11.02.2015

Mass-customized Applications, Solutions and Services (MASS)

SAP just recently rang the bell at the NYSE and launched S/4 HANA. As often the case, the software giant comes seemingly late with their game changer, but with a relatively mature release. Well, we will see which game is eventually changed with S/4 HANA. The company’s ecosystem of hundreds of thousands of experts and countless channel partners, integrators and innovators are adapting to the disruption and translating SAP’s launch to their business models.

It has been evident for a while that cloudification of enterprise software is changing the game. The primitive reaction was that it will annihilate the business of SI’s (Systems Integrators) but in fact, the outcome will be quite the opposite.

Consider enterprise software investment to be valued at 100. Back in the day, the split between software and implementation was roughly 1:6. Today it has been already levelled to about 1:2 and sometimes 1:1, even to 1:0,5! Consumer-grade apps are by definition 1:0 and still suit the needs of the most demanding users. These ratios depend heavily on the customer’s appetite for customization. The trend has been reducing this appetite and believers in “good-enough” come in stronger numbers. On the other hand, the 100 will be split into more components than before and spread out over a longer investment period than before. And the shift from CAPEX investments to OPEX investments will continue. So what is changing and how?

The 100 will split into several streams. And the 100 will soon be 50, if not less. Is 50% of the business lost? No, because the threshold for accessing enterprise-grade software solutions will be lowered almost to consumer-grade markets and by means of multiplication, the addressable market will expand radically. My estimate is that share-of-value will be redistributed across software developers (such as SAP), cloud providers, mass-customized application and solution developers (former SI’s) and service & maintenance providers. As cloud is already now commoditized, it will merge with the most logical partner in the value-chain.

This new business I like to call MASSMass-customized Applications, Solutions and Services. MASS exploits and builds on standard cloud solutions and platforms and bridges the gap from standard to custom by means of mass customization. Mass customization means combining the low unit costs of mass production software with the flexibility of individual customization. These applications and solutions will build on its developers’ inherent competencies, be them industry specific, process specific or solution verticals. MASS amalgamates different solutions and even entire platforms into one. Combined with refined service provision, MASS translates technology into superior customer experience and differentiated competitive advantage.

The pre-historic paradigm of “first cementing in the ERP foundation to build on top of” is long gone. Now businesses are supported by fit-for-purpose solutions. Commerce-Driven-ERP and Data-Driven-Development are two suitable examples where purpose drives the enterprise application framework. Commerce-Driven-ERP as MASS means that an enterprise application is designed entirely from a commerce perspective. If the end-solution requires traditional ERP processing, only required elements are included as modular components. Kind of an upside-down approach. Data-Driven-Development is not a new term and is a little ambiguous. My take on it is that assuming ‘data is everything’, one must harvest all possible data and generate value-adding solutions and business from this data. In the digital age this comes in many shapes and colors like Big Data, Internet-of-Things, Analytics Everywhere – you name it. Possibilities generate opportunities. As Konecranes’ CEO Pekka Lundmark stated recently in the FIIF conference

“anything that can be digitized will be digitized”

MASS assumes that by means of economies of scale, simplification and building smart solutions combined with subscription-based licensing and cloud-based provision, the SI’s local market becomes global – immediately and by definition. Customers will select solutions based on time-to-value, credible promise of competitive advantage, innovativeness and superior customer service. Ironically, as the world becomes increasingly digital and solutions become commoditized, differentiation will be more and more about customer service experience.

MASS also changes the innovation timeline. It gives agility a new definition. We no longer talk about increments but rather supplements. Iterative development and agile project methodologies are replaced by continuous selection and adoption of new digital business capabilities. Farewell to investment indigestion and ahoy accelerated time-to-value, simplicity and smart solutions.

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Mika Tanner

Bilot Alumni