Is it Software-as-a-Service
or Service-as-a-Software?

Why services businesses should aggressively be building custom software
A lot happens in 15 years
Back in the early 2000's the concept of large businesses adopting software-as-a-service ("SaaS") for core enterprise systems was considered high risk. At that time, the general thinking was that commercial, enterprise software packages under the management and control of your own IT department was the best choice.

As a founder of one of the first enterprise SaaS vendors in the logistics space, I was fortunate to be at the front-end of enterprise software transformation. From 2000-2003 our small SaaS startup Elogex convinced Kroger, Safeway, Hannaford, Publix, Home Depot and other large enterprises to adopt our software-as-a-service for management of their logistics. The benefits of our SaaS offering were very clear and obvious (once IT execs were comfortable with the "risks").

It was clear to us back in 2001 that software-as-a-service would win the war over enterprise software.
Here is what we clearly see happening now: Service companies will become software companies. Let's call them "service-as-a-software" companies.
These next-generation, software-driven services companies will all win their respective market-share battles over the next 15 years.
From back-office to customer user experience
(evolution of software within a services business)
Fifteen years ago it was easy to distinguish a software-as-a-services tech business from a "standard" services company. Today, the worlds of SaaS and services businesses are converging. The primary reason for this convergence is that software is increasingly involved in the end-user customer experience of service delivery.

Let's say you are a services business. It's likely that you are finding that you need mobile applications to offer to your customers. It's likely that your customers are asking for analytics and APIs so that they can use the data you produce. It's likely that your employees are under pressure to be more efficient — so you are constantly looking for ways to automate your business processes. And you probably have some startup trying to disrupt your industry. Many of the characteristics that define your competitive position in your marketplace are driven, if not defined, by software.

As a result, software has moved from the back office of a service business to the tip of the spear. It's common for services businesses to be evaluated based on their software user experience and capabilities. Essentially they are winning (or losing) business based on the strength of their software and their user experience. With tech at the forefront, selling any service is not unlike selling software-as-a-service. The worlds of software vendor and service vendor are colliding. The logical output of this collision is that the service companies with the strongest software and best customer experiences will win.
The "full stack" business
At the same time that services and software businesses are converging, we're seeing a transformation of service industries. These transformations (or disruptions) are largely enabled by software.

One of the most successful services companies of our current time is Uber. While everyone loves to cite Uber as a defining product category ("Uber for [x]"), we like to use Uber as an example of a "full stack" services business.

Chris Dixon wrote a blog post on the Full Stack business in 2014, where he explained that a new category of startups is building "a complete, end-to-end product or service that bypasses existing companies."

In this article Dixon states, "The challenge with the full stack approach is you need to get good at many different things: software, hardware, design, consumer marketing, supply chain management, sales, partnerships, regulation, etc. The good news is that if you can pull this off, it is very hard for competitors to replicate so many interlocking pieces."

While Dixon and his VC firm Andreessen Horowitz view this emerging model as attractive for startups (more on this topic), Castle sees this full stack approach as strategic consideration for the "existing companies" in a market. Existing services businesses likely already have the "supply chain management, sales, partnerships, regulation etc." — perhaps the only thing missing in a bigger strategic vision is the enabling technology.

While the full stack model may not apply to every service business, there is certainly opportunity for every company to evaluate the total customer experience and business process to determine what can be consolidated and controlled to yield higher returns. How full stack can your business be?
Software delivers your total customer experience
As services businesses evolve into software companies, executives need to adjust their perspective on the role and purpose of software in relation to their business strategy.

In the full stack discussion referenced above, Dixon notes that control over the customer experience is the key to unlocking greater share of the economic benefit a service provides. If we use Uber as an example, we can see how it consolidated a fragmented customer experience to become completely under its control.

Before UberCab launched in 2010, the business process of getting a taxi included multiple parties:
Fragmented customer experience prior to unified software platform
Prior to Uber, the customer experience for arranging a taxi involved 7 different players and systems, all of which added up to a poor experience. Uber consolidated this customer experience under the control of its own fully integrated software platform, delivered a superior customer experience, and disrupted their industry as a full stack business.
Full-stack customer experience enabled by software
Executives at Uber view their software platform as the single most important enabler of their full stack customer experience. Of course they need drivers, vehicles and customers; however Uber's mobile applications / software platform is the foundation for pulling all of this off.
If you were to disrupt your own service company with a new software platform, what would it look like? Our guess is that your vision is not what is in operation today.
The role and purpose of software in today's service business is to deliver your total customer experience.
How to become more like a software company
If we accept that the convergence of services and software is here today, then what should services businesses do if software development is not in their DNA?

  1. Hire or partner with someone that truly understands software products and trends. You need a digital product person. This is typically different from an enterprise CIO or VP of IT (these people typically focus more on existing tech than creating new tech). Software product experts have prior experience in solving problems with software and taking concepts from abstract business goals to great software in production. It's impossible to be more like a software company without an experienced guide.
  2. Consider how your customer experience can be enabled with software. Map out your entire service delivery across all the players and roles and try to envision how the sum of your customer experience could be enabled by a single and unified software platform that is accessible and operable by your customers.
  3. Make a software product roadmap. Take your big vision and create a roadmap to achieve it in phases with target dates. The plan should be logically sequenced, but ideally should provide customer value early and borrow from the "minimum viable product (MVP)" concepts commonly utilized in startups.
  4. Build your software rather than buy it. Services businesses are becoming software companies. This does not mean that you are buying a bunch of software packages from vendors and integrating it together. You need to build your own custom software to empower your differentiated and market leading customer experience. Sure there is room for some third party tools for your back office and sales team, but in order to be the market leader, your customer experience should not be based on the same software as your competitors use. Your software needs to win you new business. It needs to be truly yours.
  5. Offer your software to your customers. As mentioned earlier, the purpose of software is to deliver your total customer experience, which means that your customers should realize increased levels of value through the use of your software.
In our opinion, services businesses should be building their own custom software with a "full stack" vision for their offerings.
A lot will happen in the next 15 years. It's a huge opportunity for every service business today to leap ahead of competitors by leveraging this software-as-a-service / service-as-a-software business convergence. Feel free to contact me at [email protected] to discuss more.