09.26.07

Although BEA’s President and CEO, Alfred Chuang, predicted the “end of the era of packaged applications“, he was beaten to the punch by Bob Crowley (president of Bowstreet).  Crowley beat this prediction by seven years actually…  Crowley’s prediction is from the year 2000.

It is ironic here that my link is from AMR, as one of my favorite AMR analysts, Jon Fontanella, is at our Global Headquarters today for our annual Managed Services Forum — and he was strong in his belief that packaged applications will be with us for “a long time”.  Jon has been very consistent on this, but it is in no way due to a lack of enthusiasm for the SaaS (Software as a Service) model — it is just that enterprises do not abandon technology that is working for them and mission critical, at least not quickly.

The world is full of cautionary tales of ERP implementations that were full of pain, cost, and expensive consultants.  Less discussed, but not difficult to find, are companies running such implemented software very successfully and not eager to commence a new implementation — any implementation — anytime soon.  Where existing packaged applications are in place and performing well, they are going to remain.  Moreover, thousands of IT professionals that have worked in these shops are able to leverage their experiences and skills to increase the success rate of downstream projects.

Software as a Service is well suited to areas where traditional packaged software often disappointed.  If you want to get up and running quickly, SaaS is a great alternative.  If you need to scale cost as well as capacity, SaaS is terrific.  But if you already have an ERP system in place, it may well make sense to add a module, to leverage the shared data model.  SaaS versus packaged apps will be an “it depends” for a long time.

This whole discussion reminds me of the debate about XML and EDI.  When XML was skyrocketing in popularity, many thought it would replace EDI.   When that didn’t happen, people interpreted that as a failure of XML.  Both of these perspectives missed a key point, while new technology or business models will cannibalize some existing competing alternatives, the biggest impact is from addressing new markets or unsolved problems. 

I believe that SaaS will have a huge impact on the packaged applications market, I just don’t believe it will end it…