Many financial institutions today continue to rely on paper for conducting business: communications, contracts, disclosures, underwriting documentation are printed, mailed, copied, and moved around manually. This introduces a number of problems. Recently I began using a framework to explain the problem with paper. As you know marketers love frameworks using Cs and Ps. While these frameworks have limitations, they serve a purpose - providing a shortcut to remembering important components to keep in mind.
Introducing the 5Cs of paper based business processes.
- Cost. Without a doubt processes conducted on paper cost more at most/all points in the lifecycle.
- Cycle time. Shipping paper takes longer than using secure electronic delivery or eSignatures to get that contract signed online. Errors that are more common on paper due to lack of automatic validation (paper can't tell you that you missed a required signature or a form field) further compound the cycle time problem as paper documents may go back and forth several times.
- Control (and visibility). When a paper package leaves your organization, you no longer have control over it (i.e. you can't pull it back, easily replace it or know when the recipient opened and viewed its contents). This lack of control also applies to multi-step workslows such as underwriting. Workload balancing across geographically distributed teams is simply not effective when paper has to be shipped around.
- Compliance. We see a lot of confidential documents sitting in piles on desks or faxes left on a fax machine because the intended recipient doesn't know that the fax has arrived. These documents may contain confidential and private information (i.e. social security number and medical records). There is always a risk than an unintended individual may gain access to information contain within.
- Customer experience. Let's face it, we have all been "spoiled" by the convenience of services like Amazon and other leaders in web-based business. We expect immediate gratification (I want to download my iTunes, now.) and more options (overnight or 2 day delivery). The problem with paper is that it just can't keep up with Internet speed and convenience. As a result some sad mortgage broker somewhere exclaims "Lost another one to Ditech!".
Zoli Erdos is a software industry veteran with a great blog. I recently discovered a post where he talks about 3 common half-truths about SaaS (Software as a Service). Over the past 2.5 years I've been working as a Director of Product Marketing for a SaaS company and following the developments and the hype surrounding SaaS. In this post, I'd like to comment on what Zoli post and share what I've observed.
The 3 half-truths:
"1 - SaaS is simpler, easier to implement than On-premise software (see update at the bottom)
2 - SaaS is for the SMB market
3 - SaaS is bought, not sold, it’s the end of Enterprise Sales"
Let's take this one at a time:
1. SaaS is simpler, easier to implement than On-Premise software
In general, that is true. Assuming zero or minimal customization SaaS implementations do take less time and are easier to implement as they don't require the deployment of new infrastructure by the client.
This faster implementation translates into faster ROI for the client. (Ben Kepes who responds to Zoli's post has a nice diagram here) Sometimes SaaS is coupled with a licensing model that eliminates the upfront licensing fee and instead ties fees to the client's benefits/usage (i.e. transaction model). Such model further aligns the benefits and costs. This is interesting because costs/benefits are typically heavily misaligned in the traditional on-premise model, where in a typical scenario a client pays six to seven figures upfront for the licensing fee and then waits for months or years before seeing a return.
Note: As Zoli points out in his post - implementation is not just about the technical implementation, but it is also about the business process & change management training, etc. With SaaS implementations business process/change management aspects are relatively similar to traditional on-premise implementations. Yet, the overall project risk is still lower due to significantly lower technical risk.
2. SaaS is for the SMB market
I think this largely depends on what type of SaaS solution we are talking about. Even within "enterprise software" - there are many different types. Some enterprise software is deployed at departmental or business unit level (accounting) and some is accessed more broadly (i.e., email, intranet). It's true that SaaS has seen most widespread adoption initially within the SMB market which has fewer resources to available to deploy software. Yet, I constantly run into reports of SaaS being used in the Fortune 500. I also expect that adoption of SaaS will continue to grow among the large enterprises for several reasons:
1. Lower technical implementation risk (discussed above)
2. Attractive economics - lower start up costs are even more attractive given the current economic client
3. Self-fulfilling prophecy - all of this hype around SaaS is getting a lot of attention and resulting in more organizations considering this option (again recall seeing this in recent report, but don't remember where)
Industry specific SaaS solutions are common among large enterprises. The company where I work serves financial institutions (mortgage lenders, banks, insurance). We serve many of the largest financial firms out there and our solution is delivered via the SaaS model. This has been going on since the late '90s (before the term SaaS became popular).
