Harvard Case - Basware in 2013: Transition to Software as a Service
"Basware in 2013: Transition to Software as a Service" Harvard business case study is written by Robert A. Burgelman, Debra Schifrin. It deals with the challenges in the field of General Management. The case study is 40 page(s) long and it was first published on : Feb 6, 2014
At Fern Fort University, we recommend that Basware embrace a strategic transition to a Software-as-a-Service (SaaS) model, focusing on digital transformation and global expansion while prioritizing customer experience and operational efficiency. This approach will leverage Basware's existing strengths in supply chain management and procurement to capitalize on the growing demand for cloud-based solutions in the global market.
2. Background
Basware, a Finnish company, was a leading provider of procurement solutions, primarily through on-premise software. In 2013, the company faced a significant challenge: transitioning to a SaaS model to adapt to the changing market landscape and capitalize on the growing demand for cloud-based solutions. This transition required significant organizational change, including strategic planning, organizational structure, leadership styles, decision-making processes, and corporate governance.
The main protagonists of this case study are:
- Esa Tihil': CEO of Basware, responsible for leading the company through this critical transition.
- Basware's leadership team: Responsible for implementing the new strategy and managing the organizational changes.
- Basware's employees: Key stakeholders in the transition, needing to adapt to new ways of working and embrace the SaaS model.
- Basware's customers: Key stakeholders whose needs and expectations needed to be met through the transition.
3. Analysis of the Case Study
Strategic Analysis:
- SWOT Analysis: Basware possessed strengths in supply chain management, procurement expertise, and a strong customer base. However, they faced weaknesses in adapting to the SaaS model and lack of agility in their traditional on-premise approach. Opportunities lay in the growing SaaS market and global expansion. Threats included intense competition from established players and emerging technologies.
- Porter's Five Forces: The procurement software market was characterized by high competition, moderate bargaining power of buyers, moderate bargaining power of suppliers, high threat of new entrants, and moderate threat of substitutes.
Financial Analysis:
- Financial Performance: Basware's financial performance was stable, but growth was limited by its on-premise model. The transition to SaaS required significant upfront investment in infrastructure and development, but promised long-term growth and profitability.
- Key Performance Indicators (KPIs): Key KPIs for the transition included customer acquisition cost (CAC), customer lifetime value (CLTV), churn rate, and revenue growth.
Marketing Analysis:
- Target Market: Basware's target market included businesses of all sizes across various industries seeking to optimize their procurement processes.
- Marketing Strategy: The company needed to shift from traditional marketing to a digital-first approach, leveraging content marketing, social media, and search engine optimization (SEO) to reach a wider audience.
Operational Analysis:
- Organizational Structure: Basware needed to restructure its organization to support the SaaS model, focusing on product development, customer support, and global operations.
- Operations Strategy: Implementing lean management principles, process automation, and data-driven decision making were crucial for operational efficiency and scalability.
4. Recommendations
1. Embrace a SaaS-First Strategy:
- Migrate existing on-premise solutions to the cloud.
- Develop new SaaS products and services tailored to specific industry needs.
- Invest in cloud infrastructure and technology partnerships to ensure scalability and reliability.
2. Focus on Customer Experience:
- Develop a customer-centric culture with a strong emphasis on customer support and onboarding.
- Implement a robust customer relationship management (CRM) system to track customer interactions and improve service quality.
- Offer flexible pricing models and value-added services to enhance customer satisfaction.
3. Drive Global Expansion:
- Target emerging markets with high growth potential, leveraging cross-cultural management and localization strategies.
- Establish strategic partnerships with local businesses and distributors to expand market reach.
- Develop a global marketing strategy to reach a wider audience and build brand recognition.
4. Foster Innovation and Agility:
- Invest in research and development (R&D) to stay ahead of the competition and develop innovative solutions.
- Embrace agile methodologies to accelerate product development and respond quickly to market changes.
- Promote a culture of continuous improvement through employee incentives and knowledge sharing.
5. Strengthen Corporate Governance:
- Implement robust governance structures to ensure transparency, accountability, and ethical business practices.
- Develop a clear succession plan to ensure leadership continuity and stability.
- **Prioritize diversity and inclusion in the leadership team and across the organization.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Basware's internal and external environment, taking into account:
- Core Competencies and Mission Consistency: The recommendations align with Basware's core competencies in supply chain management and procurement, and support its mission to provide innovative solutions that empower businesses.
- External Customers and Internal Clients: The recommendations prioritize customer experience and employee engagement, ensuring that both groups are satisfied with the transition.
- Competitors: The recommendations focus on differentiating Basware from its competitors through innovation, customer focus, and global expansion.
- Attractiveness: The recommendations are expected to generate significant long-term value for Basware through increased revenue, market share, and profitability.
6. Conclusion
By embracing a SaaS-first strategy, focusing on customer experience, driving global expansion, and fostering innovation, Basware can position itself as a leader in the evolving procurement software market. This transition will require significant investment and effort, but the potential rewards in terms of market share, profitability, and long-term sustainability are significant.
7. Discussion
Alternative Options:
- Maintain the on-premise model: This option would have been less risky but would have limited growth potential.
- Focus solely on emerging markets: This option would have been more risky but could have yielded significant returns if successful.
Risks and Key Assumptions:
- Market acceptance of SaaS solutions: The success of the transition depends on the continued adoption of SaaS solutions by businesses.
- Competition from established players: The market is highly competitive, and Basware needs to differentiate itself to succeed.
- Execution of the transition: The transition requires careful planning and execution to minimize disruptions and ensure a smooth transition.
8. Next Steps
Timeline:
- Year 1: Implement a pilot SaaS solution, focusing on customer feedback and data analysis.
- Year 2: Expand the SaaS offering, invest in marketing and sales, and target key markets.
- Year 3: Achieve significant market share and profitability, with a focus on continuous improvement and innovation.
Key Milestones:
- Develop a comprehensive SaaS strategy.
- Invest in cloud infrastructure and technology partnerships.
- Restructure the organization to support the SaaS model.
- Develop a customer-centric culture.
- Implement a global marketing strategy.
- Monitor key performance indicators (KPIs) and adjust the strategy as needed.
By taking these steps, Basware can successfully navigate the transition to a SaaS model and emerge as a leading provider of procurement solutions in the global market.
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Case Description
(With SaaS, vendors stored a client's data in an external server or in the cloud, and maintained the software and relevant hardware.) Transitioning to SaaS required the €114 million company simultaneously to transform its strategy, business model, technology and culture; and the change process was bumpy. SaaS customers paid as they used services, rather than upfront as they did with the licensed software and installation business; that difference had an immediate negative impact on Basware's revenue stream. The company's new SaaS technology would be best in breed when it was complete, but it was taking longer than expected to be ready. Basware also needed to reorganize as a global organization, its sales people needed to be retrained or transitioned out, and its culture needed to adjust to match these rapid changes. At the same time, Basware's e-invoice operator business was booming. In 2013, there were an estimated 63 million transactions across the Basware Commerce Network, and the company expected to hit 150 million transactions by the end of 2015. Speed was the name of the game for Basware, as each transaction brought in money and because the network's size was Basware's competitive advantage. Although the software and e-invoicing businesses were two separate businesses, they were synergistic. The more customers moved from paper to e-invoicing, the more they would be able to use the full functionality of Basware's automated software solutions.
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