CIO backgrounder: Understanding packaged solutions

Common knowledge and experience tell us that huge, open-ended enterprise software implementations are expensive and risky. For this reason, I have advocated packaged (also called productized) services and software solutions since 2006. Packaged solutions are a direct response to customers demanding faster, lower cost, and higher value software implementations.

Economic drivers, coupled with the rise of cloud computing, have contributed to the growing importance of packaged solutions among enterprise software and services vendors. A quick search on Google demonstrates the range of vendors now offering these solutions. From a project success perspective, this is good news indeed.

The following introduction to packaged solutions is extracted from a recent white paper I wrote for SAP Rapid Deployment solutions (download PDF). Disclosure: yes, I was paid.

Please share your views of packaged solutions and related implementation issues!

Statistics state that up to seventy percent of IT projects run late, over-budget, or do not meet planned goals; this situation is pervasive among organizations of every size and geography. Consequently, implementation risk is a critical factor for all participants in the enterprise software ecosystem—including customers, vendors, and system integrators.

Responding to these concerns, software and services vendors created packaged solutions to reduce risk, increase transparency, and align stakeholders around specific implementation outcomes. Packaged solutions modularize the implementation process into smaller, well-defined units that are easier to manage and less expensive to deploy than traditional methods.

More importantly, packaged solutions holistically address the entire implementation value chain – including business purpose and scope, approach and fit, selection, and deployment. This overarching view brings together process, customer goals, and governance to reduce risk and create predictable results.

Defining Packaged Solutions

Packaged solutions involve software and/or services tailored to achieve a specific scope of work. For example, a packaged solution for CRM sales might consist of pre-configured software, related implementation services, and training bundled together as a single unit. Packaging creates a repeatable solution that produces consistent results.

Enterprise vendors developed packaged solutions in response to customer concerns over the length, cost, and lack of predictable outcomes on implementations.

Implementing enterprise software is not a core competency for most organizations. As a result, these companies lack the necessary staff and technical experience to implement software without engaging external professional services vendors, including system integrators, which perform this work on a full-time basis.

The relationship between customer, professional services provider, and software vendor is a critical link in the implementation process. The financial, operational, and administrative aspects of these relationships play an important role in determining how project risks are distributed and shared.

IDC’s Group Vice President of Software Business Solutions, Michael Fauscette, explains the value of packaged solutions:

Managing risks to an acceptable level is the goal. Packaged solutions offer the convergence of clearly defined outcomes with learning and best practices honed over multiple implementations and use cases. There’s no better way to get an outcome that matches expectations.

Understanding Packaged Solutions

Packaged solutions consist of fixed price bundles, each of which includes some combination of packaged software and related, pre-defined professional services. In addition, bundles contain pre-built content to help with training, integration, rapid configuration, and so on. Each bundle covers implementation of a specific software product or business process.

By focusing on specific business issues, rather than attempting to cover all possible variations and scenarios, packaged solutions create a standardized response to the most common implementation tasks.

Packaged solutions offer a predictable and consistent implementation experience, based on the vendor’s consolidated knowledge and experience. This predictability allows customers to calculate a more refined TCO (total cost of ownership), create a higher quality cost-benefit analysis and business case, and perform more accurate budget allocations.

Packaged solutions bring several important benefits to enterprise buyers:

• Easier buying process. Pre-defined packages are simpler to understand and faster to purchase than custom-designed, bespoke implementations.
• Lower cost and faster time to value. By purchasing only the specific packages they need, customers can reduce cost on both software licenses and implementation services.
• Reduced uncertainty and risk. Before buying or implementing packaged solutions, customers are clear on costs, schedules, deliverables, which reduces uncertainty.
• Modularity and flexibility. Packaged solutions can provide a modular approach to buying and consuming enterprise software, by allowing the customer to buy smaller units on a pay-as-you-go basis.
• Increased governance, transparency, and predictability. By making process and deliverables more explicit, packaged solutions simplify IT governance and improve predictability around results.

Choosing packaged solutions versus traditional consulting

Packaged solutions assume the presence of certain conditions in the customer environment, for example, company size (based on revenue, employees, or number of users); industry; or geography in which the company operates. In addition, each package covers a finite set of defined business processes and scenarios. The goal of these solutions is addressing the typical features and functions most organizations need to perform these processes.

Packaged solutions work well for most organizations. However, if the processes inherent in a packaged solution do not fit key aspects of your business, or misses a significant number of critical elements, then a packaged solution may not be the best choice. Packaged solutions always trade off lower cost, risk, and time to value against flexibility.

Despite the value and importance of packaged solutions, buyers should ensure the right business fit when evaluating any implementation choices.

Conclusion

Today’s enterprise customers want modular software, flexible pricing, and vendors that take concrete responsibility for ensuring successful projects. The era of “big bang” implementations, and seemingly unlimited budgets disconnected from project outcomes, is over.

Packaged solutions create predictable, clearly-defined outcomes for both IT and lines of business. They offer a straightforward approach to achieve faster business results with less risk and greater consistency.