Another conference, and another speech by a software as a service CEO forecasting the end of the world as we know it. But if the mid-market is genuinely something that companies can sell into via the Internet, then that undermines the 'big consultancy' model and opens a potentially huge, lower cost market to new players. Will services start to look like software?

What prompts this train of thought is that NetSuite CEO Zach Nelson (yes, it's that man again, bear with me) has forecast a “world of pain” for the traditional services sector over the next five years, as applications delivered over the internet transform the consultancy industry, just as they have the software business this century.

“These are the observations I have to make after 10 years in the cloud,” he said in a speech today in the US – referring not to living in a dream world, as his critics might say, but to his company's adoption of the term 'cloud computing' as a synonym for software as a service, alongside industry peers such as Salesforce.com's Marc Benioff.

Although he has said such things before – as sourcingfocus.com and Editor's Blog have reported – today's speech was significant for outsourcers as Nelson has now honed his attack on the established consultancies and outsourcing suppliers, which he says have no chance of addressing the untapped mid-market in the way they have the Fortune 500 so successfully.

“I really believe that the mid market is the last great software market. The cloud is important in the mid market as it finally makes it economical to reach what I call the 'Fortune Five Million'.

“It's always been difficult to serve and to sell applications to millions of companies around the globe, and the internet and the cloud in particular finally enables you to do that,” he said. “The other thing that makes it possible is Google.” This, he explained, allows customers to find companies such as his.

Nelson's thesis is that, in this new model where the mid market becomes viable (at last) for vendors and the big leveller of the internet changes customer expectations, the consultancy giants are no longer on a sure footing for the future.

“The next big revolution is that the services industry is going to be as affected by the cloud as the software industry has been for the past five years,” he said. “There is a world of hurt coming for traditional services companies, based on the business model of cloud computing, number one, and the expectations of customers, number two. I don't mean web services, I mean services as in consulting services, [such as] Accenture, PwC and the like.

“Someone is going to be the 'Accenture of the mid market', but it isn't going to be Accenture or any of these guys because it's a completely different model,” he said. “I don't believe any traditional consulting company is going to be able to successfully deliver consulting services over the Internet, which you still need.”

The problem, of course, is that traditional VARS are not embracing the SaaS industry as you might expect, because (essentially) there is no profit margin in doing so. This is partly because the mid-market customer mindset – honed to some degree on Facebook, Google and Wikipedia – will not permit an economic model of selling expensive, big-ticket consultancy services on the back of accessible, web-based applications used by small teams of non-expert employees.

Nelson admits that this is true of his own business as well: “We don't run services as a revenue generating business, we see it as an investment in renewal,” he explained. “We're not even trying to make a profit in the services business. It's now going to be about service as software. That's always been the holy grail of services companies: take the implementation they did for that company and use it for this company.”

In other words, contends Nelson, the next generation of mid-market consultancy to emerge over the next five years will be offering formerly one-off services as reusable software modules. Services companies, in short, will begin to look like software companies.

“Why not build the application once and use it over and over again....take customisations from one account and inject it into another account. These are the kinds of applications that are going to enable services companies to head into the cloud.”

However, things are not necessarily that straightforward, even in the web-based applications world where complexity is hidden from the user. To his credit, Nelson accepts this: “People see the cloud and believe that all applications magically work together because they're all delivered from the cloud,” he said. “Nothing could be further from the truth. The web is very good for loosely coupled things but businesses run on very tightly coupled data models.”

In the client/server days it was hard to synchronise applications and data, and so companies ended up standardising on a single ERP system, which meant rebuilding the business around it. That was good news for the Deloittes, Accentures (and its predecessors) and PwCs of the world, as they could bundle multimillion dollar consultancy programmes around huge enterprise implementions. “After six years it worked for about a week,” quipped Nelson, “and then somebody changed a field in Siebel and it all fell apart.”