Driving digital maturity with SaaS transformation – Part 1

Posted by Akhand Singh and Jeffery Hall on February 27, 2020.

Digital transformation can foster a faster, more agile approach to application deployment — a goal shared by many digital businesses. Organizations aspiring to maintain their competitive edge and execute on digital transformation strategies need modern and flexible business applications – enter the “The SaaS (Software as a Service) Technology”. SaaS has grown rapidly in the past decade and has become a key driver and deployment model for most commercial business applications, helping applications buyers to leverage technology innovation more rapidly, improve customer experience, and accelerate their transformation growth.

There’s a lot to appreciate about the SaaS model: Flexibility, quick implementation, cost benefits, ROI and the promise of an always-on pipeline of innovation through continuous updates. Yet just as many digital transformation efforts have stalled, organizations have also been slow to fully embrace SaaS apps or realize the true benefits of SaaS implementations. So how can we look beyond the hype to take advantage of the SaaS? And how are some leading digital mature organizations deploying SaaS? What are some of the benefits?  Additionally, to what extent are the expectations of an organization met on the SaaS success factors i.e. Improving processing speed? Integrating seamlessly in the company’s stack? Improving user experience and end-user adoption? Lowering costs?

 

Let’s find out answers to these questions and some actionable recommendations for organizations considering SaaS in their digital transformation strategy.¹ In our survey, we assessed the value of SaaS solutions by comparing full SaaS stack versus companies with mixed stack by understanding their journey and growth pattern.

What has worked for organizations?

1. Companies who moved their entire technology stack to the SaaS reported significant benefits compared to mixed-stack companies

In the survey, we found out that organizations moving their entire technology stack to the SaaS saw significant benefits in multiple areas when compared to the mixed stack organization² Here are some key benefits reaped by highly mature SaaS organizations:

2. Companies with all-SaaS stacks saw strong results for ROI

In our survey, for all SaaS solution, a full SaaS stack exceeds ROI expectations for more than 2/3rd of our respondents, indicating better business case development for SaaS solutions. ³ SaaS model promotes more ownership and accountability to business stakeholders, which can help them to realize benefits faster and reduce friction with the technology management organization. In our survey, we found out that when trying to capture the highest ROI possible, building a consistent stack can provide better results.

Keep in mind that when considering all options for upcoming technology implementations, it is important to recognize that implementation costs have shown in some cases to not be significantly different from previous on-premise implementations.

3. Faster implementations

In the survey, we could see that highly mature SaaS companies experienced far greater speed benefits. Companies who committed fully to a Cloud stack realized significant improvements in top-end processing speed, even relative to companies with a 75 percent Cloud stack. Organizations that committed to a full transition to the Cloud stack made infrastructure changes more quickly, allowing for faster deployment and quicker improvements when feedback indicated the need for changes.

Software decision makers consistently cite speed and agility among the most important factors of employing SaaS. The configurability of leading SaaS software products is an architectural advantage that simplifies implementation and enables changes to application setup following go-live.

4. Embedding technology innovation in SaaS platforms and ecosystems

The familiarity with application usage allows users to more quickly adopt to SaaS solutions, because in the course of time, they get more comfortable with consistent updates rather than massive overhauls after long time periods. This allows SaaS buyers to recognize the increased value of the technology platform in addition to the functionality of the applications themselves. Organizations, for example, continue to innovate at the platform level with AI and other latest technology innovations in the market.
SaaS solutions enable organizations to adapt to new technologies faster and more easily at the platform level and leverage innovation through the vendors’ ecosystems.

What hasn’t worked for organizations?
Organizations love the speed, flexibility, and business agility that SaaS enables, but as they adopt SaaS, they can also encounter new challenges, such as:

    • Managing frequent updates. Whereas on-premises software updates are infrequent, and customers can often defer or even skip them, SaaS upgrades are more frequent and non-optional. This requires an increased change management effort to decide when to put resources in place to evaluate, test, and activate version upgrades.
    • Dependency on SaaS vendors for operations and security. There is high dependency on vendors to operate and manage the solutions. Organizations usually end up in trouble where the support included in the base subscription is not enough and requires extra paid support to get better results, increased help desk support, and dedicated representatives.
    • Not achieving expected ROI and cost savings: Organizations generally assume that Cloud and SaaS solutions would deliver significant cost savings, from an implementation and operations perspective, but from the survey we learnt that only slightly more than half achieved their expected business case results. The same is true for ROI, as many respondents believed that a SaaS transition would pay for itself but found the implementations to require similar cost structures as on-premise implementations.⁴
    • Multiple purchases and widespread usage without considering architecture: SaaS subscription usually starts off too small to notice or properly address but can soon grow into an unwieldy problem. Many SaaS purchases are “just for a few users” or “just for a short time” — but then grow to become important, entrenched enterprise solutions without fitting in the overall technology architecture.

      SaaS consists of hundreds of niche solutions, few of which are built on the same platforms. Organizations purchase multiple SaaS solutions facing diverse architectures with varying skill requirements and integration challenges due to the layers of acquisitions the vendors have used to build up the SaaS portfolio.

    • Minimal due diligence and amateur negotiations during purchasing SaaS:  Organizations may not conduct the due diligence they need to understand technical integration capabilities, technical or contractual limitations or skill requirements. Business buyers may also fail to do the important ask of due diligence during vendor selection.Additionally, SaaS negotiation requires a customized negotiation approach; neither traditional software negotiation tactics nor hosting practices from the books. Many leaders are still unaware about the questions they should be asking to identify hidden costs and missing terms, which is one of the main reasons for budget overruns.

      Organizations can start by recognizing that creating a SaaS strategy or getting a SaaS subscription is only a first step. Yes, SaaS might be only one of the pillar in your overall digital transformation, but it’s still critical to know where you want to go, how to get there, and what medium would be the best to reach your objectives – of course with a balance between cost and comfort. Stay tuned for part 2 of this series where we’ll discuss leading practices for SaaS implementation.

      Akhand Singh is a senior consultant in Deloitte Consulting LLP’s Digital & Cloud Enablement practice, advising global client across industries to help them activate their digital organizations and prepare them for digital transformations.

      Jeffery Hall is a specialist leader in Deloitte Consulting LLP’s Digital & Cloud Enablement practice, advising and managing client business transformations driven by digital innovation.

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