Getting the installed base to upgrade is becoming a survival imperative, as customers left on older versions compare what they have to what’s available from the cloud and find it wanting.
The ERP industry is finally taking the new release adoption rate seriously. This is attributed to pressure from cloud based competition and a too long product enhancement cycle compared to the cloud. The author claims cloud enhancement is continuous while on premises ERP follows a 3 year cycle. The key to retaining customers is not merely delivering value to them, but getting the customers to use the value of the enhancements to improve their operations. If the customer is not aware of or does not adopt new releases and features, the will find a vendor that delivers value to them. Losses in the customer base are fatal to software vendors, recurring maintenance revenues drive profits.
This is not news at HarrisData – we identified the adoption challenge 20 years ago. By 2000 we achieved an 80% new release adoption rate and have maintained new release adoption at or above that level since. It is not a trivial challenge. Customers must have incentives (usually improved functions and new technologies) that outweigh the costs and potential turmoil of an ERP upgrade. The incentives are easy, software companies routinely enhance products (a 15 month cycle here) and can tune enhancements to maximize value for customers by simply listening to the customers instead of being distracted by analysts. However an ERP firm’s customer care efforts should not stop at the CRM boundary. The bigger and more permanent actions must address the costs of an upgrade. This is more an engineering than marketing challenge.
The marketing parts are easy to understand, yet require backbone to put in place. At HarrisData we developed our Omni-License with the idea of new release adoption foremost in our minds. The Omni-License combines the initial license fee and five years of maintenance in one package. This makes it easier to for customers to obtain a long term lease and moderate payments when acquiring our ERP products. More is included. [This is the marketing part of the solution – there is always more. –ed] Source code, fixes, help line, and new releases are all included in the Omni-License. Source code gives the customer independence from the ERP vendor in customizing the product. Competition for these implementation services lowers the costs. The services vendor selected is licensed to a development copy of the product, has access to source code, and as the customer’s agent has access to the help line – all at no additional fee. HarrisData uses this access to help the customer and services vendor complete implementation tasks on time and on budget. The lack of fees allows us to be an honest broker between them, as well as to focus on the big picture and live date. New customers will have the opportunity to upgrade to new releases a couple times during the initial 5 years of the Omni-License. We work with the customer and their service vendor to ensure success in these upgrades.
HarrisData achieves an 80% new release adoption rate annually since 2000.
Even more is included. [surprised? –ed] This is the part that requires backbone. At the end of the 5 year Omni-License period, the customer has the option to extend the license or to convert to an AS IS basis (with no fee). We believe that over five years we will demonstrate to the customer that HarrisData continues to deliver increased business benefits that far outweigh related costs. We believe this so strongly we bet our profits on it. Our customers agree and opt to extend.
HarrisData achieves over 95% maintenance renewal annually since 1995.
When an ERP company bases profit on the success of each customer, the changes go much deeper than marketing. Customer Care efforts become a driver for customer success instead of billing. The support people focus on customer value received. The User Conference and the Lunch and Learn webinars focus on helping customers improve their use of the ERP software. Outbound support calls proactively look for ways to help customers, frequently ending in one or two hour mini training sessions on functions or processes important to the customer. The CRM incident handling functions provide insight into areas where customers struggle with implementations, upgrades, or even daily use of the ERP. What we learn from the Customer Care programs feeds the product enhancement process.
Many software companies use vendor comparison spreadsheets to prioritize enhancements. The idea is to check as many feature boxes as possible. At HarrisData the priority goes to enhancements which provide the greatest total value to our customer base. The list of functions missing or needing improvement come from the CRM along with estimates of the value of the enhancement and customer cost of modifying current function to fill the gap. The CRM also provides a count of how many customers would benefit from each enhancement. Enhancements with the greatest total value to customers get the highest priorities. High priority enhancements might include structural changes to lower the cost of creating and upgrading modifications as well as new and improved features. Our goal is to lower the amount customers spend on technical services to operate and upgrade the ERP. Over 20 years we made substantial progress in reducing service costs.
HarrisData receives 95% of its revenues from licenses and maintenance since 2000.
An ERP industry focus on new release adoption rates is long overdue. Achieving high adoption rates requires substantial rethinking of software company operations and enhancement priorities. The end result is stronger profits for ERP vendors, better ERP software in the marketplace, and much greater value realized by customers of ERP software.