Software is dead, long live software

A recent blog note from Alan Buxton, CTO of TradingPartners (disclosure: Kennet portfolio company, more below) reminded me of why traditional software is a dying business and why I'm so obsessed with finding software/services/content convergence plays. 

Let me explain. 

Virtually all the layers that make up the enterprise software stack are commodities today: operating systems, databases, middleware, and workflow.  A business application is just an implementation of workflow on top of the infrastructure components.  Much of that infrastructure has already moved to the Web and workflow is following close behind thanks to the explosion of SaaS application vendors like Salesforce.com and the many companies that have followed its early lead.

With software increasingly delivered as a service, the dividing line between software functions, business content (eg analytics or industry information) and value-add services is blurring fast.  The best new vendors deliver all three in a single package, for a single subscription price.  The better the content -- in other words the more industry-specific domain knowledge it contains -- the more indispensable the service.

Some examples:

• TradingPartners delivers fully managed eAuctions to reduce procurement costs.  Customers get a state-of-the-art RFQ and auction platform delivered over the Web; access to a unique database of low-cost suppliers of every conceivable industrial product or service; all set up and run by a team of auction and industry specialists with domain knowledge second to none.
• FRSGlobal enables banks to automate the cumbersome but critical process of producing and delivering regulatory reports to financial authorities in 30+ countries.  This service combines a data management platform optimised for banking, middleware to connect to banks' accounting systems, and thousands of pre-defined reporting templates for Basel II, Corep/Finrep, IFRS and other regulatory regimes.  FRSGlobal's team of specialised business analysts maintain the reporting templates and ensure that banks don't fall afoul of the often changing reporting rules.  A single service gives peace of mind to hundreds of compliance officers.
• MedeFinance provides a hosted analytics service to hospitals and insurance companies, allowing them to reduce bad debt, accelerate cash cycles and benchmark their financial performance against their peers.  Its offering combines analytics technology, healthcare domain knowledge, and industry information gathered from its customers.
• Telemedicine Clinic provides European hospitals and private healthcare providers with remote interpretations of diagnostic images such as MRI scans and x-rays.  It delivers this service digitally, combining a proprietary case management platform with deep sub-specialty expertise in the emerging segments of radiology, including PET/CT and mammography.  This is critical diagnostic knowledge delivered as a service through software.

This may seem like an obvious insight, and in fact many software companies are heading in this direction without even thinking about it.  But every day I see vendors clinging to the idea that they can grow big selling software alone; this may work for the rate disruptive horizontal infrastructure technology (such as VMWare), but not for vendors of business applications.

The most interesting companies who get this pull together three key components:

1. Software infrastructure, ideally built on low-cost or no-cost elements (eg, the LAMP stack), but optimised for a particular application.
2. Collection of information that can be re-used to strengthen the offering, eg benchmarking customers against their industry, or proprietary analytics (such as for compliance).
3. Layering in of value-add services, delivered with a combination of onshore/offshore business analysts.

If you're doing this, give me a call.

Comments

[Alan Buxton]

.... and yet the likes of SAP continue to push "software, software, software".