Digital Marketplaces Unleashed
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Such a delivery model for software carries multiple benefits [7]:
Quick access to innovation
SaaS enables vendors to manage updates themselves. As a result, customers have the benefit of always working with the latest version and vendors can innovate faster because they have to maintain only one version.
Fewer upfront costs
SaaS is provided as a ready‐to‐use service. So customers do not have to purchase hardware or fund an IT project upfront in order to get started.
Fast deployment
Being a ready‐to‐use service, SaaS enables customers to start using it immediately. Through easy‐to‐use user interfaces SaaS vendors will make sure that none or only very little training is required.
Lower Total Cost of Ownership (TCO)
SaaS vendors handle software and hardware maintenance as part of their offering so customers do not have to budget for additional maintenance cost. Since vendors enjoy economies of scale, they can distribute cost across all their customers and therefore usually demand much lower prices.
Greater processing efficiencies
SaaS fosters specialization so SaaS vendors are dedicating all their resources to carrying out the desired task and therefore have should have a very efficient solutions. On the other hand SaaS customers are able to focus their resources on their core competencies instead.
Early insights into best practices and benchmarks
SaaS vendors with a critical mass of customers gain valuable insights in best practices and benchmarks of the targeted industry. This data is usually unique and not available elsewhere. It enables SaaS vendors to improve their service offering further and to educate their customers, thus benefiting all of them.
Easier integration with standard tools
SaaS vendors want to address a broad audience. So they make sure that their solutions can be integrated with existing software and systems out‐of‐the‐box.
Less risk
Taken together all the characteristics above result in a very low risk level for adopting a SaaS solution. It is cheap, quick and easy to test‐drive before deciding to adopt it and come with only little commitments while using it.
In summary, SaaS offers significantly less development, operational and maintenance cost (as it is shared across all customers) with specialized knowhow and central focus at vendor level to crack the most complex workflow requirements. What is more, offering tools in the form of web plugins can radically simplify integration into a NPO’s existing website.
Empirically the typical cost reduction potential through SaaS averages at 30% across industries when compared with traditional software cost [8]. Taking into account process cost savings from less manual labor, savings are even more significant: survey results from the NPO sector estimate annual cost savings of 50–70% besides a strong engagement uplift of members upon mobile and online interaction [9].
58.4 Software as a Service is a Game‐Changer for the Digitization of Non‐Profit Organizations
Contrasting the benefits of SaaS with the needs of Europe’s NPO, s. Table 58.1, shows that SaaS offers a way out of the innovation dilemma. Table 58.1NPO’s innovation dilemma vs. characteristics of SaaS
Dilemma of NPOs
Characteristics of SaaS
Lack of budget
Fewer upfront cost, lower total cost
Lack of time
Fast deployment, greater processing efficiencies
Lack of know how
Quick access to innovation, insights into best practices and benchmarks, less risk
However, the applicability of the SaaS model to NPO’s depends on the existence of shared requirements among this target group so that economies of scale can be achieved.
58.4.1 Non‐Profit Organizations Share Common Demands
Based on user feedback of existing doo [10] customers (over 4000 customer interviews within 10 months) and existing research in NPO operations [9] the process requirements of NPOs on software have been identified. In addition a specifically designed survey investigating NPOs’ IT needs was conducted in March 2015 by doo and the University of Freiburg [11]. It was completed by over 176 European NPOs of different sizes. The results were strongly consistent across all types of NPOs, s. Fig. 58.2, with a clear modernization demand and struggle to overcome adoption obstacles. The results indicated that reducing costs, increasing member engagement, improving communications and professionalizing admin were the main needs.
Fig. 58.2Excerpt of survey results. (Source: University of Freiburg; N = 176)
What is more, strong time requirements, high cost and lack of knowhow are constantly stated as the main digitization barriers. Over 90% of respondents identified cloud and SaaS technology as viable option to help overcome modernization barriers, but experienced difficulties identifying and selecting the best software tools for their activity and were worried about data security.
