The 10 Benefits Software Modernization for SaaS Growth or Acquisition

Software companies must evolve from the inside out to stay relevant, focusing on quality teams, code, processes, and more—beyond just the latest technology.

From a day-to-day operations perspective, software modernization is clearly important to keep winning and retaining customers. But it’s also a critical strategy in the long term, as it makes your business more resilient to market dynamics and improves your chances of a rewarding exit.

In this article, we will explore the rationale behind software modernization and offer some actionable advice to keep your business at the forefront of the industry.

Look at Software Modernization as a Holistic Endeavor

Simply put, software modernization is critical to survival. Making real progress takes a commitment to roll up your sleeves and “get under the hood.” That means examining everything about the state of your software platform—from architecture and scalability to performance and UI/UX—and keeping your mind open to improvements that could unlock doors of opportunity.

Modernization may also go beyond the boundaries of your software product to include everything you use to build and maintain it:

• Complete tech stack
• Development tools
• Data structure
• DevOps
• Team culture, individual skillsets
• Processes and methodologies

It is common for companies to be strong in some areas but not in others. For example, your software may have high-quality structure code today, but outdated development tools hinder your ability to adapt to changing business conditions; or, you may have a state-of-the-art environment, but poor code quality code and uninspired UI/UX seem slow and antiquated. Truly future-proofing your SaaS business needs to take every angle into account. (More on this later.)

7 Reasons Why Software Modernization is Crucial for Growth

So, how exactly can a comprehensive modernization effort benefit you when it comes to growing your SaaS business? Here’s a more detailed breakdown:

1. Faster development and deployment: With modern tools, technologies and processes, your business can accelerate its ability to fix bugs or bring new features and functionality to market ahead of the competition.
2. Better application performance and scalability: Modernized software helps create a more stable environment, reduces latency and downtime, and allows you to scale up with ease as usage demands increase.
3. Higher user satisfaction and retention: Naturally, more robust functionality, an intuitive UI, and fewer bugs lead to more satisfied customers (reduced churn) and improve the LTV:CAC ratio.
4. Enhanced interoperability/interconnectivity: The more your software can work in harmony with other platforms and applications, the more useful it will be to customers. This is particularly true as Industry 4.0 technologies continue to proliferate. Modernized software will be essential to allow your product to interact with AI and ML features, and function properly as the concept of Unified Namespace (UNS) grows more prevalent.
5. Operational cost savings: As modernized software enables more efficient workflows and cuts down on required maintenance, a typical byproduct is lower overhead costs.
6. Stronger security: The ever-present threat of data breaches should not be ignored. According to Statista, global cybercrime costs are growing annually and are expected to reach $12.4 trillion by 2027. As a general rule, old and outdated software products are more vulnerable to attacks; upgrading your platform can help prevent potentially devastating losses.
7. Improved sales: better UI/UX will win the demo and pilot “beauty pageant” driving better ARR.

3 Reasons Why Software Modernization is Crucial for Acquisition

Without question, making the investment to modernize technology, software, and supporting processes can make your software business stronger in every way. As such, it enhances your potential to realize your exit strategy and achieve an attractive valuation in the M&A market.

#1. Advanced Offerings Attract Interest

It comes as no surprise that PE firms and strategic buyers are looking to acquire software companies who are leaders in their respective fields, and whose software offers the most advanced and intuitive capabilities on the market.

#2. Innovation that Leads to Long-Term Results

More than that, buyers want to know that your company has the technologies and systems in place to continue to innovate and stay in front of the competition over time and enjoy scale without sacrificing stability and performance.

#3. Smoother Transitions When Going to Market

Modernized software also makes your business more attractive if it will need to be integrated with another company after being acquired. Outdated technologies and applications create headaches in a merger process, whereas newer tech can facilitate a smooth transition and allow the buyer to focus on its go-to-market strategy.

6 Tips on How to Approach Software Modernization

Now that you know how much software modernization can benefit your software business, how should you go about the process? While needs will vary from one company to the next, here are six key considerations:

1. Don’t delay. When dealing with the day-to-day challenges of running a business, it can be difficult to devote time and resources to future-proofing your software and technology. You can bet, however, that your competitors are working toward these goals. And, generally, the longer you wait, the harder it will be to catch up. “Don’t bury your head in the sand,” says our Chief Industry Strategist, Paul Lachance. “Many founders either believe they don’t have this issue or simply don’t want to admit it.”
2. Step away for perspective. The idea of “being too close to the problem” often applies here. For you and others who were intimately involved in building your tech stack and software offerings, it may be difficult to view the business through an objective lens. Consider hiring a third-party consultant to conduct a “tech audit” (SEG has partnered with KMS Technology for this purpose). This entails analyzing your business with a critical eye and offering constructive suggestions for modernization based on industry knowledge and technical expertise.
3. Don’t get carried away, focus only on key areas to modernize. Not all SaaS businesses have the same challenges, so you and your team will need to nail down the specific modernization projects most important to your company’s success. The “wish list” might include various aspects of your operations such as the tech stack, architecture, or performance factors.
4. Take a phased approach. Don’t bite off more than you can chew. With a proactive, systematic approach to modernization, you can make planned updates over time rather than urgently tackling everything at once (which rarely goes well).
5. Understand your options. “Modernization” means different things to different companies, and there’s more than one way to get from point A to point B. Make sure you’re familiar with the pros and cons of different approaches, which could include simply “lifting and shifting” legacy apps to the cloud, modernizing software before or after moving it to a new platform, or completely abandoning one application in favor of a new and improved solution. Arriving at these decisions is another way an outside consultant can help.
6. Utilize skilled resources. A bungled modernization project can do more harm than good, so don’t entrust the upgrade to just anyone. Ensure your team has the knowledge and skills necessary to do the job well or consider bringing in an expert.

Begin Your Company’s Software Modernization with Our Actionable Insights

To continue learning about software modernization, be sure to watch our recent webinar on “How to Future-Proof Your Software Platform for Acquisition or Growth.” Paul Lachance, SEG’s Chief Industry Strategist, Technologist, and Evangelist, discusses his own experiences as a software entrepreneur, covering some key things he did right and wrong regarding modernization. Paul is joined by Jeff Scott, Chief Delivery Officer for KMS Technologies, who offers his insights on what “future-proof” means and how companies can achieve this in today’s ever-evolving world.

Software modernization is just one facet of preparing your company for sustainable growth and eventually, an exit. Our team of M&A experts are ready to offer you a confidential and complimentary Strategic Assessment of your software company. In this session, we will review what parts of your company are market-ready and identify areas for improvement to maximize your valuation. Sign up for your Strategic Assessment.