A Framework for Enterprise Software

For decades, the companies in this industry have produced sophisticated and complex products. They are difficult to assemble, require the stitching together of a variety of component parts, and its often a long time from the beginning of a project to when the end user sees value/success. Unfortunately, many times, the user is never satisfied. The product breaks or does not work quite as it was described it would. As these quality problems emerge, the companies in this industry turn to 3rd parties, asking the 3rd parties to help their clients have a better experience. The companies incorporate IP from those third parties and many times, they ask the 3rd parties to service the products. While this often improves the customer experience, it does not solve the problem of the negative externalities (and the implications on the users) of the product. In many cases, the negative externalities drive up costs for the users.

Then, along comes the threat of a new approach and technology. It simplifies many of the previous issues. The product looks better on the surface and clients tend to be happier, sooner. It also solves the problem of the negative externalities. It’s a homerun all around. Does everyone move to the new approach/technology en masse?

Well, you tell me: do you own a battery-powered car?

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The story above is merely an illustration that history repeats itself and there is a lot to be learned from understanding and spotting patterns. I suppose most people who read this will think of enterprise software, as they read that story. And, when I get to the part about the new approach/technology, they start thinking of SaaS and Cloud. However, the answer to the question is the same, whether we are talking autos or enterprise software: The world does not move en masse in any direction, even though benefits are apparent.

I continue to see rhetoric that postulates that the future of enterprise software is simply cloud and SaaS. While its hard to argue this at a conceptual level (given its lack of specificity), I think it trivializes a very complex topic. Not everything will be cloud/SaaS, although those will certainly be two possible delivery models. To really form a view of how enterprise software evolves over the next 10-20 years, I’ve constructed some over-arching hypotheses, which hopefully provides a framework for thinking about new business opportunities in enterprise software.

Hypothesis 1: The current model of ‘pushing’ your product through a salesforce does not scale and is not optimal for clients/users. Usability will dominate, and I extend usability to include topics like time-to-value, ease of use, and
self-service.

Hypothesis 2: The model of paying Systems Integrators to make your products work together (or work in the first place) will enter a secular decline. There will continue to be a strong consulting market for application development, high-end strategy/segmentation, and complex project management. However, clients will no longer tolerate having to pay money just to make things work.

Hypothesis 3: Enterprises cannot acquire skills fast enough to exploit new technology. So, on one hand, usability needs to address this. On the other hand, continuing education will need to offer a new method for driving skills development quickly. Continuing education is much more than ‘product training’. In fact, while ‘product training’ is the majority that is paid for today…I believe it will be the minority going forward.

Hypothesis 4: There will be different models for software delivery: Cloud, SaaS, On-premise, Outsourced, etc. Therefore, just because a company offers something in a certain model does not mean that they will be successful. Clients will buy the best fit model, based on their business goal and related concerns (security, sustainability, etc).

Hypothesis 5: Clients will optimize easy (implementation and ongoing support) and return (on investment and capital). Products that deliver on both are a no-brainer. Products that only hit one of them will be scrutinized. Products that deliver neither, will cease to exist.

As I meet with new companies and even assess products that we are building, this is my current framework for thinking through how to identify the potential winners and losers.
 

Reference: A Framework for Enterprise Software from our JCG partner Rob Thomas at the Rob’s Blog blog.

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