shutterstock_254463121.jpgThis past fall, I decided that it was time to get a new car. It sounds like an easy decision to make, but it wasn’t. The decision involved my budget, what type of vehicle I wanted, features desired, gas mileage and maintenance plans; all of these would factor into my total cost of ownership (TCO). After finding a vehicle and evaluating the trade-offs of buying versus leasing, I decided to lease my car. In my experience, this process is analogous to determining which sales performance management (SPM) platform fits your organization’s needs: Do you go in-house with an on-premises platform (buy), or do you select a software-as-a-service subscription option (lease)?

Assuming that monetary costs regarding “warranty,” “maintenance agreements” and “fuel costs” are well understood, I’d like to take a slightly different perspective and focus on some other considerations that may not be direct inputs in the TCO equation for an SPM solution. There are a variety of costs that revolve around people, processes, support models and organization-specific idiosyncrasies in play.

Evaluating the Vendors           

Once you’ve identified that there’s a need to automate your SPM processing, what do you do? Research, research, research! Evaluate best-fit SPM software vendors for functionality, support model, cost, culture, time in market, etc. Understanding that most of the research information available is generated by vendors, you need to read between the lines to remove vendor bias. Leveraging formal and informal channels to vet SPM software vendors—augmenting direct vendor communications—helps to ensure that all software vendors being vetted are evaluated based on your needs.

Monetizing the Costs

Line-item dollar costs associated with the SPM platform selection cover a wide range of cost categories, which include some or all of the following: software/licensing, hardware (mainly for on-premises) and operations. Each category has its own subset of criteria that need to be evaluated, monetized and prioritized when calculating TCO. It’s important to evaluate costs that are specific to your organization; cost criteria tend to vary organization by organization. Even though the financials might point to one vendor solution, make sure to consider the non-monetary costs while contemplating your decision.

Choosing a Platform   

Vendors offer SPM solutions that are available on premises, through SaaS (in the cloud) and, in certain instances, both. If you determine that an on-premises solution best fits your near-term needs, identify which vendors support this platform and if and how long they plan to support it. With the advent and popularity of SaaS, it’s imperative to perform your due diligence regarding vendor support strategies. It’s common practice for on-premises SPM vendors to limit support to the current version and one previous release version, and they prefer that clients select SaaS as it tends to provide them more revenue over time with lower maintenance and support costs.

Weighing the Pros and Cons

When making the buy/lease decision for a vehicle, you should think beyond drive-off costs. There’s depreciation, interest, fuel, insurance and other costs associated with the cost of ownership. For the SPM platform, you also need to think beyond initial implementation costs.

    SaaS On-Premises
Pros Cost Lower upfront costs Lower long-term cost
Storage cost No monthly cost
Support and maintainence Virtualization (can be shared)
Security Secure environment Customizable
Deployment & Scalability Faster setup Higher degree of control
Highly scalable
Minimal IT support required
Cons Cost Price increases over time Extra cost (training and maintenance)
Premium support Hardware
Security Policy (security only as good as you make it) Policy (security only as good as you make it)
Industry-specific needs may not be addressed Disaster recovery and backup
Lack of control of data/software
Deployment & Scalability Customization Customization
Integration Updates
Longer implementation

 

While you can work on your old Civic, that new Ferrari in the driveway may need someone with specialized skills to help you with even routine maintenance.

Owning the Decision

Ultimately, the decision is yours, so make it wisely. Ensure that your TCO evaluation incorporates the other costs aligned to your business case. We encourage you to engage your vendors and consider their recommendations, but don’t allow them to drive the process and influence your decision. 

What were the critical factors that influenced your SPM platform selection? Is there anything else that you considered?

 

Topics: sales performance management, Steven Bebout, SPM, lease or buy