Why do companies still build their own Loaner Kit Processing Software?
This is a question I ask myself almost daily, but none of the answers I tell myself seem to satisfy. So, a little history lesson, most of our readers probably know this, but it’s worth rehashing to properly set the table.
As of 7 years ago, SaaS technology that was specific to loaner kit processing in the Orthopedic space was still only in its infancy. That meant that distribution/operations leaders at companies were forced to either license a bleeding edge technology or have their IT department build a custom solution onto their existing ERPs. Choosing the SaaS route resulted in having to work with a start-up company to build an integration with the manufacturers ERP, and then hoping that SaaS company did not go out of business, forcing them to redo the project all over again either internally or with another SaaS company (and that was only if those involved in the project still had their jobs. Choosing the internal route did not entail any of these concerns, and any risk was effectively pushed onto the IT group.
At the time it was a “no brainer” decision, especially considering that in-house IT departments beg for this kind of development work.
7 years later, the world has changed dramatically. The SaaS companies that have survived have evolved and built world class systems tailored to the industry. These technologies are built on cutting edge, flexible, IT stacks, and are incredibly inexpensive. They are deployed in many geographic locations across numerous companies and warehouses that are improving their technology monthly. They are experts at integration and can provide best in class processes, so not only do organizations get a new technology, but better operational process flow, while never having to lose any of the true value add of an ERP system.
Let’s compare the previously described scenario to an in-house custom-built ERP solution. At this point it is likely antiquated, it forces operations to follow the process flows that existed at the time the solution was built (often outdated), and it’s expensive to maintain. In some cases, it may even be preventing the company from upgrading to the most recent version of its ERP, as the cost to rebuild it would be in the millions. In other cases, the inflexibility, and inefficient processes it creates may be causing companies to neglect loaners altogether, and instead overstock its field inventory, potentially creating huge amounts of tied up capital. It is also a one-off system, only used by one company, and as such, is much less reliable than 3rd party systems. Lastly, making any changes to the system to improve it, is both expensive, time consuming, and forces operations to fit into the IT priority list, of which loaners will certainly not be at the top.
Considering the evolution of SaaS loaner software companies, why again, would anyone decide to continue to invest in a custom ERP bolt on?
- Fear of change – It is hard to change systems no matter how much benefit there will be down the road. There is an upfront cost that, while paid back quickly, still takes time to pay back. There are internal politics to overcome, especially with IT, and especially if the designer of the custom system still works for the company. Internal team change management is always hard, even though the system may be terrible from a workflow perspective because customer service and ops are comfortable navigating it and know all sorts of “tricks” to make it do what they want.
But change is inevitable. The way Orthopedic companies operate today will not work in the near future. They must be faster to evolve, smarter with their capital (which means inventory), and better overall vendors to the providers and surgeons. Their loaner cells need to become a bigger part of their business, and they need to make the changes necessary to meet the increased loaner volume, in a cost effective and timely manner. None of these things can be done or even supported with a home-grown custom ERP bolt on.
- Fear of working with outside technology companies – Let’s face it, no company providing SaaS loaner kit processing software is going to be very large. As an Operations or Distribution leader in a large company, your monthly budget is likely larger than most of these companies’ annual revenue. Is it worth spending the political capital on making a change to a company that does not have 3 decades of history and billions of dollars in revenue? We have two options. One is to go with a company that generates revenue, is used across multiple other companies in your space, and has shown to have staying power. The other option is to use a one off, home-grown software (that is likely not only bolted to an antiquated version of your ERP, but also a huge reason why you either can’t migrate away from that version), or having to pay tens of millions of dollars to do so.
- Fear of scale – Can a small technology company keep up with the volume of the business? The SaaS software in the market is built on flexible stacks, leveraging some of the biggest technologies in the world, like SQL, and AWS. These systems were built for speed, ease of deployment and scale.
All in all, the SaaS loaner kit tracking software solutions over the last 5 years, have evolved, scaled, and thrived, and continue to do so. Can you say the same about your home-grown solution?
Jonathan Tillman, CEO, Medical Tracking Solutions
Prior to joining Medical Tracking Solutions, Jonathan Tillman spent 11 years in the medical device industry helping to build outsourcing companies focused on inventory management. Throughout the 10 years that Tillmam spent at Millstone Medical Outsourcing, he held various roles within sales, marketing, account management, and operations, where he was responsible for establishing and managing the company’s loaner kit processing program within the warehousing and distribution facility in Memphis, TN. More recently, Tillman worked for Life Science Outsourcing, where he helped to build a decontamination, sterilization, and inventory management division within the company. Tillman graduated from Georgetown University where he earned All Big East honors as a member of the varsity track team.