What's Your Workforce Management Sales Strategy?
This ISVâ€™s (independent software vendor) Web-based workforce management software helped the company achieve 35% sales revenue growth last year.
Labor. Employees. Personnel. Workforce. Typically, a company's greatest expense and often one that's not managed to its potential. In fact, according to a study performed in 2007 by IHL Consulting Group and Integrated Solutions for Retailers magazine, only 33% of respondents use some form of automated employee scheduling for workforce management. It's important to note that they didn't poll your local comic book store, either. Their average respondent managed a store bringing in $7 million a year in revenue. If the majority of large companies aren't on a technology-based workforce management path, it's safe to assume small and medium ones are similarly bereft of the benefits of a modern solution. Benefits such as reduced administration time, increased employee satisfaction (and then retention), fewer errors, and guaranteed compliance are potentially easy for you to demonstrate, but do you really know the nuances of workforce management and how you can deliver it as a product? CyberShift, Inc. is one company that knows both the nuances and how to deliver. The ISV has experienced 35% sales revenue growth in each of the last three years by selling nothing but workforce management solutions. Robert Farina, CEO of CyberShift, was willing to share what pitfalls to avoid, what his company sees as the greatest growth opportunities in the market, and ways your company can take advantage of this information.
More Than Time And Attendance
The product CyberShift was founded around was a traditional time and attendance software package built on a client/server model. In 2001, the ISV began rewriting its time and attendance product to provide greater functionality and scalability, making it easier to adapt to new and changing regulations and technological advances such as biometrics. The American Payroll Association estimates that up to 8% of all payroll data is flawed in some way. In most cases, the errors are in favor of the employee. Also, FLSA (Fair Labor Standards Act) and SOX (Sarbanes-Oxley Act) regulations have placed the onus on corporations to ensure wages, vacation, and benefits are being tracked correctly. Electronic time and attendance systems and additional enhancements such as biometric authentication can reduce errors, employee abuse, and the risk of liability.
CyberShift saw opportunity in expanding its product to encompass burgeoning workforce management capabilities such as employee scheduling and expense management. "Employee scheduling, particularly in retail, is less about cost reduction and more about having sufficient staff to support desired sales volumes," says Farina. "It can be used to calculate dollars of labor costs per sale and help determine the most productive employee mix." Simply, employee scheduling answers the question, 'What skill sets do I need at what times of day in order to meet sales and/or customer service objectives?' According to Farina, customer demand and analyst-predicted growth rates in employee scheduling prompted CyberShift to include this functionality.
Build Your Solution On A SaaS Model For Recurring Revenue
Once CyberShift decided to update its software, the company had to decide how to deliver it. However, rather than adding functionality to its existing software package, CyberShift decided to rebuild its software in a manner that would allow the company to take advantage of a different delivery and fee model. "From 2001 to 2003, we rewrote the product in a Java-based service-oriented architecture, designed so it could be provided in a SaaS [software as a service] or license fee model," says Farina. SaaS is a model where software applications or services are delivered to users over a network (usually the Internet) from a hosting center. This reduces the burden of distributing the software to users, makes upgrades easier since the software resides in one location, and reduces hardware expenses for the end user since servers are owned and operated by CyberShift. To create as many sales opportunities as possible, CyberShift decided to build the software so it could be delivered via both SaaS and a traditional license fee for in-house installation. The company used a combination of internal staff who had functional expertise and experience and also hired external software architects and programmers with strong development skills.
The SaaS model created new challenges CyberShift had to address. As opposed to traditional client-server software installs where vendors might complete the job and never hear from the client again, SaaS inherently creates a long-term relationship with the customer, meaning customer service needs to be more than an afterthought. In addition, there are cash flow concerns. As opposed to the traditional license fee model where an ISV could receive a one-time check for $100,000, the SaaS model spreads the income over a variable time frame. Internet fees, servers, and staffing were other considerations. "We use a third party facility for our brick-and-mortar data center, but we purchased our own servers and networking equipment and do our own systems administration and application management," says Farina. "In addition, we have our own 24/7 staffing in our SaaS operations center. We have a higher fixed cost but better control of the quality of what is being delivered and variable costs. If you outsource, you have a middleman insulating you from your customers, and you have less control over the costs that need to be passed on to your customers."
