Software as a service goes mainstream: A tribute to those that made Microsoft’s decision to open its Office happen!

If last summer was that of financial turmoil, this summer may very well become that of the long-seeked change of the software industry. What a month!

Microsoft launches Bing, Google responds with Google Wave. Google announces the Chrome OS, Microsoft responds launching a free Office version. OK, it will still take some time until we see most of these things in the market (with the exception of Bing, but even Redmond’s new search engine in my humble opinion still requires some serious rework), but I have never before seen so many breaking news (and IT industry players making it to the front-papers of all sort of news outlets) in less than a month.

Nevertheless, we should not lose perspective. News these days tend to highlight that this is a battle of “titans”. I think that even though we have two enormous players, we should not forget that this battle would not be taking places if it wasn’t for the entire  IT ecosystem claiming for a change.  The “integrated software” model, initiated decades ago has proven to become more and more a burden to those clients that made caused its rise: corporate clients.

It were the corporate clients who have triggered most of the evolution in the IT industry to its current constellation. Large  corporations were asking “platforms” that would allow them to integrate all sort of solutions. Microsoft was smart enough to become the first of those platforms, other payers (like SAP) have achieved similar success following the same strategy.  But the model had some drawbacks. The first and foremost probably has been –and still is today- that firms suffered a high dependence on a single provider with noticeable pricing power and gate-keeping functions. In times of relative cost unconsciousness this model could work, especially in a context of relatively low IT-knowledge in the higher ranks of the corporations, and consequently with high de-attachment of executive boards and CEOs from IT-related decision . Even more, product innovation seemed fast enough in an environment in which most organizations were busy “automating” business processes. But those times are over. Cost consciousness has skyrocketed, and so have the needs for increased innovation, especially in the world of increased emergent, virtual and collaborative work.

Collaboration, virtuality,  and emergent connections initially were not dominant in the corporate world, but developed in the consumer world, in the world of the young people, in the world of those who had to use technology and who could not afford to spend the big sums that organizations were willing to spend. In sum: in the world of Internet. This is where the “freemium” model was born, dismissed by the dominant players. “Get the basic version free, pay for the premium” has become a business model that is feasible for many of the newcomers (including Google, of course), but not for the established league of software giants. Their rules were different. But now their rules seem not to apply anymore.

In a day like today, in which Microsoft announces that it will move towards its own “freemium” model, we should not forget to thank those that have been instrumental to make this change happen. The news that we are seeing these days are a joint effort of the many small (and some big) companies that have believed for many years that a different software would is possible. With a free operating system – think Linux. With free software pieces – thanks to Sun and Java! With a more open architecture – think Oracle. Try it for free, and then, either you pay per use (and here we go straight to software as a service!), or somebody will pay for you (advertisers, show me something that I value while I use the thing!) And of course, we should not forget all that have build up business models that have made that the final users have gotten used to this new way of functioning: In music (check out SlicethePie, or Spotify), in the telecommunications world (Apple’s application ecosystem for the iPhone or the Finnish operator DNA introducing ad-funded mobile phone subscription), on the Internet (more companies than I can possible enumerate here, look them up at Crunchbase).

Last summer, we did not want to hear the news about the evolutions in the financial industry. But I must say: I am looking forward to IT news this summer!


About Sandra Sieber

Sandra Sieber is a Professor of the IS Department at IESE Business School in Barcelona. Her studies center around the impact of new technologies on organizations and business models.