Dani Shomron had an interesting blog post over the weekend discussing some reasons ‘Why Traditional [On Premise] ISVs Will Fail on SaaS’.  In the post, where he compares traditional ISV’s to dinosaurs, he makes an excellent point that it often comes down to a DNA issue.  ISVs “have a product view, not a service view. Their emphasis is on features not serviceability.”  I think it’s a very valid observation.  Clearly there are significant philosophical and organizational changes that are required when an company shifts from an On Premise to an On Demand model.

But there are a couple of key points that I think Dani misses on.

First, the mastodon in the room to borrow a phrase, is that most ISVs have an overwhelming desire to protect  current revenue streams (i.e. the status quo).  They don’t have the real committment to or belief in SaaS, but offer it as an afterthought, if at all.  And often it’s done under the auspices of opening new market segments (e.g. SAP’s contention that their Business ByDesign SaaS offering is an alternative for small to medium businesses that can’t afford their core product) or as a defensive measure.  With that perspective the organizational changes that Dani talks about will never be achieved.  But that’s OK because the wholesale move to SaaS is not the desired outcome.

In Dani’s example of a company that made the committment to shift to an On Demand model, he highlights the fact that the Board brought in a new CEO and changed almost the entire executive staff — save the VP, Engineering.  I don’t doubt that these moves were criticial to success in that situation.  Now I understand that perhaps there’s a feeling that you need to keep the technical talent that knows the product.  But this is a decision that I think can really kill the transition from OP to OD.  Dani was 100% right about need to to have a “service” view versus a “product” view and understanding the need for “serviceability”.  But this leads me to my second point.

As I had written before, one of the critical philosophical  changes that engineering organizations must make is to move from a purely software engineering mindset to a systems engineering mindset.  It’s so important that the engineering teams architect and design an On Demand system with data and application availability, reliability, security in mind and understand how changes in the application can affect operations.  If the engineering team gets that wrong all the other organizational changes will be for naught.

Time and again as we work with ISVs to evaluate On Premise to On Demand product transition strategies, we see that the evaluation of the current product’s ability to support an On Demand model is under-estimated, resulting in unrealistic expectations.  Therefore, making sure that the engineering organization has the underlying On Demand DNA is extremely critical to a smooth transition.