Across industries, adaptability is a condition of long-term business survival.
Adaptability isn’t just about accepting the inevitability of change; it’s about embracing it. Whether you’re a leader in healthcare, financial services, or education, it’s your responsibility to recognise the forces of change within your industry and evolve accordingly.
Today, that mandate to adapt has a name: Digital transformation. While the particulars of digital transformation vary based on industry and company type, the overall idea is universally applied. Across all organisations, digital transformation refers to the use of technology to profoundly transform how businesses function. Broadly, it’s about leveraging the cloud to consolidate and integrate information systems across an enterprise, with the ultimate goal of delivering more value to your users.
With the move toward digital transformation, many business decision makers look to software vendors to help facilitate the transformation process. But these vendors also need to undergo their own digital transformations. And that’s a challenge that requires a strategic plan.
Key challenges for software companies looking to transform
There are several common challenges that vendors face as they approach making a digital transformation of their own.
The first and most significant challenge is the enterprise software industry’s continued reliance on the legacy perpetual license/maintenance model of transacting with customers. Under this model, software companies sell users a license that establishes ownership of the software.
Then, the vendor charges the user annual maintenance costs for patches and updates. But in the age of software as a service (SaaS), this practice is outmoded, and subscription-based sales is now emerging as the industry standard.
Internal workplace culture and processes represent another hurdle standing in the way of vendors’ digital transformations. As with businesses across other industries, many enterprise software companies are firmly planted in traditional ways of working. People get accustomed to methods of communicating and working that aren’t necessarily aligned with a transformative strategy. In this way, people and processes can actively impede progress.
How software vendors can chart their own path to digital transformation
For enterprise software companies, surmounting transformation-based challenges means taking an intentional and strategic approach. Here are the steps I recommend for software vendors looking to seamlessly deploy their own digital transformation strategy:
• Prioritise a fully cloud-based delivery model: First and foremost, enterprise software vendors need to practice what they preach by embracing cloud delivery. That means moving away from outdated transactional models and toward a fully cloud-based delivery model. For many software vendors, this transition will mean a significant overhaul of longstanding processes, including phasing employees out of using legacy apps and translating on-prem security practices to a cloud framework. But as the on-prem software world continues to be supplanted by cloud delivery, replacing these outdated models is imperative.
• Take a long-term investment perspective: As vendors migrate away from traditional delivery methods and toward cloud solutions, there will be new costs. When you offer customers a SaaS subscription model, that introduces costs to maintain the platform as well as to oversee a cloud operations team. In addition, companies will need to level-up security in order to avoid vulnerabilities that arise in the cloud. The important step here is to view the cloud as a long-term investment. While there will be immediate costs associated with cloud migration and impact to cash flows due to subscription based revenue stream, the return on investment has the potential to be huge over time – largely driven by the more predictable revenue stream after year one that accompanies adoption of a subscription-based model.
• Take an incremental approach to cloud adoption: While it can be tempting to launch a complete cloud overhaul, for internal use, software vendors are instead advised to approach the transition gradually, beginning with low-hanging fruit such as basic communications services including telephony, voice and chat for internal uses. Once these functions are migrated, vendors can look to move business applications and eventually sophisticated workflows to the cloud.
The best way to ensure a smooth transition is to begin the migration with smaller internal test groups, and use those groups to identify and eliminate any issues before deploying a broader migration.
For external engagements, vendors should incrementally convert their customer base to the subscription model, thus allowing time for customer adoption as well as time to transition cash flow impacts with the new business model.
With digital transformation emerging as an imperative for enterprises across industries, software companies need to keep pace with the speed of change. By deploying an incremental and people-focused strategy, they can successfully do so.
Sourced by Dr. Tianyi (TJ) Jiang, co-CEO and co-founder of AvePoint