Agree to Disagree

I recently read Daryl Plummer’s (Gartner Group) blog and I have to agree, but also disagree with what he said.  I agree that it is not an easy thing to transition from being a traditional ISV to becoming a SaaS provider – he is absolutely right about that - however his comment about "the vast majority of ISVs will have a very difficult time with this switch" - is what I have to challenge.  I think this is a very general statement and one that I have a tough time fully buying.

I have worked with over 200 ISVs in their transition to SaaS and to date over 90% of them have been successful - but the key is that they developed a business plan, marketing plan and technical plan on how to go about making the transition and then worked with us as their Infrastructure partner, along with a managed services delivery partner and together sold to a new target market, software services very successfully.

As he says in his blog - it is not an easy task, but if they view this as a change in their business model and partner with the right ecosystem - then they can be very successful.  I think the other key thing that he forgot to mention is knowledge of your customer's industry.  Most of the ISVs that we work with are "niche" software vendors with products that are critical to their customer's business (ex: travel, legal, healthcare, agricultural, trucking/logistics, etc....) and the biggest differentiator that they have is knowledge of the industry, and so when they build a business model of offering their software as a service with subscription pricing and a full services capability – they bring to this model – knowledge of the industry and that is KEY. 

If they do this, then ISVs will be able to expand their market opportunity to the "S" in the SMB market and their growth potential can be exponential.  The growth comes as they find a new market to offer their service, while leveraging their existing business process/software knowledge/application - but offering it to this new market in a new way.  This is, in my opinion what needs to happen by many of the ISVs out there that have a software application that is being sold via the traditional model, today.  If they understand how to develop a new business model and define the new target market - they will be ahead of a startup - because they will already have the IP they need to offer a fully functional service to their customers.

So the net/net is that ISVs can be successful – it just is that they need to think of SaaS/Cloud Computing, as a new business opportunity and develop the business model before just jumping in headfirst.  But SUCCESS is achievable and we have plenty of ISVs that have shown that to be true.