Software as a service isn’t the hot new thing anymore. Not for many of the companies whose IT executives attended the Fusion 2014 CEO-CIO Symposium. What sounded farfetched not so long ago is becoming business as usual, and CIOs are finding ways to evaluate it alongside more traditional options while learning how to leverage it for speed and innovation.
“A lot of us said, ok, it’s the next hype cycle we have to go through,” said Rick Davidson, president & CEO of Cimphoni. But that’s changing.
Here are five signs from Fusion of the growth of SaaS from hot (or not) new thing to part of business as usual, albeit bringing its own challenges that CIOs are addressing with new ideas and models.
1. It’s just another option.
Depending on who you listened to several years ago, SaaS was going to take over the world or was, well, hype.
“The way we view SaaS is that it’s just another option on the plate every time,” said Allen Benson, CIO and VP of business technology at Spectrum Brands. At a briefing for fellow executives he outlined a hair-raising story of Spectrum Brands’ acquisition of a the Hardware and Home Improvements division of Stanley Black & Decker, which involved an accelerated complete carve-out and replacement of IT services that the division was buying from their former parent’s shared services.
They relied heavily on SaaS applications during the move, including WorkDay and ServiceNow, which Benson called vital to the operation. But they also moved quickly to reallocate physical assets and get the division running on their SAP ERP system.
While speed is touted as an advantage of SaaS, Benson said the specific case favored using their SAP system because it fit into their existing plans for datacenter expansion related to disaster recovery. They had so little lead time, on a deal that went from a 5% probability to closed in a few months, that they favored the systems they knew.
2. The business is adopting it… directly.
One concern that came up repeatedly at Fusion was that of IT being disintermediated, or left with legacy while new technology spend decisions may be made in marketing or elsewhere. It’s not necessarily bad — some CIOs find it opens up opportunities for strategic partnerships with business leaders.
But SaaS is definitely involved in a shift of responsibilities. “There’s a lot of spending outside the CIO’s control today,” Davidson said. He recounted recent presentations by two vendors that pitched AAA on how their budget forecasting solutions could work directly with the business and “go around” IT while he, as acting CIO, was in the room.
But other stories at the symposium recounted how business units, once they had experienced a little of what it took to run a large-scale SaaS-based system, came back to IT to manage it, and more and more CIOs are finding that they have a voice in the business. It doesn’t to be a competition.
3. It’s bringing business at IT together like never before.
“Traditionally we’ve looked at IT as an organization. It’s this group of people who are good at technology,” Davidson said. “IT is not just an organization. It’s also a function. … Parts of IT can exist as a function outside of the organization.”
Jody McDonough, SVP of IT Shared Services at QBE North America, said their organization is no longer treating internal and external IT services differently, and now has a marketing person in the information architecture team. That’s been the case for only about four years now, and the instigator was the introduction of SaaS into the environment. The company had to get more tightly integrated and “it’s evolved over the years until today,” he said.
Organizations are realizing that SaaS requires management and that many of the skills required are skills that IT already has. Furthermore, these skills are not as well represented in most business units, creating opportunities for collaboration.
“Our customers, in general, do not shrink their core IT staff,” said Peter Coffee, VP for Strategic Research at Salesforce.com.
4. It’s raising larger questions about workforce talent
“We’re not as ready as we need to be,” Davidson said of the IT workforce, responding to new challenges and growth. “It’s difficult to find people who have a good business background and a good IT background.”
He said rotating people between business and IT roles could be a way forward, providing workers with necessary hands-on experience and connections. An 18-month or 2-year stint in IT for people from the business side, for example, could help create the next generation of cross-disciplinary talent.
“It will never come out of the educational system because the learning needs to be more hands on,” he said.
He also predicted that mid-market firms could start to starve for some key talent, as people with very good business intelligence or integration skills will naturally migrate to consulting firms that can offer more pay because of higher utilization rates.
5. It’s fulfilling decade-old predictions… or is it?
Davidson returned to the 2003 prediction of Nicholas Carr, in a controversial Harvard Business Review article titled “IT Doesn’t Matter,” that IT would become a utility, like electricity, allowing people to go about their lives without thinking about it.
“A lot of us wanted to take him out,” Davidson said.
But he turned out to be at least partially right, even though SaaS as such was not really on the radar yet. SaaS has allowed organizations to move up to a higher level of abstraction and focus less on the bits and servers. But as Davidson and others pointed out, it hasn’t really allowed organizations to stop thinking about IT, just changed the focus to a different level.
Davor Grgic, CIO of Kohler Co., said that in 15 years of being a CIO he has been told, in one way or another, that technology “doesn’t matter” — that it’s really all about the business.
“I think that is a sincere but misguided statement of the way things are … technology is absolutely necessary but not sufficient,” he said.
He even had his own utility example. Power is a total utility, but a large enough organization that uses enough power, manufacturing perhaps, probably has people who examine purchasing and try to find greater efficiencies. “If all you do is buy power and sign the checks, you’re leaving a lot of money on the table,” he said.
Furthermore: “If you only know about business and not technology, how do you evaluate the technology outsourcing providers?”
All in all, SaaS is not what it was several years ago.
Frank Ace, Director of IT for UW Foundation, who has been involved with the Fusion CEO-CIO Symposium from the beginning through its current 10th anniversary, said that unlike in some previous years, there are fewer concerns now about newness and uncertainty with SaaS. “I think it’s matured enough that people who are willing to look at it will just go ahead,” he said.