The model makes on-demand software an inexpensive way for collection shops and agencies to obtain the same benefits of commercially licensed or home-grown software without high start-up and maintenance costs - or the complexity of writing code to create features and functions specific to their business.
"Technology is changing so fast and application upgrades are coming at such a furious pace that it is getting a lot tougher for a collection department to leverage technology as an advantage, let alone stay on the bleeding edge," says Nancy Atkinson, a senior analyst at Boston-based Aite Group. "With the economy forcing businesses to look more aggressively for cost savings, on-demand software is going to get more consideration."
By definition, on-demand software is software that resides at a single location, which multiple customers access and use as needed. Users pay a monthly subscription fee, as opposed to upfront capital costs, licensing fees and ongoing back-end maintenance costs. Capacity is scalable and subscriptions are adjusted based on the capacity used.
Vendor Improvements
Vendors will upgrade their platform several times a year, compared to every 12 months or longer for licensed applications. Changes to home-grown platforms are slower too, as IT personnel must be shifted away from their core duties. Because upgrades in the on-demand model are universal to the user base when one user discovers the need for a new feature, the vendor rolls it out across the platform.
"Collection departments and agencies no longer have to pay to implement upgrades or create new features, which some are loath to do because of the expense involved," says Brian Moore, executive director, Collections Solutions at Seattle-based Varolii Corp. "Platforms can now be managed in a more coordinated manner."
More importantly, the cost of managing the platform can be paid for out of the monthly operating budget because there are no upfront licensing fees. "Paying a monthly subscription fee lowers the barrier to entry," says Allyson Boudousquie, director of Business Process Marketing at Chelmsford, Mass.-based Aspect Software Inc.
What collection managers have come to understand is that even though a custom platform may be a point of differentiation, it is essentially frozen in time because they have to request the vendor or an IT staffer to write code to make a change to the platform and then implement it.
The transparency of on-demand architecture provides the flexibility for collection managers to make changes to the platform that affect their campaigns themselves, while leaving platform upgrades to the vendor.
"IT administration is a fairly heavy burden for a lot of lenders and agencies and the on-demand model provides a lot more flexibility when it comes to IT administration of a platform," says R. Fred Houston, president and CEO at Vancouver, Wash.-based Columbia Ultimate Software. "An on-demand platform can be expanded or contracted without the undo expense of most licensed models."
The appeal of paying to operate and maintain a platform without an upfront capital expenditure is critical to small and mid-sized agencies that cling to aging, outdated platforms if for no other reason than the cost of implementing upgrades or an entirely new platform can be prohibitive. "The on-demand model levels the playing field for smaller players," says Atkinson.