Perhaps the greatest consideration for the SaaS model was that of security and compliance. To guarantee the safe transmission, storage, and processing of its clients' data, CyberShift underwent a thorough examination of its entire organization, including network infrastructure. "There currently are a number of standards and certifications SaaS ISVs need to acquaint themselves with," says Farina. "One of the bigger challenges we initially faced was in fulfilling the requirements of a SAS 70 [statement on auditing standards, number 70: service organizations] Type II audit." A SAS 70 audit is a thorough examination of the internal controls of a service organization necessary for publicly owned companies in order for them to rely on a SaaS vendor's service. "The cost of the actual audit is the same as any financial audit; however, there are a number of intangible costs," adds Farina. "With these audits, you have to know what you're going to measure first, put the systems in place, and then have a track record of measurements to prove that you've done what you said you were going to do." CyberShift had to establish new policies and procedures, create training for employees, upgrade software packages for intrusion detection and data backup and recovery, and tighten network security between internal and public-facing data. The company also established a new trouble ticket system to manage incident report and tracking.
These are just a few of the considerations CyberShift faced when considering SaaS delivery. The hard work paid off — in the past year, nearly 70% of CyberShift's new business has been in the form of SaaS contracts. If you're thinking about a SaaS model for your software, Farina sums up the planning process like this: "Your application doesn't have to have everything it needs to support a world class SaaS delivery model from day one, but you need to have a clear idea of what it's going to take to improve your application, infrastructure, and support services to get to a quality level and price point that make sense for you and your customer."
Buy Vs. Build — Should You Acquire An ISV?
An expense management software solution was something CyberShift had on its development road map, but it wasn't initially a top priority. However, the ISV found itself in the position to be able to buy another company that already had a strong foothold in expense management. "With any acquisition, among a myriad of other things, you have to look at three key components," explains Farina. "First, is your technology compatible with that of the other company's? Second, are there any issues with the compatibility of geographical locations or the culture of either company? Third, how do each company's target customers fit with one another?" CyberShift found that the targeted company had developed its software as a hosted Java-based model, the same as CyberShift's. Both companies also had offices in Toronto and targeted midsize to large customers (over 1,000 employees). Therefore, CyberShift found it made sense to purchase a customer base and expertise as opposed to starting from nothing. According to Farina, the acquisition process took six months to complete from the time both sides were serious about progressing until the closing of the deal. Once an acquisition is to take place, Farina explains that owners face a difficult challenge concerning personnel. It is easy to underestimate the time and effort it takes to make new staff comfortable with the direction of the combined business and their role in it and to fairly assess who is best qualified for jobs that need to be filled across the combined organization.
Your Workforce Management Customers Are A Resource
While many solutions providers occasionally ask customers for feedback to ensure products are meeting current and future needs, CyberShift has taken a more proactive approach. The company hosts focus group meetings to poll customers on such topics as current and future needs and the usability of its software. "We've done a lot of work on the user interface of our software in an attempt to make it very intuitive," explains Farina. "Over a two-year period, we held numerous focus group meetings with several clients and ran hundreds of usability studies. If we think it's necessary, we have no problem spending the money and allocating the resources to bring together a dozen customers for two days to help us work on an issue that will provide them long-term benefits. If your customers are willing to participate, it definitely helps to build a strong long-term relationship." Farina goes on to explain that with the number of regulations and guidelines specific to each industry, it's difficult for CyberShift to know all of the challenges its customers face. For that reason, the company plans to hold focus group meetings in the coming year to gain greater understanding of particular vertical markets as well as the the needs presented by changing government compliance requirements.
The overall approach CyberShift has used to get its workforce management offering where it is today has been an evolutionary process. As market trends were discovered, CyberShift adjusted its product. As customers asked for a refined user interface, CyberShift adjusted its product. As government regulations created challenges for the accurate management of time and attendance data, CyberShift again adjusted its product. Because of the company's willingness to change and the flexible software development and delivery model it chose to adopt, CyberShift is poised to have another year of 35% revenue growth. If you can't say the same for your company, perhaps some of Farina's advice can help you on your way.