have a very quick introduction.

I’ve been an entrepreneur pretty much all my working life. Me and a couple of friends, I started a company, one in college. We did some software development back then. From there, I moved into data analytics. Did a little bit of rock music in India at that point in time. But the analytics world and the work we did on the data scientist side at the intersection of that and customer engagement is really wonderful.

So I started a company called Cartesian in 2009, an analytic consulting company and it scales up fairly well I would say. At peak time there were about 100 people operating. And we had offices in India, Singapore, and the US.

I’ve been doing a lot of business across the role and the last couple of years have really been about pivoting that business to a SaaS business, the brand for the product business is SOLUS.ai. So, that’s what I’d be doing.

Wow. That’s a pretty long journey in terms of running your business. It’s been two decades? And incidentally, we should at some point in time, talk about your side hustle on a rock music platform as well. Sounds pretty interesting. But for today I think the fact that you’ve been running a successful business and, you know, 200 plus people, especially in analytics is quite a successful business. So what exactly is the transformation that you are making or that you meet? And what made you decide to make this transformation?

What happens is there’s a lot of joy in running an analytic services, consulting business. Because you are the person who’s got the skills and the expertise that comes in and you solve the problems and you can do that really well and they pay you for it.

It’s a lot of joy but, you know, there are some problems that start getting evident as you scale. They’re not terribly evident when you’re small. But when you scale, you find that revenue is kind of very linearly tight to the number of people that you have. And it’s not that straightforward, building the team and getting the people. There are a couple of problems that follow. One is that there’s a lot of demand for that talent today, the whole bunch of people trying to get those people, the good people and it’s expensive, getting good data talent.

At the same time, anybody who’s ever stared at an Excel sheet from across the room is calling themselves a data scientist. So sometimes it gets really hard to even figure out who even has the jobs you need to be able to do and the work that needs to be done.

So it’s not straightforward for building the team and it’s hard. At the same time, the kind of work, deep into the data and solving all the business problems is something that more and more organizations are tending to take, In-house. This is also linked to the lack of talent in organizations, they started building large in-house teams.

So they now want to do more and more things In-house. So the analytic consulting firm is very often becoming someone who is providing us fees. And we never got into this business one day to be the provider of homework. So that was not the intent. So that’s a couple of things happening in the market and at the same time, the reason for the Pivot was we’ve built an incredible amount of IP, Phenomenon knowledge and we realize that each time a new client comes our way, we kind of apply that fairly ground up.

It’s not really easily transmitted between one client and the next and anybody in the team would come in and try to do things just a little bit differently, so, we can’t scale it. In order to be able to capitalize the IP that we had, we had to start pricing the IP that we had and not the number of people that we were putting onto the job.

So that combination of the skill constraint, the talent problems, and the fact that we had a great IP level waiting to be productized led to the decision to make the pivot. Okay. Actually this whole IP point and not being able to leverage it, I think that resonates with me quite a bit because I started working, obviously started working at the same time.

We were batch mates. The company I worked at was a consulting company and they had plenty of IP in the form of just documents and content and frameworks and stuff that were there in the internal knowledge base.

But exactly, as you said, every time a new project would start, you never went back and looked at all of this stuff. You just started doing something with it and you didn’t even know that some of these things existed. So, you’re absolutely right.

I think it sounds good that, over plenty of time you build the IP. And it’s part of the sales pitch as well. But it’s much harder to actually implement that if you don’t have a product of some kind. So that’s a really strong point, Sandeep. Thanks for sharing that. So how did you actually plan this journey? Because again, plenty of people, plenty of clients. How did you evolve this whole process? It couldn’t have happened overnight.

Oh, nothing was overnight. Yeah, this is something that I think we started the work on it two years before we actually went ahead and did it.

So, two years of groundwork, it’s literally that to be able to do the pivot in 2019.

We started the work in 2017 knowing that this is the direction in which you would want to add. We started bringing in people and senior people to start changing the DNA of the organization. We brought in product engineering, and product R&D, we started packaging what we were doing in a more easily deliverable and standardised format so that, we’re actually building a product to have something.

That’s really what I took knowing exactly what the product was going to be was also part of that two-year journey. So what in our services portfolio would we not going to productize? And I remember these whiteboard meetings, and thinking about what going to be the product that we come up with but every single service offering would be on that board. And we started whipping it down and down. Literally took things out of maybe 20 that we would have delivered at some point. That was part of the hard work done.

Right and actually, speaking of the two years, did you actually plan for two years? So you knew it would take that long or did it just take two years, but you thought it would be quicker?

I was sure when we started, we thought it would happen in 3 or 4 months but 2 years is in hindsight. But when you started, there’s an awareness that it would have been very hard for it to be less than two years. Especially because you weren’t running an active, vibrant services business on the side.

