THINK IT Services

I’ve been suggesting for years that the IT system management (ITSM) market is ripe for a new generation of Software-as-a-Service (SaaS) solutions, and a widening array of emerging players are finally fulfilling my vision.

Up until recently, IT departments have been plagued by the same frustrations which permeated most large-scale enterprises contending with overly complex, cumbersome and costly business applications.

In the case of the business units, it was trying to implement and maintain enterprise applications, such as CRM or ERP, which drove them crazy and in the direction of SaaS alternatives from companies like Salesforce.com and NetSuite.

Now, IT organizations are starting to migrate away from the ITSM platforms offered by IBM, HP, BMC and CA in favor of SaaS-based alternatives from Service.now and others.

Why are IT departments moving in this direction? For the same reasons as their business unit counterparts,

• Frustration with the costs and complexities of traditional, on-premise ITSM has reached a breaking point.
• In today’s tough economic environment, IT departments have to do more with less and can’t afford the inefficiencies associated with legacy ITSM.
• Traditional ITSM wasn’t designed with today’s highly dispersed workplaces, mobility and cloud computing resources in mind.
• Technological advancements are making today’s SaaS-based ITSM solutions more viable alternatives to legacy systems.

So, just like in the broader business environment, there is a ‘perfect storm’ of economic, technological and attitudinal forces which are driving IT professionals to adopt various SaaS ITSM solutions.

My latest commentary in Ecommerce Times discusses these drivers further.

But, it is worth noting that between the time I submitted this column to the online publication and when it was posted the following industry announcements and SaaS-based ITSM vendors crossed my radar,

• CA announced its intention to acquire Nimsoft after previously announcing that it would acquire 3Tera.
• Citrix acquired Paglo to strengthen its SaaS-based GoToManage capabilities.
• AccelOps is rolling out enhancements to its integrated datacenter monitoring and ITSM software.
• ManageEngine continues to enhance its ITSM suite which sells for a fraction of the cost of legacy platforms.
• France-based, Staff&Line, is opening offices in the U.S. to offer its ITSM, IT asset management, configuration management database (CMDB) and automatic inventory capabilities here.

These are just a handful of the numerous companies targeting this market. THINKstrategies has over 150 companies listed in the HelpDesk, IT and Application Management categories of its SaaS Showplace. And, this is probably only half of the total number of companies targeting the ITSM market!

Just like in the overall market, these SaaS ITSM vendors are successfully penetrating large-scale enterprises as well as small- and mid-size businesses (SMBs). We’ve recognized many of these players with our Best of SaaS Showplace (BoSS) Awards.

And, the ITSM legacy vendors — IBM, HP, BMC, CA and others — are desperately trying to respond to this significant challenge in the same way as their enterprise application counterparts — Microsoft, Oracle, SAP and others — have done … with a combination of acquisitions, alliances, internal development and external PR.

It is for all these reasons that I identified ITSM as one of the key battlefields for 2010.

One of the key battlefields in the cloud computing market for 2010 which I identified earlier this year is IT service management (ITSM). Last month, I discussed BMC’s latest foray into the SaaS-based ITSM world, as well as Service-now.com’s recent win at PepsiAmericas.

Last week, Service-now.com issued a press release summarizing its 2009 accomplishments. The company reported that its recurring revenue increased approximately 136 percent in 2009. Cynics might discount the significance of this growth rate by suggesting it’s easy to report a substantial jump when you’re starting at a low base. However, the company’s CEO, Fred Luddy, revealed to me during a private lunch preceding a company marketing event in Boston that Service-now.com is generating signficant, albeit confidential, revenues and is on a run-rate to double its revenues again in 2010.

The company’s success in the enterprise was personified by the room full of customers who spoke and attended last week’s event in Boston. The speakers were senior IT managers from Starwoods Hotels and Staples. They both told similar stories about how pleased they were with the ease of deployment, use and extensibility of Service-now.com’s ITSM solution. In each case, the companies initially deployed a small set of Service-now.com’s ITSM capabilities and then adopted additional modules in response to positive feedback from end-users and greater than expected use among their employees.

Although Service-now.com is hesitant to refer to its solution as a “platform” because of the overused nature of this term, the Starwoods and Staples success stories illustrated how Service-now.com’s functional capabilities can be extended to meet a wide array of business needs, including field service and financial management.

