In the enterprise IT world, vendors and integrators are always talking about lowering Total Cost of Ownership (TCO). That’s an important factor to the financial buyer.
But if you’re a software vendor offering OEM solutions, or development tools to IT inside the enterprise, the” O” of TCO doesn’t quite resonate. But you need quantifiable value to show ROI in terms that matter to IT. That’s an alphabet soup of messaging!
IT buyers are more concerned with speed – that’s the real pain point.Their pressure is time to market – whether that market is your IT buyer’s business users inside the enterprise or the market of your vendor’s end product.
So, you might want to start with quantifying your value in terms of Total Cost of Development (TCD). Your solution simplifies or automates steps in the cycle, accelerating the time it takes to get your solution into the (virtual) hands of their users or their end buyers – and/or it incorporates capabilities they couldn’t get elsewhere or internally, increasing the value of the solution. Either or both of these benefits require fewer internal IT resources and save time, therefore lowering direct costs. These elements can be pretty easily quantified from “before” (the old way) or “instead” (compared to alternative approaches /competitors) to “after” (with your solution). Rough calculation: It used to take six months with four FTEs; now it takes one month with two people. The difference in salary/benefit, less the price of your offer, is the rough total cost of development using your solution.
But development alone isn’t the full picture. You want to include surrounding elements in the Total Cost of Deployment (TCD) – documentation, training, whatever it takes in the IT realm for your buyers to get to their market) – all of which you’ve also presumably compressed and/or accelerated. Can you calculate these factors into your solution’s value prop?
The last and most important message here in communicating the impact of your solution in faster Time to Market in the TCD message. In addressing TCD, there’s an “X-factor” of the value of speed that further multiplies the value of your solution beyond the direct cost savings. What’s the value of bringing solutions to market in one month instead of six? In some cases, it can be directly quantified (whether by you or your buyer) of having their solution out generating revenue or improving user productivity five months earlier. In others, it will be soft benefits of competitive advantage, user satisfaction, etc.
So with IT buyers, TCD an important quantifier – something all vendors need in building the business case with prospects – but only as it supports TTM to show real ROI.
What do you think: Is lower TCD a compelling message in the IT community? Can you calculate the full TCD value of your solution?