After reading some of my blog posts as well as others, The Unreasonable Men are asking a very reasonable question:  will it even be ISV’s that inherit the world?  He quotes me as calling Google a search company and argues that perhaps ISV’s don’t have the best position to go after these new Blue Ocean SaaS markets.  This triggered some furious thinking on my part: appologies in advance for the length of this post and the seeming oddness of some of it’s concepts, but they are very important for Business Strategists in the Digital and Web Era.

First let me say that it’s a beautiful thing when a Service becomes so good that we can step away from thinking of them as Software Companies and instead think of companies like Google in terms of the Service they provide.  It means we’re finally getting to the place we need to be.  It means we have electricity instead of steam power.  Just plug it in and it goes.  That, my friends, is the awesome power of SaaS in a nutshell. 

And, we should not forget that our Patron Saint of All Things SaaS, Marc Benioff, has proclaimed that this is The End of Software.  But I want to add a counterpoint that may at first seem argumentative and unreasonable:  

An essential element of the success of companies like Salesforce and Google is that they are innovating with software. 

Yes, they absolutely innovate in other ways too such as business model, but it is important that they innovate with software.  Salesforce pushes multitenancy.  Google is legendary for sophisticated algorithms and their Page Rank leverages emergence, which is powerful “meta” thing magic indeed.

This gets to a pretty deep question about whether SaaS without the first “S” is any more meaningful than SaaS without the last “S” (i.e. just a regular old On-Premise ISV): 

You can’t just take the Same Old Software, add generous helpings of Service, stick it in a data center, and get SaaS.  It has been tried, it was the hosting/ASP model, and it didn’t work.

Whether or not we call them software companies, to innovate with software is to not lose sight of the essential thing that computers and software do differently than other machines:

Not only do they manipulate data, but they can manipulate their manipulations as well in a totally recursive Godel, Escher, and Bach sort of way: what I call the “meta” thing.

A computer isn’t really being used as a computer until it can do the “meta” thing to whatever it is manipulating.  In other words, until you can change the program to do the thing differently.   The Wikipedia gets the “meta” concept astoundingly right.  Endowing a system with the “meta” thing means it can evolve to do new things after it has left the original designer’s hands.

Going back to the electricity vs steam analogy, it is easy to forget electricity and its ubiquity, but it created some amazing new empires because it was endlessly fungible.  Heat.  Light.  Motion.  Communication.  And ultimately, information.  Nothing else like it had existed before.  Computers are the next step above that fungibility.  They can do almost anything if you just master the “meta” thing well enough.

Wow, that sounds so totally weird and irrelevant to the mundane business strategy matters at hand of how to create Blue Ocean strategies and make the big bucks.  And yet it isn’t.  Those who understand the “meta” thing wind up owning platforms, which leads to ownership of entire industries.  A platform is a manifestation of the “meta” thing.  Many, many companies have tried to navigate the binary waters of computing and failed because they didn’t see what it is that computers do.  It’s a function of who is driving the product ship: is it somebody who gets that crazy weird “meta” thing, or is it some other function?

Here is an example:  Music.  Think about the world of music.  Consumer electronics, record companies, yada, yada.   A huge empire.  They wanted to drive the ship.  What a mess!  Nobody understood what a computer could do for music in so many ways.  It changes everything about music.  I can carry every musical experience I’ve ever had in the palm of my hand.  I can download all of that from the web.  I’ve quit using my expensive audiophile CD system. 

How did that happen?  Music took on the incredible fungible metamorphic (that “meta” thing again) qualities that computers are good at.

Who made that happen?  Software guys.  Computer guys.  Apple.  iPod.  Napster.  People who get what computers can do with the “meta” thing.  Yes, Apple is a Software Company, that and an Industrial Design Company, but we digress.

Let’s take the telcos.  They seem to know a thing or two about computer science.  We get things like Erlang out of that world, which is pretty cool.  Erlang definitely does the Godel, Escher, and Bach thing.  But those Erlang guys are not driving the ship.  They just work there.  Like a service function.  Phone guys know switches.  They know lots of 9’s.  But how archaic is their infrastructure?  They’re mired in the old Signalling System 7, even if they use Erlang to implement it.  The last big thing my phone learned to do courtesy of the telcos was touch tone dialing instead of a rotary dial.  A new breed came along in the form of cell phones, that was cool, but they still move at a glacial pace.  Who is fixing it?  Blackberry, Palm, and Apple.  They get computers.  They are basically software companies.

Unreasonable asks, “What about ISP’s?”  The answer is simple by now.  Find the ISP’s that are fundamentally software companies and not just guys that put boxes in cages and cable them up.  BTW, it isn’t clear whether just firing up a bunch of open source to provide services qualifies as the “meta” thing or just the software equivalent of putting boxes in cages.  For a while, it is a differentiator, but then everyone does it. 

You need both Software and Services because otherwise you don’t get the “meta” thing, which will trump your Services (because automation and self-service trump lots of bodies in the back room).  If you can do the “meta” thing, you can steal the heart of the business (and the bulk of the value) from an industry.  Adobe made printers do the “meta” thing when it invented Postscript. 

So who are the ISV’s that “get” software?  We want to find them, because those guys have a shot at the SaaS Blue Oceans.  Guess what?  These guys are doing utility computing or virtualization (one of the cooler newer Blue Oceans that came about because of a mastery of the “meta” thing).  They’re at software companies like Amazon (EC2/S3) and Google.  The other guys will have to keep plugging their boxes unless they either become software companies or adopt my crazy plan for hosting world domination.  Those that don’t learn to leverage the “meta” thing will get commoditized right out of business, but that’s another story.