Software-as-Service as a disruptive trend and how it affects the traditional, ISVs and IT moving to the Cloud.
Considerations in the transition to the new model and expertise on SaaS Service Operations - STORM™ and DevOps
Dinosaurs were an extremely successful model. They roamed the earth and multiplied and were the indisputable rulers of this planet for hundreds of millions of years.
They were not very fast, necessarily, nor even nice to their customers (some of them are reputed to have actually eaten their customers), but they were successful because they had spent millennia adapting to the existing environment, perfecting their model to make the most out of it.
Then an unexpected event occurred (some scientists believe a meteor hit the earth creating a nuclear winter while others claim it was fast, cheap internet and tightening IT budgets) and soon all dinosaurs went extinct. Well, not all. Two groups were not annihilated. There were those alligators that stayed in their swamp (niche) and are doing pretty well, thank you, still today. The other group consisted of small reptiles that were driven to grow wings since the larger crawlers ate up all the easily available resources. These birds were lucky to be able to adapt quickly to the changing environment and survive the downfall of their relatives.
The fast moving, warm blooded mammals were better equipped to deal with the new brave world and many have grown to become true behemoth.
In a previous post I revealed the fact that I have mostly stopped advising the traditional on-premise, enterprise, perpetual, software vendor on the transition to on-demand, subscription model, i.e. SaaS.
This is not because I do not believe that it is a smart move, or that the ISVs would not benefit from the transition. Far from it! I envision a world, not too far in the future, where on-premise software would be the exception, not the rule, and even that exception would point to a dwindling model that would survive in niche markets only (swamps) .
My experience, which is supported by many famous (SAP and Avaia for starters) and less famous companies, has been that most traditional, on-premise, enterprise ISVs will fail miserably in the transition to SaaS. I have advised to companies that started out with great enthusiasm that dwindled to a silent death. They simply do not have the DNA for it.
I am talking about the right STUFF that is inherently lacking in established enterprise ISVs that will allow them to make the successful transition. This is not a comment about these companies’ value or success. It is usually inversely proportionate. The more successful the company is, the more entrenched it is likely to be in doing things the ‘right way’ – right, as far as the traditional model dictates.
These ISVs have a product view, not a service view. Their emphasis is on features not serviceability. There is a lot of push back from every silo in the organization, for change, in general, and the SaaS change in particular. It requires a paradigm shift in the organization, and the bigger, more established that organization is, the more difficult it is to bring about that change. (See Impact on the ISV Organization July 02, for a detailed account)
Until a couple of years ago, one could say that most ISVs just don’t get it. But that is no longer the case.
Many traditional ISVs saw their market share being cannibalized by these fast moving SaaS companies. Many heard their customers ask about an on-demand offering and many understand that it is vital that they have a “me too” offering. One cannot ignore the changes in the market and shrug it off as a fad. SaaS used to be a way to work around IT; now CIOs are building on-demand strategies for their business and even starting to use on-demand tools in IT.
So, there is a much deeper understanding of the need to offer an on demand service, but very few ISVs understand that it means a total commitment from the executive level and down.
Not that it is impossible. I have worked with a company whose board made the decision to go Services. They replaced the CEO, who in turn replaced all the senior staff, save the VP engineering. The new VP Sales brought in a fresh new sales force. Then they went through the process of rewriting most of the application from scratch. This process took about a year. They are now a successful SaaS vendor, but they got as close to re-encoding their DNA as possible.
And, of course, there known successful enterprises such as Oracle on demand, HP SaaS (former Mercury Managed Services) and others that had successfully launched their on-demand services, but they are the exception to the rule.
Dinosaurs were magnificent creatures and it sad that we don't have them around any longer (except on isolated islands in the Pacific), but their only fault was that they were too successful for the 'old world' model. I wonder how many software alligators will still be around a decade form now.