In the future, people will buy software based upon the quantifiable business outcomes it produces. To be clearer, enterprise software will be sold in much the same way that sink plungers (or stain removers or any product that promises to fix a problem) are sold in big-box hardware stores. Let us set the scene:
Customer: Will this plunger help unblock my sink and allow me to drain water effectively, so I can wash my pots and pans?
Hardware store: Yes, this product will do that.
Customer: Okay thanks, I'll buy it.
As in plungers, it will be in software.
Customer: Will this software platform, application, and database package with analytics power and ancillary functions allow me to increase profits by a defined amount over a quantified period of time?
Software vendor: Yes, this product will do that.
Customer: Customer: OK thanks, I'll buy it.
The problem is, today we are quite used to buying consumer goods, professional services, and even food and drink based on this core notion of effectiveness. It all stems back to sales of goods legislation that forms state and federal law. But with software, it doesn't really work like that, up until now at least.
The Cloud Is Changing How We Consume Software
Companies are expected to purchase enterprise software platforms based upon the supposition and promise that its functionalities (even when custom tuned) can be applied to the specific business model and use case needed. But things are changing. The cloud model of componentized service-based software delivery is largely responsible for what is happening to consumption-based procurement.
If not quite a fully outcome-based model yet, SAP is now offering a new consumption-based commercial model for customers to acquire SAP Cloud Platform, the company’s platform as a service (PaaS), which is also the foundational technology behind the SAP Leonardo software design and accelerator brand for use case architecture templating—or digital innovation system, as SAP would more colorfully put it.
“SAP Cloud Platform’s new consumption-based commercial model makes it even easier for our customers and partners to build and extend innovative solutions utilizing our increasing portfolio of platform and business services,” said Björn Goerke, SAP Cloud Platform president and chief technology officer. “Innovations in mobile delivery with consumer-grade experiences give organizations more freedom and agility to create and reinvent their businesses.”
Consumer-Grade Experiences, Coming to ERP Software
Goerke's comments come from the corporate marketing machine's arsenal of preapproved commentary, yet it's clear to spot deeper meaning in his words. SAP's “increasing portfolio” can arguably be tough to navigate, so a consumption-based model should make it easier to find essential software components with less IT asset wastage. SAP's appreciation of “mobile delivery innovations with consumer-grade experiences” suggests an appreciation of the fact that customers do want to buy software like sink plungers—they want the product to do what it promises to do, at the right price, in the right place and at the right time.
SAP is talking about a simpler way of buying software with a “low-touch” customer experience in terms of configuring and using SAP Cloud Platform services. The purchasing process is facilitated by what SAP has called cloud credits, so that any available SAP Cloud Platform service can be activated via a single provisioning cockpit. The commercial model is supposed to provide transparency into the use of each service consumed through regular metering, reporting, and detailed accounting analytics on the customer’s cloud credit consumption and balance.
This makes it easier for customers to identify, procure, and monitor needed services for their applications. Once again, it's not quite that final hurdle all the way through to business outcomes and profit-related performance, but it's quite close to “how big a sink plunger do you need” by today’s standards.
Into the API Economy
As SAP now pushes toward consumption-based cloud computing models, we can expect more modular software structures from the top of the stack down to the component parts that form its DNA and lifeblood. If further proof were needed, the rise of the so-called API economy is helping us create the more manageable lower level of DNA in the stack.
It is no coincidence then to see SAP noting an adjunct to the above news with information relating to its newly enhanced SAP Cloud Platform Software Development Kit (SDK) for iOS. This is designed to help drive consumer-grade experiences, but this time for developers to get a handle on new controls to use APIs from SAP API Business Hub. Additional updates include code examples, which explain how to trigger SAP Leonardo processes with a mobile device, such as image recognition.
Whether it’s sink plungers and stain removers or mobile platform image processing code libraries for software developers, we are moving toward an increasing level of accountability in all products and services in all industries. SAP’s latest moves reflect these realities and show an appreciation for the plumbing (the software kind and the sink drainage kind) that we need on the road ahead—even if it’s not quite the whole kitchen sink yet.