First in (perhaps) a series of lightweight posts for your edification over the break – excuse the brevity and possible bad grammar – I’m in the middle of nowhere and these are random thoughts that come to mind.
My learned colleague (yup – always wanted to use that term) Phil Wainewright posted a few days ago with the example of LucidEra and their novel marketing approach using a ‘pipeline health check’ which in effect gives the prospect a taste of the benefits they could obtain using LucidEra’s solution. The idea being that the customer can realise a ROI having to fork out for the LucidEra subscription.
So far so good but Phil uses this as an example of return before investment (rBi) or in his words the fact that;
begin using the application, and they typically pay on a per-user,
per-month basis. So it’s quite easy to imagine deploying a procurement
application, for example, which achieves enough savings per user in the
first month to more than repay the monthly fee. If the fee is billed on
net 30 day terms, then the customer achieves the return before the
investment has even been made. That’s the essence of rBi.
Which is all well and good but is somewhat unrealistic in that it totally ignores the sunk costs involved in deploying a solution. Even given the fact that SaaS should be/is easier to deploy than an installed application, that deployment takes some resource – costs which need to be borne before the product is functional and generating a return.
So I’m not really fond of telling people they’ll see a rBi. It’s too easy for the naysayers out there to refute that claim by using a total cost of ownership argument that shows the true costs prior to deployment.
Much safer to just say that SaaS will generally have a quicker ROI than an installed application – we don’t want to get too far ahead of ourselves now!