Industry Insights

The One Thing CSPs Can Do to Avoid the Early Death of a Digital Transformation Project

By Ideas @ AppDirect / March 12, 2018

One Thing Digital Transformation

There’s a menace stalking your digital transformation project. You may think you’re ready for it, but it can sneak up and strike even the best-prepared company. The threat? The high cost of software integration.

In fact, out-of-control software costs strike the vast majority of companies. According to the Standish Group, 94 percent of large software projects, including digital transformation initiatives, go over budget. This not only puts the current project at risk, but can also make companies less likely to pursue other digital projects in the future.

The New Era of Digital Ecosystems

Of course, cost has always been a top concern for companies. However, today’s business landscape is different. With the dawning of the platform age, digital ecosystems are emerging as a critical way to keep up with demand for innovative digital offerings. CSPs must offer these new digital products and services to retain customers, and they often have to work with third parties to provide them.

Global spending on digital transformation is expected to reach nearly $1.3 trillion in 2018.

Just how much are companies spending on digital initiatives like these? According to IDC, worldwide spending on digital transformation projects and technologies is expected to reach nearly $1.3 trillion in 2018, up from $1.1 trillion in 2017. A big chunk of that spending—$662 billion—will be spent on supporting or expanding operations that utilize digitally connected products, services, assets, people, and partners.

For many CSPs, that spending often comes in the form of software integration costs. Integrating a new application to a commerce platform can cost anywhere between $500,000 to $1,000,000, or more, depending on the requirements. To make matters worse, companies that build one-off integrations will almost certainly end up running over time and over budget, and will have to devote resources to ongoing maintenance as well.

A recent McKinsey study confirms these findings. On average, the analyst firm found that large IT projects run 45 percent over budget and seven percent over time. The kicker? They deliver 56 percent less value than originally predicted. Clearly, cost is a critical success factor for digital transformation projects, but what can CSPs do?

The One Thing—Platforms

Take those $500,000-to-million dollar amounts, multiply them by the number of applications in a robust SaaS product catalog, and it’s clear to see why integration can stop any digital transformation initiative in its tracks. But, there’s a way to avoid these project-killing costs: platforms.

There’s a way to avoid project-killing software costs: platforms.

With a platform-based approach to integration, companies only need to do one integration to a solution that offers an existing catalog of cloud services. The third-party platform provider handles the integration with each individual solution, and can deliver a seamless experience to both providers and end users alike at a much lower cost than multiple integrations.

According to Accenture, 88 percent of firms are using third-party providers for at least one aspect of their digital transformation project, rather than implementing a custom solution. This is generally more cost effective, and it eliminates the “budget bloat” factor when it comes to estimating the project’s implementation and ongoing operating costs.

Another benefit of partnering with a third party for a cloud services platform is that it allows you to test the waters when considering offering a new digital product or service to your customers. Continuous testing is critical for today’s successful agile businesses.

Learn more: Delving into Digital Transformation and Cloud Commerce

What to Look for in a Provider

Of course, not all platform providers are the same, and partnering with the wrong provider for your digital transformation project can be riskier than going it alone. To minimize these risks, look for a provider that is:

  • Technology agnostic and open-standards based: The platform provider’s solution should integrate with the technology you’re already using.

  • API addressable: The provider’s technology should be API-addressable, which will not only give your customers a seamless experience, but also make the integrations easy to maintain.

  • Experienced with your use case: Be sure the provider has already partnered with companies in your industry and can offer expert advice and guidance.

  • Expertise in go-to-market best practices: In addition to best-in-class technology, a provider should also be able to offer guidance in developing strong value propositions, building a product portfolio, customer lifecycle management, and other key go-to-market issues.

Partnering with a platform for cloud commerce gets your business over the integration hurdle without the large upfront and ongoing investment in one-off integrations. You get to market faster, with a more robust portfolio, and a lower total cost of ownership.

Ideas @ AppDirect is a leading source for trends, statistics, best practices, and other information related to the digital economy.