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2.0 for the Enterprise

Disruptive Technology makes smooth market for SaaS Integrator

Posted by Susan Scrupski on February 15, 2007

Had an excellent chat this week with Narinder Singh, founder of Appirio based in San Francisco. Singh and his colleagues started up Appirio to take advantage of the next wave in enterprise adoption of SaaS applications such as Salesforce.com and SuccessFactors. With backgrounds from SAP, Webmethods, Borland, and Accenture, Singh and his colleagues know the enterprise market cold.

His predictions for the disruption of the enterprise app ecosystem were particularly interesting to me. Singh feels today’s enterprise vendors are falling into the classic trap of the innovator’s dilemma— how do you serve two masters– move to embrace disruptive technology while preserving your existing base? Further, he feels traditional, large SIs are also hooked on the enterprise drug with revenues pushing toward $10B for Accenture and IBM alone in enterprise app implementation and support services. On-demand also affects ISVs in that changes Oracle or SAP make in their core products won’t affect an ISV until maybe a year or so because of the complexity of the cycle in upgrades, etc. “In the on-demand model, if Salesforce innovates in an area where you [the ISV] have previously created some value add, over night their entire customer base has access to that innovation,” says Singh. The model of on-demand forces everyone to stay on their toes, and Singh believes this is good for customers.

He also sees his firm and firms like his as playing a unique role in helping enterprises with the SaaS (r)evolution. He sees a wide open opportunity to “bring the customer back to the center of innovation.” For instance, he’s working with a client to mesh their HR data (SuccessFactors) with their sales data (Salesforce) to deliver a strategic view on how to manage sales performance by increasing quality and reducing ramp-up time. The opportunity to observe, assemble and rapidly deliver new solutions is unique to this era of systems integration. The role of the SaaS-savvy services provider is more of an emissary than vendor, too. The business units are rapidly adopting SaaS under the radar of the CIO. Singh feels his firm is a natural to rationalize the SaaS silos within an enterprise and to help the CIO embrace the new technology, rather than resist it. By the same token, he feels the more successful and comfortable CIOs become with leveraging SaaS and web 2.0 solutions in the enterprise, the greater the disruption will become for the enterprise eco-system.

The following is a chart from a paper from Appirio entitled Services 2.0. It’s a good read for IT Services fans and enterprise app stalwarts alike.

before and after IT Serviceds

Another interesting paper in the IT Services sector was recently published by the Outsourcing Institute. If you want to know more about Outsourcing 2.0, you can download the paper here.

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3 Responses to “Disruptive Technology makes smooth market for SaaS Integrator”

  1. Susan, great post. Do you think eventually the small iterative deals turn into larger projects that require scale that is hard to achieve in a service model? Do you think brand is an issue for these service companies and SAAS players might prefer to territorilize their business to multiple service providers thus putting a cap on market potential? Lastly, how do you see exit potential for these businesses especially given the last question and given the capitilization of larger service companies?

    rob

  2. Hi Rob. Good questions! Here’s what I think: yes, the small iterative deals will surely turn to larger projects as interest grows in integrating new web functionality with “old-school” enterprise app data and databases. Not sure I would agree that scale is hard to achieve in a service model where there is strong demand. Look at the explosive growth in the offshore outsourcing sector, for instance, or other eras of IT services surge (i.e., client/server, Y2K, etc.) Brand is always an issue for IT Services companies. Not a lot to differentiate on in a somewhat commoditized market. Not sure about SaaS players territorializing their businesses and capping their market potential. How do you figure? Finally, exit potential should be interesting. There are more avenues for exit for these firms than ever before: 1. public markets (blegh) 2. sell to SaaS or other web 2.0 software company interested in adding on services 3. sell to larger SI stuck in pre-historic services model 4. sell to another smaller servicesco in classic roll-up fashion. I don’t anticipate capitalization being a problem in any of these scenarios for small services companies competing successfully on the next generation web.

    One last thing: Go Eagles (next year, maybe). 🙂

  3. Thanks Susan, glad to hear you are pro philly.

    A lot of BPOs are losing single vendor relationships as companies are divying up their outsourcing among niche outsourcing companies. Scale is hard to achieve as service talent becomes harder to bring in and larger projects require more people per revenue than smaller ones.

    Saas companies are not going to rely on one service provider as they grow; basing this on historical trends shows from other large software companies who build out stables of partners.

    Rob

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