Late last week I was talking to a colleague on the phone, he mentioned to me that he was reading a book that I might have an interest in; The Big Switch, Rewiring the World, from Edison to Google, by Nicholas Carr.
Historically I’m not a big book reader, I prefer to wait for the movie, however his synopsis really intrigued me….comparing the use and distribution of electricity 100 years ago to Software-as-a-Service (SaaS) today. I started reading the book Thursday night and WOW, the similarities hit me “right upside the head”, and just reinforced that what we are doing at CUSP is right on the money.
Keep in mind while reading this article, the ideas that prompted me to write it are from this book, I’ve put my little spin on it, however I would highly recommend reading The Big Switch. Some of you in the Information Technology space may recognize the name Nicholas Carr as the author of the article “Does IT Matter?” originally published in the Harvard Business Review in 2003 and later expanded into a book.
The premise of this article was that large corporate IT infrastructures were a necessary part of business; however he argued that IT was not really that important to the success of the business. You definitely could not operate without IT but systems were becoming so commonplace that they no longer provided one company an edge over their competition. That brings us to THE BIG SWITCH…..
When Edison discovered electricity the common idea of the time was all companies would have their own generators, producing their own electricity, at their individual locations with steam engines, dynamos, etc. This was way too expensive for individual households, so unless your name was Vanderbilt and you built a 200,000 square foot mansion in the mountains of Western North Carolina and could build your own electric generating plant families lived without electricity.
About 100 years ago companies stopped generating their own power and plugged into the newly built electrical grid. What made this possible were a series of scientific and engineering breakthroughs; electricity generation, transmission and new electric motors. But what really assured the success was the economics; the economies-of-scale achieved by these new electric utilities could not be matched by the individual factories producing their own electricity. In order to stay competitive manufacturers had to hook their plants up to this new electric grid to get the cheaper source of power.
Does any of this sound familiar? Since the first large mainframe computers were built companies have been “generating their own IT power”. The annual revenues realized by hardware and software vendors are in the trillions of dollars. They keep creating something new, and we keep buying it and replacing what we already have. Year after year trillions of dollars are spent, supposedly, providing something new in hardware and/or software that are going to give us “the edge” over our competition.
Just like in the 1800s when companies kept improving how they created power to be more efficient and increase production, today we do the same thing with IT infrastructure. At a certain point in time it became more economical to tie into the new electrical grid and share the economies-of-scale with everyone.
That is exactly what SaaS is today. We no longer need to keep spending trillions of dollars every year on new hardware and software. The SaaS model today is the same as the mass electrical grids of the early 1900’s.
The benefits are blatantly obvious:
• It’s less expensive, no capital expenditures and no operating expenditures. Studies have shown that the cost to operate an on-demand SaaS solution is less than half of an equivalent solution purchased the normal way
• The SaaS provider carries all the cost for the technology, hardware and ongoing support. IT departments no longer need to worry about the delivery and maintenance of a software application
• The SaaS solution can be deployed in days or weeks, not the months and sometimes years it takes to deploy many on premise software applications. The ROI for these applications is realized almost immediately
• The failure rate of large CRM and ERP applications is very high, the SaaS solution minimizes these risks for the organization
• As in the economies-of-scale discussed earlier for the large electrical grids in the early 1900s, the same apply to the SaaS solution. There is no need to determine what features and functionality you require, everyone on the SaaS platform gets everything. Organizations are not buying functionality that they may never use; they already have it with the SaaS solution
• CUSP is focusing a great deal of energy on Security Certifications, sound infrastructure and regulatory compliance. It is virtually impossible for an individual organization to keep this current. We can easily argue that our on-demand SaaS Solution exceeds the security, compliance and infrastructure of what most organizations provide themselves
In summary I believe the evidence is there to reinforce that the business model we have built at CUSP Point Software, as a SaaS solution is the present and future of Information Technology. Just like it became cheaper for companies to buy electrical power from the electrical grid, it is now becoming more economical, not just for large companies, but individual households, to buy IT Computing Power from SaaS companies over the “new grid” - the internet.
More and more organizations are using products like SalesForce and other hosted solutions as well as individuals using products like Carbonite for real time PC backups over the internet; it no longer makes financial sense for us to be spending trillions of dollars a year on the “latest and greatest” technology that is simply replacing something we already have. The CUSP on-demand EDM approach is un-paralleled in this industry today; we are setting the new bar by continuing to deliver our PaperTrail solution.
Nick Bova
VP US Sales