In its most recent announcement, Service-now.com boasts that it ended 2009 with over 365 customers and 94,000 IT professionals using its ITSM solution. And again, these are not just a bunch of ‘no-name’ small- and mid-size businesses (SMBs). Instead, Service-now.com reported that it has added the following brand-name companies to its customer base in the last six months alone: Ascension Health, Associated Wholesale Grocers, Balfour Beatty, British Council, Cameron International, Canwest, Career Education Corp., Centrica, Chiquita Brands, CITEC, Colorado Springs Utilities, Emory University, First American, Foodstuffs Limited, Getronics, Great American Financial Resources, Henry Ford Health System, International Securities Exchange, Intuit, JDS Uniphase, Jefferson County Colorado, Key Energy Services, KGB, Kimberly-Clark, Lennox International, Logicalis, Mediterranean Shipping Company, Morrison & Foerster, Motricity, National Australia Bank, NetApp, Ohio State University, Patni Computer Systems, PepsiAmericas, Perot Systems, ProBuild Holdings, PSEG, Queensland Department of Public Works, Royal Bank of Scotland, Shaw Communications, Smith International, Temple-Inland, ThyssenKrupp Steel USA, UCLA, Underwriters Laboratories, and the University of Birmingham.

Service-now.com’s growing success makes me feel even better about the Best of SaaS Showplace (BoSS) Award we issued the company last April.

What is also interesting to note is that Service-now.com has achieved this success even though the rollout of its solution isn’t necessarily as quick as its tagline might suggest, “On-Demand IT Service Management”. Instead, Luddy presented a slide during the Boston session which listed the deployment times of some of the company’s recent enterprise wins, ranging from 10-48 weeks. The slide set an honest expectation for the seminar attendees that ‘on-demand’ is a relative term.

While the application can be delivered to a customer quickly, there are still plenty of organizational obstacles, such as integration and data migration as well as change management and training, which have to be overcome to successfully adopt a SaaS-based ITSM solution. Luddy told me over lunch that this is good news for various consultancies, including established players such as Accenture and a myriad of other players, which might have been concerned about being ‘dis-intermediated’ by a SaaS-based ITSM solution.

Of course, Service-now.com’s deployment durations are still far shorter than those for legacy ITSM software. And, the company’s success rates far exceed traditional players as well.

Back to back announcements this week have brought renewed attention to the IT service management (ITSM) market as a key battleground for Software-as-a-Service (SaaS) competition.

On January 19, BMC announced its latest Remedy ITSM Suite On Demand solution, a SaaS-based offering which promises to integrate with BMC’s Atrium Configuration Management Database (CMDB) and Business Service Management (BSM) platform.

That same day, Service-now.com announced that PepsiAmericas had selected its SaaS-based ITSM solution. In Service-now.com’s announcement, PepsiAmericas’ IT Customer Service Manager, Amy Irwin said, “Our old tool couldn’t meet our needs so we went shopping for a tool that could. We quickly determined SaaS would best fit our tool requirements.”

IT acceptance of SaaS-based solutions isn’t new. THINKstrategies first identified this trend in our 2007 customer survey in conjunction with Cutter Consortium.

However, SaaS vendor focus on this segment of the market has intensified over the past two years. Service-now.com has experienced significant growth in the mid- and large-scale enterprise market with its SaaS-based ITSM solution. The company won a Best of SaaS Showplace (BoSS) Award for the measurable business benefits its solution delivered Unitus Community Credit Union.

BMC has been dabbling in the SaaS market for a few years. THINKstrategies published a profile of BMC’s initial SaaS offerings in 2006.

Like other established independent software vendors (ISVs), BMC has been attempting to rearchitect it software application, realign its go-to-market strategies, and reorient its business operations in order to integrate its SaaS offerings into its legacy portfolio. Last November, BMC announced at Salesforce.com’s Dreamforce conference that it was developing new ITSM solutions on Salesforce.com’s Force.com Platform-as-a-Service (PaaS).

It is no coincidence that Salesforce.com has targeted this market with its Service Cloud offerings. CA also announced at Dreamforce its intent to ‘SaaSify’ its ITSM capabilities via Force.com.

HP has also been circling these waters with its cloud-oriented solutions.

Why all the attention on this segment of the SaaS marketplace?

Because this is one of the few places within an organization that touches everyone and where the IT department and business end-users directly intersect. Therefore, the SaaS solution plays a pivotal role in this area and can have a tremendous strategic impact on an organization’s day-to-day operations standpoint.

I expect activity in this segment of the SaaS market to escalate and a series of acquisitions to follow.