The SaaS technology market is competitive and confusing. Making good buying decisions is tough. Making high business-impact buying decisions that are also cost-effective is near impossible. To clarify, it’s near impossible – not entirely impossible.
In a previous article Devaan Parbhoo and I wrote about how Only 43% of organisations achieve the level of savings that they set out to when procuring SaaS technologies. We then unpacked how organizations, through a cost optimisation analysis, can claw back some of this value.
This month, Devaan and I are teaming up again to continue this conversation and unpack, in practical terms, how you can make better buying decisions.
What You’ll Get from this Article
- Tools to help you buy tech better
- Things to look out for from swindling vendors
- What the Total Cost of Ownership Analysis is and how to use it
- How to collect the right data points
- How to cultivate a digital mindset
- How to save money when buying tech
Buyers Beware: We’re Dependant on Salespeople
In Daniel Pink’s 2012 best seller To Sell is Human, Pink talks about the shift in market conditions where traditionally salespeople held the power. They had more information than their buyers. Sellers would use this power to their advantage and sway buyers into making decisions that suited the seller. However, Pink argued that in the 21st century, it is the buyer (who has access to a plethora of information) who holds the power. I studied Pink’s 2012 best seller 8 years ago and have regularly applied his expertise to this day.
His argument, which theoretically holds true, is faltering in the current SaaS technology market. Here’s why:
There’s too much information at our fingertips. This leaves buyers overwhelmed, confused and at the mercy of tech salespeople. The salespeople know this and they’re using it to their advantage again.
‘No One Ever Got Fired for Buying SAP’
I dislike this saying, but it’s true for good reason. Buyers simply don’t know enough about the products they’re buying. They don’t understand how these products can create business value. As a result, they play it ‘safe’ and pick a name brand. The same name brand that’s likely (but not always) overpriced and could ultimately under-deliver.
SAP are market leaders for a reason and are very effective enterprise tools but very few mid- to low-market organisations need them. What’s often overlooked is that there are more affordable, quicker-to-deploy, user-friendly options available.
Sellers Are Focussed on Features and Not Consumer Benefits
This hypothesis was confirmed earlier this month when attending the 2024 Africa Tech Festival in Cape Town, South Africa. When engaging with the vendors, it was clear that their primary focus was on their products’ bells and whistles, and nothing else. To most, this might not sound concerning. However, to me, it highlighted two pervasive issues:
First, the technology product market is very competitive. Technology advancements continue to forge ahead, far quicker than our human ability to sufficiently use the tech.
Second, not one vendor conversation spoke to how their shiny new product can bring value to our lives. Not one conversation spoke to end-user engagement or business value. There was no consideration given to getting people to see value in using their tech. Their pitches focused solely on what their products are.
Continuing down this ‘features instead of benefits’ one-upmanship is, in my view, a race to the bottom. And it is a race that does not cater for the value that their tech can bring to our lives and businesses.
Let’s Get Practical
How to Collect Data for a TCO Analysis (and what data is important)
Think of your data costs like an iceberg. The visible tip above the waterline represents the easily accessible information buyers often rely on when making purchasing decisions. But the true story lies beneath the surface, hidden in the depths of less apparent insights.
A Total Cost of Ownership (TCO) analysis dives below the surface, uncovering the submerged mass of critical information buyers need before committing to a purchase.
It’s not just about what’s visible—it’s about providing objective data-driven insights that prioritize your best interests over the vendor’s agenda.
The quality of a TCO analysis hinges on the quality of the data you feed into it. Ask probing questions, engage stakeholders, and challenge assumptions to ensure comprehensive insights.
Remember, a TCO analysis isn’t about pointing fingers—it’s about fostering understanding and making informed decisions. Don’t fall into the ‘How did so-and-so not see this?’ trap no matter how apparent the findings are. They are just findings and, more importantly, a chance to improve your cost optimisation.
Cost categories include:
Direct Costs:
- Hardware eg. servers, network components
- Software eg. licensing, software maintenance, development and management
- Management eg. architecture/administration, system hosting, reporting
- Support eg. support staff
- Implementation eg. development, customisation and integration costs
Don’t be afraid to calculate the cost of support, not only in salaries but also in the time it takes to resolve tickets, deploy fixes or make a configuration change to either the software itself or the infrastructure upon which the software is deployed.
Indirect Costs:
- Lack of a Digital Mindset
- Change management
- Marketing, engagement, and adoption costs
- Account Management
Collect these data points and you’ll be more prepared to make an effective buying decision.
Explaining a TCO Analysis in Context
We conducted a TCO analysis of SAP Talent Software for a Financial Services Client, employing more than 35,000 staff in South Africa and abroad.
Implications
- Group-wide budgetary constraints
- Implementation complications
- Delayed go-live date
- Substandard utilisation
- Underestimated change management and delivery resources
Recommendations
- Greater analysis of the budgetary processes
- Greater analysis of the operating (direct) costs and the personnel (indirect) costs
- Analysis is required to understand the reasons behind the variance disparity
- Conduct a cost avoidance analysis to assess the viability of current SaaS instances versus alternative SaaS platforms
- TCO analysis to be conducted before investment decisions in future
3 Common Pitfalls to Avoid
There are always unforeseen speed bumps encountered along the way and it is near impossible to accurately predict them. Based on my experience and research, here are three that you need to be aware of.
1. Implementation partners
Picking the right implementation partners can make or break the success of your SaaS technology project. If you have only taken one thing away from this post, it should be this. Your implementation partner is your guide in the process.
They should (i) complete penetration tests and environmental analyses, (ii) control the time to go-live (going live too early is a common fatal error), (iii) assess your peoples’ readiness for change and ensure you have a detailed understanding of your users, )iv) advise on the necessity for customisation. To name just a few.
2. Multiyear license costs escalations
There are many ways to commercially structure a SaaS technology roll-out. Particularly multi-year enterprise roll-outs. You know, the real pricey ones 😉). Carefully consider what you agree to.
3. Underestimating the efforts required to drive utilization, adoption and engagement. A lot of the indirect cost ‘stuff’.
If you only take two things away from this post, this is the second. Time and time again, SaaS roll-outs fail because of poor change readiness. If you are following a ‘build it and they will come’ approach then you’re dead in the water.
Cultivating a Digital Mindset
To successfully navigate the marketplace, and/or workplace, today, cultivating a digital mindset is paramount. But what does this mean? As James McQuivey emphasizes in “Digital Disruption: Unleashing the Next Wave of Innovation,” a digital mindset involves embracing behaviours to formulate new habits for the context of the present. This means being open to experimentation, ‘right’ risk-taking, and continuous learning.
To foster these behaviours, you can implement the following practical steps:
1. Embrace a Curious and Open-Minded Approach:
Cultivate a sense of curiosity and consciousness to explore new ideas and technologies. Be open to different perspectives and challenge the status quo.
Include standing time in your diary to explore new technologies and how others are using it to solve problems that you’re currently grappling with.
2. Experiment and Prototype!
Encourage your team to prototype something for every sprint. This helps you identify where failure can be seen as a stepping stone to success. Create safe spaces for employees to experiment with new ideas and technologies without fear of repercussions.
3. Learn:
I don’t like the words continuous learning. They mean absolutely nothing to me. Instead, be in the constant pursuit of knowledge. Adopt a mindset that says: “no matter how skilled you are, you’re not the expert..”.
Master your craft! Reflect upon what you can do, and what you’re good at. What you can’t do, and what you’re not good at. This won’t happen by chance, so make sure you dedicate time in your diary to prompt the reminder.
Consider these and you will save money! I promise.