So one was splitting, was diamond attention, straight down the middle and saying there’s a number of times. You know, pushing the product. I still had another business to run. So anything less than two years would be honestly not possible. And I suppose that’s because you had challenges and rather, you may have planned for certain risks and so on, as part of this. So what were some of these challenges or impacts that you encountered through the process?

I think the biggest challenge is quite literally changing it when in motion. So, managing the cash flows, for example. It’s hard enough as it is but when you are testing and generating both in building up a product development and the team while making sure you don’t lose the cashflow you’re generating from a business that you’re retiring.

That dance is really hard. Compounded by the fact that there are a whole lot of people that have joined the organisation but wouldn’t join for this, aiming to do the consulting work. They want to build things ground up. So you have the change that DNA. That is a really hard thing. And, you know, the new people that you brought in are not front and center. So they needed to have the patience to do things quietly in the background before we could launch it before they came front and centre. There was quite a bit of juggling to get dead on going forward.

So actually on the second point, right? This is something that I identify with because in the past I’ve had situations where have tried to launch like a business within a business kind of thing. So, you know, it interrupts some stuff. So in that situation, I know that you are the little ant on the back of an elephant and you need your sources or you need mindshare or attention. You’re not getting it because the main thing still has to be run.

So, how did you avoid that kind of situation or did that actually happen? Like, they were starved of resources or things like that. We tried to make sure that didn’t happen. I actually had a point of time where I went into my calendar and looked at all the meetings I’ve done over the 365 days. I’d look at the Excel and tag them whether they go to products or services or whatever. And over 80% of them were indeed in the product business. That’s when you know that you’re feeding that part of the business sufficiently or this would not have happened.

This is before we even launched our product. So that pivot was done at the senior level a little bit before the rest of the organization was brought along. So it was not starved. That’s good because I guess that’s the sure way for a new thing to actually fail, even if you want to do it. And you mentioned things about people especially folks who may have wanted to continue in an analytics services space. So how did you do Org side transformation, or how did you do the communication or helping people through all of this?

You can’t do enough of it and no matter how much we did, I’m sure we fell short because we admitted lots, starting top down, literally the number of times we went through, why are we doing this? What is going to mean and how it means maybe rescaling or changing careers etc? But a bunch of people who did that they’re very excited about being part of a product business because even in the data sciences and analytics space, there is a set of people who truly believe that what we do should be part of the product. They want to build an IP that becomes usable.

There is that mindset and there is another mindset that says I want to start first. I want to go ground up. And beyond the point, you can’t bring that mindset alone. I mean, there were many instances where we also had to part ways with people. And it’s okay because it’s good for them and it’s not bad for us either because you wouldn’t want them to be in a place that is not aligned to what they want out of the carriers, which is to do analytic consulting. And I think you’ve mentioned somewhere earlier about how you had to keep clients in what you knew was going to be a legacy business. So how did that work out? The sales process, the relationship management, and so on?

Sure. There came a point where we stopped taking on any consulting work. But there are clients, our past clients, which continue to be there even today, cause there’s cashflow and there’s legacy and there’s a relationship. And more important than any of them, these are brands, which at the right point, will adopt the product we are building. So the biggest reason to carry on with some of the legacy businesses is that these are credible names and brands. So there’s a cashflow reason. The future business visa. We get to learn new things from them.

All of that. And sometimes it’s just relationships. So we have been able to carry on with some of them and we will tell them when the time comes to the city. And, they were happy to go through this journey with you like they know that it’s going to transform and so on. Yeah, they all know what we are doing in terms of the pivot. Most of them. that could have and would have made the transition. Somewhere, when the contracts were completed we have not renewed because there was no opportunity to. It’s saying no to business that is already in the bag. But it didn’t fit the future that you want for the organization.

So you have to do that a number of times in the last two months. So, that’s one of the tough parts of doing the transition, you will end up saying no to a lot of businesses. Yeah, that’s a really tough call. Definitely, it’s money that’s already there. How are you thinking about the business model or how have you planned that obviously that new business model has to take up for what you’re losing in the old one?

The business model, we talked about a lot internally, that core business is the same. In the sense that, how do you drive Incremental sales from the existing customer base, doing a really smart job of pivoting first-party data available with the brand? So the value they’re delivering to the clients actually hasn’t changed. The business model has moved from working for hire where you get paid for the hours that you’re spending to subscribing to the IP that I have.

Along with that shift in business model comes a number of things your entire structure changes because now you know what used to be account management, discuss for success, you require product support, engineering, R&D and quality control, and keeping documentation and knowledge base building. So the business actually gets far more complex. Contending business in many ways was extremely simple. The product is far more complex.

So the business model does change in that sense and owning that IP becomes the new kind of center of the business it becomes the heart and soul of the business but the pricing model changed. You started experimenting with a bunch of pricing models, whether you’re doing subscription, based on a number of customer records or a number of API calls status being made, getting people to pay you in advance for which honestly, we never were able to do in a consulting business ever.

