Customers expect answers to increasingly complex business problems now more than ever. Combining products and services into bundled solutions allows enterprises to satisfy customer demands more holistically.
This helps them to differentiate themselves from the competition, generate higher margins, and establish reliable revenue streams. In a nutshell, it sets them up for sustainable growth.
From Selling Products and Services to Providing Bundled Solutions
Legacy businesses find themselves disrupted by technology, threatened by rising customer expectations, and vulnerable to competition because of existing business model limitations.
Consider that 52% of the year 2000’s Fortune 500 companies are no longer part of it, largely because they did not adopt new business models. Overall, disruptive technology has brought businesses closer to customers.
To maintain their competitive edge and future-proof their operations, businesses must rethink what they do and how they do it. One way to keep ahead is to switch from selling single products or services to providing bundled solutions to solve complete customer problems. Such offerings combine physical goods, digital subscriptions, and services — that individually only address one minor facet of a customer problem — to holistic one-stop-shop solutions. Often solutions are offered via outcome-based subscription pricing. That way, customers are charged based on the value generated by the solution.
Let’s look at an example.
To constantly reinvent, innovate, and adopt new business models, a solar panel manufacturer went from selling products to providing solutions comprising the rental of solar panels, installation services, and annual maintenance. This resulted in higher margins, new revenue streams, and increased customer loyalty. The more a company can understand its customer, the better it performs.
Similarly, Kaeser Kompressoren moved from being a supplier of air compressors for tools to providing equipment and selling based on usage. In addition, it now offers monitored maintenance and upgrading options at the speed of innovation. Both examples show how providers are solving the challenges of their customers and improving their experiences.
Enabling Solution Business Models with SAP S/4HANA Cloud
Whether offering products or services, these new business models expand the capability of companies beyond the initial sale to include elements of a solution throughout the entire life cycle; for example, the delivery and installation of a machine and corresponding maintenance services. The technical and the business processes support the customer on their journey while minimizing the business risk for the solution provider.
This requires an order management solution that recognizes the components of an order and can orchestrate and manage the required steps from quote to cash.
Solution order management in SAP S/4HANA Cloud offers capabilities to design solutions and determine pricing models and dependencies between items. It provides an integrated view over solutions, including ways to monitor the fulfillment of their various items and to resolve exceptions in the process. Solution order management leverages the industry-leading capabilities of SAP S/4HANA Cloud to manage the completion of physical products, field services, service contracts, and projects. To handle subscriptions, solution order management integrates with SAP Subscription Billing.
Furthermore, solution order management is tightly integrated into the highly automated financial processes of SAP S/4HANA Cloud, including solution billing and receivables management, revenue recognition, and margin analysis. It also comes with embedded real-time analytics, helping sales managers to track the revenues, costs, and profitability of the solution business.
Aligned for Tomorrow’s Demands
Adopting SAP S/4HANA Cloud solution order management enables companies to set themselves apart by:
- Transforming into new and more profitable business models
- Cutting operational costs by streamlining order processes
- Gaining the competitive edge with real-time insights
Join the Change Engine
Successfully transforming to a solution-centric business model requires embedding new technologies at the core of business. While more than 60% of companies are planning to offer solutions, some are still not sure how to start or may feel a bit lost along their journey.
Solution order management is part of RISE with SAP, an offer that meets organizations at whatever stage they are in their digital transformation. It helps them grow through business innovation and operational efficiency while doing it all sustainably.
Changing customer expectations have led companies to plan to sell end-to-end solutions as a service for their new digital products and services. New business models for selling solution bundles are on the rise and both customers and solution providers benefit.
A great example is IBM, which recently underwent an enterprise resource planning (ERP) transformation as it moved its processes to SAP S/4HANA.
“IBM introduced SAP S/4HANA as a strategic quote-to-cash platform to accelerate the growth of its subscription license, as-a-service, and software-offering business. The market-leading capabilities of SAP S/4HANA to sell holistic solution and subscription bundles enabled IBM to improve the performance and usability of its order management and financial processes, thus reducing time to value and time to market,” says Prasad Chennuru, Chief Architect, IBM.
Matthias Barth is global vice president and head of Product Management Solution Business for SAP S/4HANA at SAP.
Oliver Gass is director of Product Management Solution Business for SAP S/4HANA at SAP.