Customer success has quickly become a cornerstone of a successful recurring XaaS revenue model, and 2022 will bring even more evolution to the function. Alexander Group predicts that companies will continue to expand their Customer Success organizations faster than sales organizations in 2022. And as Customer Success organizations mature, roles will specialize to become more focused on revenue generation. Finally, the evolving customer success manager (CSM) role will positively impact core seller job responsibilities in 2022.
Most XaaS companies today have CSMs and are continuously growing and evolving their Customer Success organizations. Alexander Group’s benchmarking database shows that on average, CSM headcount within XaaS organizations increased by nearly 50% between 2020 and 2021, surpassing overall Sales organization headcount growth, and this trend will continue into 2022.
Historically, Customer Success has focused on driving adoption, but companies are now finding that they can accomplish much more with CSMs if they specialize. Alexander Group’s research has identified at least five different CSM role types differentiated by the ILAER sales process – Identify, Land, Adopt, Expand and Renew. Other key job design factors will include CSM technical versus business focus, as well as use case versus reactive deployment.
As the CSM role will continue to evolve, Alexander Group anticipates more CSMs will drive revenue via growing involvement in renewals, upselling and cross-selling in 2022. As more companies invest in CSMs and they take on more revenue responsibility, the role of the core seller will be positively impacted by offloading certain tasks and shifting seller focus to high-value activities. Customer Success is becoming a team sport and will be increasingly viewed as a philosophy rather than just a distinct organization or job in 2022.
Davis Giedt: Welcome everyone to our series on predictions for the tech industry in 2022. With me today is Ted Grossman, principal leader of our technology practice, as well as Rachel Parrinello, principal, Technology Research Fellow and leader of our compensation practice at Alexander Group. Davis Giedt here. I lead our analytics and research practice at Alexander Group and today we’re talking about customer success in 2022. Our prediction is that companies will continue to expand their customer success organizations faster than sales organizations. And as CS organizations or customer success organizations mature, the roles will specialize and become more revenue-generating than they are today. As well as the evolving CSM job will continue to positively impact core seller responsibilities. So Ted, let’s talk a little bit about Customer Success, team growth and how you see that playing out in 2022.
Ted Grossman: This will be a continuation of a trend, but I think we’re going to see actually even maybe a little spike here. As companies have moved more of their business to recurring revenue, it requires them to have more ongoing interaction with customers, not just to make sure that they implement whatever solution they have well and adopt it, but also to make sure that they renew and that they’re getting the most value out of it, as well as the other features that might be available or offerings from the customer. Customer Success, which originally started as sort of a role or an organization to help drive adoption, is now being asked to do all these other things. And I think companies are finding out that there are great ways to use this as a resource to actually improve overall productivity. Productivity at the company level and even productivity at the per rep level. So with that in mind, if you’re chief revenue officer and you’re looking at all the resources you have, you say, “Well, do I want to bring on a new account person? Or maybe I can get a multiplier effect by bringing on some more customer success if I’m using them correctly.” We’re seeing more and more companies are really figuring out that equation to get to maximize how Customer Success can affect their commercial success.
Davis Giedt: And what’s interesting is across the large XaaS organizations that we survey every year, on average, customer success manager headcount increased by 46% between FY20 and 21. We expect that trend to continue into 2022 as well. So Ted, let’s talk about specialization within the customer success manager job. So tell us a little bit about that and what you think is going to happen in 2022.
Ted Grossman: Yeah, I alluded to it just previously. There’s a lot more that Customer Success can do, and that requires more specialization. It’s not one customer success role. It might be some who focus in renewals and some who focus in solving technical issues. Others who are really working at a higher level hand in glove with the sales team and with the customer buyers in terms of establishing customer value and ensuring that it’s happening. What we’re starting to see, and I think again, it’s been exposed, especially in those commercial roles, things that have to do with expansion and renewal. You’re going to see more roles being developed in more complex engagement models start to show up. And so I think that’s where you’re going to see the specialization. More roles overall.
Davis Giedt: Great, thanks, Ted. Rachel, tell us a little bit about the growing customer success manager role in revenue generation and how they’re working alongside core sellers and how you expect that to change in 2022.
Rachel Parrinello: So just as Ted said, CSM roles are becoming more specialized. Well, they’re also becoming more specialized as we think about the ILAER journey. So identify, land, adopt, expand, renew. Historically, like Ted said, CSMs were focused more on Adopt. However, we did see a renewal metric come into the field compensation plan, but for most companies, that renewal metric was a lagging indicator of the CSM roles’ focus on adoption. If they did good adoption, then the renewal will follow. That being said, what we’re now seeing is many CSMs are taking on the role of driving those renewals. So they’re actually owning or co-owning adoption, as well as the renewal responsibility. And then in addition, we are also seeing a lot of CSM roles owning or co-owning, usually co-owning in this instant, the cross-sell opportunities. So working hand in hand with their fellow AE or AM to help identify and drive those cross-sell opportunities. And then with upsell, which is selling more of the current offering, we’re even seeing sometimes the CSMs actually own that activity and taking that away from the AE or the AM. And when a CSM becomes a true owner, not only the adoption but their renewal as well as the expansion, then they become a true farmer. So they’re really, truly an account manager. But Davis, that means there’s sometimes they’re still called a CSM. So anyway, we’re going to see more proliferation of the jobs, as Ted said, with this specialization, but we’re also going to see them take on more and more this revenue generation activity.
Davis Giedt: Great. Well, thank you both for the insights today. That’s all the time we have today. Thanks everyone for watching. We’ll see you on the next video.