Who will disrupt the old World ISV business?

This post kind of builds on my last about blue ocean’s for SaaS and an excellent parallel piece of work by Bob Warfield at Smoothspan on creating game reserves. The problem I have with both of these posts is that they contend that there is old world software companies and new world software companies battling it out to be the winner of the software dollar. (To reinforce this point see the bunch of blogs over the last week which Ben Kepes provides a good summary on if you are interested).

Perhaps because of where I work I’ve got a slightly different perspective. I’m wondering if the companies that are going to disrupt the Software industry are actually ISV’s at all. That is not software companies.

Not many people classify Google as a software company, If you ask, most would say they’re a search company. To quote Bob at Smoothspan

I mean, Google is a frickin’ search company and how hard is it to add search anyway? “

Some would say that Google is an advertising and if you look at their finances its hard to disagree. The thing is, they are massively threatening to software companies (just ask someone at Microsoft). Google have in fact created a blue ocean for themselves.

Other companies not typically on the radar for disrupting software companies revenue are Telco’s. Leveraging their infrastructure, massive customer basis and in some cases their ISP plays, they too can disrupt. Don’t agree? Have a think about email. Why on gods green earth do we pay MS for exchange when there are oooodles of ISP’s offering mail?

Hosting companies like www.Godaddy.com are also doing this.

What about social networks, www.Facebook.com has its applications

In this post Bob Warfield says

“Starting up a new SaaS business inside a big Old World ISV has got to be one of the most difficult Intrapreneurship plays out there.”

This is something that I agree with wholeheartedly. I agree with the fiscal reasons Bob mentions, and would like to add more like:

  • installed customer base inertia – if you ask your installed base, the ones who you successfully convinced to do the inhouse thing (or fooled), they aren’t gonna say to you do SaaS, what a great idea.
  • DNA – you have to think and act very differently when you do services instead of software.
  • Shareholders – imagine if MS or SAP announced to the market that the business model it uses to bring in billions a year is flawed
  • Systems, processes and channels

 

So coming back to the crux of this. I would assert because of all of these factors, and competitive pressures in their home markets, a bunch of other players see the SaaS market as blue ocean and potentially pose a much greater threat to incumbent software companies than new world Software companies.  And because they don’t have to deal with the baggage listed above, aren’t lumbered with the title “Software”, they can focus on the “ as a SERVICE” part of the bargain. And as I’ve said before, to me, that’s what SaaS is all about.

Thoughts?

 Update:  I love this from Bob at Smoothspan   It might take a couple of reads but theres something in it

 

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