SaaS Predictions

Amy Wohl makes some predictions about the software-as-a-service market:

1) This market is growing in a serious way. I would expect a company of any] size to be able to purchase all of the software function it wants and needs as a service, rather than as traditional software, installed within its own firewall, within 3 to 5 years.

(2) Of course, I don’t expect every company to want to move all of its IT needs to the SaaS platform in that time period. I do expect even large companies to move functions that are used only occasionally or only by small numbers of users to an outside service provider.

(3) SaaS will increasingly look like a great solution for commodity problems like Email, for companies of any size. Remember, having Email supported by SaaS means outsourcing your Spam problems, too, and most of your virus problems as well.

(4) Look for large traditional software players to start to seriously offer SaaS-based alternatives to their traditional software offerings. These have to be serious, full-function alternatives rather than Microsoft’s recent foray into on-line services, offering incremental services to Office users, but still requiring the customer to install Office on every workstation and multiple Microsoft servers within the firewall.

(5) Watch the innovator companies like Google figure out how to be SaaS vendors beyond the consumer function they offer now. Inevitably, they’ll offer software to the small business market and they may decide to move beyond that into services that appeal to the remote workers of large companies, for example.

India’s Talent Pool Drying Up

WSJ writes:

India, despite its reputation as a bottomless well of back-office talent ready to scoop up American jobs, is having an increasingly difficult time finding qualified workers to fuel its booming services sector.

The cross-sector crunch is especially worrisome in the technology industry, where wages are rising 15% a year as call centers and software firms throw money at the increasingly shallow pool of youngsters who can hit the ground running. Consulting firm McKinsey & Co. says India’s information-technology industry could face a deficit of 500,000 workers as soon as 2010, undermining its attractiveness as an investment destination.

Even if companies continue to find the talent they need in the near term, the rising wage bill is a troublesome long-term trend for India’s competitive prospects — and for foreign companies pumping money into the global outsourcing market. The emerging talent deficit is giving rivals such as Russia space to compete with India for high-end outsourced work such as software design and solutions, and allows aspirants such as the Philippines — where English is widely spoken — to better compete for call-center business.

Business Week writes:

If India doesn’t take urgent action to reform education and build modern infrastructure, the nation could fall far short of its potential as an outsourcing haven. That’s the conclusion of a new study to be released Dec. 16 by McKinsey & Co. and Nasscom, India’s influential information technology trade association.

The first inklings of a tightening talent supply are already visible in rising staff turnover and skyrocketing wages. If offshore outsourcing work grows as rapidly as expected, the study predicts, in five years India will have a shortfall of 150,000 IT engineers and 350,000 business-process staff. “The problem we are facing is huge,” says Noshir Kaka, a McKinsey consultant who led the study. “The acute demand is leading to supply-side shortages.”

Microsoft and the New Internet

Washington Post writes:

The center of the computing experience is rapidly moving from the desktop of the PC, which Microsoft largely owns, to the Internet, which it does not. With Internet connections getting faster and more able to handle large volumes of information, whole software programs can be delivered or used online.

Thus, in what is known as the Web 2.0 world, a start-up aptly named Upstartle LLC offers an online program for creating, writing and sharing documents. Whereas the Microsoft Office suite that includes such tools costs more than $140, Upstartle’s Writely.com service is free, with add-on features to be made available for a subscription fee later.

“Where I do my word processing, how I collaborate, maintaining my social network . . . those things are shifting away from Microsoft,” said Tom Bittman, a research fellow at Gartner Inc., a market research company.

George F. Colony, chief executive of Forrester Research Inc., which analyzes market trends, argues that companies that serve consumers via Web pages will begin to do so using actual software programs, to increase the services they provide.

Dubbing the trend “X Internet,” for executable Internet, Colony said it is a revolution being led by Google, at the expense of Microsoft’s hegemony.

The Software-free Computer

Release 1.0 has placed article by Rafe Needleman:

The idea of software as a service has been around for years. The first business computer terminals, of course, had no application software on them at all – they were service clients, “dumb terminals” driven completely by applications running on mainframes. The current computing model for productivity software is the exact opposite of this: Applications run on powerful local machines, and don’t rely on network resources to function. The model has started to shift back…sort of.

Web Access on Gadgets

WSJ writes about the mobile Internet:

The overall move to Web pages designed for small screens is still in the early stages. In many cases, when you access any Web site from a mobile device, you may see the text and graphics of the normal page awkwardly condensed. But such distorted layouts are becoming less common, as companies take advantage of faster wireless networks and more powerful mobile devices.

Sites tailored for mobile — the availability of which varies depending on the device and carrier — typically have only a few links listed on the home page and few or no graphics clogging the screen. The URLs of these sites may be identical to their parent sites or may require adding “mobile” or “wireless” somewhere in the address.

