Profitability through process optimisation

In a previous life, the business of IT people was mainly built on knowledge and skills that were sold by the hour or per project. The project-based business model has long time been the only one available in many markets.

My tailor was rich

Think about the pre-war tailor, for instance. He has knowledge and skills to make costumes and dresses. His business is 100% project-oriented and has a lot in common with the way IT operates:

"A prospect learns about the tailor through word by mouth or advertising. He drops by the store and tailor and prospect start conversations on desired outcomes, wishes, budget, etc… Then the tailor takes all the measurements required and presents some textile samples. The customer takes some time to decide and comes back. A first model is being tailored and tried out. Next a long series of adjustments takes place and 3 to 4 weeks later, the costume is finished. The tailor can only hope the customer will be satisfied and subsequently pay the invoice". Optionally the tailor can offer a post sales service or guarantee on the costume"

Prêt-à-porter

Then came the world wars. Suddenly tailors were asked to make 1000s of similar costumes in different sizes. The industry saw a huge opportunity and the pret-à-porter was born. Before the war our tailor only sold to people who asked for it. Now costumes, dresses, shirts etc… are exposed in windows and even if you do not need one, you may well buy one. Just because you can.

The hand- and tailormade costume was very labour intensive, the prêt-à-porter was highly automated and relatively cheap.

Everything as a service

A lot of industries have followed. I am referring to the Spotification of the music industry, the Netflixication of the video rental business and many more subscription-based models in telecom, insurances, travel, car industry etc…

With the advent of "the cloud" IT is following the trend at high pace. An IT partner who wants to survive has to offer "as a service" on top of or besides projects. In the "as a service" the subscription rate is part of the offer and should be attractive to the customer. Else they go elsewhere. Today you see prices and rates on the market of which you may think they can never generate profit. I will come back to exponential character of subscription-based business in detail in another article. Here I want to highlight another aspect: process optimization.

About profitability

If you sell software as a service at an attractive rate, about 20% of your customers will overconsume while 80% will remain below what they are entitled to. In order to keep them all satisfied and to keep your business scalable and profitable your focus should be on process optimization. Look at the processes that take time and may be error prone. Your first challenge is to find ways to do in 5 minutes what took 10 minutes. Next reduce that to 2.5 minutes and so on until it is fully automated.

Are you an MSP looking to optimise your Cloud billing processes? Take a look at our automated billing solutions, we might be able to help!

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