The Customer Value of Digital Transformation

By Nucleus Research Analyst, Isaac Gould

THE BOTTOM LINE

Businesses that successfully navigated recent market disruptions are now adapting to the reopening of the economy. Many organizations have recognized the benefits of technology in helping them operate with greater business flexibility and agility. Now, more than ever, businesses are undertaking or considering a digital transformation journey to streamline and place customers at the center of operations. Nucleus believes organizations that modernize their solution stacks and integrate their IT ecosystem stand to benefit from increased productivity, end-to-end organizational visibility, and improved customer experiences. We have also identified product development trends, including cloud adoption, the platform-as-a-service model, and platform customizability and extensibility, that customers need to be cognizant of when sourcing new applications.

OVERVIEW

When the economy pulled back during the pandemic in 2020, many cash-strapped businesses had to cut consultants, employees, and partnerships to keep the lights on. With the arrival of the vaccine and businesses opening their doors again, the economy has bounced back faster than most anticipated. While we celebrate a “return to normal,” the increase in demand has brought about challenges of its own. How businesses recover now will determine their long-term success. Many are turning to technology to restructure their businesses and adapt processes to capitalize on growth opportunities.<.p>

Nucleus sees companies experience the greatest success when they prioritize the digitization of information and processes for all departments, roles, and business units to put customers at the center of their businesses. It is no longer sufficient to rely solely on point solutions to address individual pain points as issues become too costly to bear. Instead, companies need to proactively address inefficiencies and bottlenecks by sourcing business applications that promote connectivity and scalability.

Benchling, a cloud-based informatics platform for life sciences R&D, launched a digital transformation initiative during COVID to modernize its PSA system with FinancialForce. The company found success in greater visibility across its projects and operations and can plan further ahead to adjust to the impacts of disruptions. Ryan Whitney, a senior operations manager at Benchling, said, “we've built out reporting that tracks projects that have been on hold due to COVID-19. We now have a helpful workflow visualization of the impact that this pandemic has on our business. Not only has it helped our customer experience reporting, but it's also helped our financial planning teams to understand how many people they should budget for throughout the rest of our year.” Any technology decision should be made with considerations for the future because an organization’s solution ecosystem must support business growth in terms of performance and functionality as customer needs expand concurrently.

THE VALUE OF BUSINESS APPLICATIONS

Many businesses undertook a digital transformation initiative to deploy solutions, connect disparate systems, and standardize their databases and processes during the pandemic. In doing so, these organizations learned how to best leverage their financial and operational data to drive efficiencies in the back office, connect to the rest of the business, and improve the overall customer experience. Before businesses can expect to see benefits in increased user productivity, end-to-end organizational visibility, and improved margins, they must first integrate their IT environment and establish a Single Source of Truth (SSoT):

Integration.
Organizations that prioritized the connectivity of their solutions eliminated data and functional silos by focusing on integrating their various systems and databases. An interconnected solution ecosystem promotes end-to-end organizational visibility, collaboration, and automation; once systems are integrated, users can automate data flows to eliminate manual data entry and manipulation. Businesses can leverage greater data availability for comprehensive planning and analytics to improve the customer experience and grow the business. For example, companies can surface insights across marketing, sales, finance, and operations to support decision-making and enable sales and operations planning (S&OP).

Single Source of Truth.
With an integrated IT ecosystem, organizations can then establish an SSoT for all information. This means the data utilized on a daily or periodic basis is the same version for all employees, regardless of role or department. By achieving an SSoT, organizations ensure the accuracy and timeliness of their information since everyone is working with the most up-to-date figures. In addition to eliminating conflicting versions of data, organizations can then move towards establishing a digital twin, where all assets and processes are represented digitally in real-time, enabling a digital business. Thus, providing users across the business with notifications to potential disruptions, opportunities, and risk factors.

As IT environments mature, businesses start to see productivity gains through automation and standardized workflows, allowing time-saved to be redirected to higher value-add tasks. Additionally, managers and executives can access accurate reports and KPIs for all departments with greater ease to coordinate overarching strategies. These internal benefits then propagate outwards to improve the customer experience.

Without directly accelerating the sales cycle with self-service, order taking, and pricing capabilities, businesses can also streamline approval, production, service, invoice, and payment processing tasks. Salespersons and customer success managers can also improve the quality of their customer interactions as they have a complete view of the customer and their internal operations to assess capacity and deliverability accurately. Altogether, a modern IT ecosystem will reduce the number of touchpoints required by customers, optimize service levels and profitability, and eliminate rework due to human error.

TRENDS TO CONSIDER

Nucleus has identified recent trends in the business applications market that potential customers should consider in their technology assessment process. Last year’s disruption highlighted the importance of technology in facilitating the transition to work from home., Now, businesses must use technology to serve evolved customer needs. Many vendors capitalize on this demand by gearing product development towards their cloud solutions, a platform-as-a-service (PaaS) delivery model, and customization and extensibility functionality.

