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Tuesday, June 22, 2010

Has the Traditional ISV Model PaaS-ed On?

The cloud changes everything is a phrase we encounter a lot -- sometimes in present tense, but more often in the future tense, as in "the cloud will change everything."   That word will is potent because it automatically invokes the blinding transparency imposed by its cousin, when?  Answer that definitively and you are accountable and measurable.  Thus your powers of prediction, which seem to have a dramatic impact on one's potential to reach genuine guruhood, are either hailed or ridiculed.  

This form of risk avoidance leads to a stratification in the industry. There are companies that talk about services and the cloud, companies that embrace services related to the cloud and companies that straddle the fence.  One company that seems to get it is Intuit.  

It doesn't seem like that long ago that founder Scott Cook was peddling his wonderfully simple $9.95 electronic checkbook to anyone who would buy it. The blinding focus of technology on what once appeared to be a narrow but pressing need created a company that has remained Apple-like in its ability to build increasingly powerful solutions around simple accounting and tax preparation requirements of consumers and small-to-medium businesses.  For years, the sheer force of Intuit's forward momentum and speed shook off would be competitors like Microsoft Money  and others the way Adrian Peterson shakes off tacklers. Intuit was a poster child, then adolescent in the market space of ISVs. 

In recent years, a new breed of web-based competitors changed the game to try to level the playing field. Intuit responded in the way great competitors always respond -- they didn't just match what other were doing; they raised the bar with a range of web services appealing to their core target audience.  This included offering turnkey website design and hosting coupled with simple SEO.  All this in addition to QuickBooks, Payroll, Point of Sale solutions, Online Banking and a range of other online and offline services kept Intuit at the forefront of the market it created and dominated for years.

But what struck us most this week was a rather simple, easy to overlook statement in a blog in The DataCenter Journal.  In a reference to Intuit, the blog by Rakesh Dogra stated, "The company has grown from being a software manufacturer to a PaaS and web-services delivery firm."  The comment was nearly lost in the larger article on Intuit's recent cloud power outage, but it was striking never the less. Intuit is not a software company any longer but a PaaS and web-services delivery firm.  Now this comes as no surprise to Inuit, which has been touting PaaS for quite some time now.  But seeing it there in black white, written simply and definitively -- literally  as a matter of fact -- was as striking as if I read that Brett Farve was becoming a head coach.  There is logic to it and a natural migration path, but it takes a minute to digest the magnitude of the change.

PaaS changes the way software vendors do business. It creates an affordable infrastructure that simplifies the development and delivery of potentially disruptive point solutions from hundreds of vendors who would never have made it to market under the old, traditional processes and cost structures of product development.  So, it makes perfect sense.  But it is not an avenue available to every ISV, and we have to wonder who else might be able to make the transition and who seems destined to fall by the wayside as the shift accelerates.  

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