The New ISV & The New Software Economy

The software industry is changing faster today than it ever has in the past. A combination of factors including globalisation, internet technologies and economics, open software ecosystems, rapid development techniques, application interdependence and reuse (such as SOA) and a fundemental change in the business models and value chain through SaaS, is changing forever how independent software vendors (ISVs) will operate.

So its time to redefine the term ISV. In the past, a software company would design, develop and market a software product independently – thus the term Independent Software Vendor. They operated using a very monolithic structure on the product development side of the business. This is a model similar to many other product manufacturing industries.

But, like those other industries, globalisation has already altered the way software products are built. Labour costs (originally) moved much of the software development to less expensive ‘offshore’ centres. Larger companies built software development centres in more cost efficient locations and hired teams of developers there. Smaller companies outsourced some or all of the development process to offshore (and near shore) specialists. Software development also focused increasingly on the upper layers and large elements of the total code base are now bought off the shelf from somebody else.

So on the production side of the software industry, the concept of an ‘independent’ software vendor is already changed or changing to an interdependent software vendor (myself and other guests on this recent Haut Tech Conversations show hereby claim creation rights to this new term!).

But if changes on the production side of the new model ISV are significant enough, they will be increasingly dwarfed by changes in the delivery side of the business. As has already been discussed on this blog here and here and on others, the impact of SaaS on the delivery side is more profound. This means that we will have to reconsider the newly coined term Interdependent Software Vendor even before the paint dries. SaaS is more about a service than a software product. So perhaps we can reuse the term ISV but as an Interdependent Services Vendor. Now what could that V become…

Naming conventions aside, the fact that such major changes are impacting both the production models and the delivery models (and, of course, the associated business models) mean we are heading into a Brave New World for the software industry. The implications are broadly recognised and are shaping not just the industry participants but government policies too. I attended a presentation this morning at Trinity College Dublin, where Jeniffer Condon, the head of Enterprise Ireland’s Software Division, Ireland’s government agency responsible for supporting and growing the country’s indigenous software sector, outlined a vision and strategy for the next four years that focuses heavily on the New Software Economy and SaaS in particular.

So I guess one of the key messages to take away from this is that today’s software vendors need to understand their new role, decide what they will do in-house and what can be better done by others and carefully build an ecosystem to surround them. As is all aspects of life, choose your partners very carefully – your business will depend upon it.

Steve