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From legacy software platform to digital service
Migrating from a software platform cash cow to a new era of digital service can be daunting, but this fear shouldn’t hold you back. All…
Migrating from a software platform cash cow to a new era of digital service can be daunting, but this fear shouldn’t hold you back. All good things must come to an end.
By Mark Wilson, Founder Partner, Wilson Fletcher
Around the world today there are thousands of software systems being used on a daily basis by millions of professionals. I’m not talking about the type of thing that Google or Facebook would call software, rather the old-school software systems that are approaching, or are at the end of, their useful lifespan.
Saddled with interfaces from a previous age of computing and based on technology platforms considered state-of-the-art a decade or two ago, these tools are most commonly found on the desktops of professional users, occupying a critical — historically considered irreplaceable — role in their daily work flow.
Talk to the users of these systems, as we frequently do, and there’s a common pattern, best paraphrased as “it’s terrible, but I have to use it”. Systems providing data intelligence frequently fall into this category and so do many professional content tools. Process management, tracking and work flow solutions across thousands of sectors and specialist applications are equally likely to be examples of this previous generation of software tools.
These systems are the lost world of the digital age, created in another time, isolated from a world where everything else has evolved into new forms. In most cases, they still endure because the pressures to maintain have been greater than the pressures to adapt.
But this age is fast coming to an end. Software systems must evolve if their providers are to survive. This is much more than a technology change; it’s a strategic shift that affects every point of the provider-buyer-user scale.
Why the slow pace of change?
At the provider end, software systems represent a lucrative, recurring revenue stream. Contracts are often signed for years against tight specifications and demanding support requirements. There is enormous risk involved in change, even when you know that new competition is emerging, or there are underlying challenges to the longevity of the solution. Big changes can lead to customers considering other options. It’s simply better business to keep things largely as they are. Maintaining the status quo has long been the key to maximising profit.
The same is true for buyers. Once installed on the systems of dozens, hundreds or even many thousands of users, keeping things the same is the best way to ensure stability and operational efficiency. Users, sadly, have had very little influence on anything, using the systems their company supports whether they like it or not.
The two main components in this equation — the providers and buyers — have created a self-sustaining cycle of stagnation for decades. The risks associated with change have paralysed the organisations on both sides. That paradigm is now starting to change in favour of the buyers. Many formerly stable and dominant providers are beginning to feel the effects of a transition that will sweep them out of the market unless they act fast.
Recognising the rot
No matter the sector or system type, the early signs of stagnating software platforms are usually similar: the loss of a big customer to a provider considered to be inferior; increasingly competitive processes to acquire new customers; strong downward pressure on price; shorter contract extensions rather than full-term renewals.
Technology can also play a big part as buyers move to newer, modern platforms and mobile-centric work flows that traditional systems struggle to accommodate. Intransigent internal teams exhibiting a ‘we know better’ attitude seem to be present most of the time, too.
The reasons are varied, but the effect is the same: downward pressure on income that will rapidly accelerate to zero if not addressed. This will be the end of the line for those who don’t adapt.
Commercial triggers are usually the only reason providers start to think more actively about what the future should look like. If you are a provider, don’t wait for a negative event to be the reason you think about your future. Time is not on your side and, more importantly, you’re already missing out on new opportunities.
We’ve worked with a variety of providers facing this situation over the last few years and it’s not all doom and gloom. For most, migrating from software to service presents their first real opportunity for growth in years and for some, the stimulus for reinvention that they have been struggling with for a decade or more. For anyone in this situation, if the right changes are made, it’s an opportunity for positive change rather than desperate rescue.
From software to service
Digital services represent the future of every software system. They have already superseded numerous previously dominant incarnations of software. Customers no longer want the old version of value driven solely from stable operational efficiency. They want flexible, adaptable services that they can adopt quickly and manage easily, services that can offer them increasing value.
Transitioning to a modern digital service model demands a shift in mindset from the old software system model. Probably the most significant change is adapting to a world in which you have (and must have) a direct connection with users, not just buyers. Uncovering the real opportunities bound up in professional users is essential to success and can often open up entirely new avenues for product development.
It’s amazing how little some professional software system providers know about their end users. Many still build their software on knowledge acquired many years ago.
Equally important is adopting a mindset of platform ubiquity. Forget assumptions about desktop-bound professionals and set aside restrictive notions like mobile-first. Digital services should be inherently free of device constraints.
Digital services can have interfaces that reflect any device, place and user. You’re a braver person than me if you want to predict what someone will or won’t do on any of their devices these days.
Commercial models are the next assumption to sweep away. Modern services, frequently (but not always) powered by a cloud platform, open up new ways to charge customers. Instead of crude per-seat models or the dreaded site license, negotiated at length and locked down for years to come, digital services can be monetised flexibly and according to the degree of value that is derived from them on a per-user basis.
This shift, rather than inhibiting commercial success, allows providers to increase the income they receive by connecting it directly to value generated — making a buyer’s pressure for price reduction easier to resist. It can also open up value in audiences that would previously have been uneconomic to service.
Finally, there’s a need to think differently about customer relationships. The overwhelmingly common insight we gain from professional customers is that they want a partner more than a provider. They expect partners to bring expertise as well as tools and they look to these partners to bring their domain expertise to bear on their own operations.
As the provider of a digital service, you have the opportunity to build stronger, deeper relationships with customers at both a content and consultative level, based on genuine insight into both their usage and the broader patterns you can draw out from the sector as a whole.
Migrating from a software platform cash cow to a new era of digital service can be daunting, but this fear shouldn’t hold you back. There are numerous ways to make that transition successful and it’s remarkable how many new opportunities can be identified in the process.
We see teams transform from fatalism built up over years to enthusiasm built over days and weeks. It’s both liberating and exciting to see a future full of potential. It’s even more energising to see a path that can take you there.
Everything has a lifespan. Exploring the future will help you understand where new opportunities lie and whether to pursue them. It doesn’t commit you to change, but once you see what the transition from software to service can bring, chances are there’ll be no holding you back.