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SaaS Is Dead, Long Live Software

A version of this article previously appeared in Forbes.

During the first half of the last century, numerous fortunes were made electrifying devices that were previously manual. Because electrification was new, the qualifying term “electric” was an important distinction when describing these newfangled gadgets. However, the adjective “electric” was eventually dropped when all the devices in a product category utilized the technology. Software terminology is stubbornly not following a similar evolution.

It’s high time we kill the term Software As A Service (SaaS) and call it what it is – software. Even Salesforce abandoned it’s silly “No Software” tagline, after the company had to explain in 2015 that it meant, “No legacy software, just cloud software.”

You’re not a SaaS company, you’re a software company. You’re not a SaaS investor, you’re a software investor. You’re not a SaaS entrepreneur, you’re a software entrepreneur.

ASP To SaaS To Software

In the early 2000’s, my software startup was dubbed an Application Service Provider (ASP). At that time, I had to explain to skeptical customers that it made more sense for them to rent our software on a subscription basis, rather than purchase it outright. With few exceptions, no one now buys premise-based software. However, moving companies to the cloud was an exhausting process.

I vividly recall a meeting at Siebel to explore a potential partnership by which Siebel would sell our GoToAssist screen sharing technology to its customers. Each of the Siebel executives wore suites and ties, which seemed out of place, even fifteen years ago.

Even more off putting than their wardrobe was their arrogance. After patiently explaining that we were unwilling to deviate from our cloud-based business model, a senior member of the Siebel team derisively told me (I’m obviously paraphrasing from memory here), “Our customers will never allow software to be delivered through their firewalls! If the software does not reside on our customers’ servers, we won’t sell it.”

By the time we launched GoToMeeting, the term ASP had largely been replaced with Software as a Service (SaaS) and the software subscription model was firmly established. Despite the prescience of the Siebel executives, we successfully sold GoToMeeting, and the other GoTo family of products, to Citrix in 2004 for a tidy sum.

Vertical Software To Mobile First

Over the next decade, thousands of startups focused on software verticals in which they displaced Siebel-like, premise software with solutions delivered via the cloud.

Although software startups continue to be founded to exploit vertical markets, few of them now compete with legacy, “boxed” software. Rather, the software companies I’ve invested in, such as JazzHR, TaxJar and SimpleLegal, compete with Web 1.0 desktop oriented dinosaurs which utilize the cloud, but offer a poor user experience, especially on mobile devices.

Even so, we don’t call this new crop of companies “Better GUI Software” or even “Mobile First Software” startups. Instead, we continue to use the anachronistic term SaaS, even though no company on the planet still delivers old-school software on a disk.

Vertical Artificial Intelligence

An expansive and lucrative greenfield opportunity, especially for startups, is the vertical applications of artificial intelligence. Tim Urban’s Wait But Why blog does a great job of describing today’s AI capabilities. According to Tim, we are currently leveraging, “Artificial Narrow Intelligence (which) is machine intelligence that equals or exceeds human intelligence or efficiency at a specific thing.” Some of the examples he cites include self-driving cars, complex mobile apps such as Siri, Pandora and Waze, as well as Spam filters.

Tim goes on to conclude that eventually AI will morph from verticalized, narrow intelligence, to “Artificial General Intelligence (which) refers to a computer that is as smart as a human across the board—a machine that can perform any intellectual task that a human being can.”

Though AI technology is evolving rapidly, generalized artificial intelligence is still years away, leaving plenty of time for entrepreneurs to create tremendous value creating vertical AI solutions, in the same way software engineers in the 1980’s first computerized manual workflows with the advent of the PC.

Just as it eventually became unnecessary to qualify hairdryers as “electric,” a similar nomenclature evolution will no doubt occur in the auto industry. Soon it will be an anachronism to describe cars as “electric,” as the distinction with petroleum-based cars will be irrelevant. Hopefully, by then, we’ll also have finally stopped identifying software as SaaS.

You can follow John on Twitter: @johngreathouse

Image credit: Public domain


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