THINK IT Services

Last Friday’s government report indicating a dip in employment levels sent a scare through Wall Street and raised the spector of recession on the campaign trail in New Hampshire.

The irony is that more than half of 112 IT executives recently surveyed by the Society of Information Managers cited the ability to attract and retain IT personnel as their No. 1 concern for 2008. As I indicated in my previous blog, these concerns are among the ten reasons why I think on-demand services will soar in 2008.

Nonetheless, I’ve also received a growing number of resumes from IT/telecom professionals seeking positions in the on-demand market. Some want to get into this rapidly growing market. Others are looking for new jobs because their previous companies failed or have been restructured to better position themselves to capitalize on the on-demand services movement.

In response to these trends, THINKstrategies has added new Job Boards to its Managed Services and Software-as-a-Service (SaaS) Showplace directories. These free services are aimed at helping growing on-demand companies find qualified candidates and assisting individuals seeking new job opportunities.

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The consolidation of the legacy software market continued this past week with SAP’s announced plans to acquire Business Objects, followed by Oracle’s announcement that it intends to buy BEA Systems.

These transactions clearly indicate that the traditional, on-premise software market is undergoing fundamental changes. The most obvious driver of the latest announcements is the growing importance of business intelligence (BI) and analytics as a key ingredient in any meaningful enterprise application.

In an ideal world, these acquisitions would mean that customers no longer have to carry the burden of integrating these capabilities into their enterprise software environments. Instead, it would be logical to expect the business intelligence and analytics capabilities to become a ‘plug and play’ component of the SAP and Oracle’s software portfolios. However, it is more likely that these acquisitions will simply make their software solutions even more complex to implement.

SAP could mitigate this risk by leveraging the fast-growing Software-as-a-Service (SaaS) unit within the Business Objects to accelerate SAP’s own efforts to deliver a successful on-demand solution. However, I’ve been a part of too many acquisitions to believe that SAP will fully exploit this asset while it is also trying to absorb the full extent of Business Objects’ capabilities.

Meanwhile, Salesforce.com has taken a different tact to satisfy its customers’ BI/analytics requirements. Rather than acquire a company in this area or build its own BI/analytics capabilities, Salesforce.com has encouraged third-party companies to develop solutions which enhance its SaaS capabilities via the AppExchange.

By providing an assortment of application program interfaces (APIs) and web services that permit third-party integration with its core on-demand applications, Salesforce.com is able to meet its customers’ needs without having to make a direct investment in the added functionality.

I/THINKstrategies think the legacy software vendors (LSVs) can steal a page from Salesforce.com’s playbook and use a similar ‘tugboat strategy’ to move more quickly toward an on-demand capability.

Just like aircraft carriers can take a long time to turn around without the help of a fleet of tugboats, the LSVs can also be expected to take a long time to change their software architectures, revenue structures and corporate cultures in order to become viable on-demand software vendors unless they encourage an army of SaaS companies to integrate with their legacy software products to enhance and extend their core functionality.

Why would SaaS companies want to integrate with legacy software products?

To gain access to existing customers, in many cases enterprise customers they would not be able to access otherwise. Since it is unlikely that customers will discard their existing software products anytime soon, SaaS companies have a better chance of penetrating customer environments if they complement their installed software rather than displacing it.

Ironically, the LSV is less likely to be displaced if they get close to their ‘enemy’. Instead, they can use the SaaS companies to strengthen their positon within these accounts and in the market as a whole by attracting third-party on-demand functionality to complement their on-premise products. They can also get a first-hand glimpse at how the SaaS solutions work and evaluate potential acquisiton candidates.

These Machiavellian tactics are certainly in the repertorie of the major LSVs. They just happen to be exercising a different set of tactics in the latest round of acquisition transactions.

I’m pleased to announce that THINKstrategies unveiled today a new set of packaged services aimed at helping Software-as-a-Service (SaaS) and Managed Service providers (MSPs) ensure that they have properly designed and can reliably deliver their web-based solutions.

Our new Readiness Assessment Services (RAS) have been developed in response to the rapid rise in demand for SaaS and Managed Service alternatives to traditional, packaged applications and network/system management (NSM) solutions among end-user organizations of all sizes. This demand is attracting a rapidly expanding array of start-ups and established vendors attempting to capitalize on this new market opportunity.

We at THINKstrategies have found that many of these companies are not fully prepared to succeed in the SaaS and managed services markets because they’ve under-estimated the organizational, operational, sales, marketing and financial requirements of these service-oriented, subscription-based businesses.

Despite the growing interest and acceptance of SaaS and managed services, many providers are still uncertain how to successfully package, price, promote, sell, deliver and support these web-based services. Improper design and delivery of these services can seriously harm customer satisfaction and lead to customer abandonment.

