The Future-as-a-Service Part 1: Why every software company must become a SaaS company

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The future of business will be dominated by as-a-Service models. In part 1 of this series, we explore the implications for software vendors and their customers. In part 2, we’ll look at what the trend means for every business.

Eight years ago, erstwhile Netscape wunderkind Marc Andreesen argued, in the Wall Street Journal, that software is eating the world. Soon, industry observers extended the concept, in an aphorism now often attributed to Microsoft CEO Satya Nadella, by insisting that every company must become a software company.

But the IT sector never sits still for long, and the every-company-as-software-company truism has evolved to the point that it’s no longer strictly accurate.

Businesses may still rely on the functionality encoded in applications. But with more and more data, workloads, application development, and industry clout in the cloud, the software gobbling up business models now comes in the form of services.

As a consequence, a new mantra has become necessary: every software company must become a Software-as-a-Service company. And that new reality has implications for both the vendors that make software and the customers they serve.

Rocking the software boat

The IT industry is now dominated by four types of vendors, who variously compete, cooperate, and jostle for position in the marketplace:

Traditional software vendors develop and market applications that run on prem or in private clouds.

SaaS providers offer application functionality consumed in a pay-as-you-go model.

Cloud vendors – most notably AWS, Google, and Microsoft – provide infrastructure, but they also increasingly offer SaaS products optimized for their environment.

Systems integrators, meanwhile, play a more and more important role. They help organizations make sure their legacy on-prem software plays well with their increasingly cloud-native SaaS functionality. They can also help traditional software vendors make the transition to SaaS models.

What’s roiling the industry waters is that every software vendor is essentially under attack from cloud providers growing their cloud-specific SaaS offerings. As evidence, by 2022 the top four cloud mega-platforms will host 80% of all IaaS/PaaS deployments, according to IDC.

This has serious implications for software companies, which risk irrelevance if they fail to embrace the as-a-Service future. It also has repercussions for software customers, who risk falling behind the competition if they tie their business operations to a sinking software-vendor ship.

As-a-Service at scale

To survive, software companies will have to think about what they offer not as a product with nice features but as a solution to their customers’ problems. Approached from that perspective, the as-a-Service model only makes sense because it meets the customer’s needs today – without costly and time-consuming implementations – while adapting to new demands tomorrow.

But to make the as-a-Service transition, software companies will need to address numerous issues:

Cloud-specific vs. vendor-agnostic – Decide whether to commit to a single cloud provider or remain vendor-agnostic. Remaining vendor-neutral gives you broader appeal and doesn’t tie you to a specific technology or brand. Committing to a single provider can lend you legitimacy and give you marketing advantages.

Cloud automation – Especially if you sell through a cloud provider’s marketplace, you’ll need to automate updates and upgrades. Initial deployment will have to be easy for your customers, and updates will need to be regular and hassle-free.

Flexible, cost-effective scaling – Anticipate whether offering your software as a service will result in large processing loads. If it will, you might want to take a multi-cloud approach to spread the load across clouds. You might also take advantage of spot-price virtual machines to minimize infrastructure costs.

Security and data isolation – It won’t just be your software in the cloud; it will also be all your customers’ data. A major data breach could torpedo your entire business. Security will have to be job one.

The automation-partner advantage

Most significant, software companies that transform their offerings from licensed software into SaaS solutions will suddenly be dealing with millions of transactions. That means they’ll need to scale massively on the operational side. They’ll need to figure what technology they’ll build on and how to ramp up their commercial models. And the fact is, most software companies simply aren’t prepared for the complexity that entails.

The good news is that a cloud-automation partner can help tremendously. An experienced partner can help software companies understand the scalability and security implications. It can help automate initial deployment and ongoing updates. And it can offer a cloud-agnostic perspective to drive an effective SaaS strategy.

Those capabilities are imperative, because SaaS requires software companies to make their offerings operate in a production environment and actually deliver real-world functionality. Ironically, that’s what customers have been doing for decades. SaaS focuses software vendors on delivering a robust platform on which customers can concentrate on business outcomes.

Increasingly, that’s what customers will demand. And they’ll get it, as more and more software companies make the leap to become SaaS companies.

Thanks for reading! This blog is part 1 of a two-part series written by Capgemini Cloud experts, Amanda Clay and Ben Scowen.

If you are looking to begin your company’s journey towards becoming truly SaaS, please reach out to us via our Expert Connect profiles here: Amanda Clay and Ben Scowen

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