Monday, January 22, 2007

How much would you pay for a process?

I've been looking at some SaaS solutions recently some have been niche vertical elements, others have been more "traditional" ERP type solutions that are delivered over the web, like and Oracle OnDemand and it got me to thinking on some conversations I had with a chap called Paul Luckett. Namely if you have an infrastructure that can execute processes and you have some form of semantic mapping of your data to the format that the process requires then why would you not just by processes rather than applications?

The next logical step is then to not have the infrastructure but to "rent" processes based on how much you actually use them. Now for certain areas the argument can be made that there is too much competitive advantage for SaaS to really take off, but for lots of current ERP areas, such as Finance and HR, is there really so much value in customising things like employee onboarding, training approval, invoice creation or accounting? The answer is pretty much always "no" when it comes to putting in an ERP so why, if you have a middleware with the characteristics above wouldn't you just "buy" the process from someone who has formalised and optimised it already.

If however it is one of these commodity things that really don't add value would you really want to pay money to operate it yourself? Wouldn't you prefer to consider it as a utility in the same way as people have outsourced payrolls and telephones? I'd argue for a strong "yes" on that, and I'd even go a stage further. If you have an extremely common process, say creating an invoice, why wouldn't you actually just 100% standardise that via something like OASIS (like an ebXML that is light enough to work) and then have companies compete to be the most reliable hosting for that process.

I'm talking here about the back-end processes where ERPs currently dominate the market. But with the rise of SaaS, Semantic Web and process standards is their really a future for building your own HR, CRM or Finance solution? Isn't Oracle's OnDemand exactly the way the world needs to go?

So what is an invoice worth? 1 cent a time? 2 cents? its not going to be much. The commoditisation will rise up another level and more processes will be put into packages, but I think its reasonable to expect that in 5 years time you'll see the majority of new back-end processes being either downloaded and run or just rented. This gives whole new challenges around data security and retention to be solved but it does sort of argue that the vertical solution direction that SAP and Oracle are taking is the right one and that the new "cheap" ERPs on the block might be arriving after the bus has left.

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