The impending hyper-growth of back-office SaaS

By: Indus Khaitan, CMO, Sirionlabs

Front-office is what is a hotel’s lobby, a guest-room, a restaurant, a reception desk, and the entertainment area. It’s a place where customers engage. Whereas, a kitchen, laundry, loading docks, warehouse, are the back-office of a hotel. This is the place where employees ensure that the hotel runs smoothly and customers are happy.

In companies using software applications, front office software deal with customers. The applications provide functionality to capture customer behavior, fulfill orders, provide feedback, and provide customer support. In contrast, back office software enables employees to be more productive, perform human resources operations, manage finance and payroll, manufacturing and supply chain. Back-office enables front-office to have happy customers. Front-office brings customers in, back-office helps fulfill their needs.

Popular software application categories for front-office include customer relationship management (CRM), marketing automation, customer service, and sales force automation. Whereas, enterprise resources planning (ERP), human capital management (HCM), procurement and supply chain constitute popular back-office applications.

Before the surge in Software as a Service (SaaS), both front and back-office applications were bought as a bits of software and installed on servers in a company’s datacenters. These applications were managed by IT staff, and used by customers, employees and partners. As the digital economy grew multi-fold, running these applications were no longer cost-effective. This gave rise to a new delivery model where software was developed and managed by a specialist, and “rented”. The renter pays a subscription fee without worrying about how the software works, when to upgrade, what hardware to buy, and what security measures to take.

The last two decades of SaaS has shown an incredible growth in front-office applications. The poster-child is Salesforce.com, whose flagship product of sales automation became part of it’s comprehensive customer relationship management (crm) offering. Other companies include Box (file-sharing), Freshdesk (Customer service), Marketo (Marketing automation), Constant Contact (e-mail marketing), Shopify (e-commerce). The back-office applications are behind in this change to SaaS, but the wait would not be long.

The back-office applications are keepers of data around customers, bookings, employee records, and organizational performance. Enterprise IT closely guards this data with multiple layers of security and access controls. CXOs are sensitive about moving this data where the final resting place of bits is not in their control. However, emergence of next generation cloud security products where data is encrypted with the keys being controlled by Enterprise IT are enabling experimentation. A small subset of back-office applications has started moving to cloud viz. Human Resource Management, Field Service, and IT Service Management.

CIOs are actively funding projects which drive innovation and customer engagement, which indirectly impacts their company’s bottom line. A shortage of skills and increased competition are forcing them to engage with new back-office vendors to optimize the limited growth in their yearly budgets. Traditionally, back-office applications have commanded a lion’s share of Enterprise IT spend on people and systems. As old applications and processes gets phased out, new applications on cloud are being sought to drive that change.