There is a lot of talk in the software business these days about changing business models, particularly the trend toward SaaS (Software as a Service).

Will SaaS business models dominate the software business?

Many consultants, pundits and other industry figures are proclaiming that SaaS will very soon take over the world; saying if you’re not on the bus soon, you’re going to be out of business. I believe this is a bit overstated, but the strong trend toward the SaaS business model can’t be denied.

My opinion on SaaS adoption: When bandwidth is unlimited and close to free, all IT systems are totally secure, the Internet is as reliable as old AT&T; and every customer in the world decides they want to rent everything and own nothing–then I’ll agree that SaaS is heading toward 100% market share. As I said above there’s a strong trend in this direction, but we’re a long way from there.

Is software product management dead?

I’ve written about SaaS a number of times before, and since it has become very important in the software business I’ll continue to do so frequently. What I want to address today is another opinion some “experts” are also espousing: that the trend toward SaaS means the end of the Product Management function in the software business.

I find this statement to be downright silly.

When following this debate, it’s important to take notice that many of the folks proselytizing these opinions have businesses whose success is based upon these predictions actually coming true. It’s always important to consider conflicts of interest among the debaters.

In one recent webinar they trotted out a SaaS software company that was growing briskly every year with no product managers in the company. What wasn’t said is that it was always possible to find software companies (of the traditional sort) who didn’t have a product management function. Software companies are often founded by programmers, and they haven’t always seen the need for Product Management. There are very successful companies where the developers talk directly to the customers, with no product managers at all. However, the facts are that a very small percentage of companies that do business this way are successful, and its usually based upon special circumstances: the rare developer who understands markets and customers as well as he does coding, markets where the developers themselves are perfect customer proxies, etc.

So while software companies without Product Managers have always been out there, it just hasn’t been a broad formula for success. Trotting out one SaaS company successfully doing business this way (incidentally, I saw some big holes in their model long-term) doesn’t impress me much.

I’m not defending the status quo–I’ll say it once again, there is a huge move to SaaS in the software biz. Many (and maybe most) will be doing business this way in the near future. However, like most over-hyped trends, this are some pretty big overstatements being thrown around.

SKILLED product management will always be important

The argument being made is that many of the functions Product Managers currently perform are obsolete under the SaaS model. With continuous development more practical using SaaS, there may be fewer (or no) new version introductions. So the old waterfall chart with MRDs being created for the new version may go away along with new product introductions. I’m sure you get the picture. SaaS is a pretty fundamental change to the software business model, so you wouldn’t expect a product manager’s job to be stagnant under such change.

But those predicting the death of product management are focusing on the more mundane aspects of Product Management. The essence of this critical function is the ability to understand markets and match widespread, aggregate customer needs to the technical skills and IP of your company–creating a PRODUCT which can be sold to these many people. It doesn’t matter whether you deliver this PRODUCT over the Internet in a hosted manner using monthly subscriptions, or in the more traditional on-customer premises, licensed model. Product Management is about creating a profitable PRODUCT well-matched for a market segment. It matters not whether you are engaged in customer facing marketing/promotional activities, or upfront product planning–the product manager’s understanding of market needs and how your company can fulfill those needs is crucial in a product business. Otherwise, you’re just selling custom software–one-off’s for every customer. That’s a different business–not a bad one–and one you which doesn’t require product managers.

Can Social Media replace Product Management?

Another thing being bandied about by my favorite pundits is the impact of communities and other social media for its potential impact on product development. The thinking goes that there will be much more direct interaction with the end customer, leading to tremendous amounts of data available to ISVs. While SaaS is very well suited to communities (although not exclusive–they can be well utilized by traditional licensed software vendors), the ability to more easily obtain direct customer comments, and maybe take votes on potential new features doesn’t eliminate the need for product management. To the contrary. While communities and other forms of social media are very powerful tools, don’t mistake more data and customer access with actionable market intelligence. Data needs to be interpreted, and skilled marketers are best positioned to discern who’s telling you what and why–the underlying motivations behind any customer feedback. So all of this added customer access and resulting data will only put a premium on good product management, to use these powerful new tools and data for quicker action and to allow better product planning decisions. Remember, SaaS competitor down the road will have access to the same tools and data that you do.

It is rare to find a developer who has truly exceptional product management skills. That’s not a knock on developers; as a whole they are an extremely sharp bunch. But specialization in life happens for a reason–very seldom is someone the best at everything. Developers are trained to write code and build applications, not understand markets or extract the “truth” from customers. Different types of people’s brain’s work differently, and a good developer and good product manager are an example of this.

I find that it’s when a talented, open-minded development manager teams with a market-savvy product manager, that most great software applications are made. So no, I don’t believe that the Product Management function is going away anytime soon in the software business. There are many important changes going on in the business, the SaaS business model not the least of these. With any change in business model, functional roles will evolve and change. But I believe strongly that Product Management is a fundamental, important role that will remain critical in software businesses far into the future.

That’s what I think about SaaS and product management–what do you think? Post a comment to start the discussion! Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter.

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