I was recently speaking with the CIO at one of our long-time customers, a mid-market freight forwarder and customs broker. They were struggling to explain to their business partners why they should use a third party for integration services instead of going it alone.
The main business objector basically said, “We already have an IT staff, why do we need to pay for another tool?”
To the CIO in question, the answer was as obvious as if a contractor said, “I already have carpenters, why do I need to buy a nail gun? Can't they just keep hammering?”
Unfortunately, they needed to go a bit deeper with the math to get the team on board. We took a two track path to building the ROI case. The first track was the hard savings vs building and maintaining the integrations in house, and the second was the ROI on delivering the underlying implementation on-time and on-budget.
Track One: Hard Savings
We started by breaking down the recurring costs for building out the team and tooling required to build and maintain the integration environment:
- $215k in EDI/Mapping admin salaries (fully loaded). You have to have at least two for redundancy.
- $58k per year in EDI tool hosting and licensing
- $110k for a business analyst
- Consider security audits, penetration testing, GDPR compliance, legal, etc, and you'll spend another $80-$100k in compliance activities
- Source control, continuous integration, regression test automation: $10k-$20k
This totals more than $500K annually. Note that we stayed away from one time costs. One of the challenges in building a business case can be mixing one-time and recurring costs. By sticking only to the recurring costs, we kept the model simple.
In this case, the annual cost of Chain.io licensing for the solution was about $50k, so we’re already returning 10x value vs the internal option.
Track Two: Project ROI Value
Next, we took a look at the underlying business needs that we were supporting. In one case, we identified that the internal time to build a solution was eight months, and the Chain.io solution could be deployed in just one month. The underlying ROI was $100k / month so accelerating the project returned and additional $700k one time benefit.
This tracks with a recent quote we heard from another customer about using Chain.io. They said, "We could do all this ourselves, but, if we did it ourselves, it would take twice as long and cost 10 times as much."
As we mentioned, the thing to be very clear on with stakeholders is the difference between one-time and recurring benefits. The one time benefit of accelerating the project is $700k which initially seems better than the $450k from Track One; however Track One is recurring. Over a 5 year period, the benefit of the ROI on track one is $2,250k and our total ROI is $2,950k.
Track Three: The Hidden Benefits
We established this is a two track ROI, so why is there a track three? This is where we cover the soft benefits. These are benefits that are real to the organization but not immediately apparent on the profit and loss statement. If you lead with these benefits, then most CFO’s will laugh you right out of their office. It’s good to know these, and explain them, but only after explaining the hard dollar ROI.
Some of these benefits include:
- What benefit is your staff going to create for the company by doing other things while they are not building commodity integrations?
- What’s the risk to customers and internal stakeholders of delivering late (or not at all) because you’re not working with a platform specifically built for the industry?
- What’s the compliance risk of home grown solutions that might not go through stringent audits and security controls?
Beyond these soft benefits, when forwarders work with Chain.io, they’re joining a network of leading logistics software providers, which makes it easy to scale your operations and save even more money. We're applying the same code and patterns that we've used for the industry’s largest forwarders across our network, helping other LSPs connect their systems faster than internal teams or generic iPaas providers.
Align Investment With Business Value
There may be many problems that may feel unique to your business, but many of these can be organized into a few distinct buckets. For example, rate management and pricing is different for each business, but the core processes are the same for every forwarder. These core business processes are what our integrations are built for.
For many forwarders, the cost of integrating your systems is not just your IT team's time typing fields into mapping, it's the organizational lift of figuring out the process and maintaining it over decades.
Because our industry is constantly changing, maintenance is tough for forwarders to do in-house. When you choose to buy vs. build, you’ll have to have a dedicated team to control this and keep up with the constant change.
Choosing to Buy vs. Build
In today’s logistics technology landscape, there is no need to reinvent the wheel. Third party software providers are already solving problems for you and your competitors, and no matter how good your internal team is, you can’t be an expert in everything. No one has enough perspective, time, or resources to do everything in house and support your customer’s needs.
Beyond simplifying your integration process with Chain.io, you’ll be connected through the same core business processes as the world’s largest freight forwarders, helping to even the playing field. For large freight forwarders, we’re helping to build best practices into your integrations that will help you stand out and serve your customers even better.
Buying integrations may not always be the right decision for your company, but it may be right now. Here’s the criteria you need to consider when deciding:
- There are only a few things you can be amazing at. What can you and your team spend time on that will provide value for your customers?
- There’s a lot to buy before you get to build. Maybe it makes sense to start your project with an integrations expert and maintain things in house after the initial integrations are completed.
- Does your company win or lose based on this project?
- What’s the true cost for your team? Beyond time and money spent integrating your systems in house, what would the cost be for incorrect integrations that delay business?
- When using the Chain.io product, the ROI is about $10 for every $1 spent with us per year.
Chain.io Connects Your Supply Chain Digital Nervous System
Whether you’re weighing the costs of buying vs. building, or ready to get started with your integration project before peak season, Chain.io can help.
Our product makes the integration process fast and straightforward. Rather than your IT department spending years on multiple integrations, we partner with your development team to connect all of your data in a much faster, efficient, and scalable way using pre-built adapters to a growing network of logistics technology.
The first step toward achieving a supply chain that will work for your organization well into the future is understanding and mapping the flow of your supply chain. Next, you must understand the audience you serve so you know what technology is the most valuable to invest in. Finally, you’ll need to ensure all of your systems communicate in real-time. We can help with it all.
Download our free ebook to better understand the value of integrations or book a meeting with one of our supply chain experts to learn more.Download the eBookBook a Demo