Being both a platform and services company in IT and a media company servicing the IT sector, I am often in discussions about the new model for IT and services companies. There is no question that Wall Street has shunned the pur services businesses – and with good reason. While in the late 1990′s there appeared to be predictability in this sector, it is clear that at this point the businesses in that sector are not able to have long, predictable pipelines and in terms are always in a shaky position from a long terms perspective.
With that in mind, the apparent obvious answer would be to be more product centric and not service focused? But wait. Look at what is going on. There is no question that the open source movement is having a material impact on the IT product sector. Look at what has happened in the world of Web Content Management Systems. For sure, there are many excellent products out there that a company can purchase. But also look at the open source solutions. Not bad and getting better all the time. They have become a definite realistic alternative. And this is coming from someone who has invested a lot of money into the building of a Web Content Management Solution.
So – then let’s go to a Software as a Service model? Isn’t that the way to go? Not so fast. Look what is happening there? The low switching costs involved with a lot of these solutions make the long term predictability model very difficult to forecast.
So what is it? Our opinion, and the trend with a lot of companies these days, is that the model is some sort of equilibrium between all three. What is the combination, no one knows for sure. But watch and see and you will see product companies offering more services, service companies offering their services related to product solutions and product derivatives, and everyone testing the waters again in the SaaS model…