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Consumption-as-a-Service - The new post-SaaS era

Lance Mercereau
Lance Mercereau
17 September 2019

In our century, the world will witness billions of people stream into cities - the great majority of them into rapidly developing cities. This massive urban development, with seven out of 10 people expected to be living in cities by 2050, will create a new of era consumption as citizens consume services like those offered by Airbnb, Deliveroo, Spotify and Uber.

In enterprise technology, a similar trend has been underway for the more than 20 years - and its continuation will alter how vendors and customers interact like never before. It will also have financial repercussions for software providers.

An Abbreviated History of Enterprise Software

The enterprise software market can be divided into two eras – on-premise and software-as-a service: 

  • From the late 1960s, traditional on-premise software vendors started selling customizable packaged software for large perpetual licenses, supplemented by rich professional services fees and lucrative incremental revenue from maintenance support. These solutions were developed by and for technical users. It was also the good old days for vendors but costly for customers.
  • Circa 2009, driven by deep dissatisfaction with on-premise applications, a new era commenced that involved the emergence of vendors offering software as a service (a subscription model), which is faster to deploy and cheaper than on premise software solutions. For the first time, the business buyer in companies felt in control of what they wanted because SaaS vendors had developed a new customer experience that relied less on technologists to design, deploy and maintain software.

Yet, SaaS customers today remain dependent on IT and ongoing vendor or partner support particularly when the software requires integration with existing systems, change requests and/or if IT needs to source data for a vendor’s analytics product, for example.

Considering the high level of investment SaaS companies spend on customer success teams, it’s not surprising that business users can sometimes feel disenchanted with the continued complexity of SaaS products or solutions.

This disappointment is especially true since we have all been conditioned since our earliest days to be consumers, which today means seeking immediate gratification from using Google to search for answers or buying something from Amazon right now.

It’s here that the tell-tale signs of the post-SaaS era have emerged which will upend the traditional SaaS model of thousands of software vendors by providing customers with the ultimate consumer experience – consumption as a service. 

The Future – Business Software for Consumers

Unlike on premise and software as a service, consumption-as-a-service provides customers with outcomes generated by technology, without the need to set-up and configure the software. In other words, just log in and immediately use, share and manage the business insight presented to you.

This simplification in enterprise technology is a huge step forward for customers.  Ironically, it’s also only possible with the development and application of complex artificial intelligence techniques to automate behind-the-scenes processes so customers have an intuitive consumer experience.

Consumption-as-a-service is a huge leap forward in the evolution of software because it puts customers first - by providing customers with unprecedented speed of deployment, simplicity of use, control, affordability and satisfaction not achievable with on-premise systems and traditional SaaS products. 

So how does Consumption-as-a-Service stack up against legacy on-premise software and software as a service? 

Attributes of Different Software Business Models

Legacy on-premise software

Software as a Service

Consumption as a Service

On-premise software deployment

On-premise or cloud deployment

Cloud deployment

Developed for technologists

Developed for business users

Developed for consumers

Delivered as a system

Delivered as a product

Delivered as an app

Go live in months

Go live in weeks or days

Go live in hours or minutes

Multi-year subscription

Annual / monthly subscription

Pay as you go subscription

 

Reality Check Time

But how many vendors really have a Consumption-as-a-Service business model? It’s an emerging (software) market. One example is RequirementONE, which provides actionable regulatory intelligence streamed to users and connected compliance lifecycle management apps on a cloud platform. There is no set-up for the customer and the technology within the platform processes the data so it’s automatically aggregated, organized and ready for immediate, constant use.

There are other CaaS start-ups which have had to develop a different way to compete against established vendors by mirroring how business-to-consumer companies deliver a service via apps to customers.  

When business SaaS solutions became popular about five years ago, pioneered by start-ups, it was only then that the mega on-premise software companies followed for fear of losing revenue.  For these giants, it was a difficult, slow and costly transition, which required changing their workforces and developing new products in order to compete (read: survive).

The move to CaaS will be just as painful for SaaS vendors. The expense of developing, or re-engineering, a product into an app, or a suite of apps, hosted on a platform that governs data and policies and procedures, while joining up and managing internal communities of users, that delivers a consumer experience, are huge.

These apps tend to be labor intensive and costlier to implement, in part because they need frequent updates in response to user feedback and issues identified in user analytics. Since you’re relying on regular users and downloads and usage to measure success, it’s vital to continually maintain and update the application’s user interface (UI). Quite simply, user experience (UX) holds a lot of weight for this app genre.

Users will also expect a price point below what they currently pay for a business SaaS product, which means an initial revenue drop – and this can only be affordable for a vendor that has other revenue streams or a tight grip on spending.

Fortunately, since the CaaS model is focused on the individual business consumer within companies - and there are far more of them than just those typically targeted with SaaS business products - revenue from CaaS will match or exceed those of pure-play SaaS vendors in the long term.

Research from Bissfully reveals that the average company (with 200-500 employees) spends $2,756 per employee on SaaS products.  In the coming age of CaaS, total spend per employee will increase because there will be more business apps and more users of these business apps. This is good news for CaaS providers, not good for SaaS vendors in the future, unless they change and adapt with the times.

Customer and Revenue reach of CaaS

Today, established SaaS vendors have little motivation to embrace Consumption-as-a-Service because the expense and disruption to their existing business models is too high – but, eventually, as with on-premise before them, they will because CaaS meets the growing expectations of individual and corporate customers.

In the meantime, CaaS pioneers will increasingly take revenue away from bigger competitors until the latter get tired of losing revenue, and then the former will be taken out through acquisitions.

About RequirementONE

Our vision is to provide every compliance organization in the world with actionable and personalized regulatory intelligence – streamed to all decision-makers employees and business systems. The fully managed RequirementONE platform uniquely simplifies compliance by automating the curation and distribution of actionable regulatory intelligence throughout the compliance lifecycle, lowering the cost of compliance management by 50%. To learn more, visit www.requirementone.com