Like a tidal wave crashing ashore, the growing movement of businesses migrating to cloud-based out-of-the-box software and networking technologies seems unstoppable.
Everything from digital workplace platforms and human resources software to the growing market of artificial intelligence (AI) bots and apps that integrate with other systems continues to grow at a rapid pace. On paper, the benefits are easy to understand: These products are inexpensive and easy to install, leaving user organizations with more resources to devote to other things.
Yet there are wider shifts in how off-the-shelf tools are being procured, supported and, in some cases, rejected by customers. And those shifts need to be better understood as the software marketplace matures.
Digital Transformation and the IT Function
First, in many organizations the traditional IT function has been hollowed out and reduced in capacity. More often than not, businesses now regard IT as a cost center and not as a source of innovation and growth.
Under the “digital transformation” umbrella, IT’s primary tasks can mostly involve cutting costs, reducing overhead, improving operating efficiency, streamlining management and securing data. Significantly, in-house development teams are more likely to be more proficient at integrating third-party off-the-shelf software than they are at building software from scratch. Indeed, why bother at all, when so many software vendors compete on selling entire packages that include setup, training and support?
IT leaders, then, are tasked with offering a business service and molding their organizations (and requirements) around fully formed products. No longer are third-party vendors expected to blend their offerings around what a customer’s business already does.
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One-Size-Fits-All No More
The second trend that is starting to emerge has more to do with third-party software vendors themselves, which are now under more pressure than ever to slim down their portfolios or to find more points of integration with other vendors’ products. The days of a one-size-fits-all software model are coming to an end.
Here is an example of the risk associated with trying to fulfill all of a customer’s needs: the chaos that ensued when a lightning strike caused a power surge at a Microsoft data center in Texas, forcing the company to shut down its servers and thereby cut Azure cloud service for many Azure customers in the south central United States. It was a freak accident, but it highlights the question of whether it is sensible for users to be at the mercy of one vendor for everything.
Complexities and a Lack of Standardization
The third trend is that businesses are just too complex to standardize the way all of their employees work — how they collaborate with one other, for example. Sales teams, of course, have different needs than support teams and so on.
Recognizing that reality, software vendors are providing solutions designed to serve more niche interests as opposed to trying to meet everyone’s needs. One example of how this trend is playing out was Microsoft’s announcement at its recent Ignite conference that it has taken the unusual step of partnering with Adobe and SAP.
The goal? To help customers better integrate systems and share data. The move will ultimately help customers who, up until now, have struggled with having little choice in how the software they use integrates with other systems.
Indeed, the growing urge is to mitigate against the risk of an all-in-one vendor approach. After all, the commercial software market is always changing, improving and innovating.
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Unsure and Unknown
One final factor that is shaping the way customers choose third-party software is the fact that, with such a diverse array of solutions available, many users might not know what they want or what they’re getting themselves into. Too often, as Gallup notes in a report titled “The Real Future of Work: The Agility Issue,” many businesses respond too quickly to an ever-changing market in an attempt to outdo their competitors.
Take, for example, the banking sector. Incumbent banks are under enormous pressure to reinvent themselves. Therefore, banks are perhaps too willing to try out new things first, before their competitors — before knowing in concrete terms what the benefits or value will be from any such investment.
When circumstances, or needs, change, software that was once appropriate may no longer be useful. Hence, being locked into a long-term relationship with a software vendor can present serious disadvantages, especially if your competitors have taken a nimbler approach and have chosen, for example, to procure smaller, more niche applications from third-party vendors.
While there is probably little incentive anymore to build software from scratch, the need for more control over how everything is utilized will not go away. It will only get stronger. The winners will be those businesses that expertly weigh the benefits and the risks associated with using low-cost third-party solutions.
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