Back in the days of on-premise data centers and shrink-wrapped software, technology vendors were often accused of providing less value than promised. They might sell customers more features and more licenses than they needed, or hit them with price hikes once they had them locked in. Not infrequently, companies would waste millions of dollars trying—and failing—to use the technology in ways that actually helped the business.
Such horror stories are less common in the age of software as a service (SaaS). However, avoiding disaster is not the same thing as demonstrating value. How do customers know they’re actually getting the benefits they were promised? And how can they take advantage of opportunities for additional improvements? The truth is, SaaS companies haven’t done much better than legacy vendors when it comes to providing such insights.
Customers should expect more of SaaS vendors. If we’re going to host their day-to-day operations, we need to give them tools to measure the economic impact of those operations. Simply put, SaaS companies have revolutionized how software is developed, deployed, and sold. Now we need to revolutionize how we measure its business value.
This is not an unreasonable ask. One of the reasons the SaaS model is superior to legacy models is that we know how customers use our software, and we can tell which ones use it most effectively. SaaS vendors have massive amounts of aggregated customer data, and are increasingly applying machine learning technology to extract valuable insights. How many processors, for instance, does the average mid-sized industrial company need to run its deployments? What level of user adoption is required to actually change how people work? The answers can have a big impact on a customer’s ROI.
Because of the special nature of the SaaS model, vendors have an economic incentive to provide as much transparency, accountability and advice as they can. Most modern SaaS vendors sell subscription services, which need to be renewed periodically. When that happens, SaaS vendors must prove the value they’ve delivered—or risk having the customer depart for a vendor that can.
Since 2014, Amazon has used a “Trusted Advisor” tool to see whether AWS customers are using more or less of a resource than they had planned, so they can adjust their subscription packages accordingly. It’s a great example of an industry leader proactively showing customers and sales teams how to right-size spend.
Service Now has embarked on a significant effort to help our customers measure the business impact of the digital transformation that our technology enables. So far, we’ve worked directly with around 100 large accounts, including SwissRe, Virgin Trains and the Royal Bank of Scotland (RBS).
RBS consolidated 13 IT service management products into one, shortening the time it takes for employees to lodge a complaint by 76%. Automating the process saved the equivalent of 46,000 employee hours. Allianz Life Insurance Company replaced its ad hoc process for monitoring third party agents, lowering its governance costs and increasing its ability to spot activity that could lead to compliance violations.
By the end of 2019, ServiceNow plans to make these capabilities available in a self-service tool that our sales teams can use to help any customer. Ultimately, we want to embed this functionality in all our products, so that customers can measure business value in real time for themselves.
Customers tell us they want to understand the value of what they’re buying across many dimensions. For starters, they want assurances that promises made by our sales teams and their own executives aren’t forgotten by the mid-level managers and business operations teams that run these engagements. Customers, especially second movers who chose not to be early adopters of a particular type of SaaS, want to benefit from what’s been learned by the pioneers.
They want benchmarking data and established best practices tied to this value conversation. They want measures that articulate business value not in the vendors’ lexicon, but in their language and in ways that address their key questions. Crucially: What will be the ROI impact if we change our digital strategy or modify our operating model over time?
Today, most SaaS vendors offer relatively simple tools that measure uptime, for example, or identify services that nobody has used. Just as all car manufacturers provide gas gauges so drivers can manage their fuel consumption, these tools should be table stakes.
Over time, we need value metrics designed for particular job functions and types of companies. In the future, CIOs should be able to track not just the dollar impact of downtime but its impact on operational metrics such as mean time to resolution. Human resources chiefs should be able to track how long it takes for employees to get answers to questions placed in the self-service queue.
Again, these tools should tie the benefits of SaaS into the operational and financial models of our customers. For example, if a company activates a SaaS feature that replaces an inefficient manual process, the software should notify the customer of the reclaimed capacity so that it can be reinvested in something else.
The insights should also be based on industry-wide benchmarks. Were my gains over the past six months better or worse than those of other companies my size, or in my industry? Only then will they cut through the digital noise and drive meaningful changes in how IT departments and all digital processes are run.
We’re far enough into the digital journey to have learned many lessons. Now it’s time to share these lessons with our customers and add a layer of accountability for the results they achieve using our tech. At ServiceNow, we accept the challenge and are confident we can build the muscles needed to make this vision a reality—and drive improvements for our customers and the technology industry in general.