For an enterprise level organization, use of a software system is important as the implemented software system helps with productivity, improves efficiency, and opens up new revenue opportunities. Even though most of the enterprises know the advantages of having a software system for their business process, enterprises outside of the technology industry are looking to cut down IT costs, considering the fact that software implementation is very much considered a cost center by many organizations.
So how does a software system put a value on their software investments? Here are a few ways software provides value at a high level:
1. Accelerated processes: What used to take 2 days, takes 2 hours, enabling the organizations ability to serve its customers, reducing latency and improving capacity. The more your resources can do the more profit you make. The more profit you make, the more you can do.
2. Automation. This directly affects accelerated processes. Some organizations make the mistake of trying to measure automation, when they should be measuring acceleration. An example of automation is AeroChef Software system that integrates data from various departments of an inflight kitchen and creates a report which allows you to make more informed decisions.
3. Communication & Collaboration. Being able to communicate with people (synchronously and asynchronously) easily is an important factor to get work done. A simple example is email – it is the simplest yet critical part of any organization’s IT investments. This can be considered as one of the advantage of implementing IT systems, but once over a period of time, simple communication options like email prove to be a standard means of communications in many large enterprises. This in turn affects the ROI positively.
4. Cost reduction. Proper hardware consolidation will definitely reduce the computer workload in an enterprise level organisation. What used to take 12 servers and 8 people to do, can be done by a single person using one server after the server consolidation. Direct positive impact on ROI.
While all of the above mentioned points make sense, the question is how do you measure them? How do you justify spending a certain money value on software? This is where Software-As-A-service (SaaS) comes in. When we talk about software, we generally refer to the software architecture and may be the disadvantages over the advantages. Here I’m trying to talk about something different in this context. I’m saying that software can be measured as a service. Just like how we pay for services everyday – cell phones, internet, electricity, water etc. We pay for how much we use the software.
So why software shouldn’t be treated the same way? Why can’t IT departments adopt a pay-as-you-go model? They possibly can.
The challenge with this concept is
1) How much do you charge and
2) What do you charge for?
1. You can analyze and apply a flexible budget by showing the value and usage of the software. For example, the case of unifying budgets across IT departments as large organizations have multiple IT departments and by consolidating budgets can possibly lead to higher ROI.
2. Usage tracking and adoption. By implementing a pay-as-you-go model you can precisely track how the software is being used and your software is only worth something if people adopt and use it. In any case, this is something interesting to explore… I don’t know of many organizations taking a look at this, but at the very least, it’s important to explore a flexible usage tracking system. Giving every employee an expensive cell phone and service plan and labeling them as a cost center is not fair especially when those cell phones are helping sales people close million dollar deals!