I’ve written in the past of the viability or otherwise of Independent Software Vendors (ISV’s) changing their business model to embrace SaaS delivery.

We see a lot of it around, Microsoft embracing SaaS (albeit by a different name), SAP going down the SaaS route etc. I’ve always been pretty sceptical – not being able to imagine how an existing ISV can morph it’s operations into SaaS with its higher risk levels, different revenue streams etc etc.

Over at SaaS blogs Sinclair has written an excellent post about different strategies that ISV’s can take to build SaaS competencies and business cases. Part of the post was the following chart detailing possible business implementation strategies;

strategychart15thumbnail.gif

It’s a great post but I was left feeling unsure as to the viability of any of the strategies. they all have significant risks and threats, and they all to a greater or lesser extent rely on the shareholders being prepared to walk away from an existing revenue stream and venture into unknown territory.

I came away from the post still firm in the belief that the obstacles to an existing publicly owned ISV’s morphing itself to SaaS are just too great. Perhaps a closely held ISV without shareholder pressure for ongoing dividends could do it, perhaps the “new product line” or “software lite” approaches identified in the chart could work as an introduction to the change process but it still seems unlikely for me.

My money is still firmly placed with the lean and mean new entrants. But the only way for them to build scale and traction sufficiently rapidly to get soom momentum is to sort their funding out well. And that brings us back to Xero – despite the bad press of late about falling post-IPO shareprices, I firmly believe that their “list to fund development” strategy is right on the money….

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

3 Comments
  • Snap. While the IT industry can and does produce amazing businesses from very modest beginnings, don’t underestimate the market acceptance/trust of established brands and proven products.

  • One of the key drivers of SaaS is to lower the cost of software in order to reach the “long tail”. This means delivering high quality software for a low cost, so is more than often not going to be a viable business model for self-starting ISVs or for established ISVs. There’s a good reason why software has traditionally been sold for high upfront costs + support + …, so I agree that it takes a well funded ISV with a long term vision to pull it off properly – regardless of the strategy.

    I agree that Sinclair’s options are not appealing, but I also don’t think he’s touched on the really interesting strategies out there.

  • You’re right Andrew – there some real gains to be made out of a SaaS/v strategy that should ceate the buy in and loyalty of the ISV model, without all the pitfalls. But I know where you work so i know you understand that concept well!

Leave a Reply