I believe that a profound transformation is underway, one that promises to reshape our understanding of how services are delivered. This transformation heralds the arrival of what I’m calling "Service as Software," a shift that challenges the traditional Software as a Service (SaaS) model.
At its core, Artificial Intelligence (AI) is the driving force behind this change, enabling service companies to transition to a world where software not only supports organisations in service delivery, but actually delivers the service.
"Service as Software" represents a bit of a departure from conventional models. In this context, it refers to software that doesn't merely aid companies in their operations; instead, it takes on the role of performing the actual operations. Think of it a little more like an outsourcing model, but without many of the negatives traditionally associated with outsourcing, such as loss of control and knowledge. This is the linchpin of the impending transition.
AI serves as the catalyst for this transformation, and unlocks unparalleled scalability & cost efficiencies for Service companies that were previously only enjoyed by Software companies.
Traditionally, software companies held a distinct advantage in terms of scalability. They could replicate their products for a vast user base with minimal effort. AI, however, levels the playing field for service companies by automating tasks, enhancing efficiency, and tailoring services to individual customer requirements.
AI offers tremendous cost-saving potential across the software development value chain. By applying AI to some or all of architecture, infrastructure, code writing, documentation, testing etc, these newfound efficiencies make software development to a much broader range of service-oriented businesses than was previously the case.
As we navigate this new era a question emerges: Are the established software giants or the service-oriented companies they serve better placed to take advantage of these AI headwinds?
Service companies present a compelling argument for being better positioned:
Service companies that embrace AI and swiftly adapt to change stand to gain a significant competitive edge.
Proximity to the end customer positions service companies as experts in understanding customer needs and preferences. This proximity can translate into more relevant, engaging, and customer-centric solutions.
Many service companies already possess a firm foothold in their respective markets. By building AI at the core of their services, they can quickly strengthen their positions and expand their reach.
Conversely, established software companies face some challenges:
Software giants may find themselves burdened by legacy code and user interfaces designed prior to the AI era. Adapting and modernising these systems can be cumbersome and costly.
The democratisation of AI poses a threat to the unique selling points (USPs) of software companies. As AI becomes more accessible, traditional generic SaaS products may lose their appeal in favour of custom developed in-house solutions.
I think the emergence of "Service as Software" will demonstrate that software doesn't just support companies—it can perform their functions for them. With their agility, customer proximity, and market presence, I believe service companies are well-positioned to thrive in this evolving landscape, provided they can adapt swiftly. Meanwhile, software companies might see their value increasingly eroded.
The winners will be determined by their ability to harness AI's potential to deliver a great quality, consistent service. As the lines between software and service blur, SaaS companies and their customers are going to increasingly come into competition, and I suspect it might be the SaaS providers that are at a disadvantage.
