How SaaS changes the SI universe

How SaaS changes the SI universe

Summary: Is SaaS disruptive enough to shake up the systems integration business as ferociously as it promises to shake up the software business? SIs that specialize in SaaS are banking on it. In the past few months I've had some interesting conversations with two leading Salesforce.com partners who believe they're building highly defensible businesses on the back of specializing in SaaS.

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TOPICS: Cloud
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Is SaaS disruptive enough to shake up the systems integration business as ferociously as it promises to shake up the software business? SIs that specialize in SaaS are banking on it. In the past few months I've had some interesting conversations with two leading Salesforce.com partners who believe they're building highly defensible businesses on the back of specializing in SaaS. ZDNet readers may also be interested in what they had to say about job opportunities at SaaS integrators.

Although Accenture among the established players is making efforts to learn to love SaaS,"Hardware and database and application server skills don't matter" my impression is that the odds are stacked against the incumbents. This is a typically a business with 30-60 day projects and the ability to show things to customers as they're being developed, which is not the kind of engagement the traditional SIs are used to.

Narinder Singh, co-founder of Appirio told me that the company was founded precisely because of a perception that "at the enterprise level the kind of partner companies needed were a different animal." There was an opportunity to be a trusted advisor to the enterprise for SaaS, he said, whereas the established players weren't likely to start recommending customers rip out their existing systems in favor of a SaaS solution.

"We felt like there was a natural barrier," he said. "It's not like SaaS is just going to disrupt the vendors. The whole ecosystem will get disrupted ... The project metrics don't line up the way Accenture [is] used to."

Eric Berridge, founder and CEO of Bluewolf, discussed some of the ways that on-demand changes the business model of SIs. Berridge said that the focus is very much on best practice business processes and getting close to users in agile development-style engagements where they can see the applications taking shape and see the effect of changes as they happen. Appirio's Singh was also full of praise for the iterative development model:

"The take-a-bite-at-a-time approach is very compelling [to customers] compared to the SAP approach where 14 months in you still don't know whether you're getting somewhere or [whether] you're in disaster land."

On-demand implementation means that Bluewolf's project managers can work on several projects at a time, said Berridge. Thus they get to work with around five clients a year rather than being marooned on a single project at a customer's premises — often unproductively — for a year or more.

But Singh cautioned that many traditional SI consultants would not find work at SaaS integrators.

"Our recruiting profile is different. The lower levels of the stack become skills that are not valued. Hardware and database infrastructure and application server skills don't matter." Rather than computer sciences, Appirio values more of a management information systems skillset.

For the SI as a business, one of the great attractions of SaaS is the potential to build repeatable intellectual property — always the Holy Grail of systems integrators but rarely achieved in the world of conventional applications.

"With on-demand," Singh explained, "the friction of an individual release is very low. You can literally build a solution for the first customers and then extend it over time for the next customer. We can focus on just the intellectual property, we don't have to worry about the infrastructure and migrating the code base."

PS: In the interests of full disclosure, I should point out that Appirio (after I wrote approvingly about the company's eat-your-own-dogfood SaaS integration) recently took the trouble to send me a Nike shirt and one of those heat-retaining coffee mugs. Neither gift influenced the timing or content of this item, since I am not particularly athletic and I drink tea more often than coffee. In fact I normally rewarm my tea in the microwave so vendors bearing gifts please note, china mugs are preferred.

Topic: Cloud

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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  • Phil. on SaaS matters...

    ...I usually agree with your assessments...but on SI market not so sure there firms will get to even 1% market share any time in out professional lifetimes. It is an incredibly fragmented market with IBM with revs of $ 50 b a year from services with 7-8% market share. The barriers to entry are low, and there are vertical, grographic, tech specific niches that firms of every ilk survive and do well in...
    vmirchan
  • (Still) Not yet ready for mainstream

    Although it has grown more since it was first talked up in the mid-90s, SaaS still has not garnered a huge market. One question at a recent seminar I attended shows this and shows that issues still need to be worked out. The question was who owns the data, the SaaS company or the consumers of the service? The fact that the answer was 'it depends' is disconcerting. In standard database and/or application system, a company is licensed software-but the database content remain theirs. Until these sticky issues are resolved without question, I don't think it will get huge buy-in from SMBs and even large companies.
    markdean