October 26, 2005, 4:12 PM — In 2000, one of the most popular business books was "The Tipping Point" by Malcolm Gladwell, which described how a series of small, seemingly unrelated events can combine to create a mainstream market trend. Gladwell's concept is being proven correct again when we take a good look at the various elements that are fueling the growth of software-as-a-service (SaaS), managed services and utility computing today, and why enterprises of all sizes should be taking a closer look at these information technology service alternatives as a part of their overall sourcing strategy.
Here are ten reasons why SaaS, managed services and utility computing are reaching the tipping point:
1. Economics: Nearly every industrial sector has been adversely affected by the brutal combination of escalating global competition, skyrocketing energy and health care costs, and sagging consumer confidence. This economic climate makes it imperative that companies limit how much money they pour into ongoing IT operations.
2. Nicholas Carr: Love him or hate him, he has clearly articulated growing end-user and executive level frustration regarding the day-to-day hassles and costs of managing IT, and he has become a strong advocate for leveraging utility computing.
3. Offshoring: Thomas Friedman is right - "The World is Flat" - and the race among large corporations to leverage cheaper labor markets abroad has also pushed SMBs to find more cost-effective alternatives to managing IT inhouse.
4. Out-tasking: Organizations of every size are recognizing that traditional outsourcing arrangements that involve handing over their entire IT operation and assets to an outside company is a prescription for failure. Instead, organizations are looking for ways to maintain control of their IT requirements while selectively outsourcing or 'out-tasking' specific IT functions.
5. Salesforce.com: The tremendous financial success of Salesforce.com has also encouraged a wide array of imitators and to adopt and exploit this new business model. Furthermore, the rapid rise of software-as-a-service (SaaS) has encouraged organizations to look at different ways to manage their IT infrastructure.
6. Enabling Technologies: Virtualized server and storage systems, high-speed networks, and new management software systems that automate provisioning, monitoring, ticketing, trouble-shooting and billing processes have made SaaS, managed services and utility computing possible.
7. Packaging and Pricing: A growing number of service providers are recognizing they must package and price services in simple ways that can easily be customized to respond to the specific needs of individual customers.
8. Professional Services: Smart service providers are learning that the best way to convince new customers to acquire their services is to gain customers' trust by offering front-end professional services such as IT audits and needs assessments, along with planning, design, project management and optimization services.
9. Changing Sales and Delivery Skills: Leading SaaS, managed services and utility computing providers are replacing product-oriented sales people and maintenance-oriented service people with a new breed of consultative sales people and support staff with operations management skills.
10. Customer and Provider Success Stories: A growing list of customer case studies is helping to convince organizations that SaaS, managed services and utility computing can provide effective and reliable IT solutions that also generate substantial cost-savings. At the same time, successful service providers are becoming models for industry best practices when it comes to building, selling and delivering high-quality and profitable services.
For these reasons, enterprises and technology companies alike should be carefully reevaluating their sourcing and marketing strategies, respectively, to determine how SaaS, managed services and utility computing can help them achieve their IT and business objectives.
