SaaS or Build: Which Admin System Is Best For You?
This article was originally published by P&A Magazine in their June 2010 Issue. See the original article here.
For automotive F&I providers and administrators, Information Technology is the third largest expense after people and administrative costs. A majority of that cost goes toward the upkeep and maintenance of the core administration system(s) responsible for products, rates, dealers, contracts, claims and earnings management. Given the central role that the administration system plays, and especially in circumstances where it has been internally developed by a few key individuals, it is perhaps not surprising that the system and its attendant functions are sometimes viewed as a competitive advantage.
To deliver a competitive advantage, an administrative system needs to provide at least one of the following:
- Support a product or solution that no one else can offer
- Enable support for a product at a lower effort and/or cost than others
When Legacy Loses Uniqueness
Unfortunately, while the internally developed system may have started out delivering on these requirements, it becomes increasingly more difficult and expensive for the development team to keep the uniqueness going. In fact, as more products and product permutations have hit the market, most teams have become consumed with keeping up with basic product requirements; maintaining the uniqueness that they originally delivered becomes secondary. In other words, that thing that set them apart at the start is lost in the effort to keep up with the competition.
F&I business priorities today require administrators to provide a complete portfolio of F&I products through a diverse set of sales channels with flexible and customizable accounting, commission and reinsurance programs. The greatest challenges to legacy systems are that they can only handle one or two products, can only support a few point-of-sale tools (e.g., menus) and have prohibitive modification costs for even simple changes. In addition, continuing to support in-house systems requires considerable overhead including salaries, benefits, building space, application licenses and liability. Moreover, continuing to maintain a custom administration system forces businesses to continually mitigate the key-man and technology obsolescence risks.
Emergence of SaaS
In recent years, many industries have taken advantage of the rapid commoditization of computing and have moved to outsourced or Software as a Service (SaaS) solutions for their technology needs. The debate is not one of if SaaS solutions are the right step, but of how and when to adopt such solutions. Adopting SaaS solutions allows providers to set service level standards for vendors, thereby enabling them to focus on managing factors that provide the true competitive edge: products, business processes, branding, data and partnerships. SaaS solution providers are usually focused on one thing: the software. They have more than one customer and can therefore maintain a much larger development team than any individual provider, so they are able to keep up with business demands and often also get “ahead of the curve” when it comes to connectivity and innovative solutions.
As such, when adopting a SaaS solution, providers must look for a system that will allow for management of a complete product portfolio, retain those business processes that give them a competitive advantage, allow open access to their data and build high-performance partnerships.
It is extremely tough to finance an internal development team that can commit to all of this and deliver it in a timely manner. By adopting the right SaaS solution, a provider will gain a competitive advantage through a system that can support all of its business needs now and into the future. In addition, it enables the team to focus on true business priorities as opposed to technology challenges.