Johannesburg, 15 Dec 2021
Imagine going to a restaurant, ordering a fine meal and only eating a fifth of it. That is terrible value. Not only won't most of us do that, but we are likely to ask for a takeaway/doggie bag to take the leftovers home! And yet, we do this all the time with business software.
It's often said most software features aren't used. Research in 2020 from the Standish Group verified the claim: Only 20% of software features are often used, 30% are used infrequently, and the remaining half hardly or never. When the researchers looked at package applications such as Microsoft Office, 20% dropped to 5%!
These figures affirm what many already knew anecdotally. One of the most problematic areas of acquiring an extensive software suite is creating value by selecting suitable modules and training and hoping that too many unused features won't pad the total cost of ownership. But in recent years, the picture has shifted dramatically. Thanks to cloud platforms, we now operate in a world where customers can pick their functionalities, provided by independent software vendors (ISVs).
The new software paradigm
Let's do a bit of jargon juggling. ISVs are third-party providers of services to original equipment manufacturers (OEMs). In the software world, an OEM would be a major software vendor such as Sage. In the traditional software paradigm, the OEM would make most of the software modules and package them together in one behemoth offering. Customising such offerings is often expensive and limited.
Cloud platforms open the doors for a new type of software relationship. Like a smartphone app shop, the OEM provides the underlying core system, and third parties add extra capabilities that customers can select. Android might not have a native multi-stage timer exercise app, but you'll find several on its app store.
Today's ISV is that third party. They can partner with a prominent cloud-based OEM platform, offering specific specialised capabilities to the platform's users. For example, a cloud-based accounting suite can help a business manage its finances, but it may lack a stock management module. In days past, adding that module would be costly – providing it existed at all. But in the new platform paradigm, the specific instance of the software can add a stock management module from the platform's marketplace.
Benefits for ISVs, customers and OEMs
ISVs must take note of this trend and select the best partner platforms. Foremost, these platforms can give ISVs a global reach across thousands of customers, and the ISV can generate a continual revenue stream through subscription payments. Second, an ISV can specialise and still make a profit. I can cite examples of ISV products that do one thing: Stamp an invoice, integrate a specific data stream, or grab an OCR (optical character recognition) scan of a document. Some are very exotic, such as a sonar service that pings fuel tanks and calculates evaporation rates.
Customers benefit as well. They stop wasting money on unused features, and they don't have to wait for an OEM to develop a specific capability. They can also trust ISVs because the third parties are vetted by the core OEM and apply the OEM's security, governance and QA standards. Best of all, it can be as simple as visiting a marketplace and downloading the appropriate service – just as with an app store.
And OEMs stand to gain the most. Software development can be very intensive and long-winded. A new feature idea needs to join the roadmap, go through various development and testing stages, and eventually be part of a major roll-out. This process assumes the OEM is even competent in the feature it wants to develop. But ISVs are specialists and, therefore, naturally qualified in their chosen field. They develop and test features much faster, and the marketplace means there aren't delays such as requiring major roll-out updates.
Growing economies through partnerships
For me, the last key point is that ISVs are an excellent way to grow and support economies. ISVs are often small businesses, even one-person shops, and they generally don't have the scale and resources of OEMs. The cloud platform route, though, gives them access to grow and excel. We've already put this in practice, recruiting 15 local ISVs from disadvantaged backgrounds, offering them enterprise development training to bolster their businesses. Yet, it's not philanthropy or charity: We chose these ISVs because they add value to our platform and customers.
And platforms add value to ISVs. Platforms help them access modern, mobile-centric and software as a service markets. Through platforms, ISVs can anticipate and participate in ecosystems such as big data, edge computing and artificial intelligence.
The ISV of the future is part of a collaborative, multi-layered community, exploiting the scale and investment that the top OEM platforms provide. For me, this development is one of the most exciting advances I've seen in my career. ISVs should be excited, too: This is their time to shine. Discover Sage industry-leading apps to help you do business, better.
By PJ Bishop, Vice-President: Services for Sage Africa and Middle East
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