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Who do you think made the following comments?
1. "We must make our customers are our copilots, as they guide our future direction."
2. "All the serious development with major backing happens today in the cloud, and that will make itself more and more obvious in the next three years."
3. "It is inevitable that deep, vertical full-suite software-as-a-service solutions will gain widespread adoption." These are comments by software suppliers of both packaged and online applications. The first came from Brad Smith, CEO of Intuit; the second from Zach Nelson, CEO of NetSuite; and the third is from Mark Symonds, CEO of Plex Systems, an online supplier of manufacturing systems.
Given that, they're not surprising, perhaps. But there's a certainty that's taking over the software industry that should be noted by every IT executive, whether he likes the idea or not: Software as a service is not phenomenon limited to CRM, but one that will gradually takeover more and more of the IT infrastructure.
We'll take a look at what else those three software executives, and 42 others, had to say in a report called "Vision from the Top." There is a remarkable degree of commonality. The report was issued Wednesday by the Software and Information Industry Association in San Francisco as the group held its All About the Cloud event. The SIIA asked the CEOs to explain what software will look like in 3, 5, or 10 years. I'd like to refer you to the entire report, but so far, it's reserved to SIIA members and members of the press.
Here's a fuller account of what Zach Nelson, president and CEO of NetSuite, a supplier of online ERP applications, had to say:
"Even though it's been more than 15 years since the public Internet opened for business, we still haven't reached the point where all applications are delivered over the cloud. But we will get there," he said.
"Any business that isn't willing to truly embrace modern, Internet-based cloud architecture is the one that, by its own admission, will fall behind."
"Most people coming out of universities have lived their lives in the cloud. Show them a room full of servers and they're going to ask incredulously, 'What is this? This is how you run your business?' The Zuckerberg generation was born on the Internet, not the PC. ... The only thing they want the PC for, oddly enough, is making calls with Skype."
Brad Smith, president and CEO of Intuit, was less generation-conscious. But he's aware of the same fundamental shift: "The world is quickly shifting from a paper-based, human-produced, brick-and-mortar-bound market to one where people understand, appreciate, and embrace the benefits of truly connected software, platforms, and services."
Intuit has adapted to this world, not only by continuing to sell its packaged tax preparation software but to expand its online services. To show how his firm has moved away from paper-based services and unconnected software, he uses this example: "SnapTax [is] a mobile app that allows users to take a picture of their W-2 on a smartphone, answer a few questions, review for accuracy, and e-file," he wrote.
Mark Symonds, president and CEO of Plex Systems, is representative of not just software as a service but how SaaS can rapidly expand its reach. We are used to thinking of software as a service as a NetSuite accounting system or a Salesforce.com CRM system. Plex in a similar vein offers a manufacturing system, but it's a vertical system that can grow and adapt to a wide variety of customers.
Symonds was present at the press conference where the "Vision from the Top" was release, so we talked about what SaaS can really do. Manufacturing, he was advised early in Plex' existence, can't go online because it's too specialized for particular processes.
Symonds poses this counter example. One of Plex' customers is a Caterpillar subcontractor that builds engines in Seguine Texas. The engine builder runs its assembly line through Plex SaaS. "Our success is an indicator of how broad-based the move to the cloud is," he said.
As the engine moves along the assembly line, a signal is sent from the Sequine manufacturer to the Plex system that a unit has reached its next assembly station and that it needs a water pump. "We send a signal to the parts shelf that lights up where the correct water pump is located. That light curtain needs to be broken [by the human assembly worker retrieving the pump] before the assembly can continue. Once the water pump is on the engine, we download a program that tells an automated wrench how much torque to apply to the pump to ensure it is installed correctly."
Symonds said his manufacturing software implements a Japanese process of checking for errors in the middle of the assembly process and halting production, if necessary, rather than testing completed parts after they come off the assembly line. It's known as poka-yoke, and it improves the quality of assembled parts, reducing the need to make corrections, redo work, or throw away improperly assembled parts.
When it comes to forming a part out of raw steel, the bar code on the steel must be read by a scanner and sent to the Plex system, insuring it is the right kind of steel, before cutting or forging the steel can proceed.
Symonds said he refuses to produce customized manufacturing processes for each customer. He must keep his manufacturing application as one core system, but he can add modules as needed to meet certain customer's needs. If a customer needs a manufacturing step or process that his system doesn't do, Plex will create it. Then it's available for any future customer to use as well.
This method of creating manufacturing software has a continuous feedback loop. The more customers, the more inputs on what's needed in manufacturing, the more manufacturing modules and the more powerful the system becomes. By showing the poka-yoke features of his system, Symonds entices new customers to sign up.
There is nothing new in software applications being available on-demand or American companies adopting Japanese manufacturing approaches. But what is new is the ability of forward-thinking software companies to standardize these practices, capture them in one system instead of multiple versions, and make them available to a broad set of customers over the Internet. That may still mean it's not suitable for some manufacturers. Each manufacturing process is different and typically requires a highly individualized system. With Plex, a customer's manufacturing process has to fit its generic, one-size-fits-all approach, with only a few exceptions.
Nevertheless, the Plex approach points to IT as a service, not just software as a service. It is how IT will be delivered in the future. Manufacturing is one branch of ERP, but one day I expect a future SAP or Oracle will have assembled a cross-Plex/NetSuite/Salesforce set of applications into a complete ERP set. You'll no longer read about those multi-million dollar ERP installations gone wrong because ERP will run in a cloud data center, installed by the supplier who knows it inside and out. But this change is still a ways off, and will not come easily.
Older companies will resist ERP as a service, knowing the pain and massive configuration effort their packaged systems required and disbelieving any one suite could be a match on all fronts to their company. But younger companies, seeking the reduced investment allowed by on-demand services, will more quickly adapt themselves to it--or find ways to get an online system to adapt to them.
"Many of today's ERP brands will not survive. The chasm is too deep and wide for them to get a true and sustainable SaaS business model," Symonds concludes.
Hmmm. That sounds a little like how the mainframe was about to be displaced by the PC. Still, the new ERP and other forms of SaaS will incorporate advanced thinking and quality assurance inside the system more quickly than traditional packages can. Then they will deliver IT as a service, not as an installation problem.
The ability of online software to quickly capture new thinking--along with the advantages of being able to avoid the upfront license cost, the need to install a massive package, and the need to make periodic upgrades--will push more and more business users toward adoption of SaaS.
Treb Ryan, CEO of OpSource, a supplier of managed hosting and infrastructure as a service, was also present at the release of "Vision from the Top." His four-year-old, who can't read, can find the applications he wants to use by clicking on icons on a screen, he noted. "Somewhere between now and when he's CIO of a company, the transition to the cloud will be complete," he predicted.
Charles Babcock is an editor-at-large for InformationWeek.
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