The Application Software Suite is Yesterday's News

SaaS and other Internet-based software solutions are negating the original value of application suites by delivering superior value to companies today.

By Michael A. Braun, Intacct

Mar. 24, 2008

I've been in the technology business for 36 years. I've got all the pluses and minuses of that experience, both scars and medals. When it comes to software - especially business application software - there has always been a large market for both best-of-breed (BoB) application solutions and multi-product "suites" - a group of applications from one vendor that is pre-integrated to work together. The wars between these vendors are legendary.

But the Internet has changed the balance of power in this long-standing battle. Today's Internet-based computing platform and Software as a Service (SaaS) delivery model enable customers to choose the superior function of BoB solutions with confidence. Indeed, the suite is "so yesterday." It was born during the client/server computing era to solve a set of technology integration problems that the Internet and SaaS have rendered obsolete. And in the eyes of many customers, the suites did a mediocre job solving those problems anyway. Many view the suite as something that turned out being better for the vendors than the customers. Indeed, client/server computing and on-premise enterprise software will live on for decades; but they are yesterday's news. The all-in-one software suite is part of that bygone era.

The History of Best-of-Breed vs. Suite Products
Let's start by looking at the world before SaaS. The dominant computing platform for business applications evolved through four major generations from mainframe to minicomputer to the desktop; and in the 1990s, client/server became the dominant computing platform by blending the best of the prior generations. These first four generations had two things in common. First, application software was delivered to customers using the on-premise model. They bought application software, infrastructure software like databases, and hardware; they installed it and were responsible for all facets of operations - integration, backup, availability, security - everything. Second, each platform era had different leaders in the applications business and each era supported a market for both BoB products and suites.

Before the SaaS/Internet era, the typical computing era began with dominance by new BoB players. Why? The incumbents found it nearly impossible to divert resources from their large successful business to build something truly new that would deliver innovation made possible by the new computing platform. So, the innovators were small startup companies with limited resources to create complex applications for major companies. They had to keep focused on a single BoB application to be successful. As each era evolved, suites emerged. Some companies added applications to their core organically, and others created suites through vendor consolidation.

The suite rose to prominence in the 1990s. It arrived on the scene to solve a customer problem created by technology proliferation. Old world computing models were complex and none more so than three tier client/server. The technology was characterized by many different platforms, server operating systems, databases, application servers, client operating systems and limited interoperability standards.

The customer was totally responsible for implementing and integrating both business applications and the dizzying array of complex infrastructure technology components which all had independent upgrade schedules and dependencies.

If a customer had an Enterprise Resource Planning (ERP) system that ran on AIX, Websphere and DB2, and then acquired a company that used a Supply Chain application running on Solaris, BEA, and Oracle , it's easy to see the challenges. The technology proliferation and the need for the customers to perform their own integration between all these systems created a nightmare for them.

In addition, enterprises were also responsible for all IT operations. Each company had to have specialists - database administrators for different databases, for example - security systems, systems management, backup procedures, and so on. The customer was also responsible for system upgrades, not just for application software but for the underlying infrastructure as well.

The computing model drove the delivery model: on-premise software. But the delivery model created this incredible technology integration problem with wide-ranging effects. It dramatically slowed the adoption of software and became a huge sales obstacle. Vendors couldn't sell new products because the customer was using all its resources integrating and maintaining current systems. Many customers turned to system integrators or other vendors to outsource the integration work or even the whole IT function!



The Trouble with Suites
Suites arrived as a "solution" to this problem. Software vendors said they'd help customers with their integration needs by developing a suite of applications that were pre-integrated and built on a common technology base.

The suite was a great idea but it never really delivered on its promises. Even as it fixed some problems with the on-premise application software model, it introduced several new ones:

• Inconsistent Quality - All applications were not created equal. Some pieces of a suite would provide excellent functionality but others were considered inadequate by users. Inevitably, some business problems needed solutions that only BoB providers could deliver and that meant customers again were thrown into the integration morass that the suite was supposed to solve.
• Long and Painful Decision Cycles -Because the applications in a suite would often serve many areas of a company, buy-in from every department involved usually took a long time. Because the applications had inconsistent quality, the need for compromise created organizational winners and losers.
• Expense - In order to get a full solution and several applications, the price tag tended to be a substantial one, with implementation costs far exceeding the cost of the software itself.
• Slow and expensive innovation cycles - The sheer size of the suite offerings combined with the vendor's need to test all new features with every permutation of application and underlying infrastructure delays time to market for new features. This forces customers to fend for themselves and when the new release does finally arrive, implementation is made even more challenging by the need to rationalize customer customizations with the new release.
• Vendor Lock-in - After a customer bought the suite and implemented it across the company, switching costs became significant and many enterprises became reluctant to tear out the suite to put in something new.

• Faster and better decision process - Deciding on a single business application is just easier than deciding on many at the same time. Fewer people involved, less complexity and better data lead to better and faster decisions that improve ROI.
• Faster and better implementations - Reduce the complexity and get to value sooner. No one can implement multiple applications all at once, so BoB projects happen in a fraction of the time it would take to implement a suite.
• Better function, expertise and support - Like specialists in any field, BoB providers have the focus and depth to deliver superior results on these dimensions.
• Simplified Switching Process - If a customer decides that an application needs to be changed, it is easier to switch and install a new BoB application than a whole suite. Mergers, exec changes, and growth are all things that can drive this need.

• Leverage Expertise & Partnerships - At Intaact, we solve business problems in the Accounting/ERP area. That's our area of expertise and we plan to stick to that area in order to continue delivering the best solution available. To offer expanded functionality in closely-related categories, we partner with other vendors in areas such as CRM, HR and manufacturing/ resource planning. To make sure our products work seamlessly with BoB products in these categories, we will do the integration work ourselves - we don't ask the customer to do it. This delivers superior functionality to the customers who want suite-like interoperability and BoB functionality.
• Develop New Channels - We have a SaaS product that is very channel-friendly but we have just begun to work with traditional resellers. We've traditionally focused on developing relationships with other types of partners. Some have taken us into vertical market niches, such as property management, private equity, managed health care, restaurants, non profits and homeowner associations, to name a few. Some of these partnerships have increased our adoption in very small companies, such as CPA firms.
• Use Satisfaction as Marketing - The more customer successes we have, the more positive word of mouth we have - that's the biggest single type of marketing we've got. Google's never done a single ad yet it maintains a base of fanatically happy customers. We're spending the bulk of our marketing money on our customer satisfaction program. We've got an industry-leading approach in which we measure customer satisfaction quarterly and compensate employees based on the results.
• Emphasize Incremental Innovation - The pace of innovation for SaaS vendors is significantly faster than for on-premise vendors. Since there is only one version of our software and it is on a standardized platform, we can deliver a consistent stream of refinements to application functionality and features. We roll out an updated version of our solution each month, and our clients are always on the latest version. On-premise developers have a much more complex infrastructure to work with and need to test all enhancements on each combination of the various platforms their software runs on. This means these vendors spend a huge percentage of their time testing, instead of improving their solution and delivering the enhancements requested by their customers.