The Future of Software Finally Arrives

By Brian P. Watson  |  Posted 05-06-2008

The Future of Software Finally Arrives

Software as a service, a long-promised application delivery model, is finally being taken seriously in the enterprise.

An April survey of 850 enterprise users by McKinsey & Co. and the Sandhill Group shows that SaaS has moved into the mainstream. Respondents identified SaaS as the most important technology trend
influencing their companies, with 74 percent of enterprise customers saying they are "favorably disposed to adopting SaaS platforms."

The shift to software delivered via the Internet marks the rise of a new breed of platforms for application development, deployment and hosting, all available from a "cloud" of services, rather than from traditional enterprise IT. But changes of this magnitude don't happen overnight, and some CIOs have understandable angst about what the shift means to their organizations--and how it can be managed effectively.

One executive who has taken the plunge is Douglas Menefee, CIO of The Schumacher Group, a privately held emergency medical practice management firm in Louisiana. His company's move into the cloud has helped him focus more on strategy and helped reduce staff turnover from 87 percent three years ago to zero in 2007. "We wanted to refocus our people to become innovators, leveraging software rather than supporting it," he says.

Sounds like music to IT's ears, right? It seems natural that CIOs would welcome anything that gets them beyond the burdensome job of installing major systems for, among other things, enterprise resource planning and customer relationship management. The promise of cloud computing is huge, especially for overburdened or budget-strained IT departments.

But many CIOs and their teams may not be ready for SaaS. Forrester analyst James Staten and his colleagues surveyed 20 vendors and 10 customers for a report published in March. In it, the analysts dinged IT departments for what many business executives have already said: The business moves fast, and IT isn't moving fast enough to keep up.

"Slow Shift"

Why not? Respondents cited capacity-planning difficulties, spending restrictions and the lack of resources to handle business requests. Those are certainly valid concerns. Add the fact that many IT departments--like their corporate parents--are change-averse, and the cloud computing pill gets a little harder to swallow.

In his latest book, The Big Switch, author and blogger Nicholas Carr stresses that companies can pace themselves when moving to the cloud model. "There's nothing in the utility model that says all software has to go to the shared utility model," Carr told CIO Insight in a recent interview. "Companies should not think of this as an all-ornothing choice."

As an example of this gradual approach, Menefee and his team at Schumacher have shifted about 50 percent to the cloud. They're taking their time and choosing their shots. That's not unusual: The McKinsey study shows that despite the momentum for service computing, the traditional software license/maintenance model still predominates among enterprise users.

The future of cloud computing offers all kinds of as-yet-untapped benefits. Perhaps when the cloud extends far enough for users to make their own IT choices, they will be able to bypass traditional tech departments, which will enable IT to focus on more strategic issues.

Most companies have a long way to go before reaching that kind of payoff. First, they need to understand SaaS's benefits and then devise a migration strategy.

Finally, they will have to put cloud computing to the test against the realities of their own day-to-day operations.  

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