THINKstrategies’ new Readiness Assessment Service includes a structured scorecard to evaluate the strength of SaaS or Managed Service providers’ strategies and solutions. The multi-dimensional scorecard examines the following key indicators:

• Target Market Segmentation
• Competitive Landscape
• Corporate Management
• Functional Capabilities & Features
• Solution Packaging
• Pricing & Revenue Realization
• Service Delivery Platform & Architecture
• Security and Availability Assurance
• Service Provisioning, Billing and Testing
• Contracting, SLAs and Reporting
• Sales Strategies and Skills
• Strategic Partnering/Ecosystem Strategies
• Marketing and Positioning
• Customer Support Capabilities
• Financing and Capital Structure

The scorecard will identify SaaS and Managed Service providers’ strengths and weaknesses so that they can address important issues before they affect the provider’s ability to deliver quality solutions. THINKstrategies will recommend specific remedies to fill these gaps so the provider can achieve their corporate objectives.

THINKstrategies is also establishing a series of partnerships and alliances with a variety of third-parties to meet clients’ specific needs, including application design companies, service delivery infrastructure providers, enabling technology vendors, financial services and investment firms, and specialized consultancies.

These new consulting services are based on THINKstrategies’ extensive SaaS and Managed Services experience and indepth expertise. THINKstrategies was founded in 2001 to specifically address the unique business challenges in an increasingly services-oriented world. Since its inception, THINKstrategies has helped over 100 client companies achieve their business objectives by leveraging the power of services. THINKstrategies was the first consulting and analysis firm to identify growing interest and adoption of SaaS and managed services in 2005, among organizations of all sizes, based on its survey research in conjunction with Cutter Consortium and the MSP Alliance.

In January 2006, THINKstrategies unveiled the SaaS Showplace® (http://www.saas-showplace.com/ or http://www.thinksaas.com/) and Managed Service Showplace® (http://www.msp-showplace.com/ or http://www.thinkmsp.com/) online directories and web-based resource centers with easy-to-use listings of SaaS solutions by application and MSPs by service category, and extensive information and insight about industry best practices to help organizations fully leverage the growing array of SaaS solutions and managed services.

Today, over 500 companies have registered to be listed on the SaaS and Managed Services Showplaces, offering over 2,000 on-demand solutions, making the Showplaces the largest, vendor- independent, online directories in the on-demand services market worldwide.

Please contact me if you have any questions regarding these new consulting services.

In my most recent THINKstrategies Update newsletter, I stated that the winners in the increasingly competitive Software-as-a-Service (SaaS) and Managed Services markets will be the companies who own the trust of the customer. In that newsletter, I highlighted some of THINKstrategies’ latest publications which spotlight innovative approaches to building trust in both markets.

Yesterday, Intacct Corporation asserted itself as a leader in the trust-building business by unveiling a new “Buy with Confidence” program aimed at assuring the success of customers using its on-demand financial management solution.

Under Intacct’s new program, the company is committing to deliver the following levels of service to its customer:

1. Service Availability: Intacct is guaranteeing 99.8% service availability. If it fails to achieve its goal, it will provide a AvailabilityPlus subscription credit of 10% of the customer’s subscription fee for each percentage point below the service level goal, up to 50% of the customer’s monthly subscription fee. (The company reports that its service availability averaged over 99.9% system availability from November 1, 2006 through April 30, 2007.)

2. Professional Services Quality: If the company doesn’t fulfill its professional service contract commitments and its professional services team is late or over budget in an implementation project, Intacct will credit the customer 10% of the contract value “No Questions Asked”.

3. Rapid Response: Intacct’s support team will acknowledge customer requests within 4 hours, and resolve the problem or provide an update to the customer within 24 hours of request.

4. Immediate Notification of Changes: Intacct will notify customers in advance of any system or development plans that could impact their operations.

5. Communication Excellence: Intacct will provide regular updates of product roadmap, new releases and online training.

6. Billing Errors: Intacct will promptly correct any errors in billing statements.

THINKstrategies’ research shows that a substantial number of customers are still apprehensive about relinquishing control of their critical business applications to a SaaS provider because of availability, support and billing concerns. Intacct’s new Buy with Confidence program responds to these concerns by establishing clear service level objectives and penalties which will make customers more comfortable selecting its on-demand financial management solution.

This program sets a new standard for the SaaS market, establishes Intacct as a leader in the industry and should encourage more organizations to take advantage of the company’s on-demand financial management solution.

In January, THINKstrategies joined the growing legion of multimedia Internet producers with our Spotlight on Software-as-a-Service (SaaS) podcast series aimed at educating and evangelizing about the business benefits of today’s new SaaS solutions.

We are now expanding the scope of our podcasts to discuss encompass Managed Services as well. As with our initial podcasts, we will continue to examine ways in which customers and solution providers are leveraging managed services to achieve their business objectives.

Our latest podcast is a discussion of managed service trends, as well as SaaS developments, with Chris Hoffmann and Scott Donohue, two of principals of Triple-Tree, LCC, a leading investment bank which helps emerging and established companies achieve their corporate objectives in the on-demand services industry.

Click here to listen to THINKstrategies’ latest podcast.

I hope you find the podcast series valuable. Please sign up for our new RSS feed to keep informed of future podcasts. Also, contact us if you know of innovative companies and services which deserve our attention and broader visibility in the market.