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Software as a Service – IT for the 21st century?
There are a few fundamental truths about the IT industry one picks up along the way, but which can sometimes become hidden by the rapid innovation in technologies, and the complexities of delivering business outcomes in the real-world.
I’m sure you’ve got many to add to the list but the 3 that I seem to keep front of mind are:
- The ‘business’ _always_ gets what it wants
- Any IT system that doesn’t respect the business operating model will _always_ fail (although it may cost lots of money and take years to do so)
- Just like any management discipline, IT strategy, planning and execution is more about spinning plates than juggling balls – it’s as important to know when to leave something alone as it is when to intervene
And so for all the inherent benefits of Software as a Service (SaaS) – the economics, the ubiquitous reach, the enhanced usefulness and the enhanced customer services – perhaps it is how the SaaS model helps or hinders these 3 truths that will ultimately determine its business value relative to other IT delivery models.
What’s interesting is we don’t have to look too far into history to see where we might end up this time.
Before we go a little further I want to declare a bias. No matter how one slices and dices a major business, it is just that – sliced and diced. Sliced and diced means management control in the slices and dices (the business units) – with varying degrees of freedom to act for sure – but still freedom to act by definition.
So, the evolutions of departmental computing and the networked PC helped the 3 truths because the slices and dices could act as they needed to (enabled by IT), they could communicate with other (and more importantly the centre could communicate with them), and they could be left to it without expensive ‘corporate IT’ getting in the way.
However, over time, the need for enhanced corporate compliance, cost control and re-engineered cross line of business processes to deliver efficiencies all kicked in, which is pretty much where the corporate IT function has been busy in bringing centralised IT control to operating models for the past 20 years.
What’s truly interesting is that individual and business unit SaaS use – which is currently on the rise – fans the flames of many of the old corporate tension points the CFO and CIO have been spending years trying to address.
So are we going to see central control kicking back-in again?
Intriguingly, the world isn’t like the world was when we had the networked PC and the departmental computer for one underlying reason – the Web. Today, the world has an unprecedented level of connectiveness – through globalisation and through the Web – and SaaS is based on the Web model from the ground up – i.e. we get to support the slices and dices and enable ease of communication (and therefore control, orchestration and information access) across units, employees, partners, customers, suppliers, the corporate centre and so on.
And while just as with any approach there are many challenges with the model, to my mind, the predicted rise of SaaS has been underestimated not only because of the obvious benefits, but perhaps more so because it serves the 3 fundamental truths of IT so well.
Are ‘per-business’ package and custom solutions no longer valuable? For sure they are valuable and for sure they will likely be of value in many circumstances for many years. But I wonder whether SaaS – particularly SaaS that supports Web 2.0 and Web 3.0 evolutions – is pointing the way to IT for the 21st century. And that its predicted rapid rise has been if anything undercooked.
Posted by Carl Bate on October 24, 2007 | 
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Comments
# on October 26, 2007 12:39 PM, Kavita Gajma said:
Which softwares are used in your company.
Kavita
# on October 26, 2007 1:06 PM, Carl Bate said:
Hi Kavita - as you might imagine with any large global organisation, Capgemini uses a mix of software in support of its business - including SaaS.
# on October 26, 2007 3:11 PM, Amit Nagraj said:
Interesting article. Actualy one may say that Saas is a natural consequence of the maturing of IT industry. Its the other way of saying people have become expert in what they do or what they have been doing over the years , the core idea remains the same, faces change. Saas may be in effect a business strategy or rather one may say a maturing of business strategy as well , hedging risks and letting people do what they are good at. Ironically though , whats inherent in here is that people will try and branch out specific functions ,knowing that even people working with data security are now expert in it, but will still fear for the worst !
# on October 29, 2007 1:53 PM, Ravi Veerasubramanian said:
Imagine this scenario: a Chief Marketing Officer or Sales Director in a large company decided to stop using the CRM and sales systems provided by Central IT and signed a deal w Salesforce.com so that all sales and marketing functions/processes in that enterprise were executed on the Salesforce.com ASP platform - after all it is just a website and accessed usinng IE or Firefox.
Then the CFO can cancel the Siebel CRM contract and suspend payment of hosting charges to a data center provider for the infrastructure hosting Siebel - there is no return from continuing to pay these vendors if their service is no longer adopted/used by the business.
What will the CIO do? What can the CIO (and his mgmt team) do - reactively or proactively.
Different paradigm - if you live in Central London; what is more value and cost effective - owning a car to use on weekends only or just popping to Easycar.com and renting one.
# on October 31, 2007 10:59 AM, Carl Bate said:
Hi Amit
Agree with your points and in a very real sense one might say SaaS is the real industrialisation of IT itself. I also agree that, as with any evolution, new opportunities and risks are emerging which require attention!
# on October 31, 2007 11:14 AM, Carl Bate said:
Hi Ravi
I find it helpful to view the related governance structure through 4 layers -'pesonalise', 'differentiate', 'organise' and 'comply' - we call it the 'crown' model.
Not the place to go into detail here, but CIOs we work with on this tend to play an enabling role in the first two and a controlling role in the second two. And HR tends to provide the controls for the first two.
To make this real in your example, CMO might use Salesforce services directly to help deliver personalised and differentiating business services, but might use corporately provided infrastructure managed by CIO to ensure any resulting P&L transactions are executed and recorded in the right manner. Of course, this doesn't necessarily mean that this corporate infrastructure is owned by the corporate itself - this too might be provided through the SaaS model (but responsibility vested with CIO) should a given service providers characteristics best meet the specific business need (e.g. Netsuite are an interesting business in this market in my personal opinion).