If you’re one of millions who access music via Pandora or Spotify, or movies via Netflix, consider yourself “subscribed” to the “Subscription Economy.” Industries far and wide are being transformed via subscription business models where products and services are delivered efficiently and extremely cost effectively 24/7/365, thanks to massive computing power served up by the cloud.
Businesses are also keen to leverage the cloud, eschewing the traditional buying and licensing of hardware and software to a Software-as-a-Service model for core business systems such as ERP. Net-net: We are rapidly moving away from owning software to a leasing model.
I believe this move — while seemingly as insignificant as a ripple in a pond — is destined to unleash a whole new wave of innovation. How will switching to a SaaS model for business systems help organizations innovate and transform? To explain, I’d like to recount the tales of two budding entrepreneurs — Johnnie and Janie of Anytown, USA — who each want to start a lemonade stand.
Like many young captains of industry, the two have big dreams, but take two different approaches to gaining the necessary infrastructure to start their businesses. Johnnie pays $1,000 up front for the table, chairs, signage and equipment to get his start in the lemonade business, whereas Janie pays only $10 a month for the same. Let’s examine the impact this use of capital has on each of our budding entrepreneurs:
Getting all the infrastructure Janie needs to get up and running in a very cost effective “pay-as-you-go” manner gives her lots of extra capital to invest in marketing her business, and in developing interesting go-to-market partnerships. As well, she gets all her infrastructure delivered to the exact spot she needs it, without her having to invest the time and energy to deploy it. She is also able to hire and expand her management team, bringing on her little sister Maggie to head up R&D. Maggie then goes on to introduce a break-through product: the combination of marshmallow fluff with lemonade yielding “Marsh-Ade,” which becomes a beverage concoction in such high demand, Janie must raise prices, hire more staff and expand production facilities to fulfill a new nationwide distribution contract with Whole Foods.
Alternatively, Johnnie is cash-strapped and as such, has only limited dollars to spend on sales and marketing activities. From the onset of his entrepreneurial venture, he is haunted by the amount of product he needs sell to recoup the cost of his initial investment; however he now lacks the capital to grow and expand his business. Lugging his expensive monolithic table, chairs and signage around town prevents him from investing time and energy into product development, sales and customer satisfaction. And to add further injury to insult, he strains his back, setting him back even more. As well, he is reticent to take chances on his invention – the combination of apple cider and lemonade, so the world never gets a chance to sample Johnnie’s Apple Cinnamon-Ade.
I’ll spare you the devastating details of Johnnie’s lemonade stand gone bust. But hopefully you can see the positive ripple effect that stems from Janie’s decision to opt for a new and improved infrastructure delivery model that allows her to focus time, energy and dollars into growing her business.
Today’s SaaS ERP solutions offer end-to-end operational visibility across the organization, from customer, to production, to financial management, at a price that is so affordable the tab is often less than a company’s monthly electric bill. SaaS also minimizes the upfront costs normally associated with software, and eliminates the onus and cost of having to manage the IT behind the system.
SaaS ERP reduces “drag” on an organization, reducing the time and cost of maintaining infrastructure. Less money spent on IT means a lower cost of product delivery, enabling businesses to get a competitive pricing edge and/or higher margins. This also frees up dollars to devote to hiring, R&D and other growth initiatives.
As well, SaaS ERP also gives companies another key advantage – the ability to realize faster time-to-market. Research with executives by the MIT Center for Digital Business and Capgemini Consulting has shown that many companies struggle to gain transformational effects from new technologies. In fact, only a small minority have developed the management and technology skills to realize the full transformative potential of new technologies. The best technology in the world delivers no benefit if it never gets off the corporate “shelf”. SaaS ERP eliminates these sticky wickets, so companies can avoid wasting time and energy trying to deploy technology and instead quickly put it into practice to their advantage.
Your business is undoubtedly more complex that Johnnie and Janie’s lemonade stands. But any business needs the tools to usher in new innovation. SaaS ERP can help you shift your priorities– so you can stand and deliver game changing outcomes.