3 - SaaS is bought, not sold, it’s the end of Enterprise Sales
This is not completely accurate. I think whether SaaS is bought or sold depends on a couple of variables:
A. Complexity of the problem and the solution. Complexity includes:
- the business process impact
- legal uncertainties/perceptions
- integration complexity with the client's existing systems
- relative novelty of the technology solution itself
B. Vendor's go to market model.
Some vendors don't have a sales force and they often struggle penetrating large enterprise accounts. These vendors often do better with smaller accounts that require less face-to-face.
Other vendors build a sales force to bring their solution to market. This becomes more important as complexity of the solution increases.
What I haven't see much of yet - is the use of channel partners as the predominant sales channel. Although Google has announced a partnership with one of the big systems integrators last year, I don't think that they currently have a large number of joint implementations in their bag. This will likely change - as we'll see more software transition to the SaaS model, there will be a greater need for systems integrators to pull all the pieces together. When this happens, we can expect to hear more of the same negative press we have heard with on-premise software: time and budget overruns, failed implementations, etc. Complexity is inevitable and SaaS is not immune.
Sam Lawrence of Jive software has an excellent blog - www.gobigalways.com. I enjoy reading it because Sam often brings a new perspective on things. He is clearly a talented marketer and someone who can create an opportunity out of an unpleasant situation.
Sam's recent post talks about how digital photography had impacted the Kodak film business. He also proposes that social software may be in a similar position vis-a-vis the big software players. This is where I found myself disagreeing with Sam - my response is below.
1. The analogy itself doesn’t make sense because replacing a camera (overnight) is far easier than ripping out a software system within the Fortune 1000 environment (months or years). We are talking about two completely different markets.
2. Social software is highly unlikely to dethrone the big guys because software is and will continue to be a platform game where scale matters.
More details below:
Social software will become a commodity like all almost all other software does over time. I don’t know exactly how this will happen, but there are plenty of examples of this happening in enterprise software: small companies come up with a cool idea, big guys catch on and either buy the companies or put them out of business (what happened to the companies that offered calendaring software after Microsoft Outlook became a calendaring solution?).
Microsoft will be a likely culprit in this. They have the power to commoditize software. SharePoint commoditized Enterprise Content Management and helped drive the consolidations that recently happened in that space (FileNet acquired by IBM, Open Text buying up several companies and so on).
What’s to stop Microsoft from adding more social features in the next release of SharePoint? I’m willing to bet that next version will include more and better social software features. Also, consider that SharePoint is now a billion dollar business as MS has recently announced. At the prices that they charge per license - that’s a lot of seats! Upgrades are easier than migrations to new software and SharePoint within organizations stores more and more data every day inside (lists, files, discussion forums, etc).
What’s different now that may favor your position? The increase in SaaS acceptance changes the equation a little bit because it changes the delivery model. At the end of the day though - it’s about reach (sales force, marketing budget, executive mindshare), resources, and scale. Microsoft will figure out SaaS before the current Fortune 1000 IT guard will retire to be replaced by the younger generation who would be more likely to consider “in-the-cloud” solutions for social software.
Let’s keep in mind that the big guys don’t jump on things until there is money to be made. Social networking is a small industry now. As the opportunity to make money in it grows, we can safely expect the big guys to pay a lot more attention.
At the end of the day, software business is a platform business and there is room only for so many platforms. The transition towards SaaS has made things even more complicated for smaller guys, because platform now includes the infrastructure needed to run the software in the cloud - another area where scale is an advantage.
If you ask me, the big guys (IBM, Microsoft, Oracle, Amazon, SalesForce.com and Google) aren’t going anywhere for a long time. Their businesses reach so wide that it will take a lot more than a really cool social software app to dethrone them.
I've considered starting a blog for a while now. It's time to give it a shot.
I have to warn any potential readers out there (I don't expect many) that I have a lot of interests and this blog will likely include posts on various topics. In business ability to focus and dominate a particular segment makes a lot of sense, but I'm not starting this blog to make money.
Instead I'm simply intending to capture and hopefully share some perspectives and patterns which I find interesting.
on The problem with paper - 5Cs framework