Outsourcing the implementation of software is like separating the wheat from the chaff. You get the best without the rest.
Both vendors and their clients benefit by outsourcing implementation.
Software-as-a-Service providers can concentrate on more lucrative functions, like sales and development, by outsourcing implementation. Their customers, meanwhile, can speed adoption, thereby accelerating the return on their investment.
With annual global spending on SaaS estimated to top $22 billion by 2016, according to technology research firm Gartner, both providers and users have ample reason to spend wisely.
Given that SaaS delivery is growing nearly five times faster than the software market as a whole, and that it has becoming a significant growth driver to all functional software markets, the cloud software model will account for $1 of every $5 spent on software by 2018, according to a July 2014 report by International Data Corporation (IDC).
SaaS applications are commonly used in customer relationship management (CRM), enterprise resource planning (ERP), benefits administration and human capital management (HCM).
However, enabling technologies do not achieve full functionality unless planned and implemented properly. Outsourcing implementation helps SaaS vendors and users in the following ways.
Benefits for vendors
Software companies want to develop and sell great products. Implementation is incidental to their success—and may in fact impede their growth.
More than 80 percent of new software companies were creating, selling and provisioning SaaS instead of a packaged project by the end of 2012, according to the IDC report. Researcher Robert P. Mahowald wrote, “Figuring out how to find and capitalize on the enormous cloud services transformation is the number 1 strategic goal of all major IT product vendors. SaaS, and broader public cloud opportunities, represents both a tremendous challenge to meet change head-on and a huge opportunity to realign with partners, create new capabilities, move into new markets, and define new leaders.”
Vendors like Salesforce.com, Oracle and Benefitfocus have accelerated growth by outsourcing implementation. Here’s what they have found in doing so.
- Developers should develop. Implementation distracts them from what they do best.
- Sales could slow. Needlessly long and complicated implementations by internal employees may limit a vendor’s ability to add customers. Vendors have found that time and resources spent implementing their software could be better deployed elsewhere, like in sales.
- Consultants know best, at least when it comes to implementation. A vendor does know their product best. But consultants know how to leverage that product. They use software to improve workflows and processes based on their business knowledge and experience.
- Vendors may under staff—or worse yet under price—implementation because they do not anticipate all of the challenges and needs that firms experienced in staff augmentation and project management account for in their methodologies. Software-as-a-service consultants, which vendors commonly call “system integrators” or “implementation partners,” specialize in project management, implementation and training for SaaS applications.
- SaaS companies may bear implementation costs for months, or even years, before they fully recapture them through clients’ fees. This impairs profitability, which can constrict share prices in the case of publicly held companies or depress valuations for private firms.
- Outsourcing implementation ensures consistency in delivery. Vendors can require integration partners to undergo extensive training. Depending on the vendor, consultants may also be able to attain advanced training in specific software modules or in particular project management roles.
- Product training and certification fees provide additional revenue for vendors. Vendors commonly charge consultants hundreds of dollars a day to attend on-site training sessions, for example.
- Servicing and supporting software post-implementation is more profitable for So, they can increase profits by outsourcing implementation.
- Vendors can expand their sales force and thus generate additional revenue, through value-added-reseller relationships in which SaaS consultants help them secure and service clients.
In considering whether to outsource implementation, a vendor should weigh considerations like whether doing so would accelerate sales, profits or growth. Choosing only qualified, experienced SaaS services providers to implement would then allow them to control costs and quality.
Benefits for users
In a survey of more than 650 senior executives in 16 countries in late 2012, 33 percent reported implementation costs for were higher than expected and 31 percent stated that integrating existing IT architecture with new cloud services created challenges, according to a report by KPMG International. Principal Advisor Steven Salmon, “Implementation and integration challenges are critically important to overcome and can threaten both the ROI and business benefits of cloud.”
As experts in implementing complex IT systems, SaaS consultants can help users optimize their applications while managing costs. They do so by applying their knowledge of both the user’s business domain and their technology environment.
- SaaS specialists take a consultative approach so as to fully understand a user’s business process and organizational alignment. Then they make relevant recommendations to ensure optimal use of the enabling technology.
- Consultants can assist companies in identifying workflow problems and solving them with the SaaS application. They fix the process and then tailor the technology solution to the new process
- Outsourcing implementation can ensure that a system is built right the first time, thereby mitigating the need to invest additional time. Proper integration with other technology is also key in enabling users to.recoup their investments faster.
- Implementation specialists produce immediate benefits for SaaS customers by using robust methodologies to provide new users receive ample support. In assessing the specific needs of companies, their departments and individuals within them, SaaS consultants typically estimate the amount of support resources needed more accurately than vendors, who often rely on one-size-fits-all benchmarks.
- As certified experts with advanced product knowledge, SaaS consultants can speed adoption among a company’s users, through comprehensive training and targeted support. The quicker users adopt, the quicker the company reaps its returns on investment through enhanced efficiency.
- Unlike a vendor limited by the availability of its internal staff, SaaS consulting firms can provide an implementation team commensurate with the scale and complexity of a company’s projects through staff augmentation and contract resources.
- Also, unlike a vendor whose knowledge is confined to their software, an integration partner brings a broad technology skill set and varied experience, which allows them to support the user’s technology team holistically—even after the initial implementation.
- SaaS consultants provide users with a comprehensive total cost of ownership by thoroughly assessing integration expenses and ongoing costs, perhaps more so than a vendor. In addition to hardware and software expenses, cost of ownership includes opportunity costs like downtime and lost productivity.
Vendors may be able to recommend implementation specialists for a client, but a company ultimately should choose the SaaS consultants best suited for their needs. Users should consider factors such as price, technical expertise and methodology.
Properly planning and implementing SaaS will allow a company to accelerate its ROI. Vendors also benefit from outsourcing implementation in that they can grow more quickly by focusing on development and sales. Concentrating on core competencies allows vendors, specialists and users to do what they they do best.
About the Author
Juan is President of Providence Technology Solutions. He has more than 10 years of experience as a corporate attorney and organizational governance expert. He spent many years with two Fortune 250 businesses in a variety of roles, including legal, corporate governance, securities/financing, commercial and government contracting, strategy and organizational management.
About Providence Technology Solutions
An affiliate of The HCI Group, a global leader in healthcare IT that provides cost-effective solutions for healthcare IT implementations and ongoing support, Providence Technology Solutions evolved to develop strategic partnerships outside of healthcare.
Providence Technology Solutions provides staff augmentation and contract resources for customer relationship management (CRM), enterprise resource planning (ERP) and human capital management (HCM) implementations and training.
A cross-industry presence allows clients in numerous industries to benefit from best practices applied through the consulting and implementation services offered by Providence Technology Solutions, which it has honed through extensive experience providing high-quality IT solutions. For more information on Providence Technology Solutions, go to www.providencetechnologysolutions.com, or call Lee Shipman at (904) 512-6448. Lee Shipman can also be reached at Lee.Shipman@providencetechnologysolutions.com.