58.4.2 Digitization of Member Interactions
The analysis mentioned above found that NPOs will particularly benefit from digitizing typical member interactions because these have the highest potential for fostering member engagement and lowering process handling cost. Member interactions can be categorized as follows:
Improve member communication
The majority of interactions with members are via multiple ‘offline’ communication channels (phone, fax and mail). Newsletters are sometimes sent by email, but non‐integrated and without state‐of‐the‐art tracking capabilities. Thus, valuable information such as readership or interactive feedback gets lost. In clubs and associations where information and education play a major role, it is particularly vital to know which offering reaches and engages their members.
Facilitate member activities and engagement
All NPOs offer some kind of events or activities to their members. This requires the registration of participants, gathering of participant data and sometimes collection of ticket prices. Today’s members expect user‐friendly, mobile registrations with online payment, while most NPOs are still stuck at offline methods thus frustrating members and hindering engagement.
Empower members through self‐service
In most organizations, member admin is a central issue that requires on‐site manual labor. Empowering members to do most of their admin themselves through a web or mobile application significantly reduces manual effort and enables new services for further increasing member engagement (feedback/voting tools, data sharing and privacy preferences, etc.)
This list allows to identify three functional modules, which need to be covered by a SaaS offering for NPOs:
Community Communication
Distribution of news and other content as well as the promotion of activities and events to the community. The required feature set includes email newslettering, email and social marketing campaigns as well as tracking and collection of feedback.
Activity Management
Handling activities, registrations, payment/invoicing, participants and accounting usually demand huge manual effort. Integration should be light‐weight, e. g. through web plugins, so that entire activity calendars can easily be integrated in existing websites and taken online and mobile. NPOs have very different feature requirements that typical booking tools cannot fulfil, thus specialized feature sets are required.
Member Self‐Service
Empowering community members to update their master data such as personal details, manage payments and update or cancel registrations or bookings.
Offering these three module in one integrated platform benefits each of them in return:
Community communication allows to promote activities and benefits from up‐to‐date member data collected from registration processes and member self‐services.
Activity management makes use of community commun
ication to distribute information about activities and profits from member self‐services, which empower members to manage their registrations themselves.
Member self‐service empowers members to control their communication preferences themselves and manage their activity registrations and payments.
In summary, a SaaS offering which covers these three modules would enable NPOs to break out of the innovation dilemma and to leverage digitization in order to increase member engagement and significantly lower admin cost.
58.5 Discussion
Why SaaS has benefited many other industries before and is addressing the NPOs sector only now can be explained by the S‐curve of Software as a Service adoption. The impact it will have on society as a whole will be much greater still.
58.5.1 S‐Curve of Software as a Service Adoption
NPOs are not a market traditionally associated with significant growth, as the number of entities, members, and budget size will not noticeably change over the coming years. However, the NPO market is experiencing stronger and stronger pressure to shift budgets towards modernization and digitization, and particularly towards SaaS solutions. Across all industries, SaaS is experiencing growth of 15–20% p. a.
While for‐profit enterprises are noticeably more advanced in SaaS‐adoption, NPOs are – as previously demonstrated – strongly behind. This can be simply illustrated using the S‐curve model typically used to demonstrate innovation adoption, s. Fig. 58.3. For‐profit enterprises are the fastest adopters of SaaS solutions. Larger companies are following, while typical SMEs are gaining traction. NPOs on the other hand are still in an early stage. This typically indicates that extreme growth is to be expected in the coming years.
Fig. 58.3S‐curve scheme for SaaS adoption. (Source: doo)
This growth potential is also demonstrated by existing research: in a survey of 176 NPOs, 90% of respondents indicated that SaaS and cloud services will become increasingly important for their organization in the near future [11].
58.5.2 Social Impact
NPOs will benefit from adopting a SaaS platform in three main areas: (1) increased member engagement, (2) increased admin efficiency and (3) admin cost reduction.
To achieve the three benefits mentioned above, NPOs typically face a significant step‐up in IT/platform cost (which creates a high adoption risk). One of the huge advantages of SaaS, particularly with a pay‐per‐use business model, is the ability to offer and integrate feature richness at significantly lower cost, effort and complexity compared with customized on‐premise solutions (that require long implementation, costly development and expensive maintenance contracts).