Internet giants Yahoo, Google, MSN and AOL are leading the mobile Web push, but other sites are gaining popularity as well. Among them are mobile versions of ESPN, Mapquest, sites that list movie show times, such as Hollywood.com, and a range of travel sites.

Cisco Bets on Web Video

WSJ writes:

Mr. Chambers predicts the demands of video will transform the Internet over the next decade. Network traffic should increase fourfold to sixfold annually, instead of the 100%-a-year gains now seen in the U.S. and Europe, he says. Beyond the heavy traffic is the technical challenge of moving video, Mr. Chambers says. “Making work is really, really, really difficult.”
Scientific-Atlanta’s products help Cisco expand its offerings by bringing it closer to the consumer market for movies and other videos. The set-top box becomes a valuable piece of real estate as video becomes more widespread, Mr. Chambers says.
…
Cisco’s recent $61 million purchase of Kiss Technology AS, a Danish consumer-electronics company, was in anticipation of a push into video like the one with Scientific-Atlanta. Kiss “may have been one of the most aggressive moves we made,” says Mr. Chambers.
Web.

Google Base and Vertical Databases

Bill Burnham writes that the combination means the death of walled gardens:

Much like the delusional King in the Holy Grail, many of the Internet’s biggest and most profitable “Walled Gardens”, sites such as Monster.com, Realtor.com, Match.com, and even EBay, appear to be in denial about the ultimate destiny of their sites, which is, that they are bound to be subsumed by the larger Internet.
…
With Google Base fully in place (and ultimately similar services from Yahoo, Microsoft, and Amazon), why in world would anyone pay to have their listings displayed or pay to have to access to a database of listings? After all, if you publish the listing on your own site Google will automatically index it and then list it within Google Base within the next few days and if you want to make sure they get it immediately, you can just submit if directly to Google Base or register your RSS feed with them (a feature I’ll bet they are likely to add). Instead of charging you (or its end users) for the privilege, Google will make money off of the advertising it sells around the listings. Perhaps you may even be able to pay a fee to have your particular listing “advertised” in a preferential position.

This reminded me what Paul Graham said about emerging Web 2.0 marketplaces:

Odd as it might sound, we tell startups that they should try to make as little money as possible. If you can figure out a way to turn a billion dollar industry into a fifty million dollar industry, so much the better, if all fifty million go to you. Though indeed, making things cheaper often turns out to generate more money in the end, just as automating things often turns out to generate more jobs.

2005: Year of the Balance of Power

Sramana Mitra writes:

This year has been a year that has underscored several…balance of power developments.

In Politics and in Economics, the US dominance has been partially normalized by China and India, both emerging superpowers.

Close to home, in high tech, Google’s absurd rise has stopped Microsoft in its track, posing an alternate power block that challenges many existing assumptions.

In Silicon Valley, Google and Yahoo have even started challenging the power that Venture Capitalists have commanded thus far against entrepreneurs, and by encouraging entrepreneurs to bootstrap their startups, followed by exiting into one of the two (or into one of their competitors).

In this strange rebalance, Microsoft accuses Google of being arrogant, as do the VCs. Amusing, this turn of tides …

And one last balance of power example : the dominance of mainstream media has been shredded by the emerging democratic new media publishing trends and their supporting infrastructure that has rapidly matured this year (Blogs, Podcasts, Video-on-Demand, Microcontent, Micropayment, acceptable DRM standards, viable ad-supported business models, etc.).

IT and Business

InfoWorld writes in the context of Nicholas Carr’s “IT Doesn’t Matter” essay of 2003:

Fast-forward to the predawn of 2006, and even Mr. Carr is starting to change his tune. Nobody’s partying like its 1999 again, but across many industries companies are demonstrating that IT can be a key ingredient in a winning business formula. Here, we highlight three such companies — JetBlue Airways, Netflix, and BNSF Railway — as market leaders that make aggressive, innovative use of IT.

Management gurus are also turning more bullish on IT as a source of competitive advantage. But they note that the game has changed, that IT alone cannot create sustainable advantage in a competitive global marketplace.

Nick Carr was half right,” says Tom Davenport, Babson College professor and management guru. “You’ve got to combine IT with smart people and good business processes that are supportive of a distinctive capability the organization has.”

Davenport rattles off a roster of companies — Wal-Mart, Harrah’s, Capitol One, Amazon, and Marriott — that have “focused IT on what really matters to their business” to become tops in their categories. And he claims it may take a decade for their competitors to catch up.

Telcos Morphing

WSJ writes:

Battling for customers in a quickly changing communications landscape, telephone companies are starting to roll out a range of new gadgets and services that combine wireless, landline and Internet access.
…
The wave of new products and services comes as phone companies are trying to grab market share and beat back stiff competition from cable operators, wireless carriers and, increasingly, Internet companies such as Google Inc. They are doing so by shifting their focus to growth businesses such as wireless and Internet access.

For consumers, the strategy could mean further discounts for packages of Internet, landline and wireless services — and a wider selection of services and gadgets.