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As consumers, we all know that we shouldn’t throw our money at vague promises and too-good-to-be-true marketing slogans. We all try to think ahead and be smart with our purchasing decisions. We watch trailers before we see movies or rent movies before we buy them. We spray on perfume samples before we buy a whole bottle and we try out beds and matrasses before taking them home. While not always possible, we try our best to know what we are getting into before parting with our money.
During the summer we had a look at many wealth management apps in our blog articles that have options to try out demo versions of the software before using real money to trade. This type of sampling is basically the same as giving the keys of a car to a client to take it for a test-drive. It not only allows the client to see the quality of the product for themselves, but even if they don’t take advantage of the sample, the simple fact that it’s there radiates confidence from the seller, leading to more sales. We concluded that this is an extremely user-friendly approach which is reflected in the popularity of these apps.
In B2B markets however this great advantage is rarely taken advantage of, especially by hardcore banking systems and services. Banking systems software providers rarely have easily accessible demo versions and demonstration environments running that interested incumbents may check out at will and try for themselves. Software providers instead rely on listing the features and advantages of their solutions, counting on face-to-face client meetings to demonstrate and convince potential buyers of the merits of their software. But it’s plain to see that even the biggest bank in the world is just as keen on “tasting” a sample of the product, as any end-user is. This is why vendors are forced to dedicate precious resources for Proof of Concept mini-projects, usually for free, just to give a better impression of the software, hoping to convince the potential buyer.
While PoCs can work, especially as a “get your foot in the door” strategy, getting to that point is costly and can take months or even years. Is there a better way? Of course there is, and it’s something everyone in the industry knows about, but is still relatively small: software providers should switch to SaaS (Software as a Service) models.
To those who need a quick reminder, SaaS applications are basically internet-delivered software accessible from anywhere using multiple devices. The provider hosts the application on their servers (aka the “cloud”) and delivers them to the users through the net, usually for a monthly or annual fee. There are many benefits to the SaaS model, such as the lack of hardware and maintenance, cross-platform availability, enterprise-level security, up-front cost savings, continuous upgrades, easy app integration, easy scalability, and accessibility, etc. You can read our article about these benefits as well as potential downsides right here.
For now, let’s focus on the benefit of pricing, as it’s usually only looked at from the buyer’s perspective. To quote our own article, about the benefits of up-front cost savings: “There is no need to undertake a notable capital expenditure (implementation fee, internal resources used etc.) up-front […] should the client organization decide to opt out from using the solution, it can easily cancel the subscription.”
A key advantage is often overlooked however: the mutually beneficial possibility to offer the software service as a try-before-you-buy model. Let’s not forget, that incumbents have enormous IT operating costs, and their systems usually run layers of layers of decades-old technology, bolting on patches, quick-fixes, new regulatory required modifications, etc. The idea of replacing these systems with simpler, quicker, easier to manage software that is licenced from a vendor will always be attractive but undertaking such a huge change is an understandably risky endeavour. Monthly licencing that can be cancelled easily is an attractive proposition, but to convince veterans, software providers must step up their game and offer interactive demonstrations. The best thing about having a software as a service model, is that vendors can easily offer this opportunity, or simply waive the first couple of months of the licencing fee, making the endeavour basically risk-free for the buyer.
So, why is there a feeling that in the financial market, only disruptors or upcoming other start-ups are considering this model? Why aren’t legacy software providers the first in line to change their product portfolio? It is partially understandable, as the type of banking software offered is still mainly built for on-premise installation. Changing the code to run from the cloud and maintaining an externally accessible demonstration environment requires enormous resources and not every company is up to the challenge. On the surface, the cost-benefit ratio is not too attractive in the short term.
However, financial software providers don’t have to go far to find success stories, such as Microsoft’s Office 365 package or Adobe’s transformation into a SaaS provider in 2012. Both were industry-leading companies, with world-class software solutions that sold for a premium (much like core banking systems) but both saw that the upcoming competition offered similar online solutions for less, or sometimes for free. They realized that lowering the barrier of entry is the only way to further growth if positioned correctly.
In Adobe’s case, by offering Photoshop and their complete creative suite as SaaS, the price could be lowered to a no-brainer level, (10 USD/month as of this writing). Though on paper, it takes years for Adobe to recoup the cost of a single unit, subscribers tend to stay with a product, and they will keep on paying for years and years. The process wasn’t easy, as the transformation took 5 years to complete (from 2012 to 2017), and many consumers were sceptical at first (a petition against the change garnered 30.000 votes on Change.org), but their firm belief and continuous communication with the user-base and their shareholders won out in the end. By being prepared, expecting challenges and willing to continuously adjust, they succeeded to the point where the software is basically no longer pirated, as paying legitimately is less of a hassle.
From the perspective of our industry, financial software vendors must also take a look at their product palette and realize that what Microsoft and Adobe did is necessary to remain viable in 5 or 10 years for any software provider, from any industry. Those who commit to software solutions as a service are committing to the future, which will be rewarded by buyers who can implement the solutions with relative ease, and have them up and running in a couple of weeks for a monthly flexible licence fee.
That’s the power of getting to try, before you buy.
We at Dorsum have recognized this challenge, and we are working on offering SaaS versions of our flagship products in the coming years. Our first SaaS product, a version of our mobile client-facing portfolio management app, My Wealth will be launching this Fall. Please look forward to a series of blog posts taking you behind the scenes of our own transformation journey.