Slowly but surely 'software as a service' is altering the way in which consultancies work says, Mark Dye.
As Bob Dylan once sang, 'The times, they are a changin''. This is certainly a phrase that will be ringing in the ears for the consultancy business right now. Long gone are the days where 'fat cats' dined on Beluga and Dom Perignon off the back of long-term deals while customers sat there scratching their heads wondering where the value lay in that IT system that delivered little in the way of value to the business.
Such pictures will conjure up anger in the minds of CIOs who have been all too familiar with this predicament. Surprisingly salvation may at last be coming from those vendors actively pushing software as a service (SaaS). To the relief of the CEO this means little in the way of upfront investment in technology or infrastructure as solutions are hosted by those offering the service. As a result there are immediate and genuine cost savings which help to take the pressure off the board at a time when budgets have all but vanished.
For certain consultants and systems integrators though it has been a different matter and there has been a knee-jerk reaction of negativity in some quarters. "Their response was that they didn't like SaaS," explains Clive Longbottom, service director, Business Process Analysis, Quocirca. Much of this lay in the fact that it was originally thought that SaaS would be difficult to make money from.
"Consequently most then tried to belittle it and get their customers to think there were major problems around security, stability and scalability," adds Longbottom. "Then they found out that people weren't buying into this and it was far more a case that they were making a business decision."
He suggests that Marc Benioff and salesforce.com has had as much effect as any in this shift in thinking. When the company began offering free trials of its SaaS solution many discovered that the subsequent data this produced became beneficial to the business and stuck with it.
As a result consultants and systems integrators (SIs) have started to produce SaaS solutions themselves. But, says Longbottom, they've also realised that there is still a lot of money to be made in making sure that the best solution is integrated into 'on premise' solutions.
"We're seeing that after the knee-jerk reaction, the more canny consultants are beginning to see where the bread is buttered and where they can get the jam at he same time," he adds. "As we have the link between business consulting and SI, what we're finding is we can go in and recommend solutions and then say 'this is how we'll make it happen and given your IP architecture this is how we can make that work for you,'" explains Graham Roberts, associate partner and head of Performance Management at Atos Origin. "Or on the other hand if we are doing a systems integration business we'll show them how to exploit this software to re-engineer their reporting and planning processes."
"I think there is a lot of talk about SaaS but not a lot of action," says Ralph Bolton, Technical director, Sapphire Systems. "It's happening though, no doubt about it. The net effect is that it's very much at the margin at this point in time though, but in 12 months time I think it will start to be having an effect on software delivery into the ERP marketplace."
With that in mind, successful consultancies will have to be malleable. Long-term projects haven't been viable anywhere outside of Government for some time and those chosen will be expected to show their worth and that they're adding value to an operation within three months.
"I think they are realising that as SOA, mash-ups and SaaS come along, this is a real break in the continuum and that they can't keep talking about what they can do with Siebel, Oracle or SAP. It's a case of now we have to look at this being a real and major change," says Longbottom.
However, Martha Bennett, research director, Financial Services at Datamonitor, sees this all as pointing firmly to a shift in approach rather than an actual loss of business for most.
"If you look at one key constituency of SaaS and that is SMEs, they're not the target group of the systems integrators and consulting companies anyway. When you look at the corporate business you see a completely different dynamic.
"For example, a considerable amount of the corporate business of salesforce.com actually comes from the consultancies like Accenture and Deloitte," she says. "And the reason for that is that when you look at big corporations, the software aspect of what they do is usually part of a much bigger integration process engineering type of project."
Bennett believes that if anything gets negatively impacted it's all those endless customisation projects done on a Siebel or SAP deployment. "But when you look at anything like that it is increasingly being shoved offshore to low cost countries anyway just for the customisation programming aspect," she says. "The higher value-add services, both on the systems integration and business consulting, are just as relevant for SaaS as they are for any other kind of work these guys do."
SaaS is also gaining more traction as companies hunt for anything that allows them to get their costs down whilst squeezing more out of IT, according to Bennett. In turn it provides enterprises with a useful model that allows for the spreading of costs and quicker benefits, something which also attracts a greater level of interest.
Interestingly, she believes that those consultancies that approach SaaS correctly and embrace it only have something to gain, adding, "When I look at people like Accenture, you see what can be made as they get considerable business out of it." But does this represent the dawn of a new SaaS revolution for consultancies and the end of the software market as many have known it?
Not according to Bennett. He told FSN, "I think we're going to have to wait a while for that," she says. "When you look at the type work that a lot of them do, many of the systems and applications and services are not going to be provided on SaaS for some time because their client base is the corporate with complex processes, complex systems and while SaaS is gaining traction in that segment it's not going to be the biggest thing for a while yet."
Even so, it appears the days when a consultancy could go in and rip out existing systems just to replace them with something new to make money are long gone. As Longbottom suggests, clever operators can make money by taking a more considered approach and showing how they can add value over a three month period. Then, based upon this, the business keep that's left over can be invested into the next project.
"This leaves IT in a self-fulfilling cycle where the business is happy with the bottom line and IT improves as a result," he says. "The consultant SI is then seen as being a famed partner."