As shown in Fig. 58.4 (column 1), the average European NPO has an annual budget of 29,100 €, of which ~ 25% is spent on administration (activity registration, communication, payments, etc.). As shown in column 2, around 60% of this admin cost bracket is dedicated to manual labor and 40% to IT and systems cost (this means an average IT budget of 2900 €, smaller clubs spend usually much less and larger associations significantly more).
Fig. 58.4SaaS cost advantage compared to today and on‐premise solution. (Source: University of Freiburg)
NPOs that modernize and automate their member interactions and admin (column 3), typically get rid of 75% of their process cost (from 4500 to 1100 € on average). However, adapting an IT system requires significant investment. Based on a total‐cost‐of‐ownership (including maintenance and upgrades) customized/on‐premise systems can cost more than they save. This is one of the main drivers of the innovation dilemma in NPOs. Very large NPOs are willing to pay the price, as member engagement and admin professionalization are more important than cost reduction. However, the majority of NPOs are unable to increase IT spending.
A SaaS cost scheme and pay‐per‐use revenue model turns things around (column 4): now the aforementioned benefits are available in one integrated platform, while even reducing IT cost (from 2900 to 2100 € on average). The key here: smaller NPOs pay only relative to their usage. Thus, all kinds of NPOs can make full use of a SaaS offering – unlike the offering of typical in‐house software providers that bill by the hour!
NPOs main modernization goals are increasing member engagement and professionalizing administration. Since NPOs are not profit‐driven per‐se, but have community‐ or network‐oriented goals, it is not possible to calculate direct economic effects from these benefits. We can, however, calculate the social return, allowing us to capture and quantify community‐oriented and social effects.
When professionalizing admin, we essentially liberate members to dedicate more time to supporting member value creation (e. g. in sports: training and coaching). The annual social return of more member free time is estimated at 1960 € per NPO (see Fig. 58.5). Additionally, more professional admin processes help to attract leadership with more time‐consuming daytime jobs but higher qualification and management skills, with an effect of additional social return of 1000 € per NPO.
Fig. 58.5Social return of a SaaS offering for NPOs. (Source: University of Freiburg)
Increasing member engagement happens on two levels (quantity and quality): (1) increasing member sign‐ups for activities and other offerings. Significantly eased registration/interaction and more astute communication will lift the overall engagement level by at least 10%, corresponding with 1940 € per NPO per year. (2) Increasing the effectiveness of the offering as NPOs gain better visibility of what their members actually demand and consume adds another 485 € per NPO.
The total impact of a SaaS offering for NPOs is 9865 € per NPO per year, considering direct economic effects and social return combined (see Fig. 58.5). Comparing the average NPO 21,700 € spend on member value‐add, such a SaaS offering will be able to increase this value‐add by 45%. The mere social return of the a SaaS platform 2020, serving more than 50,000 NPOs thus reaches a combined value of more than 513 million €. This is just for 50,000 NPOs out of the 5.5 million in the EU.
58.6 Conclusion
Europe’s 5.5 million non‐profit organizations (NPOs) with their 250 million members and volunteers are an integral part of European society. However, they are left‐behind by digitization and caught in the vicious cycle of an innovation dilemma: Due to lack of funds, time and know how they are stuck with outdated technology and struggle with keeping up leadership motivation and member engagement, which prevents them from escaping this downward spiral.
Cloud computing has led to the emergence of Software as a Service (SaaS) as a delivery model for software. It transfers the task of developing, maintaining and running a software from the customer to the vendor and thus significantly reduces the risk for the customer. For the vendor it creates massive economies of scale, which enables them pass on cost savings to their customers of 50–70% per year.
For NPOs and their need to digitize their member interactions SaaS therefore offers an escape route from the innovation dilemma: It allows them to use high‐quality software instantly, with no upfront cost and little running cost. Based on our requirements analysis a SaaS offering for NPOs needs to provide workflows for community communication, activity management and member self‐services.
Compared to other industries, NPOs will be late adopters of SaaS. However, it will not only have a business impact but also an impact on society. The social impact of a SaaS offering for NPOs was estimated as 9865 € per NPO per year increasing this value‐add by 45%. The mere social return of a SaaS platform which serves 50,000 NPOs thus reaches a combined value of more than 513 million € by 2020.
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