The Application Software Suite is Yesterday’s

News
By Michael A. Braun, Intacct

I’ve been in the technology business for 36 years. I’ve got all the pluses and minuses of that
experience, both scars and medals. When it comes to software – especially business
application software - there has always been a large market for both best-of-breed (BoB)
application solutions and multi-product “suites” – a group of applications from one vendor that
is pre-integrated to work together. The wars between these vendors are legendary.

But the Internet has changed the balance of power in this long-standing battle. Today’s
Internet-based computing platform and Software as a Service (SaaS) delivery model enable
customers to choose the superior function of BoB solutions with confidence. Indeed, the suite
is “so yesterday.” It was born during the client/server computing era to solve a set of
technology integration problems that the Internet and SaaS have rendered obsolete. And in
the eyes of many customers, the suites did a mediocre job solving those problems anyway.
Many view the suite as something that turned out being better for the vendors than the
customers. Indeed, client/server computing and on-premise enterprise software will live on for
decades; but they are yesterday’s news. The all-in-one software suite is part of that bygone
era.

The History of Best-of-Breed vs. Suite Products

Let’s start by looking at the world before SaaS. The dominant computing platform for business
applications evolved through four major generations from mainframe to minicomputer to the
desktop; and in the 1990s, client/server became the dominant computing platform by
blending the best of the prior generations. These first four generations had two things in
common. First, application software was delivered to customers using the on-premise model.
They bought application software, infrastructure software like databases, and hardware; they
installed it and were responsible for all facets of operations – integration, backup, availability,
security – everything. Second, each platform era had different leaders in the applications
business and each era supported a market for both BoB products and suites.

Before the SaaS/Internet era, the typical computing era began with dominance by new BoB
players. Why? The incumbents found it nearly impossible to divert resources from their large
successful business to build something truly new that would deliver innovation made possible
by the new computing platform. So, the innovators were small startup companies with limited
resources to create complex applications for major companies. They had to keep focused on a
single BoB application to be successful. As each era evolved, suites emerged. Some companies
added applications to their core organically, and others created suites through vendor
consolidation.

The suite rose to prominence in the 1990s. It arrived on the scene to solve a customer
problem created by technology proliferation. Old world computing models were complex and
none more so than three tier client/server. The technology was characterized by many
different platforms, server operating systems, databases, application servers, client operating
systems and limited interoperability standards.

The customer was totally responsible for implementing and integrating both business
applications and the dizzying array of complex infrastructure technology components which all
had independent upgrade schedules and dependencies.

If a customer had an Enterprise Resource Planning (ERP) system that ran on AIX, Websphere
and DB2, and then acquired a company that used a Supply Chain application running on
Solaris, BEA, and Oracle , it’s easy to see the challenges. The technology proliferation and the
need for the customers to perform their own integration between all these systems created a
nightmare for them.

In addition, enterprises were also responsible for all IT operations. Each company had to have
specialists - database administrators for different databases, for example – security systems,
systems management, backup procedures, and so on. The customer was also responsible for
system upgrades, not just for application software but for the underlying infrastructure as
well.

The computing model drove the delivery model: on-premise software. But the delivery model
created this incredible technology integration problem with wide-ranging effects. It
dramatically slowed the adoption of software and became a huge sales obstacle. Vendors
couldn’t sell new products because the customer was using all its resources integrating and
maintaining current systems. Many customers turned to system integrators or other vendors
to outsource the integration work or even the whole IT function!

The Trouble with Suites

Suites arrived as a “solution” to this problem. Software vendors said they’d help customers
with their integration needs by developing a suite of applications that were pre-integrated and
built on a common technology base.

The suite was a great idea but it never really delivered on its promises. Even as it fixed some
problems with the on-premise application software model, it introduced several new ones:
• Inconsistent Quality – All applications were not created equal. Some pieces of a suite
would provide excellent functionality but others were considered inadequate by users.
Inevitably, some business problems needed solutions that only BoB providers could deliver
and that meant customers again were thrown into the integration morass that the suite
was supposed to solve.
• Long and Painful Decision Cycles –Because the applications in a suite would often
serve many areas of a company, buy-in from every department involved usually took a
long time. Because the applications had inconsistent quality, the need for compromise
created organizational winners and losers.
• Expense – In order to get a full solution and several applications, the price tag tended to
be a substantial one, with implementation costs far exceeding the cost of the software
itself.
• Slow and expensive innovation cycles – The sheer size of the suite offerings combined
with the vendor’s need to test all new features with every permutation of application and
underlying infrastructure delays time to market for new features. This forces customers to
fend for themselves and when the new release does finally arrive, implementation is made
even more challenging by the need to rationalize customer customizations with the new
release.
• Vendor Lock-in – After a customer bought the suite and implemented it across the
company, switching costs became significant and many enterprises became reluctant to
tear out the suite to put in something new.

