As SaaS vendors took off in the early 2000s, I was encouraged by their business model. They had collapsed software, hosting, application management and upgrades into one contract. But in recent years I have seen a reversal and a lot of fragmentation. So, vendors are leveraging AWS or Azure for their infrastructure. Is that showing up in lowered prices or more investment in functionality? Not that obvious. Application vendors are encouraging others to use their PaaS to develop apps with new functionality. If your PaaS is so good how come your own developers are not using to deliver more for what you are already being paid for? Vendors are bringing in “brand name” SIs into their ecosystem and risking the overruns and failures of old. What they need is more of their own services in small doses and a generation of “born in the cloud”, open source, and ML and IoT savvy operational firms. I also see vendors brag about creating millions of jobs in their ecosystems – hold on – for what and who’s paying for that?
I was pleased to see in my research for SAP Nation 3.0, SAP take the lead and offer various tools to help customers migrate to S/4HANA. Customers talk in the book about automation in the form of Simplification Lists and pre-checks for customizations, others talk about its Activate methodology. Still others talk of small doses of its Leonardo ML consulting support and Value Assurance teams. Others mention support from Innovation Centers around the world.
I know software vendors have hangups about growing services staffing. My attitude is provide them in small doses, but take accountability and deliver better outcomes.
Two conversations in the last few months with software CEOs – both serial entrepreneurs and savvy investors – have raised, for me, the bar for vertical integration.
Brad Keywell, founder and CEO of Uptake Technologies, an Industrial AI software is a founding investor in Tempus and co-founder of Groupon, Echo Global Logistics, MediaOcean, Drivin, and the venture capital firm Lightbank. He is also involved in a variety of philanthropic initiatives. He is many ways an “outsider” to enterprise software and his pov is
“Through learning how (and why) the enterprise software world got to where it is today, I very clearly see the foundational flaws that have led to incredibly low customer satisfaction scores for the legacy enterprise software leaders. There is a lack of accountability, given that there’s been a divorcing of software from system integration, which is then decoupled from implementation. And, often, that’s decoupled from optimization over time.
Most troubling, the customer is left taking all of the risk, outlaying all of the money, and then holding the bag if the implementation is a failure – the legacy risk-reward model is out of whack. Legacy software vendors ask for money but then avoid accountability for outcomes. The customer takes all of the risk, and too often is forced to write off huge investment.
Uptake believes in delivering applications that produce impactful outcomes. We deliver much more certain efficacy, therefore reducing the customer’s risk and greatly enhancing our customers’ return. We deliver impact, and that’s really what operators are thirsting for.”
Sridhar Vembu, CEO of Zoho, is similarly a serial entrepreneur and investor and in many ways also an “outsider”. During my recent visit for Zoho Day I was impressed in how many small and big ways, Zoho takes charge. As I wrote here, their R&D productivity is impressive and keeps improving. For the same price point, they keep delivering significantly more functionality to customers without involving expensive SIs or ISV partners. They run their data centers more efficiently than buying even from hyperscale IaaS providers.
But it doesn’t end there. The creative team came to my attention because they created portraits of the visiting analysts. As Vijayan, the artist who drew some of the portraits pointed out here “Our primary work involves creating graphics/ illustrations for the marketing collateral including the website. We are one creative studio for the entire 40+ Zoho products!”
BTW, Infor had done similar with their captive Hook+Loop design agency.
I was also intrigued by the Zoho office space in Pleasanton and its use for hosting events. I was shown a plan Raju Vegensa, the Chief Evangelist wrote a few years ago. Here are some extracts which show Zoho taking charge in many areas most other companies would just hand over to someone else
“We started going down the ‘standard’ path of redesigning the space by hiring an architect and an interior designer. A few weeks into the process, I realized that there was a significant disconnect between what I wanted in the space and what the architect and interior designers have been showing me. We were going down the path that didn’t reflect who we are. That was when the realization hit me – there is no way an external designer or an architect or any firm can know what you want, what your culture is, how people interact within your office etc. Unless they are part of the company, unless they deeply understand the culture of the company, they cannot design the space. So a building’s design, the flow between spaces should reflect the way the company works. To do this well, the design should come from within the company. That was a light-bulb moment. So we took the design in-house and designed the space the way we wanted it.
The colorful Zoho cubes were created by one of our customers – Pillow Goddess. The customized Zoho colored bikes in the office were created by one of our customers Mission Bicyles. Before converting our building into an event space, I did a basic calculation – how many events do we have to host at the building to break-even on our investment to convert the space into an event center. It came down to around 18 events. Few years into it, we hosted over 20 events in the space. We also opened it to the Pleasanton community where local events (like Hackathon for kids, Hack like a girl) are hosted and local catering company serving food for all our events ever since.”
That much vertical integration takes effort, but from a customer pov the outcomes are usually that much more pleasant. I hope we see software vendors take more accountability in a wide set of activities. There is just too much fragmentation and finger-pointing today.
(Cross-posted @ Deal Architect)