Tech Strategy (SaaS): How to Not Get Blindsided

 

In a press release from Gartner, Inc. in October 2016, analysts discuss the growth in overall worldwide IT spending in the coming years, “forecast to reach $3.5 trillion in 2017, up 2.9 percent from 2016 estimated spending of $3.4 trillion.”

The bright spots mentioned in the report are the software and IT services segments. Gartner projected software spending to grow 6 percent in 2016, and another 7.2 percent in 2017 to total $357 billion (see table below). IT services spending is on pace to grow 3.9 percent in 2016 to reach $900 billion, and increase 4.8 percent in 2017 to reach $943 billion.

Of particular interest to me is the software segment as this is the world that I live in every day helping clients develop and deliver innovative software products and applications. I have seen the trend each year skew more and more to “cloud-first” or “SaaS-model.” These numbers firmly backup what I’ve seen first-hand, that SaaS will overtake traditional software development sooner than most business leaders and executives think.

For example, according to IDC, the cloud software market reached $48.8 billion in revenue all the way back in 2014. This represented a 24.4% YoY growth rate from 2013. IDC predicts cloud software to surpass $112.8 billion by 2019 at a compound annual growth rate (CAGR) of 18.3%. If you take the Gardner forecast for software with it’s projected growth rate of 1.2% from 2016 (6%) to 2017 (7.2%), and project that out to 2019, software will represent roughly 10.4% of total IT spending or $377 billion. Of this projected $377 billion in software spending, SaaS will have captured 29.9%.

IDC goes on to state that “SaaS delivery will significantly outpace traditional software product delivery, growing nearly five times faster than the traditional software market and becoming a significant growth driver to all functional software markets.” By 2019, IDC predicts the cloud software model will account for nearly $1 of every $4.59 spent on software.

Why is this important? It depends on your perspective and role in an organization.

  • If you are a developer, and have not jumped fully into cloud-based development, WHAT ARE YOU WAITING FOR? This is a fundamental shift in the technology landscape. As big an opportunity as those that learned HTML in the early days of the Internet. This is just as big.
  • If you are a product or project manager, you will (and should) seek out the most cost-effective and efficient way to deliver new applications and features for your customers. SaaS and cloud represent this path for you.
  • If you are a business manager, you will need to be familiar with modern approaches to application development to adjust your expectations and broaden your imagination to what is now possible with a “cloud-first” model.
  • If you are an IT manager, you will need to be well-versed in cloud-based approaches to software development and delivery in anticipation of questions and concerns from your counterparts in the business and product teams. This includes knowledge in areas such as containers, orchestration, 12 Factors, cloud platforms (AWS, GKE, Azure, etc.) and the pros and cons of each platform. How will you organize your existing applications and make the move to the cloud? How will you maintain legacy apps in the datacenter and newer apps now deployed to the cloud?
  • If you are an executive (business, IT product, ops, etc.), you should treat cloud-first as a priority and incorporate it into your strategic plans if you have not done so already. This represents one of the biggest shifts in business and tech since the Internet and the companies that make the move early will dominate. The companies that take a “wait and see” approach will get left behind wondering what happened.

Applications have gotten infinitely more complex over the last 20 years, but the complexity is going to get even bigger with everything related to SaaS and cloud apps being software and governed by software.

If you are interested in how to get a handle your software applications and projects (traditional or cloud-based), check out Mindsight.io, a startup that I am currently advising. They are building tools to increase transparency of software projects, track productivity of the team and ensure the accuracy of their estimates. Mindsight will also enable predictive analytics around software risks, user stories, and code releases.