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Thursday, February 14, 2008

Disrupting The Disruptors

Software-as-a-service vendors find the biggest disruption is with regard to the workforce. Financial disruption comes second - The traditional sales team and revenue recognition culture also play a part – used as they are to up-front revenue recognition. Channel sales, maintenance revenue stream –all add up to a certain degree of disruption. The partner ecosystem characteristic also suffers a dent in the SaaS world.
Over time, business undergo constant "sustaining innovation". This is basically a straight line incremental enhancement to the existing product to meet higher and higher level needs. Sustaining innovations help market leaders maintain brand dominance, and are how they maintain differentiation and price margins through the early years. They optimize their operations from market research to supply chain management to manufacturing to marketing and distribution to support this continuing evolution, minimizing their costs and building up expertise. Sustaining innovations do not create markets, but they do protect and grow them
This article highlights the magnitude of disruption happening to the SaaS disruptors.

A new software service economy is rapidly unfolding and is causing disruption in the software industry. Ironically, some of the first victims of this new economy may be some pioneers of the software-as-a-service movement. We are now at point where implementers of SaaS capabilities are being disrupted by newer SaaS capabilities. Services that are built largely from other services are a reality, and offer many clear advantages.
The move to SaaS applications built on SaaS is a much more profound shift than the move from on-premise applications to SaaS applications. The software industry is beginning to display characteristics that mimic the supply chains and service layering that are commonplace in other industries like transportation, financial services, insurance, food processing, etc. A simple set of categories like applications, middleware and infrastructure no longer represents the reality of software products or vendors. Instead of a small number of very large, vertically integrated vendors, we are seeing an explosion of smaller, more focused software services and vendors.

Many forward looking SaaS firms look to constantly evolving highly leveraged cost model and focus on broadbasing offerings and creating a new ecosystem of partners – for the technology stack and for supporting varied business processes. Clearly SaaS winners are one who find ways to to combine their strengths with other entities – and that include managing Software/services “collision” well.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
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