SaaS is dead, long live SaaS!
In his book The End of Software, noted Stanford Professor and former President of Oracle on Demand, Tim Chou, predicts the end of software as we know it. He describes the rise of SaaS – software as a service, as destroying the traditional software economic models of license plus implementation plus maintenance. His more recent book, Cloud, develops the thinking to 7 business models that now make sense for software developers and buyers—from the traditional license plus maintenance model, to complete outsourcing, to SaaS to a “hybrid model” of software + services.
These are all great models, but they miss a key new model that we at Covario are starting to see: large companies such as Intel and P&G licensing software and expecting some strategic services along with it—not just the setup and maintenance of the software, but the actual strategies and execution of the business processes around it. At the beginning of the day, marketers don’t wake up and think they want to buy some software. Nor do they necessarily want to go out and switch agencies. They want an answer to a problem and a fast and effective way to get it done… a solution. So, we might now declare that SaaS (software as a service) is dead, and we are headed into the age of SaaS (service as a software, or solutions as a service)!
In Covario’s case, we help clients with paid search advertising (the placing of paid ads on Google, Yahoo, MSN – Bing!, Baidu and the other search engines) and search engine optimization or SEO (the process of optimizing brand websites to rank better on the “free” listings). While many companies will license Covario software and leverage it no differently than they use Salesforce.com, Omniture, RightNow or even traditional software like SAP-Business Objects and Oracle on a daily basis, more and more of our clients are starting to say: can you provide us strategic guidance around paid search or SEO, or even display and social media? Can you just go ahead and use your software to run the campaigns or help fix up our websites? In effect, they are looking for partial business process outsourcing (PBPO)—where software is used to automate a strategic business process and the overall process is componentized, allowing the client to keep some portions and outsource others.
For example, in paid search or SEO, companies traditionally outsourced the entire process to a marketing agency, with or without technology. Today’s digital marketers are much more tech-savvy and ROI-focused, and are looking to do more work in-house and to own more of the process. Yet they may still be short on staff with the strategic or execution capacity for this work, or they still want the safety of a best-of-breed, focused provider helping guide parts of the strategy or execution.
In the digital marketing space, we saw a similar model at the A/B-Multivariate landing page optimization firms such as Optimost (now part of Autonomy) and Offermatica (now part of Omniture). These firms licensed their software but required clients to take a minimum of several consulting hours per week to maximize the ROI of the products, or the clients could outsource the entire business process to the provider.
Covario is taking a similar approach, whereby clients may license only the software, or may leverage our consultants and expert services teams not just to set up and maintain the software, but also to advise and execute the strategies, structures and systems around paid search, SEO and other forms of interactive marketing.
It will be interesting to see where Solutions-as-a-Service or Partial Business Process Outsourcing show up next in corporate America—possibly in the accounting function, possibly in sales, possibly in the legal function. This new model will allow a company to pick a best of breed provider based on technology first, and services second, and outsource strategic or tactical portions of the actual work to the creator of the software.
So, Dr. Chou was correct, and we can say “SaaS is dead, long live SaaS!”
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1 comment
Russ,
Great article and I totally agree. At Mercado, I was running not only a technical “implementation team” but also a “Merchandising Consulting” team which not only helped optimize our solution but also provided general e-merchandising consulting. In fact, it was so important to some of our Enterprise clients in North America and the UK, we were able to place both technical and merchandising teams, on site full-time as experts. They’re willing to pay for it. We also did a very good point consulting business with our SMB customers.
I do think of this as more of a hybrid model than just providing “on demand” software solutions. The big question I have, especially in this economy…is whether most SaaS companies have the appetite to build and provide this level of servicing. We did it and based on your model, it appears Covario provides this value as well. I think there is a fear among some SW companies that it may get them off focus of being a SW/traditional SaaS company (the hope of zero professional services footprint or as close to as possible in order to not degrade their Monthly Minimum Recurring Revenue model). I disagree and would argue that adding optimization services provides the vehicle to long term client retention and most are willing to pay for the expertise.
Enjoyed the reading!
Dave
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