The Internet and SaaS Change the Game

Today, everything has changed. The Internet has created a fundamentally new computing
model which revolutionizes how customers use and buy application software for businesses of
all sizes. SaaS is made possible by the Internet. With this delivery model, customers select the
applications they need, when they need them. They pay for what they use.

For customers, there is no more platform proliferation problem. There is nothing to install and
maintain. The integration problem is no longer theirs. SaaS application providers are service
businesses like Intacct and salesforce.com, who must make their systems work together.
Fortunately this is no longer a problem either, as interoperability is the very core notion of the
Internet computing platform. Standards have arisen to make this interoperability work– SOA,
XML, HTTP, etc. These Internet standards are open for anyone to use. The technology
infrastructure is left to the vendors to integrate and they must deliver functionality to the
customers. Essentially, SaaS vendors are offering a utility – backup, storage, maintenance,
integration, everything!

As consumers, we see the power of the Internet to integrate applications on almost every
screen we view on the Web. Screens are a composite of content and applications from a
variety of BoB vendors and publishers. It’s all integrated using the Internet platform. We didn’t
need a single “suite” vendor to do it all for us.

In the old world, client/server computing drove on-premise software and problems with both
of these models drove the application suite. In the 21st century, these problems are gone.
Internet computing and SaaS have given customers a world where they don’t have to install,
maintain, or integrate software and hardware. This model is so powerful that customers with
suites installed are leaving pieces behind to adopt best-of-breed offerings from SaaS providers
like salesforce.com, Intacct and Success Factors Without the challenge of integrating complex
operations, the need for suites disappears. Undoubtedly, there will continue to be suites and
consolidation of product lines in the industry, but the balance of power has shifted back to the
BoB applications.

Advantage: Best of Breed

In the SaaS world, BoB applications will be stronger than Suites because the benefits for the
customer are significant.
• Faster and better decision process – Deciding on a single business application is just
easier than deciding on many at the same time. Fewer people involved, less complexity
and better data lead to better and faster decisions that improve ROI.
• Faster and better implementations – Reduce the complexity and get to value sooner.
No one can implement multiple applications all at once, so BoB projects happen in a
fraction of the time it would take to implement a suite.
• Better function, expertise and support – Like specialists in any field, BoB providers
have the focus and depth to deliver superior results on these dimensions.
• Simplified Switching Process – If a customer decides that an application needs to be
changed, it is easier to switch and install a new BoB application than a whole suite.
Mergers, exec changes, and growth are all things that can drive this need.

In the end, if you asked 100 business application software customers if they were happy with
the suite concept, I’d bet that you’d hear that it didn’t work out so well. The reality never lived
up to the promise.

Operating in a Non-Suite World

SaaS vendors and other BoB Internet software vendors have to rethink many of the long-held
practices of the software business. Here are a few that stand out.
• Leverage Expertise & Partnerships - At Intaact, we solve business problems in the
Accounting/ERP area. That’s our area of expertise and we plan to stick to that area in
order to continue delivering the best solution available. To offer expanded functionality in
closely-related categories, we partner with other vendors in areas such as CRM, HR and
manufacturing/ resource planning. To make sure our products work seamlessly with BoB
products in these categories, we will do the integration work ourselves – we don’t ask the
customer to do it. This delivers superior functionality to the customers who want suite-like
interoperability and BoB functionality.
• Develop New Channels - We have a SaaS product that is very channel-friendly but we
have just begun to work with traditional resellers. We’ve traditionally focused on
 developing relationships with other types of partners. Some have taken us into vertical
market niches, such as property management, private equity, managed health care,
restaurants, non profits and homeowner associations, to name a few. Some of these
partnerships have increased our adoption in very small companies, such as CPA firms.
• Use Satisfaction as Marketing - The more customer successes we have, the more
positive word of mouth we have – that’s the biggest single type of marketing we’ve got.
Google’s never done a single ad yet it maintains a base of fanatically happy customers.
We’re spending the bulk of our marketing money on our customer satisfaction program.
We’ve got an industry-leading approach in which we measure customer satisfaction
quarterly and compensate employees based on the results.
• Emphasize Incremental Innovation – The pace of innovation for SaaS vendors is
significantly faster than for on-premise vendors. Since there is only one version of our
software and it is on a standardized platform, we can deliver a consistent stream of
refinements to application functionality and features. We roll out an updated version of our
solution each month, and our clients are always on the latest version. On-premise
developers have a much more complex infrastructure to work with and need to test all
enhancements on each combination of the various platforms their software runs on. This
means these vendors spend a huge percentage of their time testing, instead of improving
their solution and delivering the enhancements requested by their customers.

Of all the new models I’ve seen in more than three decades in the software industry, the SaaS
model is the most profound change I’ve ever seen. It creates a more rewarding experience
and investment for the customer and a more efficient operation for the vendor. The benefits
aren’t exclusive to one side or the other. There’s simply been nothing like it.

Michael A. Braun is CEO of Intaact. He currently serves as Lead Independent Director on the
Board of Callidus Software (NASDAQ: CALD), and is also on the board of Boardwalktech.