What is that Platform Worth?

That’s a question you really need to be asking before you sign on the dotted line. Because platforms are getting more expensive than ever. As a result of big companies gobbling up smaller companies at high multiples, their investors are pushing them harder and harder to get profitable returns on the investments fast, and since a company can only sell so fast (because cycles are long and it only has so many sales people to purse them), the only way it can satisfy its investors is to up the price.

Now the vendor will justify the increased cost as a result of the increased value it can bring with the new acquisition(s), and while the new acquisition(s) will definitely have value to some customers, they may not necessarily have value to you … or at least not in this stage of your development. if the acquisitions require a certain degree of maturity in your Procurement organization in order for you to obtain value from them, and you won’t achieve that level of maturity for at least three years, paying for it since day one because it’s “part of the platform” is not going to buy you anything.

You need an ROI, and while it’s perfectly valid for a provider to price on an ROI model, it’s only okay for you to pay if the ROI model is one that you can achieve based upon your current processes, level of organizational maturity, manpower levels, change management capability, and buying profile.

The ROI most providers are promising is not an ROI that is achievable by an average organization until they realize best-in-class performance, and for the average organization committed to that journey, that’s five to eight years in the future.

So, before you take a vendor’s word as to what the ROI is, ask for their assumptions and do your own internal assessment. You’ll likely only realize a fraction of the promised ROI in the first year, and it will likely be 3 to 5 years until you realize the majority of the ROI being promised to you.

So the “worth” of the platform the vendors are promising, especially in the beginning, is a lot less than you might think … so be sure that the platform is priced accordingly, and key features rolled out incrementally, so that you do realize value year-over-year.