My sense about the penetration of Software-as-a-Service to date is that the majority of sales of SaaS to date have been with services that the customer didn't already have. Examples include CRM, Web Conferencing/Meetings, Web Marketing, etc. All of these are services that either the customer didn't already have, or ones where the costs of switching from one provider to another was low. The adoption of SaaS applications that replace an existing capability (e.g. Accounting) has been lower, and is highly dependent on the existence of an "inflection point" that causes the buyer to re-assess their current IT systems and evaluate the SaaS alternative.
So what does this have to do with Traditional ISVs? Quite simply it is that traditional ISVs have a significant role to play in the adoption of SaaS applications by enabling (or re-engineering) their existing applications as SaaS, and upselling the new offering to their existing customers. One of the better examples of this is QuickBooks from Intuit. The traditional pc-based accounting package was re-developed as a web-based SaaS application, and Intuit has quietly grown the customer base for these offerings to 78,000 subscriptions.
And here is the thing about SaaS - in my experience once a customer goes to a SaaS offering, they typically don't go back to the traditional software way of doing things. So all of those Quickbooks Online customers, most of which likely converted from the traditional Quickbooks offering, will stick with a SaaS offering even if they outgrow QuickBooks. They will graduate from QuickBooks and move up to NetSuite or some other on-demand accounting offering, but it is unlikely that they would go back to running their own accounting software.
Traditional ISVs are CRITICAL to the evolution of SaaS. They can move a customer to SaaS quickly and more easily because they can offer a quick upgrade path from the traditional software to the SaaS version. They can CREATE an inflection point with their existing customers instead of having to wait for one. Without a focus on SaaS from traditional ISVs, the entire SaaS revolution will take a while, but with a focus on SaaS enabling their applications and upselling their existing customer base, the SaaS evolution will happen more quickly and less painfully than it would otherwise.
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About hagins
Jeff Hagins has more than 24 years of experience in product marketing, product management, software development, technical operations, service delivery, and software quality. Hagins is currently the Managing Partner for Mural Consulting and a General Partner of Mural Ventures, both companies that focus exclusively on Software-as-a-Service. His career has also included positions as Chief Technology Officer, Senior Vice President of Product Management, Chief Architect, Vice President of Engineering, and Board Member for companies such as Lockheed Martin, J.D. Edwards, TeleComputing, Apptix, Dynix, and SMBLive.
Hagins has been active in the Software-as-a-Service industry from the beginning, helping to launch the J.D. Edwards ASP initiative in early 2000, becoming a board member of the ASP Industry Consortium (ASPIC) in 2001, as an advisor to the Computing Technology Industry Association (COMPTIA) Software Services Group, and as an advisor to Microsoft on the Communications & Collaboration Developer Advisory Council. Hagins is currently also a member of the Gerson-Lehrman Technology, Media, and Telecommunications Council of Advisors.
Hagins has worked actively over the last 6 years in the Utility Computing and Software-As-A-Service industry with companies such as Microsoft, British Telecom, CSC, Telecom New Zealand, Cable & Wireless, NTT, MCI, Bell Canada, Savvis, and many others. His efforts with these ISVs and Service Providers have focused on overall Go-To-Market Strategy and Execution, Product & Marketing Strategy, Channel Development, Service Design & Architecture, Service Optimization, and OSS/BSS Integration. Hagins' experience in the SaaS industry is unique, having worked as CTO for SaaS ISVs such as SMBLive, as a CTO for pure-play Application Hosters such as Apptix, and even as the CIO for a mid-market company purchasing SaaS offerings (Dynix). He brings a unique perspective on the complete value-chain for SaaS, and in his role as Managing Partner for Mural Consulting is actively working with ISVs and Service Providers of all shapes and sizes to help them define and execute their SaaS strategies.