Software as a Service

Services and consulting companies become “Software as a Service”

I wrote about how the cloud migration represents a large opportunity for Systems Integrators such as Accenture and Infosys, among others. Many customers are moving their existing applications to the cloud and using SI’s to enable that migration. This is largely being driven by lowering the cost of infrastructure for their existing applications.

The other big opportunity that I am starting to see for systems integration companies is the development and introduction of internal employee facing applications, which so far has been only been developed by pure play SaaS companies.

All applications built by a company fall into two categories – those that are used by employees and those that are used by customers / partners / suppliers etc.

The customer facing applications that are “business critical” and revenue producing are the ones that companies are starting to build themselves. The ones that are internal, employee used are the ones they are buying from SaaS vendors.

Why? Three main reasons:

  1. If they were to build applications in-house they need to hire people, and hiring developers for any company right now is very tough. That might change if a lot of coding schools end up producing more developers, but you can never be too rich, too thin or have too many good developers.
  2. Many of the internal application purchases are increasingly being bought directly by the business team instead of asking IT to procure. Thanks to cloud and SaaS, it no longer takes 3-6-12 months to buy, install, customize and deploy a solution, so business teams with the need (HR, Sales, Marketing, etc.) are directly buying software (usually that’s being done by someone who needs it, not by the head of the business unit) that’s needed by employees to be productive.
  3. Thanks to the lower cost and subscription pricing models it is cheaper to buy than to build. Many companies are also realizing that internal applications are no longer “the competitive edge” that they thought it was in the 80’s, and 90’s.

So, where is the opportunity?

Although many businesses are buying these applications via a SaaS model, SI’s are usually the first to know about the need as they scan the market for potential partnerships and vendors.

They also have a clear idea of business needs for these internal applications. I am surprised more system integrators are not offering products and services they have built for one customer “as a service” to others.

Currently if a customer needs an internal application – they put them into 3 buckets – a) those for individual use, b) those that are departmental and c) those that are to be used by an entire organization or across multiple organizations.

The ones that are for individual use (e.g: SEO optimization software) are usually purchased by the person with peer reviews and feedback.

The apps that are departmental (e.g. Collaboration software) involved one early adopter who gets 2-3 folks in the team to use them together and that spreads virally among others.

Software as a Service
Software as a Service

Finally the ones that are enterprise-wide, or multi-department or department-wide in usage (e.g. HR software, Email, etc.) are the only ones that go through the RFP and purchase process. These also have many customization requirements and fall into two categories themselves – 1) those that are standard off the shelf and 2) those that are custom and specific to a company / industry, etc.

The off the shelf products can be purchased from SaaS vendors, but I think the opportunity for the systems integrations to turn their businesses from consulting and services to Software as a Services is in the custom applications – being developed as a subscription style offering instead of consulting and billable hours.