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Digital adoption platforms to boost your software ROI

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digital adoption platforms

Digital adoption platforms are helping companies maximize their investment in software. They are relevant for private equity both as a potential investment target as well as a tool to use in their portfolio companies.

The scenario is all too familiar: You (or one of your portfolio companies) invest in a shiny new software tool (e.g. desk booking software). You go through a lengthy purchasing journey involving a detailed request for proposal from all stakeholders to find the perfect solution. But a few months later, just a fraction of your employees are using the tool, and even fewer are leveraging its full functionality.

This is where digital adoption platforms come in.

Digital adoption platforms are solutions that work on top of existing software to provide users with training, support, and analytics. Digital adoption platforms help increase both productivity and revenue. By 2025, Gartner expects 70 percent of organizations will use digital adoption platforms across the entire technology stack to improve application user experiences. Our Transactions Services & Private Equity team conducted commercial due diligence on this space and examined the promise DAPs hold for businesses, particularly private equity firms.

Five benefits offered by digital adoption platforms

Between internal employee training and external customer support they provide, digital adoption platforms can prove useful for organizations along a range of dimensions:

  1. They reduce cost to train: Digital adoption platforms offer step-by-step training to quickly onboard new users and introduce existing users to new software. This reduces the need for in-person training and helps organizations scale their training efforts. A Forrester study from 2020 found that Digital adoption platforms reduced employee training time on apps by 60 percent.
     
  2. They identify growth opportunities: Digital adoption platforms provide real-time analytics and feedback, allowing organizations to determine the degree of user adoption, identify difficulties users may be having, and quickly address them at scale. Additionally, the data allows CTOs to measure the return on their software investments, helping to ensure that the company only spends money on software features it uses.
     
  3. They show customers features they might not be aware of: Digital adoption platforms can guide new customers through the process of signing up for your software or app and explain its features to both new and existing customers. This in turn increases the company’s share of wallet, customer stickiness, and customer lifetime value.
     
  4. They reduce cost to serve: Digital adoption platforms can guide customers through self-service processes such as password recovery for online banking or shopping accounts. This reduces the call volume to customer service centers and can ultimately cut the cost to serve by up to 50 percent according to a study by forester.
     
  5. They can be adapted to many situations: Digital adoption platforms can be customized to match the specific needs of an organization, ensuring that users are getting the most relevant and useful information. Advanced DAPs are able to customize assistance based on past behavior of the individual user and adjust contextually.

Comparison of the leading players in the digital adoption platform market

Digital adoption platforms can range from relatively simple, step-by-step videos with text overlay explaining a tool’s functions to sophisticated SaaS solutions embedded in the relevant software. These embedded solutions analyze workflows in real time and provide context-specific support. Here are some of the best-known players in the DAP market:

  • WalkMe is widely considered one of the originators of the digital adoption platform software category. Key features include step-by-step guidance, real-time analytics, and customized training for web and mobile applications.
     
  • Pendo is a digital adoption platform that provides in-app guidance, analytics, and feedback for web and mobile applications. It offers a variety of features such as in-app messaging, surveys, and user segmentation.
     
  • Whatfix provides in-app guidance for web applications, real-time analytics, and step-by-step, customized training.
     
  • Appcues is a digital adoption platform that offers targeted in-app messaging, onboarding tours, feature announcements, analytics, and A/B testing.

Deploying digital adoption platforms in portfolio companies

Digital adoption platforms can provide a clear overview of the uptake, usage, and pitfalls of implemented software. A private equity firm with an operations team may want to build up institutional knowledge about software products they want to roll out across several portfolio companies (such as ERP software, HRM, CRM). They can then pilot a software solution with one company to identify which functions are being used and where users are having trouble. These insights will later inform the PE firm’s decision whether to implement the software in its other portfolio companies.

Investing in the digital adoption platform space

Of the digital adoption platform providers listed above, only WalkMe (stock symbol: WKME) has gone public, having IPO’d in June 2021. This illustrates that the DAP space is still nacent, with many companies about to reach profitability. Nevertheless, the field is growing, and investors should consider digital adoption platforms not just a useful tool for portfolio companies to use, but a relevant investment opportunity.

  • The market for digital adoption platforms is expected to grow from 1.02 billion US dollars in 2022 to 3.73 billion dollars by 2030 according to DataIntelo.
     
  • By 2025, Gartner expects 70 percent of organizations will use digital adoption platforms across the entire technology stack to improve application user experiences.

Takeaways for private equity firms

In conclusion, digital adoption platforms should be on investors’ radars. They help boost the value of digital products and the return on software investments by increasing revenues and reducing costs. Using DAPs across portfolio companies allows private equity firms to gather institutional knowledge about software products that can be used to inform future investments.

Looking to add a company in this space or any other industry to your portfolio? Get in touch with us to discuss the value of DAPs and learn more about the leading platforms highlighted in this article.

For more information visit: Simon-Kucher - Transaction Services und Private Equity



 

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