Research Reveals Insights into Fast-Growing ISV Market

An IDG study[1] sponsored by Sungard Availability Services and Cisco into the Independent Software Vendor (ISV) market reveals the surprising finding that more ISVs (60%) rate good customer service as the route to success than having a superior all-round product (53%).

This can be attributed to the volume and diversity of SaaS services in the fiercely competitive market, which puts considerable competitive pressure on providers to offer the best combination of value, reliability, security and availability within their hosted software packages to differentiate themselves from rivals.

ISV paper_pg8_500With conservative estimates predicting the Software as a Service (SaaS) market will be worth some $50.8bn by 2018, the rewards are high for those ISVs that can differentiate themselves from competitors by offering better, or more customised, products than the opposition to entice subscribers. Consequently, two thirds of survey respondents highlighted improved service as a current business objective with 25% seeing it as their biggest priority. In contrast, growing profit margins (55%) and reducing overheads (54%) are relatively understated by ISVs, perhaps reinforcing the idea that much of SaaS provision relies on low-cost, volume sales activity based on already tight financial margins.

The research also found that ISVs’ provisioning challenges mirror customer anxieties with respondents’ top five concerns cited as being security (78%), backup, failover and business continuity (69%) availability (64%), performance (59%) and providing usage-based billing or reporting (59%).

As a result, ISV customers today place far higher demands on their SaaS provider than their own on-premise environment, demanding service level availability guarantees (66%), flexible pricing (61%) and proven datacentre infrastructure and failover capabilities (54%). With little or no perceived control over the applications they lease customers are understandably more likely to seek guarantees around application performance and reliability.

Switching to a SaaS-based delivery model is fraught with risks for the ISV. Rather than the old fixed price licence structure, SaaS tariffs are likely to vary according to customer requirements. Adding to the challenge, the pay-as-you-go, on-demand SaaS model is characterised by short-term contracts that are usually counted in months and days – or even hours and minutes – leaving customers free to switch providers at short notice causing wildly fluctuating revenue.

IDG paper_p5_500This creates a huge challenge for ISVs who must both adapt services to accommodate increased customer churn and also ensure end user data can be quickly and smoothly returned to the customer and deleted from a hosted server infrastructure to comply with new European data protection laws.

These problems have not gone unnoticed by those ISVs that participated in the survey. Almost three-quarters (73%) identified calculating the cost model as a risk and almost as many (70%) quoting changes to business processes.

 

 

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[1] Source: IDG report ‘The changing landscape for business software’ – September 2015