Feb 21, 2007

SaaS And The Future of Bloated Enterprise IT

How many times have Businesses complained that they are not getting the worth for Technology spend? IT departments have bloated in size over the decades and with the ensuing bureaucracy and entropy, have often failed in providing nimble and economical solutions to the business. Nicholas Carr famously said on this: "Does IT matter?" implying it doesn't. Jeff Nolan now CEO of Teqlo and previously with SAP, also writes..
IT is no longer going to be the sole provider of these within the enterprise. In fact, my bet is that IT becomes a utility provider responsible for infrastructure services while business units take responsibility for business solutions. In this scenario SAP and Oracle are ill-equipped to win on their terms because for their entire history they have been solving CIO and IT problems, not user problems. "

Now Software as a Service (SaaS) is one disruptive trend that promises to offer Business Applications to end users without the hand holding of an IT department. So for a business user the vision is: 'I need an app, I go buy it off the Net from someone who hosts it and takes care of all the IT stuff (security, privacy, disaster recovery etc). Basically, I get the app on the tap.'

The handicap that Jeff articulated about SAP/Oracle is bound to impact the Indian services players too unless they evolve rather dramatically. So far they also have been solving CIO and IT problems, and attempts to connect to the business have not been very successful. To cite two reasons: IT feels threatened when they talk to the business, and Indian service players do not yet have the sales/engagement skills to talk to the business about their problems, leave alone solving them.

Now, Indian companies moves into SaaS have so far been revolving around either building the IP themselves (organic) or acquiring niche companies (inorganic). Basab Pradhan, a veteran IT Services Sales guy, in this latest post avers that it will be more of the latter.

But it is much more than just the product or IP involved, the desi companies will have to integrate different sales and product managment culutures into the services setup, compensate the product thinkers differently, allow for a different gross/operating margin play, invest in product lines much more aggressively etc. Ultimately the first S in 'SaaS' matters much more than the second which is increasingly a commodity.

2 comments:

Anonymous said...

Exactly - the capability for hosting apps and providing software as a service is merely a new delivery mechanism, and not so much a novelty anymore. But can the software, now being delivered direclty to business, actually talk directly to the business users? Merely enabling existing products for hosted delivery may not cut it, its only a medium - in search of its killer app - the truly 'business' software.

http://gutfeelguy.blogspot.com

Ram said...

For the software to make sense to the business users, a whole lot of humans (sales/account mgrs) need to intermediate that conversation.

My take is that the traditional Services Players will find this intermediation tough as they do not yet possess the right skills, internal processes and culture required for software products.

The right way to do it would be through alliances between niche s/w players and the big services players. In some cases a merger/buyout may work better.