Software as a Service (SaaS) or On-Demand as it was originally called is certainly part of mainstream thinking today. However back in 2001 when the concept was first introduced it was a relatively new model ideal whereby organizations would pay a fee for using the application versus owning or licensing the software.
What made Virginia’s model interesting is that in the first 4 years of the contract, the vendor absorbed the bulk of the upfront implementation costs. Hungry for business, the vendor accepted the Commonwealth’s offer to be paid a percentage based on the volume of orders processed through the system. This of course provided them with the necessary impetus to ensure that eVA became “effectively” operational as quickly as possible.
- from September 20th, 2007 Procurement Insights post “Yes Virginia! There is more to e-procurement than software! (Part 2)”
The excerpt above is close to 4 years old and its enduring popularity (having been picked up by numerous print and electronic media publications) is significant. The excerpt supports a steadily growing interest in the SaaS model as a viable alternative to the more traditional ERP licensing/consulting model.
The SaaS model enabled Virginia to eschew the commonly “forced” one plan/one mind precept that often anchors and ultimately handicaps the majority of e-Procurement initiatives. (Henry Ford’s proclamation that customers can choose any Model T color they want as long as it’s black comes to mind here.)
This model meant that Virginia did not have to focus exclusively or predominantly on the cost justification normally associated with ERP implementations. In a traditional ERP implementation, the ROI would have been years down the road. Instead, Virginia was able to concentrate on the essential elements of the strategy itself which included open and productive collaboration with key stakeholders. This is a far easier task when the proverbial financial clock isn’t ticking louder with each dollar that is being spent.
However, the SaaS model does require a heightened level of collaboration and project responsibility on the part of the client. The client often needs to take initiative and create and drive the vision. SaaS solutions can (and do) provide the prerequisite level of freedom that is conducive to a far broader and more effective enterprise-wide collaborative engagement of all stakeholders.
Given the success of eVA, it is hard to imagine that other government entities do not possess at least some of the expertise and determination to generate similar results within the framework of an equally effective SaaS cost model. Hopefully the Commonwealth of Virginia’s success will act as a beacon to those public (and even private) sector organizations that are grappling with the challenges of a complex and diversified procurement practice.
Going forward, key things to watch for will be the will and insight of the client to facilitate meaningful dialogue with internal as well as external stakeholders, and the ability of the SaaS vendor to not only deliver a superior technological capability on a cost efficient basis, in addition to ensuring the solution being utilized serves as a support mechanism for achieving both the individual as well as collective objectives of the organization.
The take away lesson for today’s CPO is simple: learn how to truly leverage SaaS capability from a practical utilization standpoint to enable the unique stakeholders within the organization to achieve their specific goals, while keeping an eye on the overall interests of the enterprise as a whole. This holistic view is something I will talk about in greater detail in the next installment in the series titled “Dissolving the functional silos (removing the barriers of collaboration and influence within the enterprise).”