Leveraging Emerging Technology/Software as a Service In A Structured Corporate Environment
More and more, large corporate organizations are relying on small, upstart tech firms to fulfill niche business requirements. As a procurement executive, should you be looking at these companies differently? And should they be subject to the same rigor and risk management procedures as established companies?
It's tempting to be an early adopter of the latest Software as a Service (Saas) startup. You could leave behind a host of problems from your legacy systems and integrate new functionality. Plus, employees like getting their hands on the latest solution instead of struggling to keep legacy applications relevant.
You'll find SaaS solution in just about every discipline from ERPs to supply chain planning to marketing to corporate travel. SaaS solutions, also known as cloud-based computing, are attractive. They're often on a subscription plan instead of a large upfront licensing fee. Some services offer pricing based on use, so a company can scale its commitment to fit current operations and future growth, reducing fixed costs.
Making a big move to a SaaS solution can be risky. But not changing carries its own risk of losing a competitive edge. Here's a look at some considerations in leveraging emerging technology in a structured corporate environment.
Evaluate innovative technology
It's essential for procurement leaders to be able to separate fact from fiction in evaluating innovative technology. It's easy to get excited about the possibilities that emerging technology can deliver. After all, the average IT application is 20 years old. That's why many companies are moving to SaaS options to launch their Internet of Things and big data strategies.
SaaS solutions deliver a range of benefits to support growth and innovation. It's easier to integrate merger & acquisition partners and connect a global workforce with a single course of information.
It's easier to transform IT processes into outcome-based activities rather than operate them as cost centers. SaaS providers can be managed on outcomes such as increased revenues and profits, reduced costs or improved customer acquisition metrics.
However, experts recommend measuring performance based on operational metrics rather than direct IT return on investment. The goal is to drive fundamental improvement in the company rather than reducing spend in one area.
Manage risks of SaaS
While adopting a Saas solution may seem simple compared to traditional IT procurement, its essential to provide effective supplier risk management during supplier assessment. SaaS solutions bring some unique challenges to a structured corporate environment, so it's crucial to identify those potential gaps.
Cloud security issues
Threats from cloud-hosted applications and Internet-only access arrangements range from unauthorized access to confidential data and identity theft. Bad actors constantly work to steal data and plan malware and ransomware.
Business continuity
Make your provider has a solid business continuity plan with service level agreements for recovery point objectives and recovery time objectives.
Data ownership and location
Understand who owns the data housed on the application's servers, and where the data is physically stored. If it's off-shore, you may have to deal with a tangle of privacy laws that were not anticipated.
Know the vendor
Many SaaS solutions are offered by startups that may be undercapitalized. They may offer an attractive price, but the business model may not be sustainable. Be clear on what happens to your data if the solution is no longer offered and have a Plan B in place.
Manage expectations
In making a significant operational change with a SaaS solution, it's vital to communicate with stakeholders and suppliers of startup technology effectively. The Gartner "Hype Cycle" got its name for a reason. Understand where you are on the cycle and the maturity of the solution and its provider.
For instance, the planned savings from transitioning to SaaS don't always appear when promised. There may be additional costs in managing legacy applications to co-exist with the new environment.
Procurement and finance executives can use an array of performance measures in managing IT investment. Look at tangible gains from savings on capital expenses and operating spend. While other benefits such as faster time to market and increased innovation are harder to measure, they will be revealed in financial performance.
Even after a transition to a SaaS solution, many IT challenges remain, such as managing security efforts and monitoring IT performance logs.
When appropriately managed with realistic expectations, SaaS solutions offer significant benefits in a structured corporate environment.
To dig deeper, don't miss the expert panels at ProcureCon IT Sourcing, June 16-18, 2020, in Denver.