And we’ve talked to a point where we get paid in advance of the year as well. So those things are very, very fundamental changes. So that must be the primary reason for doing things like this. I think one was the use of IP or better use of IP. And the second is the fact that money comes in a very different way from what used to be in a services business. And if I could just add one point to that, if it would take us a team of three people to deliver a certain task, we can see that now happening with a fifth of us to deliver. It takes an army to build it.

So you require an army to build something, which now, fifth of a person can deliver. So then that changes very substantially. Yeah, that’s right. And that is the true IP-building effect of all of this. And build it once, hopefully, and it gives you a dividend for the rest of overtime. So that’s on the business model. So in summary if you look back at all the stuff that you’ve seen over the past two years, what are some of the things that you had planned that worked, and what are some of the things that you thought would happen, but didn’t work or didn’t happen the way that you thought?  What’s worked is the traction that you’ve got.

This traction was all bootstrapped where we’ve now got like 32 grand on a product platform and the numbers are created and they are great and we learned a whole new language of the kind of Manchester. The sales engine is on both sides. It’s been phenomenal in some markets. The new market is yet to pick up. New unfamiliar markets break into them, the product offering without the backing, a fair amount of experiments that may or may not go wrong. And marketing so far, we’ve not been on track And it’s even kind of migrating ​all that, we’re doing differently.

So that’s one. Your entire GTM, what’s that product market fit, what is often worked in a market doesn’t immediately transit to the other market. It’s something people told us early on the journey and we’re learning now that it does not happen that great. What’s worked in A place is not going to transit immediately. So the sales engine, getting it coming in unfamiliar markets, fitting in the product market fit again, kind of similar thing for a new market. And realising that it’s challenging, experimentation will take time especially when you’re bootstrapped.

Right. Are you finding that when you approach a new prospect of clients, are they more open to a SaaS offering than equivalent ones that were services offering? Is it easier to get a foot in the door?  It is. Especially in this market right now, we have never seen a sales pipeline like what we have right now. And I also know that about 70% of those brands, If we spoke to them about services offering and today’s sales, I haven’t even announced that we’re doing this. Okay. So, that’s interesting that you actually have managed to get a whole new sort of service, which people appreciate, and it’s actually playing into the way that people think nowadays.

So, Sandeep, thanks a lot for sharing all of this. It’s been really interesting and I think very, very insightful. And I’m sure people who’ve worked on and who have services businesses will learn a lot from this and I’m pretty sure they can actually try to make their own transformations. So in that context, before we close, do you have any tips or any suggestions for other people who might want to transform or pivot or make some sort of a hybrid out of their own services business? What would you want to tell them?

So, probably three things. One is – be very sure you want to do it. It is hard and it’s hard for a while. So very sure you want to do it. You have to be very clear on what you want to build. If you are even a little unsure of the product, it would have taken longer to find that fit. We are incredibly lucky that we found the fit quickly and we started generating variable cash flow very quickly. And you have to mentally restart. You have to feel like you are the founder of a brand-new startup.

So, a mental reboot is absolutely crucial. In fact, related to that, I think you mentioned that when you all were whiteboarding all of this, like deciding what to build, you started with everything. But you had to keep at it until you brought it down to some core set of services. So, I guess it is really like running a startup. I mean, starting from scratch and being very ruthless about what you are going to be productive?

It is Right. So, thanks a lot Sandeep for sharing this. So in summary, what you’re saying is if anybody wants to go through this journey, they need to be prepared for the long haul both before and to some extent after, as well.

They need to be very, very sure about, why you are doing something and what exactly it is that you’re going to be building and have the entire backing of your leadership team, obviously, but also of your people and know that some of them are not going to make this transition with you for good reasons. Can I add one more thing?

It is just incredibly exciting to build a product. You know that is. If at all, we kind of wish this won’t be done sooner because of the joy you get when you build something, which people subscribe to and you keep pouring your time and energy into it to make it better and better rather than moving on to the next project. It is unbelievably gratifying. Wow. That’s pretty cool. And it’s actually quite cool that you’ve had the experience of both sides. Right?

First, you get the chance to actually work with clients, which has its own fun and joy because you’re directly working with them, you can see what you’re actually doing. And then you have the joy of seeing that you’ve built some knowledge, which is so powerful and so packageable and so universally applicable that people will pay you just for that knowledge in a package form. So that’s pretty cool, actually both phases.

So, thanks again, Sandeep, for joining us. It was a wonderful conversation and I’m sure very, very valuable to all our listeners. Thanks a lot for joining and for our listeners – thank you for being with us today. This was Sandeep and Amit with ShopTok. We’ll see you next time. Thank you.