THINK IT Services

As I’ve suggested multiple times, the major hardware and software vendors are aggressively pursuing the tremendous business opportunities in the managed services market.

Now, the key questions are how will they bring these offerings to market and what role will their channel partners play in provisioning these new services?

The two most recent examples are IBM’s new Express Advantage security-as-a-service offerings and Dell’s April 24 closing of its MessageOne acquisition.

IBM’s security-as-a-service solutions are its first on-demand offerings based on its acquisition of Internet Security Systems in August 2006. The new solutions will primarily serve small and midsize businesses (SMBs). They include Express Penetration Testing Services; Express PCI Assessments; Express Multi-Function Security Bundle, which includes protection against worms, spyware, anti-virus and spam in a unified threat management offering; and Express Managed Protection Services for Servers.

These solutions have been historically been offered as on-premises offerings, but Peter Evans, director at IBM ISS, is quoted in eWeek as saying,

“Spending on security is rising 6 percent a year… But spending on the labor needed to manage that security is rising 11 percent a year; therefore we need to help SMBs remove some of the cost by offering solutions as fully managed services.”

IBM will sell these services to SMBs through its ISS channels, but you can bet it will also offer them directly to some of its larger, key accounts.

Meanwhile, in its announcement of the completion of its $155 million acquisition of MessageOne, the company said:

“With its acquisition of SilverBack Technologies, Inc., Everdream Corp., ASAP Software Express, Inc. and now MessageOne, Dell is architecting an integrated service delivery platform of SaaS applications that will enable it to remotely monitor, maintain, troubleshoot and address the majority of routine IT infrastructure issues that challenge businesses of all sizes. The company anticipates that services such as patch management, anti-virus, online backup and recovery, asset tracking, software license management and e-mail continuity delivered and managed over the Internet will reduce the cost of infrastructure management and free budget for the IT driven innovation that grows business.”

This statement makes more explicit the strategic implications which I outlined earlier this year.

Dell’s President of Global Services, Steve Schuckenbrock, goes on to say that Dell is “building a services supply chain” that will give customers greater flexibility regarding how they support their IT environments.

Again, Dell is offering these services to its growing array of channel partners but is also expecting to deliver these services directly to its key accounts.

So, channel organizations must determine how to fully leverage these offerings while at the same time effectively differentiating themselves from others, including the vendors, who will be offering the same managed services.

Microsoft is finally recognizing the fundamental ways in which people’s lives and work-styles are changing, and it as a company and its technologies must respond to these changes.

Welcome to the world of Software-as-a-Service (SaaS)!

Live Mesh is Microsoft’s attempt to catch up to the Web 2.0 movement which has quickly evolved into an Enterprise 2.0 migration process in which a rapidly growing number of companies of all sizes are shifting their IT strategies from on-premise products to on-demand services.

This trend is being led by Salesforce.com and Google, and being supported by hundreds of other start-ups and established vendors, including Cisco Systems, Dell and EMC.

Salesforce.com and Google’s alliance which produced a new set of integrated services last week is the most recent challenge to Microsoft’s dominance in the workplace.

Cisco Systems has been talking about the melding together of network-centric business processes for years, and has elevated its vision of the market to include new collaboration opportunities to showcase its WebEx acquisition.

Dell is seeking to redefine how companies will manage their servers, desktops and other devices by leveraging web-based managed services.

EMC is repackaging its storage systems into SaaS solutions, led by its Mozy acquisition.

By coincidence, I attended Salesforce.com’s Tour de Force roadshow in Boston yesterday where Marc Benioff and a series of guest speakers spoke persuasively about the power of its Force.com platform. In order to make the point that its platform capabilities can appeal to any software developer in any type of business, the event speakers included:

• Cheryl O’Connor, Worldwide CRM strategy manager of Analog Devices.
• Narinder Singh, Co-Founder and CTO, Appirio
• Jeremy Roche, CEO, CODA

Microsoft is now trying to define this trend in its own terms. Conceptually, it is hard to argue with the company’s view that the world is changing. Its latest initiative goes beyone the “Software Plus Services” ideas it has been promoting for the past two years. Practically speaking, it will be interesting to see how far Microsoft is willing to go to respond to these changes, and how successful it will be convincing corporate and consumer customers that it has the right portfolio of web-based services to satisfy their changing requirements and preferences.

In my last blog entry I listed a number of reasons “Why IT Now Sees SaaS As A Savior.” Dan Druker of Intacct, has done a superb job embellishing and expanding upon my ideas on his own blog.

Here’s another important reason why IT is embracing SaaS which I forgot to include in my last blog entry, but may supercede the other reasons I outlined long-term — SaaS enables IT to fulfill its role as an internal service provider.

The idea of the IT department serving as an internal service provider to corporate end-users and strategic business units, as well as customers and partners, was first suggested during the late 1990s when an explosion of external service providers (xSPs) emerged in response to deregulation of the telecommunications industry.

