11 Jan The software as a service revolution will not be televised
Do you buy or do you lease? That basic business question has likely been asked as long as businesses have been around. There is a well known phenomenon where companies don’t buy mega-dollar application software suites or IT security infrastructure items, but instead pay fewer dollars per month or per year for programs that run over the internet or actively monitor your network 24×7. In fact, it has become the mega-trend of this past year.
There are numerous terms for this concept: software as a service, application service providers, on-demand software, or Microsoft’s new term “live software”. This idea of software as a service is not new. In fact, there are many similarities to the time-sharing days of the 1960s and 70s. During the dot-com era, ASPs as they were more typically called then were hyped as “the next big thing”. Mark Benioff, the founder and president of Salesforce.com, at his company’s launch in 2000 pronounced his company was the “end of software”. It was a brash statement from a brash person in a brash era.
During the late 1990s, as midsized and enterprise sized firms addressed their Y2K remediation concerns, most often they replaced their primary business systems with packaged software from the likes of SAP, Oracle, JD Edwards, Siebel and PeopleSoft. Massive dollars were spent on software, hardware, implementation, training and also the on-going care and feeding of the software running on site at the organization. More often than not, these deployments really didn’t contribute to the bottom line or real business agility. On the contrary, I hear many executives lament cost, complexity and lack of flexibility of these now established systems.
The dot-com implosion and corresponding sobriety it created in the industry forced a real discussion between software providers and their customers. The price of deploying an ERP or CRM system was just too high. The price of creating secure Internet access, web and email again was just too much money. There had been a startling lack of attention to real business value.
Given the history of spending large sums of money for few results, a new generation of software as a service has emerged over the last half dozen years or so with compelling value propositions. Let a specialized company write, deploy, maintain and make all the other specialized efforts that it takes to make the service work and have your company focus its precious time and resources on being the best in its marketplace. If you’re a lug-nut company, how do you justify running and maintaining a huge infrastructure and the ERP software? Doesn’t it make sense to focus your efforts on being the best lug-nut company there is in the market place?
From an application software point of view besides the market gorilla, SalesForce.com, there are key players such as RightNow Technologies and NetSuite, who in addition to CRM have integrated hosted web-based accounting and E-commerce. From a security point of view firms have emerged such as FrontBridge, SecurePipe and ScanSafe. Each of these firms has a unique value proposition in the network security space.
The real indication that this is a true mega-trend is that Microsoft has finally responded. Bill Gates issued one of his famous memos in November. You may recall that in the mid-1990s he issued an “Internet Tidal Wave Memo” that in essence created the awareness and shifted Microsoft’s momentum to become more Internet-oriented. In November’s memo titled “We’ve Got To Get This Services Thing Right,” Gates states: “The broad and rich foundation of the Internet will unleash a ‘services wave’ of applications and experiences available instantly over the Internet to millions of users.”
These software as a service companies have been around awhile and are ready for primetime. If you’ve not looked into it already, now is the time to start to evaluate software as a service as a real alternative for various areas of your IT and business operations.
That said, software as a service is not a panacea. In December, Salesforce.com had several major disruptions in their service. It’s key to look to the service level agreements with uptime guarantees. Like any technology, it’s key to work with people experienced with these services.
Overall, these trends are very good for decision-makers who are tired of traditional software companies. The intensifying competition will make for plenty of choices at favorable prices. With apologies to Gil Scott-Heron, you won’t see this revolution play out on television; rather it will be right there on your workstation on the net. It will be interesting to watch.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.