Software Companies Are Redesigning Themselves around the “Software as Services” Model

This services-oriented approach is more than a repackaging of software. It's also having a profound impact on the organizational structure of companies. Software companies, in particular, are beginning to shift their organizational structures to accommodate the growing importance of services. This new organizational model has the ability to be much more customer adaptive. It's a good example of Outside Innovation organizational design.

My favorite instantion of this services-based organizational model to date in the software industry is the way Intuit has "architected" its organization. I believe that we're going to see more organizations structure themselves in this way. Like many companies, Intuit has business units for each of its major product lines—Quicken, QuickBooks, TurboTax, etc. Like many companies, Intuit also has a set of corporate organizations to support the business units: Marketing, Finance, Operations, IT, etc. But here's where Intuit differs from many other software companies. Intuit supports its customer-interacting business units with a three-layered structure that works really well.

The first layer is the Web Commerce Group (housed in corporate marketing), which does the development and delivery of all of the Web sites, portals, customer-facing Web tools, search, content management and so on.

The second layer is a central technology organization (CTO) which develops and delivers all of the software services that are used in and by customers using Intuit's Web sites and by its software products—product download, licensing, activation, registration, subscriptions, diagnostics, updates. This group also develops and deploys the more complex services that are used on the company's Web sites—product configurators, order gateway, product-specific knowledgebases, such as tax updates, and so on. This group also manages the company's Internet sites.

The third layer is the central IT organization (CIO), which is a separate group. It runs operational IT—ERP, customer data stores, product data stores, inventory management, and so on.

What works well about this model is that each of these groups has a different modus operandi and a different set of goals and objectives. Corporate IT worries about operational excellence. The central technology/services organization worries about agility and responsiveness. It can swap services in and out, update them, and keep them humming. The Web Commerce group worries about the online user experience in interacting with the brand and making it easy for customers to decide, buy, and self serve. It can also do promotions and offers in real time and make changes in near real time.