IPaaS

No, it is not a typo, and neither am I contemplating adding another acronym to the alphabet soup. I am simply emphasizing an important aspect of the business - Intellectual Property-as-a-Service. IPaaS is the upper tier of SaaS, what might be known in the industry as ‘Managed Services’ or ‘Expert Services’.
An enterprise software vendor should be delivering more than a software tool. If it also provides a methodology, best practices, and subject matter expertise, then the differentiating value of that ISV is clear. It is (supposed to be) the hub of knowledge of all of its customers on how to do ‘It’ right. ‘It’ may be document, process, or project management, or business intelligence, or performance testing, or CRM, ERP, ABC and XYZ.
Its products are expected to encompass years of experience at a particular vertical or a process by interacting with the customers, heeding to their needs and compiling all of their usage history into the product and the company’s knowledge base.

There are countless tools out there being offered on-demand: email, webex, Google’s Apps and Microsoft Live, to name a few.
What differentiates these services from IPaaS is that they do not require a domain-level expertise. Almost anyone can log into a web-based tool such as webmail and start deriving value from it.

But, one may claim, this domain-level expertise is true for any ISV that offers vertical or complex, process driven systems. So why is this more compelling in the SaaS model?

There are three reasons.

The first is that SaaS vendors can channel their resources into offering a higher level experience for their customers. Most traditional ISVs devote most (if not all) of their professional services’ talents to installation, customization and upgrades/maintenance. If you take these activities out of the equation in the SaaS model, the ‘Professional Services’ can be upgraded to ‘Expert Services’ and dedicate the manpower to helping their customers derive more value from their products.

The second, and even more compelling, reason is that in the SaaS model the software vendors can generate another revenue stream from offering project-based, domain-level expertise. In the traditional model, no company in its right mind would buy and install an enterprise system to run a year-end financials project or a pre-launch performance testing project. Now this is possible with the on-demand model. The software vendor - the ‘expert’- owns the infrastructure; the systems are already installed and ready to use. Send in the expert team (this is a figure of speech of course, the beauty is that you can do it remotely) to run the project and extract a high price for this valued service.

The third, and most important, is the fact that no one has as much visibility into the domain as the SaaS provider. It can view how the software is being used, what kind of data is kept and how it is being manipulated. It can run queries on aggregated data and provide benchmarks and best practices.

Very few companies today make a use of this source of knowledge (and, yes, power) but I predict that it will become an important differentiator in the near future.