It's no secret that software companies operate in a very competitive space where rivalry is increasingly fierce and where profit margins can be razor thin. New, smaller software companies are sprouting up each month and the leading software companies continually make strong advancements forward leveraging massive cash flow reserves. This cycle makes it difficult for the mid-sized software company to compete because (a) they don't typically have the cash flow necessary to take giant leaps forward in the industry and (b) because they need to continually move forward to stay ahead of the smaller software companies that are vying for their slot in the marketplace. Consequently, making the jump from an unknown to a mainstream brand can prove to be very difficult for the mid-sized software company.
Finding ways to create new revenue streams and to decrease current costs is imperative to the success of companies caught in this cycle. They need to be thinking on their feet, thinking ahead and thinking creatively, all at the same time. This can be a daunting task, as any software executive will tell you.
Despite all of the challenges that face the mid-sized software market, there are several ways to create these much needed revenue streams and to decrease current costs. New advancements in technology and its use in training and development make generating these revenue streams possible.
Setting the Stage
It is almost taken for granted that when an organization purchases a software package from a reputable vendor, a certain amount of end-user, customer training will be either bundled into the purchase price or made available to them for an additional cost. If training isn't available to the end-user customer, the learning curve on the new software package is going to be fairly steep, depending on the complexity of the software.
Typical training expense categories associated with most mid-sized software companies include:
1. The salaries of offline trainers
2. The travel expenses of offline trainers
3. The costs of producing hard-copy training manuals
4. The time involved in offline, onsite customer training
These expenses should be under a watchful eye and should be consistently viewed as expenses that could be alleviated to some degree to not only improve the company's attractiveness in competitive bid situations but to increase the profit margins of the supplemental training services provided by the company.
At the same time, in the background, mid-sized software companies should be looking for ways to create new revenue streams that they aren't currently capitalizing on to work in collaboration with their cost-reduction initiative.
Step 1: Lowering Training Costs Using Custom e-Learning Content
The first step to any well laid-out cost-reduction plan is to decrease the costs the organization currently incurs in order to get a better handle on profit potential from sheer cost savings. Previously we outlined what our target cost categories are?now we're going to lower the costs associated with those categories by leveraging custom e-Learning content.
Take this scenario: A mid-sized software company that develops intranet portal systems currently employs 3 trainers that are onsite with clients for end-user training 3 days per engagement and they each average approximately 50 engagements per year for a grand total of 150 days on the road per trainer or 450 days on the road collectively.
For these trainers, the onsite training program for the end-user customer may look something like the following:
Day 1: Software Introduction and Primary Functions
Day 2: Functional Use and Administrative Actions
Day 3: Real-World Functions and Labs
Lowering the costs: By leveraging custom e-Learning content, the company used in the above scenario, can effectively reduce the onsite time required for each trainer, thereby reducing all costs associated with the training program across the board.
By using a professionally designed, self-paced, custom e-Learning module to focus on the Software Introduction and Primary Functions training that normally occurs on Day 1 and then delivering that learning module online to their end-user customers at the time of purchase through an e-Learning Management System (LMS), this company could decrease travel time for all 3 trainers by 1 day per engagement. This would decrease travel time for each trainer by 50 days per year, or 150 days collectively during the year. In addition the end-user customers will already be familiar with the software package before the trainers ever set foot in the front door.
This would successfully:
Decrease the costs associated with those 150 days of travel that are now being saved.
Enable the company's trainers to perform more training engagements OR enable the company to decrease the number of in-house trainers it employs.
Decrease the costs associated with creating and publishing the sections of the hard-copy training manuals that deal with the Software Introduction and Primary Functions training session that normally occurs in-person on Day 1 of the training engagement.
Taking it one step further: Reducing each trainers travel schedule by 1 day is good, but it isn't good enough. Software companies employing this cost-reduction method should take it one step further to enhance their end-user customer's experience. They need to make sure that their end-user customers are learning what they need to know to ensure time isn't being wasted covering the same topics when the trainer visits the customer site in-person.
To do this, the software company needs to look at how they plan to deliver the online training to their end-user customers. They will want to make sure that the end-user customers can track and manage the online training portion of their sessions, whether it is self-paced custom e-Learning content or real-time online trainer/student collaboration. Selecting this delivery platform can be difficult but it should include the following basic functions:
1. Student Knowledge Assessments
2. Student Success and Progress Tracking
3. Real-Time Interactivity
4. Self-Paced Learning Delivery
By selecting a delivery platform that addresses all four of these facets of end-user customer training, the mid-sized software company can not only decrease their own costs but enhance their client/vendor relationship by delivering more than what is normally expected or experienced in today's software market. What's the bottom line? The customer is pleased with their user's performance and the value they received from the software company.
Step 2: Creating Revenue Using Custom e-Learning Content
Now that we have lowered our costs, the company needs to look at how they can use their new learning technology to generate new revenue streams for their organization.
Take this scenario: The mid-sized intranet portal software company used in the scenario above now has their own proprietary basic end-user e-Learning module to cover 1 day's worth of what was previously onsite training. The company has effectively reduced their overall, offline training costs. Now it is looking for ways to generate new revenue streams using this technology to (a) make back their initial purchase costs and to (b) create more profit potential for the entire organization.
Creating the revenue: One way for a mid-sized software company, such as the one we're using in our example, to create this much needed revenue stream is to create subsequent, more advanced, self-paced, custom e-Learning training modules. Attractively priced, these learning modules could be made available to their end-user customers online without incurring any additional offline training costs.
In order to do this efficiently and without incurring additional offline training costs, the company needs to make it easy for the end-user customer to purchase the more advanced training content and make it easy for the end-user customer to track their own learners as they attend the training courses so they can readily see its effectiveness. By investing the money today to build the more advanced, custom e-Learning content, this mid-sized software company could realize profits from the training modules within 12 to 24 months once they begin marketing and selling it to their existing client base. Such profits would be dependent on development timeframes, how they market their new training service and their chosen modes of delivery.
Taking it one step further: Making the more advanced e-Learning content convincing and attractive to purchase from the client standpoint takes some ingenuity. People are very susceptible to purchasing something that is located right next to the checkout lane at Target. Similarly, it stands to reason that client of this mid-sized software company will be more apt to purchase additional e-Learning content if it is readily available to them and if they can purchase it without any hassle.
One way to accomplish this is to publish the new, more advanced, self-paced e-Learning modules to the company's LMS portal and then make the modules available for purchase via credit card using e-Commerce or via standard invoice with a single phone call. This essentially acts as the product stands we all see at Target next to the checkout lane. Since everyone needs to pass through checkout lane, it makes sense to put additional products available for purchase there. In other words, if the mid-sized software company is delivering portions of their beginner training program online to their end-user customers, this more advanced e-Learning content should be available for purchase right next to those basic training modules, thus, increasing its visibility and increasing the attractiveness to buy from the client perspective.
The Completed Solution
Because of the tight software market and the strain put on mid-sized software companies to perform, if these companies can decrease the costs associated with their current training programs and create new revenue streams at the same time, it becomes a win/win situation both for the vendor and for the customer. The software company gains a competitive edge and continues to move forward while the client gains an easy-to-engage training program and added value from their software vendor.
Synapse SE Staff Contributor
For questions about this article, please contact:
Shawn Torkelson, Synapse SE, 612.501.2620, www.synapse-se.com