One of the easiest areas to overlook when trying to increase the profitability of your commercial operations is the cost of existing tools and platforms. The systems, tools and platforms comprise a "stack" which in simple terms can be tiered into layers of data, decisioning and delivery.
When companies mature in digitalisation, it becomes increasingly important to consider total cost of ownership instead of merely time to value. Maturing does not mean you would completely stop piloting with new tools. It should mean more effort in recognising the established use cases and the stack with which those are make sense to run.
In the past years of economic boom and technological innovation it has been ever easier to buy new tools. Just with a flip of company credit card, no need to think too much of the total costs in the long term. SaaS vendors, consultants and solution integrators generally benefit from the implementation of new tools, which makes the Shiny Object Syndrome (SOS) in organizations ever more rampant.
Most stacks are bloated, too complex, difficult to operate with, resulting in high costs, sub-par internal user and customer experiences. It might be sweet for a moment and tick all the boxes, but can be terribly unsustainable to operate with in the long term.
Consider the following research on the topic. An average enterprise stack contained 91 cloud services in 2017 (Chiefmartec.com). In the past five years the amount of Martech solutions available has nearly doubled (Statista.com). A large or complex martech stack is not inherently good or bad – it depends on the context and your organization's maturity to operate. Then again, marketers are using less than half of their martech stack capabilities (Gartner).
Over the years, helping companies to get most out of their existing stack and new tools, I've seen it all. Any of these classics ring a bell?
Don't take this listing the wrong way. I know from experience that at the time of going with a certain decision, it might have made sense. All I'm implying is, that instead of letting your stack grow organically in the future, making and inventory of what you already have and how you could use it might just be the best bang for your buck.
So you are ready to embark on a journey to recompose your stack to better fit the overall purpose of what your commercial operations are trying to achieve. A holistic approach to recomposing should be about cutting costs and simultaneously recognising unfulfilled use cases that could be done with the existing tools and platforms (a topic for another article).
Cutting costs essentially boils down to two things: cutting the direct costs of licenses and maintenance costs involved in having the tools in place. Indirect costs can be cut by recognising costs that occur due to inefficiencies with operating a siloed workflow, or generally, a loosely integrated stack.
Approaches to cutting can be various. It is obvious to deprecate tools that are not used anymore or do not provide meaningful customer or business value. Deprecating tools that implement use cases that can be better implemented in another existing tool, needs more digging into your existing stack, as well as what might be available in the market to buy or build.
So, how do you actually get started with a systematic approach?
If you don’t already have a blueprint of the technologies and processes they support, start with that. The blueprint can simply be an excel sheet to get you started. Start by scoping first what categories you will cover. The typical 6 main martech categories where you can find overlaps and inefficiencies are: Advertising & Promotion, Content & Experience, Social & Relationships, Commerce & Sales, and Data.
As an example, a blueprint should cover:
This technology mapping should then be complemented with an overview of how it connects to different processes and high-level use cases.
Sounds laboursome? The mapping exercise is typically done over the course of four weeks with a person who leads the initiative to gather the needed intel. You need to involve different business stakeholders from different teams, administrators of different systems and even finance to get the overall understanding of what tools are in use, how they are used, and what their costs are.
Based on the mapping, it should be easy to derive answers to the following questions. Where do you have overlaps, ie. redundant tooling for similar use cases? What similar use cases are implemented in multiple tools? Could you combine the use cases under one tool, or could you look at what is available in a more mature market?
Recognise tools that are significantly underutilized. Consider the scope of features you are already paying for: what features could be taken into use and which siloed tools are to be deprecated. Inefficiency typically comes from lack of integrations or inoperability of a tool. Is there manual file importing related to some tool which would make sense to integrate with another tool?
What about the reversal of this – are there tools are not to be replaced or touched? Try to identify, which technologies should be the cornerstones of your martech stack in the next 3 to 5 years, that are more likely to be a solid foundation on which to connect and extend your use cases.
Formulating a business case should start from recognition of alternatives to the identified opportunities. Keep in mind of any bias that might be present and influenced in the organisation. Dichotomies such as platform versus best-of-breed, and buy versus build might be appropriate frameworks for analysis, but as business leaders, we need to keep an open mind and be able to scratch the surface.
Mature enterprises compose and combine diffrerent approaches along these dichotomies to fulfill their specific needs within specific cost parameters.
Building something custom does not always mean that higher total cost of ownership. A platform-driven does not always guarantee better interoperability, as some platforms are below the surface very loosely tied together. And best of breed does not mean you have to do all integrations yourself, as most best of breed solutions are actually built to support the most common platform ecosystems.
So, adopt a total cost of ownership -mindset and consider the whole suite of approaches: completely deprecating unused tools, bundling use cases to existing platforms, unbundling features from monoliths platforms, and buying, or building new technologies that might fulfill the needed use cases at a lower cost.
As an example, let’s take a look at a simple business case of unbundling transactional email functionality from a monolith to a new solution. The example is from real life, but I will not go into vendor names here.
Current situation: a company is paying extra license fees for your marketing automation vendor provider to have capability for transactional messaging within the platform.
The maintenance of that setup is close to zero, but the costs of the SaaS feature might be for example 600 € / month. A replacement option for transactional emails exists in the stack and is used elsewhere, and it would have license costs of 50 € / month if the same amount emails would be sent there. Integrating the email service with the marketing automation tools to fulfil the use case would take 5 working days, accounting to 5000 € of cost, done by an external martech consultant. Maintaining the integration would take 50 € per month, as we account for some future iterations and monitoring.
In each month, approximately 500 € would be saved by the replacement, and the payback period would then be 6 months. Considering this is a core functionality that will likely run for the next 5 years (a "lifetime"), the 6 month payback time is a no-brainer. The business case for this small replacement would be savings of 25 000 €.
Business cases are often more complicated than this. Doing a business cases holistically for all the small things should not be the driver. Instead, think of quantifying the largest cost-saving opportunities in a concrete business case as helping you to prioritise and get the necessary organisational buy-in to initiate the change.
Once you have a set of valuable business cases, it makes sense to revisit the blueprint. You might have roadmap items that ultimately make sense to start only when you can cut the licensing from the previous system. When you have monthly billed SaaS, the systems are likely easier to deprecate and replace, as no sunk cost needs to be accounted for.
An elaborated roadmap should organize the initiatives on a timeline and also provide a resourcing plan: what competencies are needed and how the change is managed. Migrating to some new platform or technology is always easier when people affected are heard and co-create the experience. When cutting costs it might be tempting to push change drastically, but it is ultimately about people and their skills.
Cutting costs is a key to ensuring profitability in uncertain times and creating avenues for investments that can unlock growth. Making your martech stack lean always makes sense, but even more so now. An indirect benefit is that you will likely alleviate the skill gap of the organization.
How can Costa help? Our team has combined experience of creating cost savings to enterprises that are measured in 8 figures.
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