Impact and Considerations of Strategy Services for the Customization of Large-Scale Software Platforms

This report was originally prepared and submitted as my 2A work report, the second of four work reports that the Co-operative Education Program requires that I successfully complete as part of my BCS/BBA Co-op degree requirements.

Executive Summary

ThoughtWire offers customized software for Smart Buildings and Smart Hospitals. As a result of their decision to customize the platform for each customer, they face a higher barrier to gaining commitment for license purchases, especially on large projects. To solve this, the Strategic Initiatives team has proposed introducing a Strategy & Solutions team to deliver pre-license consulting services.

This report aids in creating a stronger understanding of the problem and addressing key implications of the proposed solution to ensure optimal implementation.

The introduction of a Strategy & Solutions is likely to be effective in address the host of challenges faced in large-scale custom software deployments, including increased risk, complexity, and indecisiveness.

Other companies facing the same challenge have implemented this approach, notably two major Canadian software providers: Intelex and Element AI. They have seen great success with it, which bodes well for ThoughtWire. To measure the new team’s success, this report proposes three key criteria. These criteria are license purchases, sales cycle length, and profitable revenue. These selected criteria capture key impacts on revenues and costs.

To ensure optimal utilization of the team, ThoughtWire needs to determine which specific customers would be the best fit for its services. Customers who are undertaking projects for the impact on their brand image or for their potential to grow and scale with time will see significant benefits from this approach.

1.0 Introduction

ThoughtWire Corp. is a Toronto-based software company, with 74 staff who work across key functional areas including Engineering, Sales & Marketing, Product Management, Technical Services Group, Business Operations, and Customer Success. ThoughtWire’s core technology is their leading Digital Twin, which allows organizations to “operationalize data from [their] built environment, IoT devices, people, and workflows” (“ThoughtWire”, n.d.). They target customers in the Healthcare (Smart Hospital) and Commercial Real Estate (Smart Building) spaces (“ThoughtWire”, n.d.).

As a result of the complexities of the built environment, ThoughtWire’s platform is often purpose-built for each customer (“ThoughtWire”, n.d.). These tend to be large-scale projects across a major hospital or commercial real estate portfolio (“ThoughtWire”, n.d.). Before ThoughtWire can begin work, a customer must be contractually committed to purchasing their platform, by means of a recurring license fee. Yet, a customer will not see the benefits until ThoughtWire has completely configured and installed the system, a process that can take over a year. This means that customers face a high risk in purchasing ThoughtWire’s platform, and as a result, ThoughtWire likely faces challenges getting commitment, since they are unable to show a tangible return on investment (Rodrigues, Ruivo, & Oliveira, 2021).

To increase sales conversion, ThoughtWire needs a balanced approach to reducing risk and increasing confidence early in the procurement process. ThoughtWire has considered introducing a new Strategy & Solutions team for this purpose.

This report will explore the problem space in depth and justify its significance to ThoughtWire and similar organizations. Then, it will elaborate on the proposed approach and analyze its effectiveness in each problem area based on existing examples. Finally, this report will present key success metrics and guidelines for ensuring the successful implementation of the proposed solution for ThoughtWire.

2.0 Analysis

2.1 Problem Context

Before implementing a solution, organizations like ThoughtWire need to first understand the challenge faced in commercializing large-scale custom software deployments. This challenge stems from the choice to deploy custom solutions, as opposed to “cookie-cutter” apps. While out-of-the-box software platforms provide a sturdy solution, they can still be quite expensive relative to the value they provide (Mann, Mann, Kumar, & Kumar, 2017). On the other hand, custom solutions better “favour the needs of modern businesses with unique reporting hierarchy and core processes” with the potential to remain relatively cost-effective by unlocking much greater value (Mann, Mann, Kumar, & Kumar, 2017). This is why some organizations, including ThoughtWire (“ThoughtWire”, n.d.), will choose to sell their software as customized deployments.

However, custom solutions are not without their own host of challenges. A large custom deployment increases complexity, ambiguity, and cost for the software vendor, and increases effort and risk for the end customer (Sawyer, 2000). Potential customers may struggle to understand how to take advantage of the opportunity to customize their deployment (Sawyer, 2000) and may be missing out on the full potential of the platform. They also need to invest time and money into the customization process before they get a return on investment, which likely reduces ThoughtWire’s ability to gain purchase commitment due to the high perceived risk (Rodrigues, Ruivo, & Oliveira, 2021). Altogether, customized software deployments suffer from increased risk, complexity, and indecisiveness for customers which directly affects the vendor’s success.

2.2 Proposed Solution and Impact

With software playing an increasingly important role in organizational success, Alt, Auth, & Kögler (2018) asserts that “IT companies with skills in software development and operation are in a position to also offer consulting services in the operations and partly even in the strategy field”. To capitalize on this opportunity, ThoughtWire is exploring creating a Strategy & Solutions team. This team will guide customers through discovery, evaluation, and selection of use cases for their organization. This addresses the customer challenge by clarifying use cases, key users, solution design, roadmap, and return on investment. As a result, customers gain greater clarity on the solution and its financial implications, and ThoughtWire can secure buy-in by involving the end-user in the design process (Alt, Auth, & Kögler, 2018).

