These legacy applications are a stark contrast to what will drive the next, and more powerful, wave of digital transformation: Intelligent software services that can think, learn, adapt and autonomously take action on data faster than any human could.
Such software services could include:
- A ride-sharing service that taps a customer’s schedule and social media posts to proactively suggest local events, arranging transportation and nearby venues to eat and shop, as well as a local weather forecast.
- A home shopping and financing service that monitors a customer’s cash flow, current home listings and the latest changes in interest rates and mortgage terms to suggest specific properties and relevant financing strategies.
- An inventory tracking system that monitors not only the amount of goods in warehouses but also expected production levels at suppliers and manufacturers, weather and traffic conditions and pricing trends to automatically minimize inventory costs while avoiding out-of-stocks.
What sets all of these services apart from software applications is that they can initiate action without waiting for human input, learn and optimize their performance over time, and tap a far wider range of information than a human ever could.
The Role of Software Services
For consumers, software services will provide far more complete, convenient and useful solutions to everyday challenges, saving them money and time. For enterprises, software services will deliver increased employee productivity, customer satisfaction and retention, competitive differentiation and the potential for new revenue streams, such as the sale of products or services that complement their primary offerings. Auto manufacturers, for example, might receive a portion of the sales of camping gear through a trip-planning application provided to vehicle owners, or a bank might receive a referral fee from a lender providing mortgages to users of its home-purchasing service.
To understand the difference between a software application and a software service, consider the humble thermostat.
In the pre-digital days, thermostats could be set to maintain only one temperature, whether or not anyone was home, or whether energy prices had spiked. Next, we had digital thermostats that could be programmed to, for example, use less energy at night. Like a software application, these devices merely took our input and executed it.
Far more useful is a thermostat service. Using location information from the homeowner’s smartphone, these intelligent, connected devices can turn up the heat when the individual is 20 minutes from home. Through links with the family calendar, they can automatically adjust the temperature, and by connecting with weather tracking and forecasting services, as well as utilities and heating oil suppliers, even lock in the best energy price for the season, or save money during peak pricing periods.
The ability to intelligently and automatically take action to achieve a desired result for an enterprise or customer will enable a wave of innovation, driving efficiency and value into everything we do.
Such software services are not to be confused with “Web services” that replace traditional monolithic applications with reusable “services” that make up, for example, the user interface or a loan calculation engine. Software services are a different form of software, far more intelligent and independent than software applications, that can learn over time based on new data that doesn’t have to be provided by humans.
Critical Challenges
These software services will enable new business models, especially when combined with ever-greater capabilities in areas such as artificial intelligence (AI) and virtual and augmented reality. But delivering them will require meeting four critical challenges:
- Effectively applying AI so that systems make better decisions over time. This will require skills in, among other things, big data management and analytic frameworks, analytic algorithms and machine learning. Effective AI will also require ensuring data quality and connectivity with an explosion of Internet of Things (IoT) devices whose data will help provide more and better services to customers and employees.
- Governance, risk management and compliance (GRC). It doesn’t take much of a security breach to tank a company’s stock price, trigger fines and lawsuits, and end careers. As software services require far greater degrees of real-time data sharing between more enterprises, the amount of data at risk (and the channels through which it could be compromised) will also grow, making GRC more complex. Businesses will need internal staff or partners that can ensure GRC without slowing the pace of innovation.
- Finding and keeping skilled staff with a deep understanding of the industry and corporate culture. Employees will need to work together in new ways, using DevOps and Agile approaches and principles, to deliver fast innovation. This will entail careful recruitment and/or partnering with outside specialists, as well as retraining and change management.
- Understanding which capabilities will drive the greatest competitive advantage. Before writing a line of code, businesses need to understand, at the deepest possible level, their customers’ human needs. Such insights are best gained through in-depth, on-site anthropological research that uncovers needs and, coupled with rapid delivery, produces services that resonate with customers.
Software Services: Get Started Now
The infrastructure allowing enterprises to deliver software services is being created as we speak with every tweak to an AI algorithm, each device added to the IoT, and every new application built to enable real-time data sharing. Each of these helps enable software services that add more value than the software applications that came before.
Software services will create new winners and losers in every industry. The winners will aggressively build their AI capabilities, manage the GRC challenges, grow or partner with others to develop the right skills, and ensure their new software services meet the most critical human needs of their customers.