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Transforming IT through SaaSification

SaaS – software as a service concept with young man

What is SaaSification? Software as a Service (SaaS) is a model by which customers pay for utilization of a service rather than buying a license. SaaSification refers to the conversion to this model. However, more broadly it refers to a model by which the units of a company are turned into services and provided via software-style APIs.

This mode of interaction is not completely new. Credit card companies, finance and logistics providers such as FedEx and UPS have long provided APIs that allow customers to do everything from shipping to tracking items. While the actual “service” is provided by people with trucks, they are driven by APIs.

Companies also are transforming their internal operations as “services” provided to other units. This serves both as an accounting or operating model and as a way to provide more flexibility to the business. Services can be composed as business workflows via tools for business process management (BPM). SaaSification means that essentially APIs take the place of mail, email, telephone and other communication functions.

What is in it for me?

SaaSified companies reap several benefits. First, they become more flexible. Consider fulfillment as a software service. So long as the product, the amount to be paid, and the destination are the same, a company can easily integrate a vendor’s fulfillment services into its existing process. Moreover, it can potentially provide that service to another firm. Who or how something is done is encapsulated, and by changing a business process workflow or rule, change can be driven more quickly.

SaaSified companies should be more transparent overall. Because the internal functions of the company are provided as services and accounting and performance integrators are built into each part of the whole, it is easier to find inefficiencies and bottlenecks. Moreover, third-party vendors can potentially compete with the firm’s internal services and provide the same kinds of metrics. This can form a kind of internal marketplace where the best services and ideas have a chance to compete in providing the most value for the lowest cost. The metrics built into the system make it easier to experiment.

Saasified companies are also more valuable. Given that integration is a key reason why many mergers and acquisitions fail, having easily integrated and recomposed business units and software functions will add to the company’s overall value to a potential buyer or investors. And, combined SaaSified companies can simply adapt their overall business process workflow and pick between the best internal service providers. By making integration seamless from the start, not only are acquisitions easier but potential buyers receive risk mitigation and may be willing to pay more.

How do I get there?

Begin by making your internal systems into services. This means they run independently, have a REST API and service level agreement, and capture key metrics, including cost. Ensure that the business is aligned with those services. All uses of that business function go through that service. Most or all authorization to perform that service is obtained upfront to get access to the service. This means, if I have access to internal.your.co/ship/createShipment, then I have access to ship things. Compose workflows using a tool like business process management software. The road to SaaSification is started by making your business a series of software services and workflows.

Change the culture from phone calls, emails and informal processes to align with services. Change how rules and processes are obeyed via software. Evaluate company performance at the service level. If more visibility is needed then the service is too granular. Evaluate whether services are meeting expected KPIs including costs, and set goals at the service level. It is the API that is the gateway to a function.

Evaluate third-party alternatives and services based on cost compared to internal services. Is the third-party service compatible but cheaper? Can they really ship from your warehouse for half the price, for example, or are there internal costs such as loading dock workers that have to be decomposed and considered in terms of performance and cost?

Look at your technology and whether it scales. Is it robust and can it scale business services both out and back when business is less robust. This includes moving to service versions of core technologies like security as well as databases. Consider upgrading legacy relational databases to distributed SQL databases which scale out, provide greater reliability and can scale back without data loss.

Upgrading to a services model is a combination of culture, technology and how the business is managed. It cannot happen overnight but the great thing about SaaSification is that it can happen a service or two at a time. Core to this is moving to communicating via APIs and upgrading to scalable technologies.

What organizational changes are needed?

Business organizations should also be aligned with services. This includes IT functions. There may be foundational core technologies and expertise required to run services, but generally application teams, and at least some administrative staff should be aligned with the services themselves, at least for core services (e.g., logistics). Reorganization and process changes should happen at the software level which drives different human actions.

By moving to a SaaSified company you can provide better and more services to the market, consume cheaper and better services than you can produce internally, increase flexibility as change happens and build a more valuable company. These changes are more than just vendors providing services that used to be internal. They are shaping how internal services should happen and how the organization should communicate both internally and externally. As new technologies and business practices become important they can be readily integrated into or on top of an existing service layer.