CLOUD ADOPTION

Cloud solutions have been available for much of the past two decades, and both customers and vendors have been slowly ramping up adoption and offerings. Since the pandemic, however, there has been a marked increase in demand for software-as-a-service (SaaS) solutions and organizations migrating to a cloud environment in both the SMB and enterprise markets. Today, we estimate that over half of all net-new technology deployments take place, at least in part, in the cloud. Customers migrating to a cloud environment find value in improved integration and extensibility as opposed to on-premises counterparts.

Willow, an Australian property and infrastructure technology vendor, implemented FinancialForce’s automated, end-to-end cloud solutions, including ERP, PSA, and Analytics, to manage purchase orders, billing, manager approvals. By integrating its financial, project, and report management systems, Willow created a single automated, controlled cash flow process; slashed the cash flow matching process from three days to three minutes. Additionally, the accessibility of a cloud solution grants executives and board directors access to accurate, business-critical reports on demand.

In the analysis of over 100 SaaS case studies, we have determined the typical value drivers of cloud technology: eliminated infrastructure costs, reduced IT-spend, improved data availability and quality, and extended functionality. Nucleus found that, on average, cloud technology deployments deliver 4.01 times the ROI compared to on-premises implementations from January 2018 to November 2020. (Nucleus Research u176 – Cloud delivers 4.01 times the ROI as on-premises – November 2020). Further isolating the financial impact of cloud technology, we assessed the ROIs obtained by customers that migrated to the cloud with the same vendor. We determined that, on average, these organizations saw a return of $3.43 for every dollar spent on their migration investment. (Nucleus Research v47 – Cloud migration returns $3.43 for every dollar spent – November 2020) The ROI of cloud deployments is 4x that of on-premises solutions.

PaaS MODEL

With SaaS superseding on-premises deployments as the norm, vendors differentiate their offerings through a PaaS delivery model. (Nucleus Research v93 – ERP Technology Value Matrix 2021 – June 2021) Many vendors now offer the framework on which their solutions are built and the cloud components and services for extended functionality, such as chatbots, analytics, and data management capabilities. Once on a platform, deploying platform-native solutions is straightforward since the amount of upfront configuration is reduced. In addition to cost savings, businesses also benefit from the connectivity of platform applications; solutions built on a single data model support an SSoT and the automation of processes that span across various departments. Given the nuances between financial and customer data, a business can integrate an ERP with a CRM on the same platform much faster than connecting two disparate solutions.

Both Willow and Benchling use Salesforce for CRM in tandem with their FinancialForce PSA and ERP solutions, built on the Salesforce Platform. Leveraging these natively integrated systems increases the fluidity of dataflows across their businesses. Both companies streamlined cross-departmental processes under a single system, eliminating the need to manually compile spreadsheets, wrangle data, and import and export files. Similarly, Redkite, an Australian non-profit, leveraged the FinancialForce accounting system to capitalize on the consolidated platform benefits with Salesforce. With pre-built native connections between FinancialForce and Salesforce, the company enhanced its business analysts’ ability to capture data, enabling sales and customer information analysis to surface financial insights. The seamless connection also accelerated reporting time by 50 percent and improved the granularity of their reports to meet stringent regulatory compliance requirements. Altogether, Redkite reduced its finance operations overhead by 9 percent.

Another key benefit of a PaaS is its high degree of customization and extensibility. In addition to typical cloud benefits like scalability and low IT involvement, solutions developers can work directly on a PaaS to make changes, integrate systems, and even build out additional solutions or capabilities. While connecting platform-native solutions is straightforward, connecting to third-party systems is a challenge that vendors address through integration tool kits and API layers. To further alleviate complexity, many vendors offer low or no-code capabilities that run the gamut, from simple user interface customizations to enterprise-scale application development. By avoiding outsourced developers and consultants, businesses can manage and implement changes as needed or even develop new capabilities within the platform to address any functionality gaps.

WHY IT MATTERS

Redkite, Willow, and Benchling’s success highlights the importance of comprehensive digital transformation initiatives to support a customer-centric business. Together FinancialForce and Salesforce combined customer interaction and sales data with granular financial information to provide a complete customer view that became central to their operations. With the entire organization, from IT to sales to upper management, united in their outlook and approach to the customer, attention can be turned to driving greater efficiencies both in the back office and the customer experience. Business users can mine quality insights into customers’ success factors to anticipate their next moves and increase cross and upsell opportunities. Businesses can then focus on creating innovative experiences for both the employee with automated processes and guided workflows and the customer with curated and streamlined lead to cash journeys.

As the US comes out of the pandemic, Nucleus has seen a sharp increase in demand for enterprise applications across a broad range of solution classes, including ERP and CRM. We believe the midmarket will see the most growth as SaaS and PaaS offerings lower the IT and cost barriers to entry and vendors democratize their offerings with tiered pricing models. Companies looking to migrate off cumbersome on-premises deployments, retire legacy solutions or avoid Excel and e-mail driven processes should consider a consolidated platform to establish a customer-centric framework and drive continuous value for the long term.