Dirty Little Secrets Traditional Enterprise Software Companies Don't Want You Knowing
January 17, 2018 6 min read
Big businesses have purchased software in the same way since software first became available. One to five companies offer competing options and you step in to spend thousands or even millions on a single-purchase for an enterprise software license. Integration takes weeks or even months, and anyone who uses it has to go through a lengthy training process. But, one integration is good for 3 years, or a standard '1,000 day' lifecycle – and sometimes up to 10.
Today, that sales model is outdated and nonexistent when you look at small business, who often rely on entrepreneurs and software as a service instead. But, medium and large businesses still often concentrate their efforts on large-scale legacy software programs, where little has changed since the 1990s.
Chances are that if you buy legacy software, you believe that it's the only option. If you're a large business, you need big-business software. Right? As software as a service evolves and grows, the answer is increasingly, a resounding no.
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Why Do Legacy Programs Cost So Much?
Traditional enterprise software is time consuming and costly to purchase and implement. You'll often spend a large portion of your IT budget on just maintaining your software. Meanwhile, technology continues to evolve. Computers, phones, software programs, just about anything you could name, are all cheaper – but not enterprise software.
That's partially because companies rely on you continuing to do the same thing you've always done. In fact, if you've been working with a big company, you're likely to continue working with them, not questioning that you could be seeking out something better or cheaper.
Traditional enterprise software companies take advantage, using the same rates, and relying on the fact that you are doing something you've done before, so you will keep doing it. You buy a software license for thousands, pay consulting partners, pay to reengineer the software to suit your needs, and then take months integrating that software. Once it's integrated, a legacy purchase will last for 3-10 years, but not without frequent, and expensive, upgrades along the way.
Enterprise software companies get away with this because just 5 major companies hold a 93% share in the total global market. And, while some of them offer comparable upfront costs to SaaS and cloud programs, the total cost of ownership, including updates, IT, customization, and bug-fixes is significantly higher.
Traditional Programs Don't Evolve
Modern technology is rapidly evolving. Product life cycles are often as short as 6 months. With this limited window of opportunity, you may find that legacy programs are out of date before you actually finish implementing them.
Modern SaaS solutions capitalize on a license structure allowing real-time upgrades, so the software you pay for now will always be up to date. It's an industry trend that's sweeping all of software, not just enterprise software.
For example, both Microsoft and Adobe are scrapping traditional licensing in favor of SaaS models. Rather than buying single programs for a lump sum every few years, consumers pay a monthly fee to access software that's constantly evolving and changing. They never have to replace the software and they always have the latest features.
That business model is good enough for some of the largest companies in the world, who are adopting Adobe Cloud and Office 365. In a world where new technology hits the market every 3-6 months, 1000-day solutions simply don't work. Old technology only works for old customers and old sales platforms, so 3-year-old enterprise software is often dated and well-behind what competitors are using.
Legacy Software is Not Easy to Use
While most of the software industry is on a rapid move towards ease of use, Enterprise software often isn't as accommodating. Installers rely on hefty training programs to earn more value, so making them as intuitive as QuickBooks or Sage just isn't in their best interest. But, it is in yours.
Many organizations are shifting away from IT heavy infrastructure, changing how they work, and implementing work structures where one person can handle everything they work with. This requires user-driven solutions and software that is intuitive and usable. Not overly complex legacy software.
Legacy Software Requires IT
Modern servers feature virtualization software to improve utilization, but if you're hosting and running your own data centers, your utilization is likely between 50 and 20%. Running your own legacy programs means staffing IT experts, and often limiting real access and use to those experts.
SaaS contrasts heavily by offering cloud functionality. By running on vendor infrastructure rather than your own, you don't have to invest in technical experts, multiple versions of the software per platform you use, or support for versions at different stages of maturity. So, you save a great deal in IT resources, while making software more accessible to the actual users.
You also have the same problems with software tests and proof of concepts, if you want to do it with traditional software, it takes months and often a great deal of money. SaaS solutions usually integrate immediately, allowing you to perform proof of concept tests, check functionality, and test if the software meets your needs before investing in it.
SaaS is Faster, More Scalable, More Reliable
Software as a Service is delivered as a subscription, offering real-time upgrades, and disrupting how enterprise software is served and used. Enterprise-grade solutions like Skubana integrate in weeks, are intuitive, and as a cloud inventory management service, require significantly less support from IT. Traditional enterprise software, fronted by internal IT, is limited by internal budgets, and typically cannot deliver short-term functionality. SaaS is not held back by these limitations.
Instead of expensively training internal IT in software, you get external support from customer service, real-time updates and patches to fix bugs, and no responsibility for the software. That can not only save you considerably, but will dramatically reduce downtime and issues, because the people working with it are experts. You don't need to hire consultants to fix or debug the software, because that comes as part of your plan.
Modern SaaS enterprise software is every bit as reliable, functional, and value-driven as traditional licensed programs. But, with scalability, real-time updates, and intuitive interfaces – often at a fraction of the cost, SaaS often makes significantly more business sense. And, with flat rate pricing for software, departments can make individual budget decisions upfront – saving time and expense on budgeting.
Many businesses are still investing in old-fashioned enterprise software, but, you don't have to. With newer, faster, and easier SaaS solutions on the market, you can integrate enterprise-grade solutions at a fraction of the price, and often gain functionality, flexibility, and scalability in the process. SaaS shifts the buying power from a few big players to a large market, giving you more options, more features, and the ability to scale up without outpacing your software.
Written By Chad Rubin
Chad Rubin is the co-founder and chief executive officer of Skubana, a multichannel e-commerce software the enables brands to unlock growth by unifying their back-office operations.