While the idea had plenty of theoretical justification and support, most IT departments were unable to fulfill the promise of this concept because they lacked the service management tools and were constantly distracted by day-to-day ‘firefights’ just trying to keep their systems and software up and running.

SaaS, and the associated evolution of managed services, now permit IT professionals to achieve a more stable software and system environment. With the challenge of simply keeping these assets up and running becoming less of a concern, IT can now focus on more effectively delivering the functionality their end-users, business units, customers and partners need to achieve their corporate objectives.

SaaS service management solutions are also emerging to help IT departments become internal service providers. If these IT departments succeed in becoming true internal service providers, they will also finally become aligned with their end-users, business units, customers and partners.

I predicted in December that IT would become more comfortable with Software-as-a-Service (SaaS) in 2008, helping to accelerate its growth over the coming months.

Here are some clear indications that my prediction is coming true,

1. SaaScon: CIOs from many big name companies, as well as smaller organizations, spoke about their positive experiences with SaaS and traded insights about how to take fuller advantage of SaaS to meet their end-user and IT management needs.
2. SaaS for IT: A growing number of major hardware and software vendors are offering SaaS solutions specifically aimed at the IT department. Although many of these offerings could be sold direct by the vendors as managed service solutions, they are being pushed through the vendors’ channel programs.
3. Platforms: While the initial platform plays in the SaaS market were aimed at software vendors and developers, the more recent initiatives by Salesforce.com, Bungee Labs and Google have been designed to also appeal to IT professionals and software architects within enterprises as well.
4. Compliance: Many of the CIOs at SaaScon and elsewhere have told me about how they are using SaaS to satisfy corporate, as well as government and industry, compliance requirements. Today’s storage and back-up services give many IT organizations the archival and audit capabilities they’ve lacked until now.

You can add standardization to the list. Many of the CIOs who spoke at SaaScon admitted that they like the limitations which SaaS places on customization. They have always known that business unit demands for customized solutions were a major factor in the high costs and failure rate of legacy applications. CIOs are seeing SaaS as a way of reshaping the expectations of business end-users.

The CIOs I’ve talked to recently also recognize the financial benefits of SaaS in today’s recessionary climate. Its subscription pricing model permits companies to shift their software acquisition costs from tightening capital budgets to more flexible operating expenses.

And speaking of the climate, many CIOs are viewing SaaS as a ‘green’ solution because it reduces their computing needs and ‘carbon footprint’.

For years, I’ve been advocating that hardware and software vendors along with their channel partners and telecommunications carriers have the opportunity to leverage Software-as-a-Service (SaaS) solutions and managed services models to generate powerful benchmark statistics and produce valuable best practice studies that can enhance their customer relationships and strengthen their position in the market.

Today, TriActive and THINKstrategies published the first of a series of benchmark studies which clearly demonstrates this unique capability.

The study examines end-user software utilization patterns across over 125,000 endpoints in 460 companies managed by TriActive’s Asset Management Suite™. The study found many companies where Microsoft Office installations are underutilized or not used at all. This means that many companies have more software licenses than necessary or have purchased higher than necessary versions of the software to meet their needs.

Based on this actual software utilization data, the study found that many companies can save 50% or more on their Microsoft Office software licensing costs by better matching their purchases to actual useage levels.

Ironically, many of the companies studied had deployed TriActive’s Asset Management Suite via managed service providers (MSPs) and value-added resellers (VARs) because they were concerned that they may have illegal copies of Microsoft software in their businesses and expected to have to ‘true-up’ to ensure they were in compliance. Rather than pay more, many of these companies will actually experience significant cost-savings as a result of TriActive’s Asset Management capabilities and findings of this study.

The TriActive-THINKstrategies study illustrates the power of today’s SaaS-based managed services not just as a more economical method of managing IT operations and tracking real software utilization, but also as a means of delivering a new level of value to customers.

Having helped launch META Group’s (remember them?) benchmarking practice in the 1990s, I’ve had first-hand experience grappling with the costs and complexities of traditional benchmark methodologies which too often failed to generate meaningful information or insight.

In contrast, today’s SaaS solutions permit service providers (xSPs) and channel companies to obtain actual useage statistics that can provide actionable data for individual companies and powerful perspective for a broader community of customers.

While I was running International Network Services’ (INS) strategic marketing group in the late 1990s, we launched an industry research program which generating survey findings and gave us tremendous visibility in the market that catapulted INS to the top of Yankee Group and UpSide Magazine’s leading IT consulting company list in 1999–above Anderson Consulting, CSC, EDS, HP and IBM. That designation led to INS being acquired by Lucent for 12 times revenues or $3.7 billion, the most ever paid for an IT services company and surpassing what IBM paid for PWC Consulting. (INS is still doing its industry surveys as a part of BT today.)

Innovative SaaS and managed service providers can achieve even greater thought-leadership and win greater mindshare today by capturing and compiling valuable activity data through their ongoing interaction with customers. They can utilize this data and analysis to better serve their customers and better position themselves in the market.

I look forward to working with more companies who recognize this exciting opportunity. Contact me if you want to discuss this opportunity further.