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A lot has been said about what Software as a Service is and is not – and we’ve been part of the noise. I really feel however there is something bigger going on. There is a tsunami coming and SaaS is only one of many waves.

People have said SaaS is:

• A delivery method enabled by the spread of low cost broadband
• A technical architecture (multitenancy) that provides higher efficiency and lower costs (in the best implementations anyway)
• A business model led by direct responsibility for service to end-users
• An alternative to the traditional capital investment model of software licensing
• A low cost way to take advantage of applications and services for SMBs
• Gaining acceptance in enterprise business
• A potentially disruptive business model that could end the dominance of traditional software vendors
• An opportunity that allows new players to “level the field” against intrenched industry leaders
• A flash in the pan that will eventually morph into some other even cooler marketing-led hype.

I would say all of these things are true – and more – or less. In another way however, these observations miss the point. An illustration might help:

Business as Usual

In the “traditional software vendor” business model, the buyer is the ultimate customer. If the buyer is a company – no matter how large or small – the buyer is the filter between the people who use the application and the vendor. If you add in a sales or service channel, a secondary source, the relationship with end-users becomes even more tenuous for software vendors.

Think about that.

Most buyers don’t want to be constantly involved with their vendors and the bigger the company the buyer represents, the more that is true. So, if a vendor relationship comes down to a purchase and maybe a license renewal every two or three years – fine. Near renewal time, there are opportunities to push for new features, fix nagging problems, and maybe switch to a new application. Just as often, renewal periods are time to leverage the “choice” to change to get better terms. Even more importantly – renewals are generally concurrent with new product versions so that vendor sales and buyer interactions are orchestrated. Marketing and sales insure that the conversation at renewal time is more about the “new features in this version” rather than the new features needed by specific groups of end-users.

So how is SaaS different?

Power to the End-Users

In the SaaS business model, the “wall” provided by the buyers between end-users and the software vendor is nearly eliminated. SaaS is a service relationship and the vendor is directly responsible for “user experience.” The buyer enables subscription or transaction payments on an expense basis and turns the operational relationship over to the software vendor. Software-delivered-as-a-Service. Oh….

Now the daily concerns about why the application doesn’t quite meet expectations can go directly from the end-user to the vendor and in most cases – since this is outsourcing in reality – the buyer expects nothing less. Put that beside the truth that high renewals are key to survival as a vendor in a SaaS business and you begin to see something important. The software vendor – to be successful – needs to consider a new way of operating.

Enter “agile” product development and “the agile business architecture” stage left.

The same wave that is gradually taking hold in software development is now being adapted to service-based business operations. Except – we haven’t really acknowledged it yet. How does a SaaS vendor insure retention and stay ahead of competition in the dynamic world of the Internet? By eliminating the artificial renewal period version change, proactively engaging with end-users (support), mining the business intelligence that is now in their hands (aggregated usage), becoming the face of a service instead of a label on an install CD (social media and marketing). By co-opting competition and finding ways for them to join in (APIs and marketplaces). By eliminating long design cycles in favor of a system that can embrace continual, targeted improvement and that responds to a changing landscape. By becoming truly Agile for the same reasons the idea has taken hold in development.

The truth is that the problems that became apparent when outsourcing first hit customer service in consumer goods are just as important when an application becomes a service. A service provider who ignores the end-user’s context, that can only respond when you have reached the head of the queue and then only read from user manuals isn’t going to win at SaaS. Creating more hurdles for the end-user to jump over so you have less interruptions during the design cycle doesn’t make you more agile. Being Agile is about flexibility, response to change, and finally responsibility for success at a very individual level.

In a world where Moore’s Law is an accepted reality, where even GM has to downsize to become more competitive – we also have to accept that change is now the constant and we have to rethink how we organize and work. The principles behind the Agile Manifesto are being applied to successful business more and more every day. Because we – at Scio – believe this is a critical subject you can expect more about agile business architecture and for SaaS vendors – how it can be enabled in the application itself – in the future.

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