In June 2009 I aired a broadcast titled Emerging Giants: The New Titans of the SaaS World which featured a number of organizations that were (or almost were) dominant players in the new SaaS-driven world of procurement automation.
It was an interesting 60 minutes which provided a brief glimpse into the mindsets of the company leaders of the upstarts whose approach to providing their respective solutions were tied to what has now become the non-consultancy model.
Specifically, and unlike their ERP-based counterparts where implementation timelines are traditionally measured in terms of years and millions of dollars, the new SaaS-based vendors operate in a world of months, weeks and yes even days. And they do it for a fraction of a cost of the SAP or Oracle-type licensing model which also includes a hefty and ongoing monthly maintenance fee.
Think of the ERP model as a race, although started, that never actually sees a runner reach the finish line — with the runner still having to pay to use the track. But people grew tired of paying and just walked off the track.
But did they go?
This is where disruptive innovation comes in to play because it provides a bonafide alternative to the accepted technologies of the day, many of which have been or are now out of touch with how the real world operates.
What is interesting is that most ERP-centric software (according to my March 2010 TMA House post) had “historically been delivered as an inflexible code,” which was myopically focused on the “originally intended application.” This is what I have always referred to as software development using a rigid equation-based model.
Conversely, the bolt-on applications (and I have always considered the term “bolt-on” to be both inaccurate and even to a certain degree condescending), were structured around an agent-based model utilizing artificial intelligence coding. This meant that these “best of breed” solutions were “easier to manage, upgrade and connect.”
Despite the apparent benefits of the new and highly adaptable “open system architectures,” the “underlying philosophy” of early ERP systems focused more on internal integration versus real-world operability. Translation: the business model of the ERP giants was built around a cumbersome and inflexible code that provided a perpetual revenue stream to support a bloated cost model. Introducing bolt-on solutions that could easily accept modifications, additions or linkages to external software, thereby dramatically reducing both the lengthy implementation time lines and corresponding high costs presented a significant barrier to entry for the Oracles and SAPs.
However, the challenge until recently is that the market was trapped in the aforementioned perpetual loop of a payout without end for several reasons, and was therefore slow to embrace the promising alternatives.
Market perception has now changed, as reflected in former SAP executive John Wookey’s acknowledgment late last year that “he doesn’t blame these customers for going out and getting SaaS.”
Although Wookey did add cautionary caveats such as bringing “cohesion to the model, a cure for SaaS sprawl” and, my personal favorite, “on-demand orchestration,” in an effort to legitimize ongoing ERP vendor influence, the truth is that the days of the big solution vendor’s control over the market’s overall direction are indeed waning. Especially has it pertains to convenient and cost effective integration with SaaS solutions.
In a comment that underscores this new reality Ravi Thakur, a senior executive for California-based SaaS player Coupa, made the observation that “we don’t even need to contact SAP, let alone engage them in any meaningful way to implement our solution.” They are “not necessary to the implementation process.”
In fact, Thakur added that SaaS implementation flexibility actually enhances the value of an existing ERP platform by “delivering solutions that extend existing enterprise investments to make these systems more valuable to their respective organizations.”
In short, SaaS is the ideal amalgam of technological advancement and superiority, cost efficient acquisition and a simple and seamless integration process that a holistic enterprise thinking CPO can champion with confidence.
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