Innovation is a loaded and grossly overused term. To put “innovation” into context, let's take a stroll back to Amazon circa 1996 and compare it today’s Amazon.
Innovation, right? Quite a remarkable difference in just 20 years. How many upgrades or training classes did you take as Amazon innovated and expanded its application and offerings?
That’s multi-tenant cloud. That’s innovation that made us more productive shoppers. We get constant innovation in our personal lives, why shouldn’t we have it in the workplace?
The business world is changing faster than ever before. The technology and business processes that impact software are changing too. It’s imperative to have a software strategy that keeps pace with change through ongoing innovation.
Without innovation, companies become more vulnerable, less efficient and lose competitive ground. Without software innovation, your applications may not deliver the productivity gains that are needed every year to stay competitive.
Headwinds and Tailwinds to Software Innovation
Software’s delivery model directly impacts its pace of innovation. It also impacts the value and disruption that comes with innovation. The right model speeds things up. The wrong one can hold a business hostage, stifling innovation, and the software begins to set like cement.
Multiple Versions of Software
If a software vendor is managing multiple versions of software at the same time it slows down their development team. They have to divide engineering and QA resources to support older versions of the software, plus the additional rigor needed to make sure new versions play nice with older versions.
It’s like building a new house while restoring 5-10 others. At the same time. With the same number of builders as if you were just building one house.
This approach divides focus between looking forwards and backwards. This innovation quagmire is one of the biggest disadvantages of on-premise software or vendors that have multiple software delivery models. If you keep spinning more plates, eventually one will drop.
In contrast, multi-tenant software has one current version of the software and all of its customers are on it. This allows multi-tenant software vendors to innovate much faster. They typically deliver two to three new releases a year with new features, enhanced functionality, and greater flexibility.
The Comfort Zone
On-premise systems take more internal IT resources to manage compared to multi-tenant cloud. This is due to the custom nature of on-premise software and the associated software-hardware-network management burden.
If many of your internal IT resources are deeply immersed in a particular technology, they tend to lose perspective or even the desire for innovation. They are simply too busy keeping the lights on. When the only tool in your backpack is a hammer everything you look at starts looking like a nail.
Cloud software shifts most to all of the management burden to the vendor, leaving your IT organization to focus on business value and strategic innovation. And that’s all I have to say about that.
The Return on Innovation Investment
If a software vendor is managing multiple versions or multiple “clouds”, the bang for their buck goes down. Investing in a new capability, be it an application feature or a performance improvement, requires more resources because it has to be implemented multiple times. This leaves private cloud software vendors stuck making difficult choices that should be easier to make.
By contrast, multi-tenant software investments are applied once and everyone benefits. The efficiency of multi-tenancy delivers greater ROI for customers and directly benefits the software vendor through happier customers. Win win.
Cost & Disruption
Upgrading on-premise software (or hardware) costs money and can be disruptive. This fact puts you, the customer, in a challenging predicament. Should you upgrade to get the innovation?
Is the upgrade giving you enough value to justify the cost and effort? What if you just stay on the current version? Will your end users be okay if you just continue to use the old version for a bit longer? What all do I have to do to implement and support this upgrade?
The answers to these questions can be costly, literally or figuratively. As a result many companies opt to skip a few upgrades until their users just can’t take it anymore. Or until they get additional funding. But by that time you are dealing with a change management nightmare since your users basically just woke up from a five to seven year software coma.
It’s like going from a flip phone to the latest iPhone or Samsung Galaxy. Learning curves aren’t meant to be so steep that half the people slide back down and revert to manual workarounds.
Visibility and Insight
This aspect of innovation is simple, and quite trendy. Big Data, Data Science, Machine Learning, and all that jazz. While there remains some skepticism around those new obsessions, it is undeniable that the more you know the more informed decisions you can make.
How customers are using software is very valuable information to a software company. It’s golden data that tells us vendors what is going well, where we need to innovate, and what needs attention. Adoption patterns, what do users struggle with, how long do screens take to load, how much data is there, how is one customer doing compared to their peer group.
Multi-tenant cloud software gives a vendor 20/20 vision. Private cloud makes it possible to get visibility but harder to aggregate and benchmark. On-premise software leaves the vendor blind. The smarter your vendor, the more proactive they can be and the more thought out their enhancements are.
Depreciating or Appreciating Assets
Innovation comes at a cost. The difference in software models is who pays for the innovation and what burdens it puts on the customer.
If you purchased a car 10 years ago, chances are it did not have backup cameras, blind spot indicators, or 12 airbags. If you want to upgrade to benefit from the safety innovations of the past ten years, you need to get a new car. This is akin to the on-premise software model. Buy a depreciating asset, deal with it for as long as you can tolerate, then spend money to upgrade.
In the multi-tenant cloud model, the software is an appreciating asset. New innovation becomes available with your subscription (license) and it is applied to the current and only version of the software. Typically in two to three releases a year. And features are default off until you chose to leverage them.
This model is not unique to enterprise software. Take a car, like Tesla. Today a "tune up" is parking your Tesla in your garage, connecting it to your wifi, and letting Telsa run diagnostics and upgrade the car's software systems.
Imagine that scenario in a private cloud - Tesla would have a server in the cloud for every car? And cars would be on different versions of software?
Aside from the expense, lack of aggregate visibility, support complexity and general chaos, can you imagine the liability exposure? And how would that impact Tesla's quality and brand? It’s untenable.
Expert's Guide to Evaluating Software Series:
Chapter 1: What Really Matters When Making Software Investments
Chapter 2: Defining Software Models
Chapter 3: Security & Scalability
Chapter 4: Total Cost of Ownership
Chapter 5: Innovation
Chapter 6: Flexibility
Chapter 7: Conclusion
Chapter 8: 20 Questions You Should Ask Vendors
Frank Defesche began his software career at Trilogy Software in Austin, TX, an on-premise software company. In the summer of 2000 he joined salesforce.com as one of their first consultants. In a world dominated by on-premise and home grown software, he was faced with the challenge of translating traditional software processes to an emerging cloud paradigm. He was part of the cloud’s first chapter and has lived it ever since. He currently serves as the SVP and General Manager of Veeva Systems and is responsible for expanding Veeva’s solutions to industries beyond Veeva’s life science beginnings.