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Mark Everett Hall

Sanity as a Service

Shift to SaaS upsets integrators' IT applecart

3 comments

TAGS:Appirio, Chris Babin, integrators
IT TOPICS:Development, Enterprise Software & Services, SaaS & Cloud Computing

Software as a service is not only disrupting the packaged application market, it's undermining the strengths of the traditional integrator such as Deloitte, IBM Global Services and Accenture.

So says Chris Barbin, CEO of Appirio Inc. in San Mateo, Calif. His company does consulting and implementation work for companies, just like the major integrators, but everything his firm does ends up in the cloud.

It's not that every IT problem Barbin sees is a nail he can slam with his cloud computing hammer.

"Some things aren't ready for the cloud yet," he admits.

But he believes most software will be ready soon, betting that 70% of enterprise applications will run in the cloud in 10-15 years, a slightly more conservative estimate than I gave earlier this week.

The way Appirio is getting CIOs attention is to work with the App/Dev group, taking jobs that may have already been planned, but not started. Barbin claims that as a rule Appirio will finish the work with half the staff in half the time that were built in the App/Dev's original plan.

Appirio can do this, Barbin says, because it leverages existing services like Amazon S3 storage on-demand service, Google App Engine and Force.com from Salesforce.

"With them there's so much you don't have to do during development," he says.

When CIOs get wind that their App/Dev project list is getting whittled down faster than anticipated and for less money, that's going to get their attention, especially in today's economy. In fact, Barbin says IT shops are not engaging with Appirio "to swap out apps." Rather, they have a corporate imperative to save 10-15% of their budgets quickly, he says.

SaaS, it turns out, is a very good way to make the cuts and maintain or enhance service.

Barbin points to the dramatic savings switching to Google Apps alone can bring to a company using Exchange or Domino, where email and calendaring programs can run more than $500 per user versus $50 for Google's service. He says Appirio is in various stages helping pilot Google Apps at more than 50 enterprises.

Big enterprise integrators are well aware of the impact SaaS is having on the market. They may even have plans to profit from the quick shift by business to applications in the cloud. But I'm guessing offering to complete App/Dev projects in half the time with half the people will not be part of their marketing strategy.

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We have seen this movie before

Submitted by David A. Vap on April 8, 2009 - 1:35 P.M.

Mark, the role of the system integrator vis-a-vis SaaS is a very interesting topic. I work for RightNow Technologies, an early cloud innovator, and it has been fascinating to see how the relationship between SaaS vendors and integrators has evolved and is evolving.

I would agree that the model for how a traditional large integrator (e.g. Deloitte) works with a cloud vendor is not optimal as of today. That said, we have seen this movie before. I remember years ago when the role of the large integrator was primarily to build custom applications. Then, packaged applications came along and disrupted their business model. Why implement a packaged application for $100 when you can build one from scratch for $500? That said, eventually the software vendors and integrators figured out where they could each add value and the integrators thrived. I see the same transition happening today with integrators and cloud vendors hashing through their respective roles. For example, RightNow Technologies is working closely with Deloitte and there were some inital challenges in working through the relationship model, but it is happening. I see Deloitte modifying their previous focus on large implementations with lots of hours to a more flexible model around rolling out a cloud based application.

So, my view is that we will eventually see the traditional integrators map their business models to cloud technology and thrive just as they did during the transition from custom to packaged applications. We will also see companies such as Appirio (Hi Glenn Weinstein!) ride the technology disruption into successful businesses.

I agree that we will see the work mix of these vendors change due to the assumption of some stuff in the cloud, but the integrators can change their business models.

Interestingly, I do not believe that on-premise software vendors will make the transition. Their business models are much more tightly wound than an integrator and they will be hard pressed to unwind their current momentum and reliance on a perpetual-on-premise cycle.

Thx for starting the open conversation on the topic.

David Vap

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Disruptions Are Disruptive

Submitted by Glenn Weinstein on April 9, 2009 - 8:50 A.M.

In theory, any business that finds its market is changing could simply update its business model. But history shows that most companies fail to do so - they keep doing what worked before, whether out of inertia, or ingrained culture, or a bet that the change won't be as fast or as dramatic. Not to be too cute about it, but disruptions are, by definition, disruptive. And software-as-a-service is definitely a disruptive market force.

We recently blogged about why we think investors should short the Global SIs. There is still plenty of money to be made servicing on-premise software, and SaaS evangelists at the global SIs are still the red-headed stepchildren - trotted out for trade shows and interviews, but they won't be permitted to threaten the foundational revenue stream from work supporting the major on-premise partners. The shift to packaged client/server software signaled the demise, or at least the beginning of the end, of a lot of SIs, while creating new juggernauts. It seems likely the shift to SaaS will be similarly disruptive.

This isn't because the Global SIs don't have very smart people. It's more about the fundamental difficulty any business faces in changing its business model, especially one that's been so successful. David, large consultancies, to use your term, are fairly tightly wound around the on-premise model - particularly the economics.

In any case, good to see you here (David and I worked together for an on-premise software company some years ago - and I think we learned the same lesons, and moved to SaaS!).

GlennW

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There's opportunity for someone...

Submitted by Joanna Lees Castro on April 13, 2009 - 3:13 P.M.

I think there's enormous opportunity for integrators in the move to SaaS. It's just that those integrators may not be the traditional big SI's that we think about today.

The fact is that implementing a SaaS solution and embedding it into existing enterprise systems and process can be quite complex, touching a lot of business processes and applications. Enterprise mashups sound great... until you get into the details.

There's a lot of legacy and integration challenges in making this work in a typical enterprise environment. If the SI's are smart, they will realize this sooner rather than later. If not, I'm sure some one will step up to the plate to fill their shoes.

Joanna

Joanna Lees-Castro
http://www.software-marketing-advisor.com

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