Managing potentially disruptive innovations in software companies: Transforming from On-premises to the On-demand

• The objective of this study is to investigate the management of disruptive innovation in the software industry using the example of SaaS. Management strategies of well-established software companies are examined who successfully entered the SaaS market.
• Well-established companies have to shift their focus from the (still) profitable On-premises market to an, as yet unprofitable, On-demand market to survive. Thereby nine management strategies are uncovered that may help managers successfully transform from an On-premises provider to a company focusing on SaaS.
• The study’s findings contribute to both theory and practice. The major contribution of this study is a set of management strategies for managing potentially disruptive innovations. The description of possible dependencies and influences across different strategies leads to a more explanatory theorization and provides advice for practice.

The software industry faces a fundamental change from delivering software On-premises to delivering software On-demand. Well-established companies have to shift their focus from the (still) profitable On-premises market to an, as yet unprofitable, On-demand market to survive. This requires strategies to handle the transformation process. Based on five case studies and following Christensen’s disruptive innovation theory, we learn the successful strategies that software companies can adopt to handle a change from On-premises to On-demand delivery. These strategies include the general ideas that Christensen proposes and separate extensions for the software industry, suggesting an emerging area of IS research.