Whitepaper
How to Measure the Value for Money of SaaS Apps
By Team RavenApps
Profit margins are currently being squeezed by inflationary cost pressures and a tough economic environment for increasing revenue. Some of these cost increases are coming from increases in SaaS application costs such as Salesforce’s 9% list price increase announced on 11 July, Oracle’s 8% price increase in late 2022 and SAP’s 3% price increase at the beginning of the year.
With the average company now using 130 SaaS apps it is more important than ever to have a methodical approach to measuring which apps are driving value for money as their costs increase.
In the simplest sense we should get much more value created than the total cost of ownership of any app:
The below balanced scorecard provides a consistent measure of value created which can then be compared to total cost of ownership.
1. Revenue Increase and 2. Cost Decrease
Ideally we could measure the revenue increase and the cost decrease directly driven by a SaaS app to get a quantitative figure of value created. In practice it is never this simple. If we take the example of the most popular Salesforce paid app DocuSign, it creates a lot of value from streamlining document creation, eSignature and file repository and this helps close deals faster and allows employees to work more productively. Hence revenue is increased by faster deal closure and costs decreased by the same employee base being able to deal with more customers. But does the revenue increase by 1% or maybe more like 3%? Do the automations allow employees to manage 20% more customers or more like 50% more? For most SaaS apps the benefits are broad and measuring revenue and cost improvements often give very large ranges limiting the effectiveness of this measure. It should nonetheless be undertaken as is a key factor in understanding value.
When measuring revenue and cost improvements it’s also important to consider what the improvement is baselined against. If it is against users using pen and paper then all SaaS apps are a no brainer. In reality there are normally substitutes products to compare to. In the case of DocuSign you could use CongaSign, Titan or several alternatives.
3. Increased Productivity
As revenue and cost improvements are generally hard to quantify, another good way to assess the value created by a SaaS app is through productivity improvements; enhancements in key performance metrics that drive value.
A good example of this would be the array of Salesforce telephony Apps; Vonage, RingCentral, Genesys, etc… Calls made, calls received, time between calls, sentiment flags can all be accurately measured and compared to baselines to see productivity gains and linked to cost improvements to give a value creation metric.
Depending on the app assessed the metrics will vary and often will not be as clear cut as the telephony example above.
4. Employee Satisfaction
Happy employees are productive employees so asking them for feedback on the systems they use is a great metric to understand if value is being generated by each SaaS app. It is key to review the full spectrum of users from those that have to administer the app to end users to understand points of efficiency and pain.
NPS or other similar metrics can be used to provide another part of the balanced scorecard.
5. Future Compatibility
Technology is changing at such a rapid speed that we do not know how our business processes will have evolved in 1 year let alone 5 years. If an app is not flexible to adapt to this change then this is a big red flag as changing SaaS applications has an overhead in terms of app suitability assessments, implementation cost, training, onboarding etc… It is therefore essential to ensure that any app brought into the tech stack is future-proofed to be both easily configured for change and can adapt to other connecting systems changing.
Measure Future Compatibility needs investigation on a case by case basis. Within the Salesforce ecosystem, Salesforce Apps that align with Salesforce’s permission and sharing rules and connect to standard Salesforce features such as flow automations are especially adept for future business process changes.
Also within the Salesforce ecosystem the subset of apps that are 100% native to Salesforce provide assurance that the solution will remain in the ecosystem for the long term and isn’t a temporary external app exploring if it fits within Salesforce. Only 15% of Salesforce apps are Native, for more details of native app benefits see here.
Summary
No single measure can give the value creation of an app but by combining these metrics into a balanced scorecard a measure of SaaS value can be shown and compared to the total cost of ownership for each app. Apps can then be compared to see where good value for money is being obtained and areas where replacements / substitutes need to be considered.
Using Grids for sales, service and marketing users drives value across these 5 areas:
Revenue Increase - shorten sales cycles with customised interfaces
Cost Decrease - move off expensive legacy systems
Increased Productivity - reduce clicks and save time
Employee Satisfaction - 5/5 AppExchange customer reviews
Future Compatibility - Built on LWC, Salesforce latest technology, and a native app
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