As SaaS Continues to Rapidly Grow, How will IT Services Delivery Change?

In just a matter of a few years, SaaS and cloud-computing have gone from IT buzz words, to a new emerging architecture, to a leading market driver on the IT market. No where is that more clear than the accelerated growth of Salesforce.com, who reported 38% growth last week for their FY-Q2, on revenue of $546 million, while surpassing the 100,000 customer mark. Beyond Salesforce, there's a cadre of other suppliers in the S/P/IaaS space, along with Workday, Taleo, Concur; as well as mature IT suppliers who are building out their own offerings, such as Microsoft Azure, SAP Business ByDesign & Lines of Business SaaS... and of course Oracle's Siebel CRM OnDemand (although I haven't heard much about this one in a while!).

Given this momentum, IT services companies need to prepare for SaaS. While from a percentage basis today, SaaS-related IT services projects are relative small compared to on-premise projects, the accelerating growth may bring a sea-change sooner than most suppliers realize...

First off, SaaS-related implementation projects are entirely different beasts than on-premise. While individual projects vary, what used to be a multi-million dollar services project tied to Siebel CRM in the early 2000's, can now be in the 100's of thousands around Salesforce.com. On major PaaS solutions, such as Force.com, the integration and development costs may bring up project values, but since a lot of the commodity (R.I.C.E.-based work, application development and maintenance, upgrades, technical servoces) services are baked into the PaaS, project services cost tend to be 25-to-50% lower than on-premise...

So far what has been most successful around SaaS-related project services has been a more industrialized, higher volume approach for implementations. Since systems integrators can now easily use customer data during pilots, and even fine-tune some solutions during pre-sales meetings, the whole design to roll-out phase is much more compact, and much more collaborative. Data, as in on-premise, is always a major issue, and having enough resources and the proper tools for data migration is step #1, and step #2 is to make sure there is a long-term plan and adequate resources for data management and administration.

So with much of the commodity-level services around SaaS either being removed, or greatly reduced, how should IT services companies prepare their resources?

Business Solution Architects:

Something that my PAC colleague Tobias Ortwein and I have been talking about for many years in the Enterprise Application Services space is the on-going need for business solution architects (BSA)'s. And to grab a phrase from my dot-com days, these are truly the "purple squirrels" of our time!

BSA's are consultants with both a deep domain expertise (typically coming from the industry), along with a strong technical acumen, but not a hard-coder. Increasingly in the enterprise space, and especially in SaaS, PAC sees a growing need for BSA's to restructure and innovate around business processes... all applied to a company's unique business model and industry needs.

"Cloud Factories":

Surprisingly, I have not seen the Indian offshore players more involved in this emerging segment, but rather companies such as Accenture and IBM. There are a few areas that are "resource heavy" during a SaaS implementation, and they include data migration services, cloud-to-cloud or cloud-to-on-premise integration, as well as custom development on a related PaaS. By creating highly industrialized services around SaaS solutions in a "cloud factory" model, some innovative IT services companies are looking to further reduce the TCI (total cost of implementation) for a SaaS solution, in order to free up additional resources around innovations (business transformation, creating custom solutions on PaaS) and effectiveness training & consulting services (related to sales, HR, logistics, etc.). So essentially, by leveraging lower cost "cloud factories," a company like Accenture can then propose more high-end consulting services, in order to bring clients more differentiation in their SaaS solutions.

In my next blog post related to this topic, I will be addressing the future of Offshore services in the SaaS world. Given that commodity skills are often reduced in the cloud, how do you see offshore services adapting? As always, please feel free to comment below and I'll make sure to address them in my next post!