This solution directly addresses the concerns detailed above. Firstly, it reduces risk by minimizing the upfront cost. A customer can invest in this consulting service to determine whether a license purchase is worthwhile, without committing to the license purchase. Next, it reduces complexity but determining and validating all requirements and use cases before the start of development. The team assists a customer in identifying the most impactful use cases and can understand the potential of a custom solution before purchase. Finally, this approach allows ThoughtWire to present a very detailed analysis of the organizational benefits and cost implications of a license purchase, which reduces indecisiveness. As a result, ThoughtWire can improve buy-in and adoption.

2.3 Case Studies

In the past, other companies have successfully implemented this approach. As a first example, take Element AI. Element AI is a global AI Software provider, based in Montreal (Lunden, 2020). In addition to their products, Element AI also offers some customers AI “Advisory & Enablement” services which guide the customer through identifying, scoping, and implementing AI solutions in their organization (“AI Advisory and Enablement”, n.d.). For example, they worked closely with National Bank of Canada to “define an actionable roadmap for AI deployment to support a broader transformation agenda for the organization” (“AI Advisory and Enablement”, n.d.). Prior to its acquisition, Element AI had reached a valuation of $600-$700 million (Lunden, 2020), demonstrating the success of its approach.

Another exemplary organization is Intelex Technologies, one of Canada’s largest software companies (“About Intelex”, n.d.). Intelex offers consulting services for needs identification and custom configurations of their environmental, safety and quality management platform. They offer these services to their over 1,400 clients, including many in the healthcare sector which ThoughtWire targets. Using this approach, they have cemented themselves as a global leader for their specific software offering.

2.4 Success Metrics

In order to ensure the effectiveness of a consulting approach, it is critical to lay out key performance indicators (Ibatova, Kuzmenko, & Klychova, 2018). To measure the success of ThoughtWire’s new them, this report proposes the following three criteria. First, conversion to license purchases, a measure of what fraction of the Strategy & Solutions team’s customers move forward with a license purchase. This is key since it demonstrates the team’s ability to increase future commitment from customers towards a profitable and scalable end goal. Next, sales cycle length measures how long it takes a customer to commit to a license purchase. This is key because it captures the reduced sales effort enabled by a more concrete solution. Finally, profitable revenue measures whether the team itself can operate profitably, generating revenue from its work. This metric will be interesting since ThoughtWire is entering a new line of work, with lowers margins and valuation multiples. These three metrics will determine the success of the team based on the way it affects revenues and costs.

2.5 Target Customers

To successfully start this team, ThoughtWire will need to correctly identify the right customer profile for this service. When customer needs differ strongly from available services, they will be less satisfied which will have a negative impact on an organization’s financial performance (Buell, Campbell, & Frei, 2021). The customers with the best fit will be the ones facing the challenges described above to the greatest degree.

Organizations who are seeking a platform that will grow and evolve with their changing needs will benefit greatly from this approach. For example, customers in the healthcare sector, which ThoughtWire targets, face a rapidly changing economic, technological, and social environment that warrants strategic planning (Chletsos & Saiti, 2019). Since strategic planning is “a rather complicated and difficult process” (Chletsos & Saiti, 2019), a Strategy & Solutions team can deliver strong value in helping set strategic direction and showcasing the value of their platform.

Another customer profile is one who is interested in positioning themselves as “thought leaders” by adopting innovative technologies. These customers know that “consumer perception of CSR has a positive effect on brand image and purchase intention” (Pham & Chiu, 2021). They want to be leaders in how they leverage digital spaces for their stakeholders, internal and external (employees, tenants, customers, etc.). This customer would want to prominently showcase and capitalize on innovative features and would benefit from the assistance of a Strategy & Solutions team to customize the platform for this purpose. By specifically targeting these customer profiles, ThoughtWire can better ensure success.

3.0 Conclusions

The challenge facing ThoughtWire, and its customers, stems from the choice to deploy custom software solutions, which has a host of benefits and drawbacks. Among these drawbacks, it leads to increased risk, complexity, and indecisiveness. To address these issues, while capitalizing on industry trends, ThoughtWire has considered starting a Strategy & Solutions team.

Many organizations have successfully implemented this approach, including two Canadian software companies: Element AI and Intelex. These companies operate in similar industries and target similar customers as ThoughtWire. They have seen significant success with their approach, which indicates that this is a worthwhile investment for ThoughtWire.

This team will address the identified concerns but requires ThoughtWire’s further consideration before the team is started. It is important to identify key success metrics for the new team. This report suggests conversion to license purchases, sales cycle length, and profitable revenue as three key success metrics since they effectively capture the team’s impacts on revenues and costs. ThoughtWire must also determine a target customer for this service. This report recommends customers who are looking for a platform to grow with them and customers who are intending to use the technology to bolster brand image through thought leadership. These segments will benefit greatly from the new services.


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